Schindler Holds Guidance as Modular Platform Drives Record Margins While China Installation Slump Deepens
Half-year results call, July 21, 2026
Schindler reported a record operating margin of 13.2% in the first half of 2026, up 90 basis points year-on-year, as CEO Paolo Compagna and CFO Carla Geyseleer confirmed full-year guidance despite a soft 1.4% revenue growth rate in the period. The Swiss elevator and escalator maker is betting that an accelerating modernization business and easing currency headwinds will drive the low to mid-single-digit revenue growth implied by its unchanged outlook, even as new installation orders in China continue to contract at a double-digit pace with no clear bottom in sight.
Modular Platform Emerges as the Real Margin Story
The most consequential disclosure on the call was not a headline number but a mechanism: Schindler's modular product platform, rolled out first in Europe roughly 18 months ago, is now generating measurable field-installation efficiencies that management says are structural, not one-off. Compagna explained that when the platform was introduced three to four years back, the strategic rationale centered on capturing "field efficiency" gains, and that benefit is now showing up in the numbers as a rising share of installations move through fulfillment. Geyseleer reinforced this, telling analysts that operational efficiency gains "are expected to further increase because that is really the result now of the implementation of the modular platform," and that she is "very encouraged" by the trajectory heading into the second half. The company is on track to deliver roughly CHF 200 million in cumulative efficiency savings for the year, and Geyseleer indicated the run rate could even come in a bit stronger, with second-half savings likely to outpace the first half as procurement gains mature and field-operation benefits from the platform continue to compound. This is a durable competitive advantage narrative rather than a cost-cutting one, and it appears to be feeding directly into market share gains in Europe, where new installation order intake in units grew over 12% against a market Schindler estimates grew only low single digit.
China New Installation Shows No Signs of Bottoming
Schindler's China new installation business remains the single largest drag on group growth, with orders declining at a pace management now characterizes as "high single digit to low double digit" for the remainder of the year, a notably more cautious framing than some peers who have flagged moderating declines. Compagna was blunt about the divergence from competitor commentary, noting that Schindler has historically taken "the dark side" view on China and has been proven right, adding "I'm not proud of that, absolutely not." Leading indicators including floor space starts and real estate investment deteriorated further sequentially in June rather than improving. The company is not chasing volume to offset this: Geyseleer confirmed Schindler is making no concessions on down payment terms in China given deteriorating credit risk among customers, applying identical discipline to both new installation and modernization orders. Backlog in China was down mid-teens as a result. Compagna acknowledged that if the current trajectory of double-digit new installation declines paired with double-digit modernization growth persists, "one could do a calculation" showing modernization and service eventually overtaking new installation as the larger part of the China business, a structural shift he said "cannot be excluded over the next years to come."
Modernization Delivers Sixth Straight Quarter of Double-Digit Growth
Modernization orders grew 11% in the second quarter against a tough 24% comparison a year earlier, marking six consecutive quarters of double-digit growth with an average rate of 17% over that period, according to Compagna, comfortably outpacing overall market growth. The business is expanding across every geographic zone, including China, where government bond programs for equipment replacement continue to support high double-digit growth, and Spain, where ITC regulation is mandating safety upgrades. Management declined to disclose modernization's share of group revenue when pressed by ODDO BHF's Delphine Brault, but the backlog data tells its own story: modernization backlog was up 13% year-on-year, and with an estimated 10 million elevators globally now ripe for upgrade, Compagna described the opportunity set as effectively without a ceiling. Backlog margin also improved sequentially, which Geyseleer called "quite a nice development" tied to the profitability quality of recent order intake.
Cost Inflation Intensifies in the Second Half, Testing Pricing Power
Schindler flagged an incremental CHF 35 million of energy and commodity cost inflation for the full year, with roughly two-thirds of that impact landing in the second half, primarily driven by higher copper and aluminum prices consistent with guidance given in April. Tariff impact remains estimated at approximately CHF 15 million gross annually, also unchanged from April. Management insisted pricing outside China has remained solid with no unusual competitive pressure, but Geyseleer was careful not to overpromise on the ability to fully offset the accelerating raw material costs, stating the company does not want to "preempt the potential successful passing on" of these costs and left explicit caveat language in the guidance. This tension, solid backlog margins on one hand against rising steel, copper and aluminum costs on the other, is why Schindler held its full-year margin guidance at 13% rather than raising it despite running at 13.2% in the first half, a decision Geyseleer attributed partly to favorable mix effects in the first half that will not repeat and partly to the back-half-loaded inflation.
Strategy Unchanged Despite Industry Consolidation, Capital Markets Day Reset to November
Asked directly about the competitive landscape following the KONE-TKE tie-up, Compagna was firm that Schindler's strategy requires no alteration, stating "there is no change to our strategy. This is working." He characterized the consolidation as a potential source of commercial opportunity through customer stability concerns but declined to speculate on competitor distraction, saying "I don't know what competitors will do, but I know what we do." The company's Capital Markets Day, originally scheduled earlier but pushed to November 19 in Ebikon, will focus on Schindler's own midterm targets rather than any assumptions tied to industry remedies or M&A timelines, according to Compagna, who described the agenda as centered on "what we aim to do and what is in our hands."
IFRS 18 Transition Will Trim Reported Margins by Roughly 40 Basis Points in 2027
Geyseleer flagged that the upcoming IFRS 18 accounting standard, effective January 1, 2027, will reclassify certain items, primarily operating finance costs such as bank fees, credit card fees and financing costs tied to modernization activity, from below the operating line to above it. Applied retroactively to the first half of 2026, this would have reduced operating profit by approximately CHF 20 million, implying a full-year drag of roughly CHF 40 million and a margin impact of about 40 basis points going forward. A smaller component tied to foreign exchange gains and losses will also move above the line, which Geyseleer said she is "not so happy" about given the inherent volatility it introduces, even though the absolute amount is immaterial to overall results. Investors should factor this technical headwind into any 2027 margin bridge Schindler presents at its November Capital Markets Day.