1 Milestones in 2011

2011 – growth markets continue to gain in importance

KION Group increases order intake to €4,682 million – growth markets account for almost one in three trucks delivered

Despite the European sovereign debt crisis and uncertainties in the financial markets, the global market for industrial trucks experienced a strong upturn in 2011. Two factors encouraged this positive trend: the recovery of demand in Europe and the rapid pace of economic growth in the emerging markets. The KION Group particularly benefited from the sharp rise in global demand for warehouse trucks and for efficient counterbalance trucks with electric motors or internal combustion (IC) engines. Aftersales business also expanded compared to 2010, and there was a year-on-year rise in revenue from rental and used trucks. Order intake for the KION Group rose to €4,682 million, representing a year-on-year increase of around 21 per cent (2010: €3,860 million). Revenue advanced by 24 per cent year on year to €4,368 million (2010: €3,534 million). The KION Group's earnings before interest and tax (EBIT), adjusted for non-recurring items, rose from €139 million in 2010 to €365 million in 2011. This represented an EBIT margin of 8.3 per cent, which was higher than the figure achieved in the record year of 2008 and represents a significant year-on-year improvement. The 2010 adjusted EBIT margin amounted to 3.9 per cent.

The KION Group successfully continued with its globalisation strategy in 2011. Germany, France, China and Brazil were the most important regions in terms of sales of new industrial trucks last year. Three in ten trucks supplied by the KION Group went to customers in emerging markets. The KION Group intends to make even greater use of the high potential for growth in these markets over the coming years, particularly in the BRIC countries.

On a global basis KION Group slightly lost market share to 14.8% (2010: 15.3%). By continuing to expand in fast-growing regions, the KION Group hopes to maintain its leading positions in the European and global markets for material-handling trucks in the long term. The KION Group is currently number one in the European market and number two worldwide.

Consolidation of the STILL and OM brands in the STILL brand segment

Back in 2010, the KION Group had begun to more closely integrate the sales activities and product portfolios of the STILL and OM brand companies in order to serve the markets more efficiently. OM focuses on its home Italian market and now incorporates STILL's activities in Italy. It also began to improve the breadth and depth of its own product range by adding products from STILL in 2011. This focused business expansion has enabled the OM brand to remain one of market leaders in Italy, while STILL is benefiting from stronger sales support, above all in eastern Europe and the emerging markets. OM has been operating under the brand name 'OM STILL' in Italy since January 2012.

Further improvements to efficiency in the production facilities

Last year the KION Group drew up various plans to safeguard the long-term competitiveness of its production facilities. The planned transfers of production within Europe, the further expansion of production and the existing sales and service networks in fast-growing markets are enabling the Group to become more flexible as well as strengthening its position in regional markets worldwide. A decision was made to concentrate the STILL brand segment's production of warehouse trucks and counterbalance trucks at individual European locations so that production facilities can focus on particular product series and optimise their capacity utilisation.

Production processes and product quality have also continued to be steadily improved at KION's Baoli brand production facility in Jingjiang near Shanghai. The three primary objectives were to step up inhouse training, modernise the production methods and workflows and optimise cooperation with suppliers. This involved providing employees with ongoing training on all aspects of quality management as well as standardising their work by introducing defined processes and guidelines. Baoli has also restructured the production plant in order to make the material flows and production processes more efficient. In addition, Baoli has familiarised its suppliers with the new production processes. By selecting its suppliers carefully and continually developing its partnership with them, the brand company guarantees quality, a continuous supply of materials and compliance with technological standards. This results in better product quality, higher productivity and shorter delivery times.

The KION Group is also strengthening its presence in Brazil by setting up a plant geared to the manufacture of counterbalance trucks in São Paulo. Production is scheduled to start there in 2012. The existing Brazilian plant in Rio de Janeiro manufactures warehouse technology for KION's STILL and Linde brands. Counterbalance trucks with IC engines are the most popular form of industrial truck in South America. KION is expanding its South American distribution and service network so that it can continue to meet rising demand. The São Paulo site enables the KION Group's current sales offices in the region to intensify their relations with existing STILL and Linde customers.

Voltas Material Handling opening up the Indian market

As part of its continued focus on the world's emerging markets, the KION Group and the Indian conglomerate Voltas Ltd. founded Voltas Material Handling (VMH) in April 2011. The KION Group acquired a majority share of this company using existing funds. VMH develops, manufactures, sells and services forklift trucks and warehouse technology. KION will add truck and warehouse technology to the Voltas product range and, based on market demand, will focus above all on warehouse technology. India's material-handling market has grown rapidly in recent times, with a sharp rise in demand for warehouse technology solutions. Voltas has built a new plant in Pune, India, in order to fully exploit the strong future growth potential offered by the Indian market. Products from Voltas have enjoyed an excellent reputation in the Indian market for many years. The brand's 25 branches provide it with a strong distribution and service network even given India’s material handling market today still being characterized by low volumes.

Successful expansion of sales and service network

The KION Group continues to enhance the position occupied by its two premium brands – Linde and STILL – in Russia. In 2011, the Linde Material Handling subsidiary acquired the business of its longstanding dealer partner Liftec in Russia and, on the basis of high growth forecasts for the region, also acquired Liftec's Kazakhstan business at the start of February 2012. The purchase of Liftec's business in Ukraine is planned for mid-2012. This provides Linde Material Handling with even better and direct access to the growth potential of these major eastern European markets. Russia is one of the most buoyant high-growth regions alongside Brazil, India and China. In 2011, it was the fifth largest market in Europe. STILL has strengthened its Russian market presence by opening an additional branch in St. Petersburg.

The KION Group is expanding and optimising its sales structures on an ongoing basis in western Europe. As part of this process, Linde Material Handling has acquired the outstanding 51 per cent of shares in the UK-based Linde dealer Linde Sterling Ltd. Linde Sterling is the leading provider of new and used industrial trucks, rental trucks and aftersales service in north-west England and north Wales. This transaction has enabled the KION Group to further strengthen the leading position of Linde and the brand's UK distribution and service network. In December 2011, Linde Material Handling also acquired the outstanding 25.5 per cent of shares in Linde Castle Ltd. and now holds 100 per cent of the shares either directly or indirectly.

Stable financial footing

In spring 2011, KION successfully issued a secured corporate bond with a total volume of €500 million in the capital markets. This has enabled the KION Group to improve the maturity profile of its debt, with some financial liabilities being extended to 2018. It has also diversified its investor base. The Company used some of the cash from the issuance of the bond to fund existing loans. With a maturity date of 2018, the secured bond was issued at par in a tranche of €325 million at a fixed interest rate and in a tranche of €175 million at a variable interest rate. The interest rate for the fixed-interest tranche is 7.875 per cent per annum, while interest is charged annually on the floating-rate tranche at three-month Euribor plus 4.25 percentage points.

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