Earnings

EBIT and EBITDA

Total earnings before interest and tax (EBIT) amounted to € 266.7 million, which was 3.0 per cent below the same period of the previous year (Q1—Q3 2012: € 275.0 million). Excluding the hydraulics business (resulting in EBIT of € 248.8 million for the first nine months of 2012), EBIT improved by 7.2 per cent thanks to the improved cost structure and price effects. One of the factors that depressed earnings was the cost of the IPO and the accompanying capital increases. Of the total costs of € 29.9 million before tax, € 8.6 million was recognised in expenses while the remaining transaction costs after tax were recognised as other comprehensive income (loss). Including the costs of the IPO and the capital increases, non-recurring items included in EBIT came to a loss of € 11.9 million (Q1—Q3 2012: income of € 10.4 million, adjusted for the hydraulics business).

The KION acquisition items relate to the acquisition of the KION Group, which was formed at the end of 2006 when it was spun off from Linde AG, Munich. The associated effects of the purchase price allocation equated to an expense of € 22.3 million in the reporting period, compared with an expense of € 27.4 million in the first nine months of 2012, and largely comprised depreciation, amortisation and impairment.

Adjusted EBIT, which excludes non-recurring items and KION acquisition items, amounted to € 300.9 million, thereby exceeding the prior-year figure (Q1—Q3 2012: € 291.9 million) by 3.1 per cent. The adjusted EBIT margin was 9.1 per cent, compared with 8.8 per cent in the first nine months of 2012.

EBITDA was down by 2.9 per cent on the first nine months of 2013 at € 516.0 million (Q1—Q3 2012: € 531.3 million). Adjusted EBITDA amounted to € 527.4 million, which was above the comparable figure of € 508.8 million for the first three quarters of 2012 (excluding the ­hydraulics business). The adjusted EBITDA margin was 15.9 per cent, compared with 15.4 per cent in the prior-year period.

Key influencing factors for earnings

The cost of sales fell to € 2,388.0 million (Q1—Q3 2012: € 2,482.0 million). The favourable movement in commodity prices, the cost benefits derived from the successful restructuring of the production sites and the resulting increase in capacity utilisation failed to compensate in full for the effect on gross profit of the sale of the high-margin hydraulics business.

Administrative expenses decreased to € 219.3 million in the period under review (Q1—Q3 2012: € 226.3 million). The cost-cutting measures put in place began to take effect, particularly in the third quarter, and offset the costs of the IPO, which were recognised under administrative expenses.

The key influencing factors included under “Other” were as follows. Other income rose to € 82.0 million (Q1—Q3 2012: € 57.8 million). In addition to higher commission income compared with the first nine months of 2012, this item also included additional income of € 8.1 million resulting from the sale of our controlling interest (70.0 per cent) in Linde Hydraulics GmbH & Co. KG.

Profit from equity-accounted investments fell from € 15.5 million in the first nine months of 2012 to a loss of € 0.3 million in the period ended 30 September 2013. In the course of the acquisition of the remaining 51.0 per cent of shares in Linde Creighton Ltd., Basingstoke (UK), income of € 8.0 million was realised on the revaluation of the shares, which had been accounted for under the equity method in the first nine months of 2012. Conversely, a pro-rata loss of € 9.2 million for the nine-month period, generated by Linde Hydraulics GmbH & Co. KG, was included in the overall loss from equity-accounted investments in 2013. This loss largely comprised the effects of the purchase price allocation.

Net financial income / expenses

Net financial expenses increased slightly year on year, rising to € 182.4 million (Q1—Q3 2012: € 181.3 million). Third-quarter net financial expenses amounted to € 70.3 million and were negatively affected by a number of non-recurring items. The long-term bank loans under the acquisition finance arrangements (Senior Facilities Agreement or SFA) were repaid in full from the proceeds of the IPO, part of the new credit facility and existing cash reserves. This, along with the early redemption of the 2011/2018 floating rate note, resulted in deferred borrowing costs of € 19.1 million being recognised as an expense. In addition, interest-rate hedging instruments that had been used in the past for the acquisition finance arrangements, were ended, which led to an amount of € 17.7 million being recognised under financial expenses in the third quarter of 2013. Adjusted for these non-recurring items, net financial expenses amounted to € 33.5 million in the third quarter, compared with € 56.0 million in the corresponding period of 2012. This sustained reduction in net financial expenses was due to conversion of the shareholder loan of € 670.8 million provided by Superlift Holding S.à r.l. into equity at the end of 2012, full repayment of the acquisition financing and cheaper funding under the new credit facility.

Income taxes

Income tax expenses of € 59.1 million in the first three quarters of 2012 contrasted with expenses of € 3.1 million in the reporting period. Current tax expenses fell to € 41.3 million (Q1—Q3 2012: € 50.1 million), largely owing to income tax refunds of € 5.4 million from previous years. Whereas there had been deferred tax expenses of € 9.0 million in the prior-year period, there was deferred tax income of € 38.3 million in the first nine months of 2013. The main reason for this change was the profit-and-loss transfer agreement between KION Material Handling GmbH (formerly KION GROUP GmbH) and Linde Material Handling GmbH, which was signed in April 2013 and resulted in additional deferred tax assets of € 47.9 million being recognised on tax loss carryforwards that it had not previously been possible to utilise. Of this amount, € 20.0 million had been utilised by 30 September 2013.

Net income

After taxes, net income amounted to € 81.3 million, compared with € 34.6 million in the first nine months of 2012. Pro-forma earnings per share for the period totalled € 0.82, based on 98.9 million no-par-value shares (in accordance with IAS 33: € 1.07).