Factors affecting our Business

Business Restructuring and Redesign

In Q1/2012 we continue to implement long-term structural and efficiency measures going forward. Structural measures are to include additional consolidation of our European production facilities by closing our plants in Bari, Italy, and Montataire, France. The production capacity of these plants would be integrated into our other existing facilities, which we expect would increase our capacity utilisation levels in our European production facilities.


On 28 February 2012, we purchased the remaining 51 per cent of shares in Linde Creighton Ltd., our UK dealer, and today own 100% of the company. From March 2012 onwards, Linde Creighton Ltd. will be consolidated in our Group financial statements.

Financial Services Segmentation

In the first quarter of 2012 we have pursued the roll-out of our financial services segmentation. For the time being, in addition to our current reporting structure we will continue to include selected voluntary information regarding the results of our financial services segment as an annex to our quarterly reports. This additional reporting excludes our financial services activities from our reporting segments of LMH, STILL and Other, and presents such activities as a separate segment. The new reporting model which has been extended to include the financial services segment is based on the current reporting methodology for our leasing and rental business. Under this reporting framework, our financial services segment acts as an internal finance partner for our operating segments. The financial services segment generates its income from an agreed interest margin resulting from the leasing contracts. Any surplus achieved by the financial services segment above the agreed interest margin is allocated to the operating profit generated by the LMH and STILL segments. The LMH and STILL segments and the financial services segment are reported separately. Transactions between each of the segments are presented on an arm’s-length basis. For more information, see section 4.3 of the 2011 Management Report and the respective Note [36].

Procurement Price Volatility

In Q1/2012 commodity prices evolved in different directions. Whereas oil prices were further up by 13% versus 2011, steel prices were down by 7%, steel bars down by 3%, and aluminium down by 2%. Scrap and copper prices remained flat on 2011 level. In general, approximately 26% of the cost of materials required to manufacture our industrial trucks is directly impacted by commodity price movements, including steel, scrap and copper. Raw material price changes become effective with a time delay and will gradually impact our cost of materials going forward.

Procurement, Suppliers and Purchasing

In Q1/2012 supply limitations were due to operational and financial problems of very few suppliers in Europe. Those are closely managed by our purchasing organization with our own staff at those suppliers in order to ensure continued supply to KION Group.

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