Opportunity report

Opportunity management, like risk management, forms a central part of the Company’s day-to-day management. Individual areas of opportunity are identified within the framework of the strategy process. Opportunities are determined and managed on a decentralised basis in line with the Group strategy.

There are monthly reports on the opportunity situation as part of the regular Group reporting process. As a result, the KION Group is in a position to ascertain at an early stage whether market trends, competitive trends, or events within the Group require individual areas of opportunity to be re-evaluated. This may lead to reallocation of the budgets earmarked for the realisation of opportunities. Such decisions are made on the basis of the potential of the opportunity, drawing on empirical values. There is no management system for the evaluation of opportunities comparable to the system for risk management.

By ‘opportunities’, we mean positive deviations from the expectations set out in the outlook relating to the economic situation and the KION Group’s position. Opportunities are divided into three categories:

Market opportunities describe the potential resulting from trends in the market and competitive environment and from the regulatory situation.

Strategic opportunities are based on implementation of the Group’s strategy. They may lead to positive effects that exceed planning assumptions.

Business-performance opportunities arise in connection with operational activities along the value chain, such as restructuring or cost-cutting measures.

Market opportunities

The economy as a whole may perform better than expected in 2014. For example, the eurozone might stabilise at a faster rate than predicted by economic research institutes. This could also have a positive impact on growth rates in eastern Europe and other emerging markets. Moreover, circumstances may occur in the wider market at any time – such as quality problems at competitors or the effects of consolidation – that boost demand for products from the KION Group brands. New, unforeseen regulatory initiatives could be launched, for example the tightening of health and safety regulations or emissions standards, that would push up demand for the premium products offered by the KION Group brands. Average prices for procuring commodities over the year may be cheaper than anticipated.

Medium- to long-term market opportunities are presented, in particular, by:

• growing demand for intralogistics products and services as a consequence of globalisation, industrialisation and fragmentation of supply chains;
• high demand for replacement investments, especially in developed markets;
• the trend towards outsourcing service functions to industrial truck manufacturers;
• the trend towards trucks powered by electric motors – one of the KION Group’s particular strengths.

Strategic opportunities

The realisation of strategic opportunities is already largely reflected in the expectations regarding the KION Group’s financial performance in 2014. Nonetheless, its actual performance may be even more positive if the effects of individual measures exceed expectations. New strategic opportunities that were not part of the planning may arise over the course of the year, for example acquisitions and strategic partnerships.

The KION Group’s medium- to long-term strategic opportunities arise, in particular, from:

• strengthening of its market-leading position in core western European markets, especially in view of its leading technology and high proportion of customer-specific fittings;
• expansion of the service portfolio at every stage of the product lifecycle, taking advantage of the high number of trucks in use;
• harnessing of market potential in fast-growing regions;
• expansion of business in North America.

Business-performance opportunities

The expected consequences of the planned measures for increasing efficiency and restructuring – such as the closure of the plant in Merthyr Tydfil, which was the final phase in the restructuring of the European production sites – and the harnessing of intra-group synergies have also been incorporated into the 2014 forecast. Nevertheless, effects might occur that are better than had been expected.

The following occurrences may lead to profitability increases in the medium term:

• ongoing efficiency increases at production sites;
• use of global development capacities and product ranges;
• modular and platform strategy for products across the Group.