United Tech sees sales uptick in China; posts profit beat

United Technologies Corp saw an uptick in equipment orders in China in the first quarter, Chief Executive Greg Hayes said in an interview on Wednesday, as the company posted results that beat analyst estimates.The maker of Pratt & Whitney aircraft engines and parts, Otis elevators and climate controls and security systems, expects activity in China and Europe to keep rising, Hayes said.”It feels like things have at least bottomed out both in Europe and in China,” Hayes said. “We expect a better back half (of the year) at Otis as well as at our climate controls and securities business.”The U.S. market continues to be strong, with new orders for Otis equipment up 33 percent in North America, Chief Financial Officer Akhil Johri said in the same interview.The company’s shares rose 1.3 percent to $106.06.

Sales of aftermarket aircraft parts and repair services rose an exceptional 19 percent in the quarter. That reflected the market catching up after slow sales last year and a rise in major overhauls of V2500 engines on Airbus A320 planes that are reaching a service milestone. The company expects the trend will continue for the next few years, though at lower growth levels.In addition, airlines are flying more hours, and some are keeping older planes in service, requiring more spare parts.”We have seen (aircraft) retirements last year slow down as fuel prices have slowed down,” Hayes said.

“What that means is they are flying the older planes longer. They aren’t as anxious perhaps to take some of the new, more expensive equipment and as a result, it’s probably good news for us in the aftermarket for a bit here as long as oil prices stay low.”In part to capture such growth, Boeing Co is aggressively building its own aftermarket business.Hayes said Boeing has not tried to take aftermarket business away from United Technologies.

“Boeing got its pound of flesh from partnering for success a couple of years ago on the 787,” Hayes said, referring to a Boeing program to reduce the prices it pays suppliers for parts. “We have been very guarded in terms of giving aftermarket away because … we make big investments up front and the only way we recover it is in the aftermarket.”The company reported adjusted first-quarter profit of $1.47 a share, beating consensus estimates by 8 cents, and reaffirmed its full year profit forecast. (Reporting by Alwyn Scott; editing by Chizu Nomiyama and Marguerita Choy)


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