TKAMY Thyssenkrupp AG (PK)

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 Inc.

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 Thyssenkrupp."

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 community."

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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