Financial position

Main financing activities in the reporting period

The KION Group’s financial position improved significantly in the first half of 2013. The maturity profile of its financial liabilities was extended by the issuance of a senior secured bond in February 2013, while the funds received on 2 July 2013 as a result of the IPO (share premium) were used to repay a substantial proportion of the Group’s financial liabilities in the second half of 2013 (see Events after the reporting date).

Analysis of capital structure

Equity

The KION Group substantially increased its equity by means of three capital increases associated with the IPO. The increase in Weichai Power’s shareholding from 25.0 per cent to 30.0 per cent added € 328.4 million to the Group’s equity. The conversion into equity of a loan provided by Superlift Holding S.à r.l., Luxembourg, also increased equity by € 118.1 million and enabled borrowings to be reduced accordingly. The public offering of 17.2 million shares resulted in an increase in equity as at 30 June 2013 of € 413.4 million less transaction costs. The Group’s equity ratio improved from 10.6 per cent on the reporting date in 2012 to 22.7 per cent in mid-2013. >> TABLE 13

Financial debt

A senior secured bond with a total volume of € 650.0 million and a maturity date of 2020 was issued in February 2013. It consists of a fixed-rate tranche of € 450.0 million and a floating-rate tranche of € 200.0 million. The issuance of this bond brings the total par value of debt capital issued to € 1,150.0 million. In addition to the measures taken in 2012, the new bond has enabled the KION Group to reduce its liabilities to banks by a corresponding amount (after deduction of transaction costs), thereby extending the maturity profile of its debt by a significant period. Consequently, there has been no material change in the total amount of financial debt as a result of having issued the bond.

After deduction of cash and cash equivalents, the remaining net financial debt came to € 1,701.6 million at the end of June 2013 (31 December 2012: € 1,790.1 million). This included borrowing costs of € 38.6 million which were higher than those at the end of 2012 (€ 34.1 million). The net financial debt reported as at 30 June 2013 did not take into account the total share premium of € 701.6 million (after deduction of bank charges) arising from the capital increase from Weichai and the IPO. The share premium arising from these capital increases was reported in the statement of financial position under Other current assets until the funds were received on 2 July 2013. >> TABLE 14

Capital expenditure

Capital expenditure amounted to € 52.0 million, which was down by 11.7 per cent on the first half of 2012 (€ 58.9 million). In both the Linde Material Handling and STILL segments, the volume was below that of the comparable prior-year period, which was characterised by relatively high capitalised development costs.

Analysis of liquidity

Net cash provided by the KION Group’s operating activities totalled € 55.9 million (H1 2012: € 68.7 million). Higher consulting fees and tax payments had the effect of reducing the net cash provided, while the cash flow for the same period in 2012 also included the hydraulics business.

Net cash used for investing activities amounted to € 40.4 million (H1 2012: net cash used of € 60.6 million). This was attributable to lower capital expenditure in the Linde Material Handling and STILL segments as well as the absence of any significant amounts of cash used for acquisitions, unlike the previous year when a majority stake was acquired in Linde Creighton.

As a result of the factors described above, the free cash flow in the reporting period was € 15.6 million, which was substantially higher than in the first half of 2012 (€ 8.1 million).

The cash flow from financing activities amounted to minus € 58.6 million. Financial debt increased by € 649.0 million due to the issuance of the senior secured bond in February 2013. As a result of the capital increases from Weichai and the IPO at the end of June 2013, the capital contributions made up to 30 June totalled € 30.9 million. In total, transactions carried out in the first half of the year enabled the repayment of financial liabilities amounting to € 654.2 million relating to the Senior Facilities Agreement. The cash payments of € 30.5 million arising from other financing activities (H1 2012: inflows of € 16.6 million) included costs of € 18.9 million incurred in connection with the debt and equity transactions mentioned above. Regular interest payments were € 5.1 million lower than in the first half of 2012 and amounted to € 52.0 million in the reporting period. The cash flow from financing activities for the first half of 2012 (minus € 201.9 million) was largely attributable to the repayment of loans.

Together, the positive free cash flow and the net cash used for financing activities resulted in a reduction in cash and cash equivalents from € 562.4 million as at 31 December 2012 to € 517.7 million. >> TABLE 15