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 as well as the earnings of KION GROUP AG. Any unexpected developments in the global economy would result in the KION Group’s and KION GROUP AG’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.

Outlook for 2017

The overall assessment of the financial situation of the KION Group compares the outlook included in the 2016 combined management report and the adjusted outlook in the Q3 2017 quarterly statement with actual performance in 2017.

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

In its outlook for 2018 published in January, the International Monetary Fund (IMF) predicts global output growth of 3.9 per cent, which is slightly higher than the rate for the past year. Besides the sustained upturn in Europe and Asia, stimulus from the US tax reforms approved in late 2017 is having a positive effect. At 4.6 per cent, the worldwide volume of trade is expected to be close to its 2017 level.

The outlook for macroeconomic conditions is based, in particular, on the assumption that conditions in financial markets will continue to be favourable and that market sentiment will remain upbeat. These factors will support further growth of demand, particularly in terms of capital expenditure. Furthermore, it is expected that trading partners of the United States will also benefit from the US tax reforms.

Expected sectoral conditions

Going forward, the overall market for industrial trucks and warehouse systems will continue to depend heavily on the strength of the economy in the main sales markets. In past years, the market’s growth – measured by the number of new trucks sold and the revenue of the largest system manufacturers – has consistently exceeded the growth rates for global gross domestic product (GDP). In view of the generally positive macroeconomic prospects, the KION Group anticipates that the worldwide market for industrial trucks and warehouse systems will continue to expand in 2018.

Following very strong growth in the global market for new industrial trucks in 2017, growth rates are predicted to normalise, returning closer to the long-term trend of around 4 per cent. Europe and North America are expected to register further moderate increases in orders. The KION Group anticipates continued growth in demand in China, with a rise in the proportion of electric forklift trucks and warehouse trucks. The constantly increasing number of trucks in operation worldwide provides a sustainable customer base for the service business.

Demand for supply chain solutions is likely to be underpinned by the strong inclination to invest seen in the main customer industries in connection with multichannel and e-commerce strategies. In the years ahead, market growth of around 10 per cent per year is predicted.

Expected business situation and financial performance of the KION Group

In 2018, the KION Group aims to build on its successful performance in 2017 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 €8,050 million and €8,550 million. The target figure for consolidated revenue is in the range of €7,700 million to €8,200 million. The target range for adjusted EBIT is €770 million to €835 million. Free cash flow is expected to be in a range between €410 million and €475 million; the cash payment for the planned acquisition of a non-controlling interest in the Chinese company EP Equipment has already been factored in. The target figure for ROCE is in the range of 8.7 per cent to 9.7 per cent. The outlook for free cash flow and ROCE reflects the impact of applying the new IFRS accounting standards for the first time. Further details can be found in the ‘Basis of preparation’ section of the notes to the consolidated financial statements.

Order intake in the Industrial Trucks & Services segment is expected to be between €5,950 million and €6,150 million. The target figure for revenue is in the range of €5,700 million to €5,900 million. The target range for adjusted EBIT is €650 million to €685 million.

Order intake in the Supply Chain Solutions segment is expected to be between €2,100 million and €2,400 million. The target figure for revenue is in the range of €2,000 million to €2,300 million. The target range for adjusted EBIT is €180 million to €215 million.

The outlook is based on the current exchange rate environment and the assumption that material prices will hold steady. > TABLE 038

Expected financial position of the KION Group

Having significantly reduced its borrowing in the reporting year, the KION Group intends to use free cash flow to achieve a further moderate decrease in net debt.

Overall statement on expected performance

The KION Group believes it will continue along its path of profitable growth and aims to further improve its market position worldwide in 2018.