5.1.3 Income statement of the KION Group for 2010

Order intake had a positive impact on the KION Group's revenue, which rose by €450 million or 15 per cent to €3,534 million (2009: €3,084 million). The main factor in this rise was the new trucks business, which recorded a 20 per cent increase and particularly benefited from the rapid recovery of counterbalance trucks (IC and electric trucks). Significant growth rates in the German, Chinese, eastern European and South American markets also played a considerable role. Revenue from new trucks did not quite keep pace with the rise in order intake measured in units, because revenue is not recognised until later and is also affected by the structure of the order backlog. Moderate price increases also helped boost revenue in 2010. The improved market conditions and, therefore, the higher demand for industrial trucks were also felt in other product categories. Rental business, especially short-term rentals, was boosted by customers' immediate need for additional capacity as a result of the economic recovery. There was also an encouraging increase in demand for used trucks, resulting in revenue rising by 15 per cent to €187 million. Aftersales profited from the improved capacity utilisation of the fleet in the market, which caused demand for services and spare parts to rise by 10 per cent to €971 million.

Gross profit in the KION Group rose by 42 per cent to €850 million. This was because the rate of increase in the cost of sales (+8 per cent) was lower than that of revenue. Gross margin rose from 19.4 per cent to 24.1 per cent in 2010. The higher margin was caused by the cost-saving measures implemented in 2009, the significant rise in capacity utilisation and efficiency gains in production, which more than offset the higher raw material prices.

There was also only a moderate rise in other functional costs. Selling expenses increased by around 12 per cent, which was a smaller rise than that of revenue and can be attributed to effective monitoring of transport costs. Lower depreciation for property, plant and equipment had a positive impact on general and administrative expenses, which were around 5 per cent lower than in 2009. Research and development (R&D) expenditure rose by 3 per cent to €103 million. In line with the KION Group's focus on consolidating its technology leadership, one of the most crucial projects in 2010 was the establishment of the new KION Asia R&D unit in Xiamen, China, where products tailored specifically to the Asian market are developed.

Revenue rose as a result of the improved market situation, while sales and functional costs increased at a significantly lower rate than revenue partly due to the rigorous management of fixed costs. These two factors combined to enable the KION Group to generate impressive earnings before interest and tax (EBIT) of €35 million (2009: minus €182 million).

Acquisition-related effects and one-off items amounted to a total of €105 million in 2010 – significantly less than in 2009 (€153 million) – primarily owing to one-off items, which decreased by €53 million to €76 million. As the bulk of the restructuring related to the relocation of production was completed in 2009, the corresponding restructuring costs in HR and impairment losses were considerably lower in 2010 than they had been the previous year. The effects from the purchase price allocation (PPA) in connection with the acquisition of KION amounted to €29 million (2009: €24 million). The following table shows the reconciliation from EBIT to adjusted EBIT:

The KION Group's EBIT adjusted for one-off items came to €139 million in 2010, a year-on-year improvement of €168 million.

This presentation of adjusted EBIT also includes the profit or loss from equity-accounted investments and other net investment income. These items are derived from smaller operating investments in the Linde Material Handling segment and other investments in dealers.

Linde Material Handling accounted for a significant portion (€139 million) of the considerably higher adjusted EBIT. The significant improvement is a result of the positive revenue increase in the strong home German market and the emerging markets, optimised capacity utilisation and successful containment of fixed costs. The same applies to STILL's adjusted EBIT, which rose by €42 million to €26 million. OM's adjusted EBIT improved by €6 million to minus €5 million in 2010.

Net finance costs rose by €43 million from €223 million to €266 million in 2010. The main reason for this was the increase in the interest expense on loan liabilities in connection with the senior facilities agreement (SFA) from €96 million to €129 million. The challenging economic environment in 2009 and the related amendments to covenant agreements with effect from October 2009 increased interest costs compared with 2009. However, this was partly offset by lower interest-rate hedging costs in 2010. This was attributable to the altered structure of interest-rate hedges because, in addition to swaps, caps are also used now, which did not trigger any compensation payments.

Overall, the loss before tax decreased significantly, declining from €405 million in 2009 to €231 million in 2010.

In 2010, the income taxes reported for the KION Group were again positive. They comprised a net tax income of €35 million, compared to €39 million in 2009. This figure is broken down into current tax expense of €15 million and offsetting deferred tax income of €50 million, which led to a slightly higher amount of deferred tax assets being recognised due to the much stronger earnings situation and utilisation of tax loss carryforwards compared to 2009 (€44 million).

The net loss for 2010 amounted to €197 million (2009: net loss of €366 million). This clear improvement of €169 million reflects the KION Group's much better business situation and the greater efficiency achieved by optimising production processes.