Financial position

Main financing activities in the reporting period

Following completion of the main funding activities in the first nine months of 2013, the KION Group can report a healthy equity ratio of 26.4 per cent. As at the reporting date, net debt was roughly 1.5 times adjusted EBITDA for the past twelve months (excluding the hydraulics business) and was underpinned by a far lower level of long-term financial debt with a generous maturity profile and advantageous conditions. The funding arrangements therefore also contribute to the Company’s stable basis for growth.

In connection with the IPO, the KION Group had agreed a new revolving credit facility with a group of banks for € 995.0 million with a term to maturity of five years after the IPO. Combined with the lower margins, this credit facility offers more favourable credit terms in line with those typically available to comparable listed companies.

On 2 July 2013, the outstanding proceeds were received from the share premium arising from the placement of the new shares and the capital increase from Weichai Power. They totalled € 710.9 million (after deduction of banking fees amounting to € 701.6 million).

These proceeds, along with part of the new credit facility and existing cash reserves, was used to repay in full the long-term bank loans under the acquisition finance arrangements (Senior Facilities Agreement or SFA) of € 1,078.1 million in July 2013. In addition, the floating rate note, which was due to mature in 2018 and amounted to € 175.0 million, was repaid in full.

On 28 August 2013, KION GROUP AG began to buy treasury shares for an employee share programme. By 30 September 2013, it held 200,000 treasury shares, funded from a total of €5.6 million in cash and cash equivalents.

Analysis of capital structure

Equity

After capital increases in the first half of the year, the KION Group’s equity changed only marginally in the third quarter. As at 30 September 2013, it amounted to € 1,574.5 million, which was far higher than the figure of € 660.7 million reported at the end of 2012. The reduction in debt in the third quarter caused the equity ratio to rise to 26.4 per cent as at 30 September 2013, compared with 10.6 per cent as at 31 December 2012 and 22.7 per cent as at 30 June 2013.

Financial debt

Since full repayment of the acquisition finance of € 1,078.1 million and the floating rate note with a volume of € 175.0 million, the KION Group’s long-term borrowing has comprised two secured corporate bonds with a total volume of € 975.0 million. 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 fixed-rate tranche of a bond issued in 2011, which has a volume of € 325.0 million and a maturity date of 2018, remains unchanged.

Excluding guarantees and other loan obligations from foreign subsidiaries, € 300.0 million was drawn down from the newly agreed revolving credit facility of € 995.0 million in the third quarter. Of the amount drawn down, € 30.0 million was paid back soon after, resulting in a current financial liability as at 30 September of € 270.0 million. As at 30 September 2013, the KION Group had unused loan facilities worth € 784.1 million that it could draw down at short notice.

After deduction of cash and cash equivalents, the remaining net financial debt came to € 1,056.6 million as at 30 September 2013 (31 December 2012: € 1,790.1 million). This included borrowing costs of € 17.9 million (31 December 2012: € 34.1 million).

Capital expenditure

Capital expenditure amounted to € 79.2 million in the first nine months of the year, which was down by 18.1 per cent on the same period of 2012 (Q1—Q3 2012: € 96.8 million). In both the Linde Material Handling and STILL segments, the volume was below that of the comparable prior-year period, which had still included the hydraulics business.

Analysis of liquidity

Net cash provided by the KION Group’s operating activities totalled € 136.4 million (Q1—Q3 2012: € 135.1 million). The improvement in cash flow from operating activities was achieved despite the fact that the previous year’s figure included the net cash provided by the hydraulics business and that EBITDA declined in the reporting period.

Net cash used for investing activities amounted to € 68.7 million (Q1—Q3 2012: net cash used of € 96.2 million). This was attributable to lower capital expenditure in the Linde Material Handling and STILL segments, although the hydraulics business had still been included in the figure for the first nine months of 2012. The net cash used for the acquisition of the Arser Group in Turkey amounted to € 3.9 million (after deduction of the cash received). In the first nine months of 2012, € 9.7 million of the outflow of funds was attributable to the acquisition of a majority stake in Linde Creighton. Free cash flow in the reporting period was € 67.7 million, which was substantially higher than in the first nine months of 2012 (€ 38.9 million). The cash flow from financing activities amounted to minus € 395.1 million. Financial debt increased by € 649.0 million due to the issuance of the senior secured bond in February 2013. Excluding guarantees and other loan obligations from foreign subsidiaries, € 270.0 million had also been drawn down from the new revolving credit facility as at 30 September 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 September totalled € 741.8 million. In total, these transactions plus funds drawn from existing cash enabled the repayment of financial liabilities of € 1,732.3 million relating to the Senior Facilities Agreement (SFA) as well as the early redemption of the 2011 / 2018 floating rate note amounting to € 175.0 million. In the third quarter, 200,000 treasury shares worth € 5.6 million were purchased on the stock exchange for the new employee share programme. The cash payments of € 27.3 million arising from other financing activities (Q1—Q3 2012: € 7.0 million) included costs of € 42.3 million (Q1—Q3 2012: € 13.5 million) incurred in connection with the debt and equity transactions mentioned above. Regular interest payments were € 9.8 million higher than in the first nine months of 2012 and amounted to € 97.4 million in the reporting period. These interest payments included a non-recurring outflow of funds of € 14.4 million resulting from the termination of interest-rate hedging instruments in connection with the previous acquisition finance arrangements. Cash flow from financing activities in the first three quarters of 2012 (minus € 257.0 million) was also largely attributable to the repayment of loans. The positive free cash flow and the existing cash from 2012 were predominantly used for the repayments. Overall, this resulted in a sharp contraction in cash and cash equivalents, which fell from € 562.4 million as at the end of 2012 to € 230.6 million as at 30 September 2013.