Dear shareholders, customers, partners, employees and friends of the KION Group,

For us, 2014 was a year that flew by – and I mean that literally. We travelled all over the world in order to advance our KION Group Strategy 2020. But as different as the market requirements in each region and country may be, our objective is always the same: to give our customers the best possible support so that they can achieve their goals and do business successfully. We can only truly be satisfied once our products and services offer them the utmost added value.

The objectives that we have set ourselves with the Strategy 2020 are ambitious. They focus on growth, profitability, capital efficiency and resilience. We want to remain highly profitable – even in the event of any future crises – and further consolidate our position as the most profitable supplier in our industry. In the medium term, we are aiming for EBIT margins of above 10 per cent.

2014: a record year

We continued to make good progress along this route in 2014, setting records with all of our major key performance indicators. Our adjusted EBIT improved by 6.3 per cent year on year to reach €442.9 million. The EBIT margin stood at 9.5 per cent, compared with 9.3 per cent in 2013. And we have started the new year with a substantial order book worth €787.2 million. So that we can continue to increase our profitability, we want to generate further dynamic growth, contain our fixed costs and reduce administrative expenses.

Our orders for new trucks advanced at a faster pace than overall market growth. In 2014, global demand for industrial trucks went up by 7.8 per cent to 1.1 million units. The KION Group’s new truck business expanded at an even healthier rate. We received orders for 155,000 new forklift trucks and warehouse trucks, which equates to a rise of 8.5 per cent compared with 2013. Our order intake increased in value by 8.6 per cent to €4.877 billion.

We also made further improvements to our funding structure. In spring 2014, we repaid corporate bonds with a total volume of €525 million. This will lower our interest payments – by more than €20 million per year – and give us greater flexibility as we forge ahead with our growth strategy.

Following the KION Group’s record year, conditions are therefore ideal for achieving our objectives going forward.

Streamlined management structures for faster decision-making

We streamlined the Group’s management structure at the start of this year. This means we can make decisions more quickly and more effectively. We are creating additional synergies between our brand companies and putting even greater effort into driving our innovations forward, yet still delivering our customary high level of quality. We are working to make our activities even more customer-centric than at present. Our aim is to transfer the market feedback from our sales teams and the ideas of our employees into product innovations and improvements with greater efficiency and speed.

The KION Group is more than the sum of its individual brands. This added value benefits not only our customers, but also our shareholders, partners and employees. This is precisely where this Company’s potential lies – in leveraging cross-brand synergies even more intensively than we do at present. We are continuing with our successful multi-brand strategy. At the same time, shared modules and platforms are helping us to reduce costs and bring new products to market more quickly.

The platforms are developed for fast-growing markets, primarily at the KION Group’s Chinese research and development centre. In Europe, the focus is on shared, cross-brand modules. The R&D teams in Europe and the growth markets are sharing knowledge and information extensively. Last year, we launched more than 20 new trucks and truck families.

Successful initiatives in North America

The platform strategy is one of the reasons for the strong position that the KION Group has held in the South American market for many years. But another excellent example of where and how we are deploying this strategy is North America, a vast market in which we want to establish a far stronger foothold as one of the world’s two largest suppliers of forklift trucks, warehouse technology and associated services. In order to increase market share in the USA, Canada and Mexico, we are adapting our product portfolio to local market requirements and offering new services.

The existing Linde plant in the US state of South Carolina was renamed KION North America in 2014 and now manufactures products for various KION brands. Our initiatives are already delivering results: whereas the North American market as a whole expanded by over 9 per cent to 219,500 units, KION North America boosted its order intake in units by 23 per cent.

Just like the Summerville plant, our new factory in the Czech Republic is to build trucks for multiple brands under one roof. Following the ground-breaking ceremony in November 2014, production at our Stríbro plant near Plzen is scheduled to begin in 2016 and the KION Group is investing around €12 million in setting it up. The aim is to be able to supply the markets of eastern and southern Europe even more efficiently, in line with one of the KION Strategy 2020 objectives of manufacturing trucks as near as possible to the customers who will buy them.

At the same time we are consolidating our leading position in our home market of western Europe. To further increase their competitiveness, we will invest roughly €60 million by 2021 at Linde Material Handling’s core plant in Aschaffenburg and around €23 million at the core STILL plant in Hamburg over the same period. This will create capacity for more growth in the medium term. The Linde MH and STILL plants in Aschaffenburg and Hamburg are the centres of excellence for their flagship IC trucks, electric trucks and reach trucks in the premium segment.

This will create capacity for more growth in the medium term. The Linde MH and STILL plants in Aschaffenburg and Hamburg are the centres of excellence for their flagship IC trucks, electric trucks and reach trucks in the premium segment.

Consolidation of market position in China

We of course have our sights firmly fixed on the incredibly important emerging markets of Asia. With our new truck orders up by around 13 per cent in China last year, we outperformed the world’s largest single market. This enabled us to cement our position as a major international supplier and the number three overall in the Chinese market. One of the driving forces is Baoli, our third global brand company after Linde and STILL. Serving the Chinese economy segment, the brand has a great deal of potential. It also supplies platforms for robust yet affordable trucks across the Group.

India is another example. This emerging market offers huge long-term opportunities for our growth and thus for the implementation of our KION Group Strategy 2020. Voltas Material Handling, one of the country’s two leading providers of forklift trucks and warehouse technology, now operates as KION India. This name change symbolises its membership of the KION Group family.

Around the globe, there are now 1.2 million trucks from the KION brands in operation for our customers. That is why the KION Group’s service business has continued to grow, contributing more than 45 per cent of the KION Group’s revenue in 2014. Our customers rely on our trucks and on their availability. Our service portfolio is therefore far more than a core element of our integrated business model, and the excellent results for 2014 are further proof of its effectiveness. At the same time, our service offering represents a major selling point for our new trucks.

Strong demand for employee shares

The popularity of our employee equity programme shows that it is not just my fellow Executive Board members and I who firmly believe in the KION Group’s strategy for success and its potential: our employees are convinced of it too. The programme was launched initially in Germany last year and is to be extended to other countries this year. We are making it possible for the KION Group’s employees to share in their Company’s success to a greater extent than they do at present. Almost a quarter of the employees who were eligible to take part took up this chance to acquire shares – and more than half of those opted for the maximum of 60 shares.

This high level of participation is an indication of the confidence that they have in our growth strategy. After all, our employees are the people who can best judge the potential that the KION Group holds. I would like to sincerely thank them for their hard work, their ideas and their loyalty. They are the face of the Group and enable it to be successful. And they are the central pillar of our Company.

Besides those in our workforce, we also welcomed many new shareholders from outside the KION Group. Since being included in the MDAX in September 2014, our shares have become even more visible and tradable. Following sales of shares by Goldman Sachs and KKR, the proportion of shares that can be publicly traded on the stock exchange is now more than 50 per cent. Our shareholders form the second pillar, providing the strength for us to continue along our path of profitable growth and achieve the objectives in our KION Group Strategy 2020.

Our customers – whose importance we highlighted at the start – of course form the third pillar. In the front part of this annual report, we describe how our products offer customers genuine added value and explain what they can and should expect from our trucks and services. We are there to help our customers achieve their goals. In every industry, in every region and around the clock:

We keep the world moving.

With best wishes,

Gordon Riske
Chief Executive Officer KION GROUP AG