Our Strengths

We are the leading industrial truck manufacturer in Western and Eastern Europe and the second largest industrial truck manufacturer globally by revenue and units in 2011 (Source: McKinsey, Industrial Trucks Market, 2012). In China, we are the third largest supplier after Anhui Heli Co. Ltd, China and Hangcha Group Company Ltd, China, and the largest non-domestic supplier (Source: Global and China Forklift Industry Report 2012). Other than in China and Eastern Europe, we are also a leading industrial truck brand in other important growth markets such as South Asia and South and Central America (Source: calculated on the basis of WITS/FEM). In Brazil, we are among the market leaders for E-trucks and warehouse trucks (Source: calculated on the basis of WITS/FEM). We operate in a market with attractive dynamics. We believe that the growth in our market is driven by fundamental economic forces, including globalization, growing population and goods production, growing international trade and shipping volumes and increasing fragmentation of supply chains. This fragmentation of supply chains is a result of the global trend of increasing specialization in production and logistics and the outsourcing and relocating of production closer to consumers or to low-cost regions so as to realize cost savings. Growth is also being driven by increasing demand in growth markets, where expanding industrial production and mechanization drive the need for logistics and material handling solutions such as industrial trucks. In more mature markets, such as Western Europe, growth is more moderate, but stable supported by a combination of replacement demand generated by a large and stable installed truck base worldwide (approximately 685,000 trucks in the LMH segment and approximately 425,000 trucks in our STILL segment) and incremental sales built on technological innovation and new tailor-made offerings which combine a customized product and service package.

We focus purely on industrial trucks. We are the leading industrial truck manufacturer in Western and Eastern Europe and the second largest industrial truck manufacturer globally by revenue and units in 2011 (Source: McKinsey, Industrial Trucks Market, 2012). With our broad product range, our multiple brands and global reach we can benefit from economies of scale and achieve cost savings. We operate our business through a multi-brand strategy, allowing us to strategically position ourselves across a wide range of products, geographies, regions and customer preferences. Through our multiple brands, we offer a complete product range of new industrial trucks, from small low-lift pallet trucks to large trucks for heavy loads. Our customers are highly diversified in terms of end markets and geography, which reduces the risk profile of our business. Our top ten customers for the KION Group only represented 6.3% of our total revenue in 2012. Through our broad product range across many price segments and brands we share components and key modules. This allows us to benefit from economies of scale in R&D, procurement and production and to achieve high margins while offering competitively priced products. We have demonstrated our ability to expand our business by successfully entering growth markets in order to benefit from their development. Approximately 29% (in terms of units) of our new trucks were sold to customers in growth markets in 2012, mainly in China, Brazil and Eastern Europe. We believe that our strong local presence in these growth markets combined with our established local supply chains, manufacturing capacity, research and development facilities and service operations will allow us to capture additional sales volumes as these markets continue to grow. We have been operating in China since 1993. Our Linde brand was one of the first non-domestic brands present in China. Meanwhile, it has become the leading non-domestic brand in material handling in China (Source: Global and China Forklift Industry Report 2012). We currently have two production facilities in China (Jingjiang and Xiamen). Since the acquisition of Baoli in 2009, we have built up a strong sales and service network with approximately 150 sales and service locations which offers the full range of our products and addresses all segments of the market. Through our newly established strategic industrial cooperation with Weichai Group, a leading Chinese automotive and equipment manufacturer, which is part of the state-owned Shandong Heavy Industry Group, we believe we will be able to strengthen our position in China and other important Asian growth markets. Weichai Group has a service network in China with more than 500 service centers, which we can build on to expand our sales and service network in China. Through joint procurement and cooperation in the supply of components, Weichai Group will grant us access to its supplier base in China and Europe, which we anticipate will lead to cost savings. In addition, Weichai Group's large customer base in Asia offers significant cross selling opportunities.

We are at the technological forefront of the IC-truck and E-truck segments, and we believe we have a leading technological position in warehouse trucks. We believe our technological leadership, which is driven by high R&D spending, enhances the overall value proposition we offer to our customers and allows us to achieve premium pricing and high levels of repeat business. Our LMH and STILL brands are technological leaders whose innovations create tangible value for their customers by increasing efficiency and productivity of material handling by reducing total cost of ownership and operations. In 2012, our total R&D spending amounted to €120.2 million, which is equal to 2.5% of our total revenue for that year and capitalized R&D costs accounted for 33.0% of our total capital expenditure. During the last three years, our R&D spending has always been well in excess of €100.0 million and we maintained our R&D spending level during the financial crisis in 2008 and 2009. As of March 31, 2013 we had 852 employees (FTE) working in our R&D departments worldwide. We have eleven local research and development facilities worldwide that focus on specific customer requirements in local markets. Two of these local facilities are in China, one is in Brazil and one in India. We believe that as a result of our technological strength, the total cost of ownership and operation of our premium trucks is significantly lower than that of many other trucks. This is due to overall cost efficiency, higher productivity of the trucks, lower service costs, customer specific product options and higher residual values. This allows us to charge a premium for both our Linde and STILL products.

