Outlook

Forward-looking statements

The forward-looking statements and information given below are based on the Company’s current expectations and assessments. Consequently, they involve a number of risks and uncertainties. Many factors, several of which are beyond the control of the KION Group, affect the Group’s business activities and profitability. Any unexpected developments in the global economy would result in the KION Group’s performance and profits differing significantly from those forecast below. The KION Group does not undertake to update forward-looking statements to reflect subsequently occurring events or circumstances. Furthermore, the KION Group cannot guarantee that future performance and actual profits generated will be consistent with the stated assumptions and estimates and can accept no liability in this regard.

Actual business performance may deviate from our forecasts due, among other factors, to the opportunities and risks described here. Performance particularly depends on macroeconomic and industry-specific conditions and may be negatively affected by increasing uncertainty or a worsening of the economic and political situation.

Forecast for 2015

The overall assessment of the financial situation compares the forecasts included in the 2014 group management report and subsequent interim reports with actual performance in 2015.

Assumptions

The forecasts in this section are derived from the KION Group’s multiple-year market, business and financial plan, which is based on certain assumptions. Market planning takes into account macroeconomic and industry-specific performance, which is described below. Business planning and financial planning are based on expected market performance, but also draw on other assumptions, such as those relating to changes in the cost of materials, the KION Group’s ability to command higher prices from customers and movements in exchange rates.

Expected macroeconomic conditions

According to the January outlook of the International Monetary Fund (IMF), the pace of global economic growth will gradually accelerate in 2016, both in the developed economies (growth of 2.1 per cent) and in the emerging markets (growth of 4.3 per cent). The IMF believes that China’s contribution to worldwide growth is likely to fall further in view of its economic restructuring. Overall, the IMF expects the global economy to grow at a rate of 3.4 per cent and the eurozone at 1.7 per cent in 2016. The IMF also predicts comparatively low growth in global trade.

The outlook for macroeconomic conditions is based on the assumption that monetary policy in the eurozone will remain expansionary, interest rates will rise slightly in the United States and the oil price will stay low, which will boost consumption.

Expected sectoral conditions

The overall market for industrial trucks will continue to depend heavily on economic conditions in key sales markets, with the level of capital investment and the growth in global trade being particularly crucial. Given the overall economic prospects, the KION Group expects a slower rate of global market growth this year. The 2015 trend is likely to continue, with a sustained rise in the number of trucks ordered in Europe and North America along with further contraction of the Russian and Brazilian markets. Following a sharp decline last year, KION expects China to stabilise although conditions will remain challenging.

Market expectations remain positive over the longer-term perspective. Over the coming years, the KION Group expects the average growth of the global market to be higher than that of global gross economic growth (GDP), with above-average growth in demand for electric forklift trucks and warehouse trucks. Moreover, the increasing number of trucks in the field – around nine million new trucks sold worldwide over the past ten years alone, spurs additional demand for spare parts and other aftersales services. Further potential for the future is also offered by increasing connectivity and automation, not only in terms of products but also in relation to services and end-to-end system solutions.

Expected business situation and financial performance

In 2016, the KION Group aims to build on its successful performance in 2015 and, based on the forecasts for market growth, achieve further increases in order intake, revenue and adjusted EBIT. The order intake of the KION Group is expected to be between €5,350 million and €5,500 million. The target figure for consolidated revenue is in the range of €5,200 million to €5,350 million. The KION Group predicts higher volumes of revenue and orders, particularly in western Europe.

The targeted range for adjusted EBIT is €510 million to €535 million. The adjusted EBIT margin is predicted to increase above the margin of 9.5 per cent that was generated in 2015. This improvement will stem from significant positive effects, such as a further increase in the efficiency of the production network. Free cash flow is expected to be in a range between €280 million and €320 million after taking account of the acquisition of Retrotech Inc. ROCE is expected to go up slightly. The forecast is based on the assumption that material prices will hold steady and the current exchange rate environment will remain as it is.

Expected financial position

The fixed-rate (6.75 per cent) tranche of the bond issued in February 2013, which has a volume of €450.0 million, formed part of the Company’s funding structure during 2015 and was repaid in full ahead of schedule on 15 February 2016. This bond, together with amounts drawn down from a credit facility that, like the bond, dates from before the IPO, were repaid using funds from the new syndicated loan agreement totalling €1.5 billion, which has been taken out on terms with investment-grade characteristics. The new funding significantly reduces interest costs and provides KION with considerable flexibility for continuing with its strategy of profitable growth. In 2016, the KION Group plans to use free cash flow to lower its net debt still further. > TABLE 034

Overall statement on expected performance

The basis for the long-term success of the KION Group will continue to be the strong position occupied by its international and national brands in western Europe and the emerging markets. The international brands Linde Material Handling and STILL, in particular, safeguard their technology leadership and underline their status as premium brands by maintaining high levels of capital expenditure and R&D spending.

By pursuing its Strategy 2020 and other measures, the KION Group believes it will continue along its path of profitable growth and aims to achieve a further improvement in its market position worldwide in 2016.