Philip Buller

Philip Buller inquired how investments in service excellence led to lower-than-expected repairs and why this trend should not reoccur in 2026. He also asked for more details on the factors affecting retention rates in China and whether the expected slight improvement in 2026 applies to the total group or only ex-China.

Answer

Judy Marks, Chair, CEO, and President of Otis Worldwide Corporation, noted that the repair backlog is growing and the company aims to increase conversion rates and implement proactive repair solutions. Christina Mendez, Executive Vice President and CFO of Otis Worldwide Corporation, explained that lower-than-expected repairs were due to calibrating field resources during the quarter, prioritizing maintenance to support customer satisfaction, rather than a lack of demand. Judy Marks clarified that China's retention is structurally different due to annual contract renewals with no auto-renewal ability, and she expects continuous improvement across all groups, not just ex-China, with strategic Otis decisions impacting the rate but leading to a healthier portfolio.

Philip Buller with Rothschild & Co inquired how Otis's investment in service excellence led to lower-than-expected repair volumes in Q4 2025 and why this trend should not reoccur in 2026. He also asked for more color on the declining retention rates in China and how Otis aims to stabilize them, and whether the expected slight improvement in retention for 2026 applies to the total group or is still exclusive of China.

Answer

Judy Marks, Chair, CEO, and President of Otis Worldwide Corporation, explained that while the repair backlog is growing, Otis needs to increase conversion rates and be more proactive. Cristina Méndez, Executive Vice President and CFO of Otis Worldwide Corporation, clarified that lower repair volumes were not a demand issue but a result of calibrating field resources to prioritize customer satisfaction in maintenance. Judy Marks stated that China's retention dynamics are structural, with every contract up for annual renewal without auto-renewal, leading to continuous re-proving and repricing. She expects continuous improvement across the entire group, not just ex-China.

Philip Buller of Berenberg asked about any 'green shoots' in softer markets like European Electrical, residential, or autos, and inquired if the strategic importance of the automotive business would be a topic at the Investor Day.

Answer

Craig Arnold, Chairman & CEO, noted that while Europe remains weak, Eaton forecasts incremental improvement in 2025, driven by data centers and utilities, with some recovery in the machinery OEM market. Paulo Sternadt, President & COO, confirmed that the strategy for the Vehicle and eMobility businesses will be a topic of discussion at the March Investor Day.