Our product portfolio covers all types of trucks (including IC-trucks and E-trucks, warehouse trucks, heavy trucks and very narrow aisle trucks) in all price segments of the markets (premium, value and economy). We offer a high level of innovation and customization for our trucks addressing the premium segment of the market and accommodating the wide range of applications for which our customers use their trucks. This comprehensive product portfolio is complemented by a broad service offering, comprising the supply of spare parts, repair and maintenance (increasingly based on multi-year service contracts), marketing of used trucks, provision of service packages, short-term rental, financing services and logistic systems solutions. In the financial year 2012, we generated €1,907.4 million of our revenue from our service offerings. This represented 40.4% of our total revenues in the financial year 2012. For the three-month period ended March 31, 2013, the revenue from our service offerings amounted to €473.7 million, compared to €471.8 million in the three-month period ended March 31, 2012. This revenue stream benefits from our installed truck base of over one million trucks worldwide (approximately 685,000 trucks in our LMH segment and approximately 425,000 trucks in our STILL segment) and is less volatile than new truck sales. Our global network of over 1,200 sales and/or service locations (owned or third party) in over 100 countries comprises approximately 12,850 direct and additional external multi-skilled service staff. In addition to supply of spare parts, repair and maintenance services, our service business offers customized service packages and offers short-term rental agreements. The after sales market offers attractive growth opportunities. In 2011, this market generated revenue of approximately €11 billion. 50% of this market is still held by third parties, including independent dealers (Source: McKinsey, Industrial Trucks Market, 2012). We are well positioned to increase our market share through our global sales network and the acquisition of selected dealers in regions with attractive growth opportunities. We also offer financing to our customers when purchasing new trucks. The arrangements can take different forms. Either the new trucks are sold to leasing companies which lease it to the customers with residual value or default guarantees or the trucks are sold under a sale-and-lease-back arrangement to a leasing company and subsequently sub-leased to a customer.

In 2012, we achieved an Adjusted EBIT margin of 9.3%. For the three-month period ended March 31, 2013, we achieved an Adjusted EBIT margin of 8.5%, compared to 8.8% in the three-month period ended March 31, 2012. Excluding the Former Linde Hydraulic Business, on a comparable basis our Adjusted EBIT margin for the three-month period ended March 31, 2012 amounted to 8.2%. Our Adjusted EBIT margin is driven by our technology and the cost efficiency of our products (which allow premium pricing), our broad product range with a high degree (approximately 30-40% of our new IC-truck and E-truck orders) of customization in the premium segment of the market, economies of scale due to our high production base and synergies within KION Group. Our efficient production operation after the successful implementation of cost reduction programs and the high share of revenue from service offering, which generate higher margins than the new truck business also drive our Adjusted EBIT margin. We have a strong track record of identifying and implementing programs to increase our efficiency, reducing fixed costs and driving up our margins. Measures we have implemented include the streamlining of our global production footprint through the closure of our former manufacturing site in Basingstoke, United Kingdom, the downsizing of two further sites in Germany, as well as the relocation and closure of two production sites in Bari, Italy, and Montataire, France. Furthermore, we announced in February 2013 the sale of our container handling business in Merthyr Tydfil, United Kingdom, to Konecranes. The transaction closed on April 30, 2013. Production in the plant in Merthyr Tydfil, United Kingdom, will cease during October 2013. At the same time we have been expanding our production in growth markets with reduced costs and increased localization of production lines and R&D to enable us to provide tailored products for specific markets. These measures have improved capacity utilization of our other production sites and lowered our fixed cost bases. In 2011, we rationalized our cost base in Europe through combining our OM and STILL segments, while maintaining our leading position in Italy utilizing the OM STILL brand. During the economic downturn in 2008 and 2009 we reduced our capacity worldwide by 20% and increased the numbers of temporary staff in our employee base in the period of recovery beginning 2010. These measures have lowered our fixed cost base and have significantly increased the flexibility of our cost structure. As a result, we have improved our ability to adjust our cost base to cyclical demand fluctuations. We continuously implement additional operational improvements, such as common production standards, modular concepts for industrial truck development, optimization of our product portfolio, design-to-cost initiatives and supplier management. We try to optimize our material costs by increasingly sourcing components from low cost countries (countries other than countries from the EU-15 area, EFTA, USA and Japan) and building up a global sourcing network. In 2012, 26% of our materials and components were sourced in low-cost countries and we intend to further increase this share.