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Chinese demand helps elevator maker Kone to aim higher

FILE PHOTO: Finnish company KONE flags flutter at their headquarters in Espoo, Finland July 17, 2018. REUTERS/Ints Kalnins/File Photo

HELSINKI (Reuters) - Finnish elevator maker Kone on Thursday nudged up its forecasts for 2019 sales and profits, citing strong first quarter orders in China as a driver of the company's growth.

Kone reported higher than expected first-quarter sales and its Chief Executive Henrik Ehrnrooth said the Chinese government's decision to loosen some of its restrictions on construction and housing had been a positive impact on its operations in China.

"We did not see a stimulus (from the government) in construction but some restrictions on construction and property markets were loosened up. That immediately activated the housing market and prices," he told Reuters on the phone.

"But we do expect the governmental restrictions in the 100 largest cities to continue and if the markets become more active, they are likely to be tightened," he added.

The company said its first quarter sales rose 10 percent to 2.2 billion euros (£1.9 billion), beating all analysts' expectations, with adjusted operating profit rising to 228.4 million euros, in line with expectations of 229 million.

Its shares gained 3 percent by 1330 GMT, taking gains for the year to date to almost 20 percent.

In addition to China, Kone said its order intake was strong in the first quarter in Europe as well.

Ehrnrooth said the company's profit grew more slowly than its sales because of rising personnel costs, especially in Europe, as well as last year's higher costs for materials, such as stainless steel and copper, still being felt.

Costs for subcontracted assembly work are rising rapidly, due to "labour shortage in many countries in Europe," he said.

Kone forecast its 2019 sales would grow 3–7 percent at comparable exchange rates, with 2019 adjusted EBIT in a range of 1.16-1.26 billion euros. It had previously forecast sales growth of 2–7 percent, with adjusted EBIT of 1.12-1.24 billion euros.

Kone expects both its main markets, China and Europe, to remain mainly stable this year, with growth in some southern European countries and in Germany.

(Reporting by Anne Kauranen, Editing by Mark Potter)