Financial position

The KION Group made further improvements to its funding structure during the reporting period by repaying two corporate bonds ahead of schedule in April 2014 and, at the same time, taking on bank debt at a lower rate of interest.

Analysis of capital structure

Long-term borrowing amounted to €973.0 million as at 30 September 2014 and largely comprised the fixed-rate tranche of the corporate bond issued in 2013, which is due to mature in 2020 (€450.0 million), and the long-term portion of the revolving credit facility (€523.0 million). As at the reporting date, an amount of €108.7 million had also been drawn down from the revolving credit facility on a short-term basis (31 December 2013: €184.4 million). The unused, unrestricted loan facility therefore stood at €611.3 million as at 30 September 2014, or €741.7 million including unrestricted cash and cash equivalents.

At €1,140.3 million, financial debt was lower overall than at the end of last year (31 December 2013: €1,198.6 million). After deduction of cash and cash equivalents of €130.8 million, the remaining net financial debt came to €1,009.5 million (31 December 2013: €979.3 million). Net debt was 1.3 times adjusted EBITDA for the past twelve months and was therefore greatly improved relative to earnings in the third quarter. >> Table 12

At €711.6 million, pension provisions were higher than they had been at the end of last year (31 December 2013: €560.1 million), largely owing to interest rate changes.

The lease liabilities resulting from sale and leaseback transactions used to fund long-term leases with end customers rose to €667.6 million (31 December 2013: €617.1 million) due to further growth in the volume of financial services activities. Of this amount, €429.7 million related to non-current lease liabilities and €237.9 million to current lease liabilities.

Other financial liabilities also included liabilities of €343.7 million from sale and leaseback transactions used to finance the short-term rental fleet (31 December 2013: €327.5 million).

The level of equity changed only marginally. Despite the other comprehensive loss of €106.8 million caused by the reduction in the interest rate for pensions, equity remained virtually the same as at the end of last year at €1,616.0 million (31 December 2013: €1,610.0 million) thanks to the encouraging earnings performance in the first nine months of 2014. The equity ratio of 26.2 per cent was also at roughly the same level compared with the end of the previous year (31 December 2013: 26.7 per cent). >> Table 13

Analysis of capital expenditure

The KION Group’s capital expenditure reached €87.4 million, compared with €79.2 million in the first nine months of 2013. As was the case in 2013, this spending mainly constituted capitalised development costs in the Linde Material Handling and STILL brand segments. In addition, the KION Group continued to modernise its production sites, especially in Germany. A portion of capital expenditure was channelled into ongoing improvements to the IT infrastructure.

Analysis of liquidity

Net cash provided by the KION Group’s operating activities totalled €293.7 million (Q1 – Q3 2013: €243.6 million). The year-on-year increase in cash outflows resulting from the change in working capital plus tax payments contrasted with significant effects such as depreciation, amortisation and impairment as well as the loss from equity-accounted investments included in EBIT. Overall, there was a year-on-year rise in the net cash provided by operating activities.

The net cash used for investing activities increased to €196.2 million (Q1 – Q3 2013: €180.5 million; adjusted for rental business, which was previously reported under cash flow from operating activities). Cash payments made in respect of capital expenditure and intangible assets rose by €8.2 million to €87.4 million. Net disbursals for the rental fleet business advanced to €122.9 million (Q1 – Q3 2013: €107.2 million), primarily due to replacement investment.

Free cash flow increased year on year to €97.5 million (Q1 – Q3 2013: €63.1 million).

Cash flow from financing activities amounted to minus €187.8 million (Q1 – Q3 2013: minus €390.5 million) and included the net cash of €34.5 million used to pay a dividend of €0.35 per share to the shareholders of KION GROUP AG in the second quarter. The net repayment of financial debt in the period under review totalled €70.9 million. The financial debt taken up, which came to €1,133.5 million and was largely drawn down from the revolving credit facility, was more than offset by repayments totalling €1,204.5 million. These repayments included €525.0 million in respect of the early redemption of the bond tranches. Current net interest payments resulted in an outflow of funds of €74.9 million, which included the early repayment charges of €14.8 million paid in relation to redemption of the bond tranches in the second quarter. In the third quarter, 51,000 treasury shares worth €1.5 million were purchased on the stock exchange for the employee share programme.

Overall, cash and cash equivalents had declined to €130.8 million as at 30 September 2014, down by a total of €88.5 million compared with the end of 2013. >> Table 14