Letter to shareholders

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

Last year marked the dawn of a new era for our Company, and also for others. By acquiring Dematic, a specialist for automation and supply chain optimisation, the KION Group has become a different, more diverse and more powerful group. We can now offer our customers around the world everything they need for their intralogistics – from basic hand pallet trucks to the most complex of automated material handling solutions – underpinned by what is probably the most extensive sales and service network in the industry worldwide. By offering a comprehensive portfolio from a single source, we are better placed than anyone else to help customers create value. That is why, now that Dematic has joined the KION family, we have also begun a new chapter for our industry.

Our world is evolving rapidly and our industry is being shaken up. How we live, how we work – digitalisation is changing everything. When you order goods online, they usually arrive the next day or, more and more frequently, the same day. Cities are growing and people are starting to prefer using their local shops again instead of going to a mall. Warehouses are therefore being relocated to distribution centres. Thriving companies are those that have automation solutions with which they can meet the constantly changing needs of today’s and, above all, tomorrow’s consumers.

All set for innovation and Intralogistics 4.0

Of course it is not only thanks to Dematic that the KION Group is fully equipped to fulfil – and benefit from – our customers’ expectations regarding innovation and solutions in the world of Intralogistics 4.0. Sophisticated technology has made our smart trucks even safer, and we have refined our fleet data management systems. We are breaking down the barriers of automation with STILL’s award-winning autonomous order picker, iGo neo: this intelligent truck follows the operator at every turn like a willing colleague. What’s more, Linde has expanded its range of Linde-MATIC trucks equipped with robotics, while Egemin has unveiled new, compact versions of its automatic guided vehicle systems. We have also made huge advances in cutting-edge drive technology: Linde and STILL went to market with the first counterbalance trucks powered by a lithium-ion battery in 2016.

Our traditional business of forklift trucks and warehouse technology on the one hand and the automation solutions from Dematic on the other are the perfect fit, and not only in technological terms. The two companies complement each other because they both have a strong market position and regional presence, which will open up cross-selling potential in the medium term. Dematic will make use of the KION Group’s outstanding reputation and the leading position of its brands in key markets such as Europe, China and Brazil, while KION benefits from Dematic’s strong standing in the US and European automation markets. Moreover, the combination of the KION Group’s comprehensive sales and service network and Dematic’s large installed base will also result in opportunities for further growth in the software and service businesses and in the retrofitting and upgrading of systems. The benefits that each company has for the other will also generate cost synergies.

KION Group is evolving in line with customer needs

Customer needs, market requirements, the technology: everything is changing from the ground up, and our Company is of course evolving at the same time. Since acquiring Dematic, we have put a new management and reporting structure in place for the KION Group. The Industrial Trucks & Services, Supply Chain Solutions and Corporate Services segments have replaced the Linde, STILL, Financial Services and Other segments. Industrial Trucks & Services consists of the KION Group’s existing business and is made up of four regional operating units: Linde Material Handling EMEA and STILL EMEA, which each concentrate on Europe, the Middle East and Africa, plus KION APAC and KION Americas, which hold cross-brand responsibility for the Asia-Pacific region and the Americas respectively. Supply Chain Solutions comprises the global Dematic operating unit, Egemin Automation and Retrotech, while Corporate Services includes head-office functions and groupwide services such as internal logistics and IT services.

In the magazine section of this annual report at www.kiongroup.com/A_New_Era, you can discover what this new era for the KION Group means – including on a personal level – to the people who head up our operating units. You will also find videos, photos and stories illustrating how the KION Group is actually tackling changing markets and technologies for the benefit of our customers.

New structures paying off

We have made significant progress with establishing our CTO organisation, which has been managed by our Chief Technology Officer Dr Eike Böhm since the summer of 2015. The organisation brings together key technical functions of the KION Group in a centralised structure. The responsibilities have now been fully defined, the CTO organisation’s more than 2,000 employees have attended workshops to learn about its purpose and objectives and major projects have got under way. We are therefore well on track to harness the full potential of cross-brand collaboration on product development, of course with Dematic on board.

Our new and future-proof structures following the purchase of Dematic, the constant innovation in our core business of forklift trucks, warehouse technology and related services, the corresponding changes to our Group’s structure – these are all vital elements in achieving the targets of our Strategy 2020: more growth, increased resilience to crises, higher profitability and greater efficiency. One of our core tasks in 2017 will therefore be to press ahead with the integration of Dematic so that we can add even more value for our customers, shareholders, employees and partners in the years to come. To support the change that is needed inside the Company, we launched the ‘Lift up’ initiative last year as a way of communicating the new structures and embedding them in the corporate culture.

Profitable growth again in 2016

Clearly, the only constant in the KION Group is change. This was never more obvious than last year, and yet we again generated profitable growth. We met our forecasts for 2016 in full, achieving record results. Excluding the purchase of Dematic, our revenue, adjusted EBIT, adjusted margin, and net income reached unprecedented levels, as did the value of our order intake. The profitability of the KION Group (excluding Dematic) rose to 9.9 per cent. In our outlook for 2017, we predict further profitable growth in both of our new core segments, Industrial Trucks & Services and Supply Chain Solutions.

We can thank our now more than 30,000 highly motivated and skilled employees around the world for these outstanding results. I would like to take this opportunity, on behalf of the entire Executive Board, to offer them my sincere thanks for their fantastic efforts.

As you can see, there is a good reason why we called this annual report ‘A new era’. Our Company is now not only much bigger but also much closer to our customers because their local service engineer or sales office is now nearer. Our portfolio of products and service is now far more extensive and it has never been easier for customers to obtain the solution they need from a single source. But one thing has stayed the same: our mission statement that the KION Group equates to more than the sum of its brands.

With best wishes,

Gordon Riske
Chief Executive Officer KION GROUP AG