Financial position

The KION Group’s financial position changed only marginally in the third quarter of 2018.

Analysis of capital structure

At €9,731.4 million, current and non-current liabilities had risen by €386.0 million compared with 31 December 2017. Long-term borrowing amounted to €2,037.7 million and was thus almost unchanged compared with the end of last year (31 December 2017: €2,024.8 million). This figure can essentially be broken down into promissory notes with a total volume of €1,210.0 million and the remaining floating-rate long-term tranche of €800.0 million drawn down under the acquisition facilities agreement (AFA). Current financial liabilities, on the other hand, increased to €361.6 million (31 December 2017: €243.9 million) because of drawdowns under the revolving credit facility that were needed to fund net working capital as a result of the temporary bottlenecks at individual suppliers. After deduction of cash and cash equivalents, net financial debt grew to €2,234.1 million (31 December 2017: €2,095.5 million). This equated to 1.5 times the adjusted EBITDA on an annualised basis. The unused, unrestricted loan facility under the senior facilities agreement (SFA) stood at €825.7 million as at 30 September 2018. > TABLE 11

With discount rates unchanged on average, the retirement benefit obligation of €999.4 million was slightly lower than its level at the end of last year (31 December 2017: €1,002.7 million).

Lease liabilities arising from sale and leaseback transactions to fund the leasing business declined to €820.0 million (31 December 2017: €1,131.1 million). This reduction was offset by an increase in liabilities from financial services relating to the long-term leasing business, which were up by €474.1 million to €911.5 million as at 30 September 2018 (31 December 2017: €437.4 million). Liabilities from financial services rose by €704.0 million overall to reach €1,141.4 million as at 30 September 2018 (31 December 2017: €437.4 million). They included a part of the financing of the short-term rental business amounting to €229.9 million (31 December 2017: €0.0 million); the remaining amount of €321.9 million (31 December 2017: €515.7 million) relating to the financing of the short-term rental fleet was recorded under other financial liabilities. Other financial liabilities also included liabilities from procurement leases totalling €383.4 million (31 December 2017: €369.1 million), for which right-of-use assets were recognised. Overall, current and non-current other financial liabilities came to €762.1 million (31 December 2017: €962.2 million).

Contract liabilities, of which a large proportion related to the long-term project business, increased to €459.4 million (31 December 2017: €324.4 million) due to higher advance payments from Dematic customers in connection with new orders.

Equity stood at €3,152.5 million as at 30 September 2018 (31 December 2017: €2,992.3 million). The addition of net income of €243.8 million was partly negated by the dividend of €116.8 million paid by KION GROUP AG in May. The equity ratio increased slightly to reach 24.5 per cent (31 December 2017: 24.3 per cent). > TABLE 10

Analysis of capital expenditure

The KION Group’s total capital expenditure on property, plant and equipment and on intangible assets (excluding right-of-use assets from procurement leases) totalled €164.1 million in the reporting period (Q1 – Q3 2017: €136.9 million). Spending in the Industrial Trucks & Services segment continued to be focused on capital expenditure on development and on the expansion and modernisation of the Operating Units’ production and technology facilities. Capital expenditure in the Supply Chain Solutions segment mainly related to development costs as well as software and licences.

Analysis of liquidity

Cash and cash equivalents decreased slightly, from €173.2 million at the end of 2017 to €165.2 million as at 30 September 2018. Taking into account the credit facility that was still freely available, the unrestricted cash and cash equivalents available to the KION Group amounted to €989.5 million (31 December 2017: €1,138.0 million).

Net cash provided by operating activities, which totalled €259.6 million, was significantly below the figure for the prior-year period of €331.6 million. A significant proportion of liquidity continues to be tied up in inventories in the short term owing to the temporary bottlenecks at individual suppliers and the resulting delays to deliveries. Higher advance payments from customers on the back of growth in the project business mitigated the impact of increased inventories on net working capital. As budgeted, tax payments increased to €141.7 million (Q1 – Q3 2017: €70.2 million). This was the primary reason for the year-on-year reduction in cash flow from operating activities in the period under review.

Net cash used for investing activities amounted to €153.1 million and was therefore higher than in the prior-year period (Q1 – Q3 2017: €144.6 million). Within this figure, cash payments for development (R&D) and for property, plant and equipment rose to €164.1 million (Q1 – Q3 2017: €136.9 million).

Free cash flow – the sum of cash flow from operating activities and investing activities – amounted to €106.6 million (Q1 – Q3 2017: €187.0 million).

Net cash used for financing activities came to €111.4 million (Q1 – Q3 2017: €267.2 million). Financial debt taken on during the reporting period stood at €1,448.0 million and predominantly consisted of drawdowns under the revolving credit facility to fund the temporary increase in inventories and the inflow from the placement of a promissory note in June 2018. Repayments amounted to €1,318.5 million, which included repayment of a further part of the long-term AFA tranche. Interest and principal payments for liabilities from procurement leases totalled €82.4 million during the reporting period (Q1 – Q3 2017: €68.0 million). As a result of the optimised financing structure and the corporate actions carried out in 2017, regular interest payments decreased to €29.3 million (Q1 – Q3 2017: €38.3 million). The dividend paid by KION GROUP AG led to an outflow of €116.8 million in the second quarter (Q2 2017: €86.9 million). > TABLE 12