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 the KION Group, 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. The KION Group does not undertake to update forward-looking statements to reflect subsequently occurring events or circumstances. Furthermore, the KION Group cannot guarantee that future performance and actual profits generated will be consistent with the stated assumptions and estimates and can accept no liability in this regard.
Actual business performance may deviate from our forecasts due, among other factors, to the opportunities and risks described here. Performance particularly depends on macroeconomic and industry-specific conditions and may be negatively affected by increasing uncertainty or a worsening of the economic and political situation.
Forecast for 2013
The KION Group achieved the forecasts that it had made despite challenging conditions in the economy as a whole and in the material handling sector. Order intake and revenue were almost at the same level as in 2012. Currency effects had a negative impact on these figures, which is why the original forecasts made in the 2012 group management report were adjusted slightly downwards in the interim financial report for the third quarter of 2013. There was another increase in adjusted EBIT and the EBIT margin, as had been anticipated. One of the contributing factors here was the further rise in the proportion of total revenue generated by the service business, which increased to 43.9 per cent – above the target of 40 per cent. The KION Group generated much higher net income of €138.4 million, as had been forecast in the 2012 consolidated financial statements.
The forecasts in this section are derived from the KION Group’s multiple-year market, business and financial plan, which is based on certain assumptions. Market planning takes into account macroeconomic and industry-specific performance, which is described below. Business planning and financial planning are based on expected market performance, but also draw on other assumptions, such as those relating to changes in the cost of materials, the KION Group’s ability to command higher prices from customers and movements in exchange rates.
Expected macroeconomic conditions
In the opinion of the International Monetary Fund (IMF), the pace of global economic growth will pick up slightly in 2014. The global economy is expected to grow at a rate of 3.7 per cent and the eurozone at 1.0 per cent. The economic situation in emerging markets is stabilising, and moderate growth is anticipated in those countries. The forecast for economic conditions is based on the assumption that the eurozone will continue to stabilise, monetary policy will become increasingly more restrictive and be adjusted to reflect the faster pace of growth, and fiscal policy will remain cautious. The Chinese government is not expected to launch any major growth initiatives.
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. In 2013, the global market for industrial trucks expanded by around 7 per cent, reaching a record level of more than one million new trucks ordered. This was primarily driven by a recovery of demand in China and North America. Given the positive economic prospects and more optimistic investment climate, the KION Group anticipates a further increase, albeit moderate, in the worldwide market volume in 2014. The major driving forces are likely to be the further stabilisation of demand in western Europe, a sustained uptrend in North America and growth in fast-growing Asian and eastern European markets.
Market expectations are also positive over the longer-term perspective. Based on current macroeconomic forecasts and in view of the rise in global trade volumes, the KION Group predicts an average annual growth rate (in units) of about 4 per cent for the global market over the next few years and does not expect there to be significant changes in the proportion of total revenue generated by each product segment.
Expected business situation and financial performance
The KION Group aims to unlock the full potential of the western European markets and emerging markets in 2014.
The KION Group expects a slight increase in both its order intake and its consolidated revenue compared with 2013. Contributing factors here will be a recovery of the markets in western Europe and increased market share, above all in fast-growing markets, where the KION Group also wants to build on its strong position. Service business in western Europe and the emerging markets will continue to play a significant role in 2014. From a regional perspective, the KION Group expects Asia, eastern Europe and the United States to provide particularly strong impetus, assuming only moderate exchange-rate fluctuations.
Based on market expectations, the Group forecasts a significant year-on-year rise in adjusted EBIT resulting from the anticipated rise in revenue and further improvements to processes and cost structures, for example in sales and development.
The margin is also likely to increase compared with 2013 owing to the Group’s continued ability to command higher prices, a more favourable cost situation following the closure of the Merthyr Tydfil plant, implementation of the modular strategy and better production capacity utilisation at existing plants. In addition, the forecast is based on the assumption that the cost of materials will rise only moderately and that there will be negative currency effects.
Free cash flow is also expected to be considerably higher in 2014 than in the previous year. The main factor will be cash flow from operating activities, which will be boosted by increased EBIT, among other things. Taxes that were paid in 2013 in connection with the sale of the hydraulics business will not be due in 2014. With regard to cash flow from investing activities, the KION Group anticipates higher capital expenditure than in 2013.
Expected financial position
The KION Group improved the maturity profile of its borrowing in February 2013 by issuing a bond and then significantly reduced its debt in June when it made its initial public offering. These measures, combined with its good operating performance, meant that the KION Group had reduced net debt to below €1 billion by the end of 2013.
The Group intends to continue down this path in 2014, using cash flow from operating activities to further lower net debt and further optimising its capital structure and funding structure.
Overall statement on expected performance
The basis for the long-term success of the KION Group is the strong position occupied by its global and regional brands in western Europe and the emerging markets. The global brands Linde Material Handling and STILL, in particular, safeguard their technology leadership and underline their status as premium brands by maintaining high levels of capital expenditure and R&D spending.
Overall, the KION Group is forecasting profitable growth for 2014 and aims to achieve a sustained improvement in its market positions worldwide. The successful IPO in 2013 lays the foundations for further optimisation of the Group’s financial position.