The forward-looking statements and information given below are based on the Company's current expectations and assessments. Consequently, they involve a number of risks and uncertainties. Many factors, several of which are beyond the control of KION, affect the Group's business activities and profitability. Any unexpected developments in the global economy would result in the KION Group's performance and profits differing significantly from those forecast below. KION does not undertake to update forward-looking statements to reflect subsequently occurring events or circumstances. Furthermore, KION cannot guarantee that future performance and actual results will be consistent with the stated assumptions and estimates and can accept no liability in this regard.
Expected macroeconomic conditions
According to estimates made by the International Monetary Fund (IMF), global economic growth may pick up slightly in 2013, amounting to 3.5 per cent (2012 estimate: 3.2 per cent). The purchasing managers’ index (PMI) also signals a slight economic recovery. Growth prospects are better in particular for emerging markets such as Brazil and China, which could provide considerable stimulus for European exports. The outlook for the euro zone still assumes slightly negative growth, however. On the other hand, an economic upturn is anticipated in the euro zone beginning in 2014, which could also provide additional momentum to the growth anticipated globally.
Global growth will be fuelled, above all, by a rise in capital expenditure, whereas consumer spending may only increase to a small extent. The IMF predicts that the volume of global trade will grow more robustly than it did in 2012. It also anticipates a moderate fall in commodity prices.
Overall, therefore, economic conditions may already be somewhat more benign in 2013 than in the year under review. However, this forecast is based on the assumption that monetary and fiscal policy will support the global economy. There are also considerable risks resulting, in particular, from the sovereign debt problems in the euro zone and the United States, consolidation and tightening of public finances as well as a possible destabilisation of the financial markets.
Expected sectoral conditions
The overall market for industrial trucks will continue to depend heavily on economic conditions in key sales markets, with the level of capital investment and the growth in global trade being particularly crucial. Whereas the global market for industrial trucks in 2012 was around 3 per cent down on the record level achieved in 2011, KION expects demand to recover slightly in 2013 as well as in the following year. China, other Asian countries and eastern Europe are likely to be the main growth engines in the market. Stable demand is expected in western Europe, fuelled predominantly by the in some cases overdue replacement of old trucks.
Market expectations are also positive from a longer-term perspective. Based on current macroeconomic forecasts and in view of past market performance, KION predicts an average annual growth rate of about 4 per cent for the next five years, which should not involve any significant shifts of the shares of the individual product segments in total revenue.
Expected business situation and financial performance
In 2012 KION laid the foundations for continued profitable growth in subsequent years. Drawing on its multi-brand strategy and the successive expansion of its service business, the Group intends to tap the potential offered by the developed markets of western Europe and the emerging markets. A continuing high level of capital investment and research and development spending serve to preserve the technological leadership of LMH and STILL, and ensure their continued position as premium brands.
Adjusted Group revenue is expected to be higher in 2013 than in 2012. KION anticipates that the new truck business will initially grow at a faster rate than the service business in 2013 because of the strong demand for replacement investment – as a result of the investment backlog from the financial crisis – and due to increasing product sales in Asia and Latin America. Once pent-up capital investment has been exhausted, KION expects that the next few years will see above-average growth of the service business due to the large number of trucks that already exist on the market. The service business is expected to contribute around 40 per cent of consolidated revenue.
The emerging markets are predicted to again be a significant factor in the growth of revenue. In this context, the partnership with Weichai Power is expected to have a positive impact in the Chinese and Asian markets as early as 2013, leading to intensified sales activities in these markets. Additional options, such as consolidating the forklift business in China, are currently being examined. Unit sales in Latin America are forecast to rise on the back of increased production capacity and intensified sales activities. The service network in western and eastern Europe, which was expanded in 2012, is intended to make a considerable contribution to growth also in the new truck business.
Similar to the Group as a whole, the two segments LMH and STILL are aiming for a moderate rise in revenue in 2013. Following the deconsolidation of the hydraulics business, LMH intends to increase its volume of business in all key sales regions, with above-average revenue growth in Asia and other growth markets. STILL expects to generate growth in Latin America and eastern Europe. Moreover, sales in 2012 were also impaired by shifts in production. Adjusted EBIT is expected to improve moderately in both segments. KION forecasts a further rise in the volume of leasing in the FS segment, accompanied by almost unchanged EBT. As in 2012 this business will be concentrated in western Europe.
The good market position of the brands, the broad product portfolio, high market share in the core markets in Germany and France, good positioning in growth markets, growing service business, the measures taken towards a more flexible cost structure as well as economies of scale should all contribute to moderately improving the adjusted EBIT margin in 2013 as well. It will also be positively influenced by the consolidation of the European production facilities, which was largely completed in 2012. The higher proportion of procurement in emerging markets, which will be supported by the partnership with Weichai Power, should have a positive effect on earnings by as early as 2013.
The consolidated result for 2012 was influenced by positive one-off items that will not occur again to the same extent. For 2013, however, slightly positive consolidated net income is expected, which should also reflect the reduction of debt.
In 2014, KION anticipates further moderate revenue growth, slightly improved adjusted EBIT, and continued positive net income, all on the back of even more buoyant global economic growth.
Expected financial position
KION significantly improved its financial position in 2012, particularly owing to the investment of Weichai Power. As a result of the successful issue of the corporate bond in February 2013 (see Events after the balance sheet date section), the debt maturity structure has also been extended. All in all, KION has significantly expanded its financial flexibility and possesses a sound foundation for its course of growth.
The Company will continue to reduce debt levels while at the same time optimising the funding structure. No specific steps were being planned at the time this group management report was compiled.
Wiesbaden, 13 March 2013
The Executive Board
|Gordon Riske||Bert-Jan Knoef||Theodor Maurer|
|Ching Pong Quek||Dr Thomas Toepfer|