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United Technologies on downward ride in China

  • Author:naky
  • Source:www.diecastingpartsupplier.com
  • Release on:2015-07-23
United Technologies was forced to put the brakes on expectations for this year’s profits after soaring hopes of installing air-conditioning and Otis lifts in Chinese skyscrapers were brought down to earth by a slowing economy.

The cut in the forecast for full-year earnings per share — from between $6.55 and $6.85 down to a range of $6.45 to $6.60 — came a day after the group announced a deal to sell its Sikorsky helicopter business for $9bn to Lockheed Martin.

Sikorsy’s earnings are included in the forecast, but not an expected gain from the sale.
Greg Hayes, who took over as chief executive in November, told investors on a conference call yesterday that United Technologies might have been “too aggressive” in projecting a 5 per cent increase in orders for Otis products in China for the year. It has been hit with a 10 per cent decline.

As recently as an investor meeting in March, the group had been touting a “positive Otis trajectory” and pointing to worldwide new equipment sales up

13 per cent for 2014 as evidence of the division’s robust health.
“A 5 per cent increase didn’t seem like overly aggressive from a new equipment standpoint,” Mr Hayes said. “The property market has come down a lot faster in China than we expected. We’ve seen a lot of pressure there.”

The company warned that, adjusted for one-off items, operating profits for UTC Aerospace Systems — which supplies aircraft parts and components — would be $25m-$75m down on last year. Deliveries of Boeing’s 787 Dreamliner, for which it provides parts, had been slower than expected, and UTAS was hit by an overhang as airlines built up their inventories of spares last year.

“Did we push hard?” Mr Hayes said, referring to the assumptions behind the forecasts. “Yeah, we did?.?.?.?I think we just got way too aggressive on the after-market at UTAS and the European recovery, and it hasn’t happened.”
United Technologies is one of many US industrial companies that have put a large number of the eggs of growth expectations in the basket of continued rapid Chinese economic growth.