Letter

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

We are witnessing a revolution. Not one that sweeps aside governments but one that will fundamentally affect how all of us live and work. The distinction between goods and services in a digital world is becoming blurred. In factories, products and machines are starting to talk to each other. Racks determine for themselves when they need to be replenished, shipping containers place the order for their loading, forklift trucks organise themselves autonomously. I am, of course, referring to the fourth industrial revolution – known as the Industrial Internet of Things or, in Germany, Industrie 4.0. A sea change that would be inconceivable without Intralogistics 4.0.

The ones who are benefiting are our customers as they can use their warehouses, production lines and distribution structures much more efficiently than in the past. However, it is not employees who are posting their status on social media, sharing their location or describing what they are currently doing. It is our trucks! These are genuine innovations that offer added value for our customers.

Intralogistics 4.0 is already a reality in the KION Group. Our trucks are controlled intelligently and completely electronically, with a broad range of assistance systems that mean better safety and efficiency for drivers. Sophisticated fleet data management solutions, such as ‘connect:’ from Linde and FleetManager from STILL, capture and analyse huge quantities of information, e.g. operating hours, distances covered, speeds and energy consumption, that can be used for preventive maintenance and other purposes. The overarching objective is always to optimise the deployment of trucks and reduce costs for customers. KION brand companies already offer award-winning automation solutions, such as STILL’s iGoEasy. And since the acquisition of Egemin Automation, our portfolio has also included comprehensive intralogistics systems that combine warehouse management software with automated trucks. We are connecting machinery, products and processes, thereby laying the foundations for Industry 4.0, for intelligent supply chains in factories and warehouses.

Together, Egemin Automation – our seventh brand company – and the KION Group have vast potential for innovation that will enable us to provide the best possible solutions with which to satisfy future customer requirements around Intralogistics 4.0. The knowledge built up by our truck brands over the decades, combined with the almost as extensive experience of the automation experts at Egemin, opens up completely new opportunities – and is a major unique selling proposition for the KION Group. Welcoming Egemin as the new member of the KION family is a further milestone in the implementation of our Strategy 2020 and will help to secure our profitable growth in the years to come. To see Egemin’s vision for the future of logistics, please visit kiongroup.com/industrial_revolution.

Focus on quality, customers and innovation

We have made good progress in turning our Strategy 2020 into reality. We are revamping our plants in Europe, Asia and the Americas so that they are even better able to meet future market requirements. Between now and 2021, we will optimise the efficiency of our core plants in Aschaffenburg and Hamburg as part of a seven-year project involving total capital expenditure of €83 million. Our new plant in Stríbro, Czech Republic, took less than a year to build and is what is known today as a ‘smart factory’.

We have made good progress in turning our Strategy 2020 into reality. We are revamping our plants in Europe, Asia and the Americas so that they are even better able to meet future market requirements. Between now and 2021, we will optimise the efficiency of our core plants in Aschaffenburg and Hamburg

as part of a seven-year project involving total capital expenditure of €83 million. Our new plant in Stríbro, Czech Republic, took less than a year to build and is what is known today as a ‘smart factory’.

Manufacturing got under way at the plant in January 2016. Constructing it on a greenfield site provided a good opportunity to design the processes and structures from a completely new perspective. KION Stríbro is a factory where digitised manufacturing of the future can take place. Ultra-modern IT systems, such as Extended Warehouse Management and Manufacturing Execution System, provide support for the production processes at the new site, enabling us to monitor and control assembly digitally. The first elements, such as real-time process tracking and networking of all processes, are already up and running, and there are more steps to come. About 150 people are working in Stríbro for now. We have capacity to build around 12,000 trucks per year there. The innovation section of this annual report gives you an insight into our newest, most modern KION plant.

Just as important to our profitable growth is our global modular and platform strategy in which the brand companies use shared modules to build their own products for our core market of western Europe. These modules include cutting-edge drive technologies, such as lithium-ion batteries. In all other parts of the world, we deploy shared global platforms for the volume and economy segments. The first market selected for these platforms was China, where we presented eleven new products last year. The necessary expertise is supplied by our developers in the southern Chinese city of Xiamen, where we have been represented by our Linde brand for more than 20 years. Our Chinese brand Baoli also unveiled the D Series, its first economy platform for global use. The advances that the KION Group is making worldwide are exemplified by our vertical order picker for the North American market, which features in the second article in the innovation section of this annual report.

