Otis Names New CFO as It Preps for Separation From United Technologies
By Nina Trentmann
Otis Elevator Co. hired a new finance chief as it gets ready to
separate from industrial conglomerate United Technologies Corp.
The Farmington, Conn.-based maker of elevators and escalators
said Monday that Rahul Ghai is its new chief financial officer. Mr.
Ghai joins from defense company Harris Corp., which this year
completed a combination with L3 Technologies. Mr. Ghai had been
Harris's CFO since February 2016. Prior to Harris, he worked in
financial roles at health insurer Aetna Inc. and Otis's parent
company, United Technologies.
United Technologies is in the process of breaking itself into
three entities, even as competitor Thyssenkrupp AG prepares to sell
its elevator unit.
United Technologies's Carrier Global Corp., the
heating-and-cooling business, and Otis are expected to become
separate companies in 2020, leaving United Technologies to focus on
aerospace. Carrier Global on Friday appointed a new CFO.
Otis is seeking approval from regulators on its future capital
and tax structure and is setting up its own management and finance
systems, United Technologies Chief Executive Gregory Hayes said at
an investor conference Thursday.
That will entail additional costs because Otis will no longer
benefits from centralized functions. Mr. Ghai is expected to focus
on reducing costs across departments and on pruning the independent
entity's portfolio, said Joshua Aguilar, an analyst at Morningstar
Otis in its latest quarter reported a 6% drop in new equipment
orders compared to the same prior-year period. Some of that decline
is down to slowing economic growth in China, an important market
for Otis, resulting in pricing pressure for the manufacturer.
"Pricing has been a big detriment for Otis," said Sheila
Kahyaoglu, an equity analyst at investment bank Jefferies LLC.
Otis generates about 60% of its revenue from sales of new
elevators, while maintenance services account for 40% of its
turnover. The company recorded net sales of $3.3 billion in the
quarter ended June 30.
Competitor Thyssenkrupp is also working to separate its elevator
division in response to criticism from activist investors over its
structure. The company initially planned to break itself up, but
shelved those plans in May as it seeks to sell part of the elevator
business in an initial public offering during the 2019-20 fiscal
year. Management is also listening to potential buyers, Chief
Executive Guido Kerkhoff has said.
A potential sale or IPO at Thyssenkrupp could highlight the
state of the unit's maintenance services compared to Otis, said
Josh Sullivan, an analyst at Seaport Global Securities LLC. "The
growth in this industry is on the service side," Mr. Sullivan said.
"That is where your margins are, and Otis is playing catch-up with
Remote analytics and augmented reality tools can help bring down
maintenance costs, and Otis could boost investments in the service
area once it has been spun out of United Technologies, Mr. Sullivan
said. "It will be up to the new CFO to make these investments
wisely but judiciously, as the industry is changing," he said.
Otis said Mr. Ghai would focus on achieving earnings growth and
performance goals in his new role.
"Rahul has joined us at a pivotal time as we prepare to drive
growth and shareowner value as a stand-alone company," Judy Marks,
Otis's chief executive, said in a statement. "He has outstanding
public company leadership experience, and brings to Otis a deep
understanding of the needs and expectations of the investor
Write to Nina Trentmann at Nina.Trentmann@wsj.com
(END) Dow Jones Newswires
September 16, 2019 17:00 ET (21:00 GMT)
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