CT-based Otis elevator excludes Russia from financial results, citing ‘growing concerns’ about its business operations there

Otis Worldwide Corp. said Monday it is excluding Russia from its financial results and is reviewing its future there, citing “growing concerns” about its business operations as President Vladimir Putin pushes ahead with his assault on Ukraine.

For the purpose of year-over-year comparisons, 2021 has been adjusted to leave out Russia. Beginning in the current quarter that began April 1, the Farmington-based elevator manufacturer began reporting adjusted financial results excluding Russia.

“We are disheartened to see the escalation of the crisis in Ukraine,” Chief Executive Officer Judy Marks told industry analysts on a conference call discussing first-quarter financial results. “We have growing concerns about the long-term sustainability of Otis’ operations in Russia, especially with mounting regulations and supply chain disruptions.

“As a result, we are motivated to find solutions and explore alternatives for our Russia business that are in the best interests of all of our stakeholders,” she said.

Otis has previously said it stopped taking new equipment orders and making investments in Russia. It’s evaluating the best ownership structure for the business “whether that’s with us or somewhere else,” Marks said.

The company is working through its backlog to meet customer commitments, but it’s “very challenging,” she said, citing supply-chain disruptions and international sanctions imposed on Russia following the invasion it launched Feb. 24.

Otis expected to generate about 6 cents of adjusted earnings per share this year from sales in Russia.

Analyst Nicholas Heymann of William Blair & Co. said Otis’ business in Russia accounted for 2% to 3% of sales of $14.3 billion last year.

It primarily makes equipment, but sells new elevators to others to install, which helps generate a higher profit margin.

Demand is strong, but due to supply chain problems, “the ability to fulfill demand is under question,” he said.

Excluding Russia will come with a cost, particularly in new equipment sales that are expected this year to be flat to up 1.5%, down from previous guidance of an increase of between 0.5% and 3%.

First-quarter sales were up a fraction of 1%, to $3.41 billion, less than estimates according to Zacks Investment Research. Earnings per share of 77 cents beat Wall Street estimates.

Shares of Otis closed at $74.60, up 1.6% as the broader market, which was down most of the day, staged a reversal and ended the day up.

Stephen Singer can be reached at ssinger@courant.com.