All of these are far-reaching changes, and our own organisation too must adapt so that we can meet the needs of customers and markets even more effectively. The regions outside Europe now have more responsibility, enabling us to respond more flexibly to our customers’ wishes. At the same time, the brand companies are collaborating even more closely. This is demonstrated by KION India: in India, we sell Baoli forklifts and build trucks for our main Indian brand, Voltas, partly using tried-and-tested technology from our Italian regional brand, OM STILL.

Specifically, the realignment of the organisational structure means that the Group is now managed as four operating units. Competition has become a lot tougher, especially in Europe. That is why the Linde Material Handling EMEA and STILL EMEA operating units are focusing their strengths on Europe, the Middle East and Africa. The KION APAC and KION Americas operating units hold cross-brand responsibility for the Asia-Pacific region and the Americas respectively. These four operating units oversee marketing, sales, service and the factories in their regions. They also hold P&L responsibility. The units are supported by overarching group functions and the KION technical functions, which are now managed centrally.

Specifically, the realignment of the organisational structure means that the Group is now managed as four operating units. Competition has become a lot tougher, especially in Europe. That is why the Linde Material Handling EMEA and STILL EMEA operating units are focusing their strengths on Europe, the Middle East and Africa. The KION APAC and KION Americas operating units hold cross-brand responsibility for the Asia-Pacific region and the Americas respectively. These four operating units oversee marketing, sales, service and the factories in their regions.

They also hold P&L responsibility. The units are supported by overarching group functions and the KION technical functions, which are now managed centrally.

Synergies in product development

Since summer 2015, Chief Technology Officer Dr Eike Böhm has held groupwide responsibility for all research and development activities for counterbalance trucks, warehouse technology and products destined for the global markets. He is also in charge of module and component development, innovation, product strategy, groupwide procurement, quality management and the production system. Bringing our Group’s technical functions together under one roof will play a valuable part in helping to fully harness the potential of cross-brand synergies in product development while we of course continue to pursue our successful multi-brand strategy. The areas of technology in which we want to take the innovative strength of the KION brands to a whole new level are described in the joint interview at the start of the innovation section of this annual report.

Order intake, revenue and EBIT at record levels

You can see that we undertook a great deal in 2015 – and, at the same time, continued to grow profitably and strengthen our market position. We benefited from our strong position as market leader in western Europe, where the market fared well. In China, we were able to outperform the weak market because we are well placed with regard to warehouse technology and have a high proportion of service business. Our global order intake rose both in terms of units (165,823 trucks, up by 7.0 per cent) and in terms of value (€5,215.6 million, up by 9.3 per cent). We increased our revenue by 9.0 per cent to €5,097.9 million while the order book was up by 13.1 per cent to €864.0 as at 31 December 2015. And our profitability reached the same very high level as 2014. EBIT of €482.9 million gave us an EBIT margin for 2015 of 9.5 per cent – one of the best ratios in our sector.

We owe this success to our almost 24,000 extremely motivated, highly skilled and fully committed employees. I would like to take this opportunity, on behalf of the entire Executive Board, to offer them my sincere thanks for their fantastic efforts.

What challenges, opportunities and potential do our employees see in our Company? This was the question that we put to around 1,800 managers in mid-2015. The survey gave us a clearer picture of how we want to take our business and our corporate culture forward together.

KION Group turns ten

The KION Group will mark its tenth anniversary this year. We have come a long way in a decade, growing from a European supplier into a global player in the material handling industry – despite a severe economic crisis. Around 1.2 million trucks are in operation in our customers’ companies around the world. These provide the basis for our profitable service business, from which we again generated approximately 45 per cent of our revenue last year.

We are looking to the future – to many new opportunities for adding value for our customers. That is why the theme of this annual report is ‘Moving Forward – Innovation’. Always being able to take the next step means being on a firm footing, knowing which direction to take, always focusing on your destination. After all, we do not want to simply witness the fourth industrial revolution. Through our forklift trucks, warehouse technologies and services, we touch the lives of millions and millions of people around the world every day. That is why we are seizing the opportunities to help shape this revolution and ensure it creates benefits for our customers.