Overall assessment of the economic situation
As the European market leader, the KION Group felt the impact of poor economic conditions in the established western European markets and customers’ reluctance to invest. The revenue growth that it has been aiming for has therefore been subdued so far this year. However, a decline in new truck business in Germany and the rest of western Europe contrasted with some positive trends: strong growth in China, Brazil and eastern European markets as well as a stable performance by the service business. The stable level of revenue achieved despite the challenging conditions shows that we have based our growth strategy on the right foundations. Moreover, we are constantly investing in the quality and innovativeness of our premium products. Because they deliver numerous benefits to our customers throughout their lifecycle, we have been able to largely offset the subdued level of unit sales through our prices.
The financial flexibility we need to continue pushing ahead with our international growth strategy has increased significantly as a result of the IPO and subsequent repayment of financial liabilities; the equity ratio has climbed to a healthy level. This is enabling us to gradually expand our service business, boost international sales and step up global marketing activities. The strategy also has a beneficial effect on costs, for example because of increased procurement in emerging markets.
The efficiency of the KION production sites has been further improved by restructuring the heavy truck business and their cost discipline was a significant factor in the moderate increase in adjusted EBIT (excluding the hydraulics business). Given the competitive situation, the adjusted EBIT margin of 9.1 per cent for the first nine months and 9.3 per cent for the third quarter was very satisfactory. Net income and thereby earnings per share were also helped by a reduction in debt, better funding conditions and non-recurring tax items.
Business situation and financial performance of the KION Group
Key influencing factors
To improve comparability between the results for the first nine months of 2013 and 2012, revenue and order intake are additionally stated – at the level of the Group and the Linde Material Handling segment – excluding the contributions made by the hydraulics business, which was sold in December 2012. Consequently, EBIT and EBITDA have been adjusted to take account of the contributions made by the hydraulics business on the basis of the financial results relating to the hydraulics business reported in the Linde Material Handling segment in 2012.
Please also note that the segment structure of the KION Group changed at the end of the 2012 financial year. Financial services activities were aggregated in the Financial Services segment to enable them to be managed separately.
The first-time adoption of new financial reporting standards (see Notes to the consolidated interim financial statements) did not have a major impact on the financial performance or financial position of the KION Group. Because the rules governing transition to the new IAS 19R “Employee Benefits” require it to be adopted retrospectively, the first three quarters of 2012 have been restated.