Earnings and profitability

EBIT, EBITDA and ROCE

Earnings before interest and tax (EBIT) amounted to €549.4 million, up by 26.3 per cent on the 2016 figure of €434.8 million. EBIT included negative effects from purchase price allocations of €176.2 million (2016: €60.4 million). In 2017, EBIT was also adversely affected by non-recurring items of €40.1 million (2016: €42.2 million) that arose mainly in connection with the integration of Dematic and the start-up costs for the new plant in Monterrey, Mexico. The non-recurring items in 2016 had included transaction costs relating to the acquisition of Dematic. EBIT adjusted for non-recurring items and purchase price allocation effects (adjusted EBIT) rose to €765.6 million (2016: €537.3 million). The adjusted EBIT margin improved to 10.0 per cent (2016: 9.6 per cent). > TABLE 020

Return on capital employed (ROCE) increased by 3 percentage points year on year to 9.9 per cent in 2017. This improvement was due to the fact that Dematic’s earnings contributions had only been included for the months of November and December in 2016. While adjusted EBIT went up sharply, there was only a small countervailing change in capital employed.

EBITDA rose to €1,185.7 million (2016: €889.5 million). Adjusted EBITDA came to €1,223.9 million (2016: €931.6 million). The adjusted EBITDA margin decreased from 16.7 per cent in 2016 to 16.0 per cent in 2017. > TABLE 021

Key influencing factors for earnings

The cost of sales rose by 41.3 per cent to €5,699.1 million (2016: €4,034.6 million), a disproportionately strong increase compared with that of revenue. Higher prices for materials, particularly steel and lead, pushed up the cost of sales in the new truck business significantly. Negative currency effects – especially relating to pound sterling, the renminbi and the US dollar – also squeezed the gross margin. The gross margin for the Group as a whole contracted from 27.8 per cent in 2016 to 25.5 per cent in the year under review. Selling expenses and administrative expenses totalled €1,286.3 million (2016: €1,073.6 million). This increase of 19.8 per cent was disproportionately small compared with that of revenue. The prior-year figure had been influenced by various factors, including consultancy expenses in connection with the Dematic acquisition. Research and development costs went up by 41.9 per cent to €137.0 million (2016: €96.5 million). The ‘other’ item came to €18.2 million (2016: €52.3 million). This included the share of profit (loss) of equity-accounted investments, which amounted to a profit of €13.6 million (2016: profit of €6.5 million), as well as gains and losses from exchange differences. The figure for the ‘other’ item also comprised impairment losses on assets of €14.8 million (2016: €0.0 million), of which €8.6 million related to the Egemin brand name. > TABLE 022

Net financial income / expenses

The net financial expenses representing the balance of financial income and financial expenses decreased to €81.1 million year on year (2016: net financial expenses of €95.7 million). The prior-year figure had included one-off financial expenses of €25.7 million incurred in connection with optimisation of the financing structure in February 2016. Overall, current interest expense on borrowing increased year on year due to the acquisition of Dematic, but exchange differences had a countervailing positive impact on net financial income/expenses. As a result of the early repayment of financial liabilities, transaction costs of €3.5 million were recognised as expenses in 2017.

Income taxes

Income tax expenses fell sharply to €41.9 million (2016: €93.1 million). The low tax rate of 8.9 per cent is attributable to the reduction of the corporate income tax rate from 35.0 per cent to 21.0 per cent that was approved in the United States. The remeasurement of deferred tax liabilities, which relate mainly to the purchase price allocation for Dematic, led to deferred tax income of €92.2 million in the Group. Adjusted for this non-recurring tax item, the tax rate was comparable with the previous year at 28.6 per cent (2016: 27.4 per cent).

Net income and appropriation of profit

Net income increased by €180.4 million to €426.4 million (2016: €246.1 million). The net income attributable to the shareholders of KION GROUP AG was €424.8 million (2016: €245.5 million). Basic earnings per share came to €3.72 based on 114.3 million (2016: 103.2 million) no-par-value shares; this was the weighted average number of shares outstanding during the reporting year. Adjusted for the non-recurring tax item of €92.2 million included in net income, basic earnings per share (pro forma) on a comparable basis with the previous year stood at €2.91 (2016: €2.38). Diluted earnings per share, which is calculated by adding the potential dilutive no-par-value shares under the employee share option programme, amounted to €3.71 based on a weighted average number of shares of 114.4 million (2016: 103.3 million) and €2.91 on a pro-forma basis (2016: €2.38). These calculations did not include around 160.8 thousand no-par-value treasury shares that were repurchased by KION GROUP AG as part of a buy-back to support employee equity programmes.

The Executive Board and the Supervisory Board will propose to the Annual General Meeting to be held on 9 May 2018 that, of the distributable profit of KION GROUP AG for the 2017 financial year amounting to €168.1 million, a dividend totalling €116.7 million be distributed. This equates to €0.99 per dividend-bearing share. It is also proposed that a sum of €51.2 million be transferred to other revenue reserves and that €0.1 million be carried forward to the next accounting period. This would give a dividend payout rate of approximately 35 per cent of adjusted net income.