12.1 Opportunities report

Strategic focus on opportunities

Identifying and acting on opportunities is an integral element of strategic corporate management in the KION Group. To identify and evaluate these opportunities, the Company systematically monitors and analyses developments in its relevant markets and tracks overall and sectoral economic trends. Once it has analysed and evaluated the opportunities, the Company draws up strategic initiatives that are aimed at profitable growth and a sustained increase in shareholder value.

Various developments in the national and international markets have an impact on the KION Group as one of the world's leading providers of industrial trucks. The economic conditions described in this report, as well as the current market trends and business performance, create a multitude of potential opportunities. Using and building on its existing strengths and competitive edge, the KION Group endeavours to exploit the potential opportunities that arise to the best of its abilities.

The following developments open up significant potential opportunities:

Growth opportunities in an attractive market

The KION Group occupies an outstanding position in an attractive market. The market for industrial trucks is strongly correlated with industrial output – and therefore also with macroeconomic trends. Strong growth in the global economy and, in particular, the recovery in world trade in 2010 are having a correspondingly positive effect on demand for industrial trucks. This growth trend is expected to continue in the coming years. Greater division of labour and rising inventory turnover rates in the major industrialised nations will increase the degree of mechanisation in logistics. This, in turn, will increase demand for efficient warehouse equipment and comprehensive intralogistics solutions. In the next few years, market growth in the industrialised world will be reinforced by the gradual release of pent-up demand caused by the postponement of replacement investment in industrial trucks that was seen during 2009 and 2010. In fast-growing markets such as eastern Europe, South America and Asia, sales of industrial trucks will continue to benefit from more rapid overall economic growth and associated expansion investment. The KION Group is excellently placed to participate in this trend. Although customers in these countries generally have lower technological requirements and are more price-sensitive, there are also signs that demand for trucks based on high-quality, reliable technology is rising in these regions.

KION can seize the opportunities presented by market growth and, during the crisis for example, it actually expanded its market share in Europe. From this position, the KION Group is set to benefit from the continued recovery in the industrial trucks markets.

Successful multi-brand strategy meets specific market needs

The needs of customers in the market for industrial trucks are very wide-ranging and, with its five brands – Linde, Fenwick, STILL, OM and Baoli – the KION Group covers the entire spectrum of industrial trucks from basic warehouse equipment to container handlers. Linde/Fenwick and STILL/OM operate in growth markets such as ergonomics and intelligent intralogistics. By virtue of their technological and solutions-oriented competencies, they are widely regarded as leaders in technology and innovation. Baoli targets the economy segment, where customers have different priorities in terms of technology and pricing, and it also meets the needs of rapidly developing high-growth markets. The KION Group's broad-based structure enables it to benefit from growth in all market and product segments, using its expertise to develop new solutions and to build market share.

Continued expansion of service business

Service-related business offers an opportunity for growth that is largely independent of market cycles. With a fleet of over one million trucks in use worldwide, the KION Group has a broad platform from which to generate lucrative service business. It uses this business as a tool for maintaining long-term customer relationships and for tapping into profitable income streams. Services such as financing solutions, maintenance and repairs, spare parts, and efficient end-to-end solutions for fleet management play an increasingly important differentiation role. The KION Group will apply its expertise to expanding its range of efficient service solutions, adapting them to local needs and thereby increase its market share.

Expansion supported by selective opportunities for growth by acquisition

Despite the consolidation that has taken place within the sector, the market for industrial trucks is highly fragmented. Some providers only sell their products in certain regions. The KION Group can bolster its organic growth by making selective acquisitions – including in the area of sales and service structures – as a quick and effective way of strengthening its position in specific markets.

Trend for 'green' logistics and efficient technology

Economics and ecology are the mega-trends in the market for industrial trucks. That is why the KION Group as a driver of innovation is already ahead of the game in terms of environmentally-friendly trucks and fuel-saving technologies. The advantage for customers is the low total cost of ownership of products, which includes the cost of maintenance and repairs, consumption and labour costs in addition to the purchase cost. Examples include Linde's PureMotion programme – in which Linde Material Handling is using its expertise to protect people and the environment – and STILL's extremely fuel-efficient forklift trucks that have been developed thanks to its leading position in hybrid technology. Going forward, the KION Group will focus on exploiting its technological lead to develop new products that benefit its customers – innovations that provide opportunities for growth.

Consolidation in the sector

The KION Group has many small competitors, especially in the high-growth markets of Asia. However, past trends in the industrialised markets indicate that not all of these market participants will be able to establish themselves on a permanent basis. Regulatory requirements, such as in the area of environmental protection, are one reason for this. The KION Group's technology leadership enables it to use consolidation processes to expand its own market share.

In other markets, existing regulations act as a significant barrier to entry for international providers, such as Asian manufacturers in the economy segment. One example is EU Directive 2002/44/EC on vibration, This Directive obliges companies to protect their employees against noise and vibration, for which it sets mandatory limits. The KION Group possesses technologically advanced products that comfortably comply with these limits – a quality advantage that opens up further sales opportunities.

Additional potential synergies in the KION Group

The Group's organisational structure offers further potential for synergies. Even after the initial successes of the new 'One KION' organisational structure, there are more opportunities for savings in the overarching functions in KION and the brand companies, including in purchasing, development, production and logistics. The KION Group will exploit any as yet untapped potential synergies, which will give it opportunities for improving its competitiveness and efficiency.

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