Letter to shareholders

Gordon Riske
CEO

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

Our employees made 2019 a year of impressive success for the KION Group, demonstrating their talent, experience, huge commitment and a great deal of passion in their efforts on behalf of our customers. We easily outperformed the market as a whole and strengthened our market position. Moreover, we not only achieved our ambitious business objectives but in some cases even exceeded them significantly, despite increasingly difficult conditions for the industry that were brought about by macroeconomic challenges, several delays to Brexit, trade disputes and bilateral protectionist tariffs. These pleasing results for 2019 are the work of our more than 34,000 highly skilled employees. Our success represents a fantastic team effort, and my Executive Board colleagues and I would like to say a big thank you.

In 2019, the global market for industrial trucks contracted by 2.1 per cent compared with the prior year. Yet the value of the KION Group’s order intake increased by a total of 5.3 per cent on 2018, mainly because of the strong growth in the Supply Chain Solutions segment. The consolidated revenue generated in the period January to December 2019 rose by a robust 10.1 per cent year on year. Adjusted EBIT was also higher than in the previous year, increasing by 7.7 per cent to €850.5 million. At 444.8 million, our net income was also up significantly by 10.7 per cent. We hit our targets for all of the key performance indicators, partly thanks to the global boom in e-commerce.

Once again, we have delivered proof of our leading role in the industry. The strong results illustrate how we have succeeded in making an enduring improvement to the Group’s resilience in recent years. They also show that we are able to maintain our course, even in choppy waters. And we have put everything in place to ensure that we can write further chapters in our story of success over the coming years.

Paving the way for success: KION 2027

Our corporate strategy, KION 2027, provides the basis for our success, and we are now reaping the rewards of our rigorous implementation of the strategy. We are steadily strengthening our market-leading position through our efforts in five fields of action: energy, digital, automation, innovation and performance.

We are already a leading player in every part of the material handling market. One such area is efficient energy use. The New Energy Systems department brings together the KION Group’s knowledge and skills relating to current and future drive technologies. Powerful lithium-ion batteries are a particular focus. The advantages of this technology for our customers are high energy efficiency, top-up charging to save time, zero-emission operation and user-friendly processes. Fuel cells are another important focus in the field of energy, because worldwide interest in hydrogen as an alternative energy source is increasing. Here too, our Linde and STILL brands are already taking the lead.

A crucial competitive edge

In the years ahead, digital transformation and the increasing degree of automation will be the decisive distinguishing factor for many industries and businesses. These trends are also significantly shaping and changing the intralogistics sector, as rapid, reliable and efficient supply chains create a crucial competitive edge in the web economy.

In modern warehouses, digitalisation and automation go hand in hand. A prime example is the latest innovation from our automation specialist Dematic. As well as large distribution centres, small decentralised warehouses are springing up in towns and cities in response to consumer demand for ever-shorter delivery times and to enable omnichannel fulfilment. These small storage areas, which can be found at the back of local supermarkets, for example, are known as micro-fulfilment solutions. We are one of the driving forces in this area of innovation. But digitalisation is not only making logistics execution easier, it is also improving the planning of end-to-end flows of goods. The Dematic iQ Virtual software provides customers with a ‘digital twin’ that simulates an entire warehouse. These days, more and more industrial trucks can move around the warehouse autonomously thanks to automation technology. Driverless trucks are already used wherever there are recurring processes. The KION Group is the global market leader in this rapidly expanding market. This trend will continue to grow, leading to more accurate analysis and activity in real time once the 5G communications standard is introduced. As a result, our customers will be able to operate even more efficiently.

The digital transformation will become the decisive distinguishing factor for many industries.

Innovation is in our DNA

Dematic is not the only company that embodies the KION Group’s capacity to innovate. Two brand-new generations of Linde and STILL counterbalance trucks with a load capacity of 2.0 to 3.5 tonnes are bringing the future a step closer. Linde’s new forklift trucks are designed with the demands of Industry 4.0 firmly in mind. Thanks to connectivity as a standard feature, data from the trucks can be sent to the KION cloud. As a result, the new generation of trucks can be adapted throughout their lifecycle to changing customer requirements, including to ones that we do not even know about today. Connectivity, remote diagnostics and predictive maintenance increase the trucks’ uptime and help our customers to reduce their costs.

STILL, the KION Group’s other premium brand company, is particularly focused on fitting its industrial trucks with powerful electric drives. In a new model series, developers have managed to significantly increase handling capacity in the load category up to 3.5 tonnes and, at the same time, improve energy efficiency. The range is also outstanding: the trucks can easily complete a three-shift operation without needing to have their battery changed.

All these – and many other exciting new products – show that around the world the KION Group is bringing together exceptional people with a truly innovative mindset. Our strength lies in listening to customers, understanding their problems and finding individually tailored solutions for their complex requirements. In different ways and in different fields, we are ensuring that our customers have a crucial competitive edge. We are using our strength in innovation to continually set new standards in the industry.

We are ensuring that our customers have a crucial competitive edge.

Investment for further growth

To maintain our rate of innovation at a high level going forward, we are continuing to forge ahead with the optimisation of our manufacturing operations and investing in the expansion of our worldwide capacity. Fiscal year 2020 is expected to be characterised by strategic capital expenditure in medium- to long-term growth. Alongside the modernisation of existing plants in Aschaffenburg, Hamburg, Châtellerault and Luzzara, we are currently planning to build new factories in Poland and China. Two further plants – in Pune (India) and near the city of Xiamen in China – were completed just recently. And with KION Battery Systems GmbH, KION Group has established a new joint venture with BMZ Holding GmbH for the development and production of lithium-ion batteries.

The planned expansion of our business in China is a key part of our growth strategy. By constructing another factory for counterbalance trucks in Jinan, eastern China, we are extending our product portfolio, seizing opportunities for growth in the value segment and taking even greater advantage of the increasing electrification of industrial trucks in China, one of the fastest-growing and most important markets in the world. As well as capital expenditure of around €100 million, we will create more than 800 new jobs at our new site in the province of Shandong by 2025. Our new highly automated plant, the adjoining KION Value Competence Center and the expansion of our sales and service network will enable us to harness further potential in this important market and significantly strengthen our position.

In addition to expanding our product range and capacities, we will strengthen the software development for automation solutions and at the same time further develop our range of products with respect to energy systems. We will also press ahead with the ongoing expansion of our global sales and service network and the Group’s digital transformation.

Positive prospects despite growing challenges

The KION Group is excellently placed to continue benefiting from global megatrends in the coming years. The main drivers here remain the growing tendency of consumers to buy online, increasingly fragmented supply chains in the global economy and the desire for new drive systems and energy sources. Although the economy is expected to weaken and the market for industrial trucks is losing momentum, we anticipate that we will continue to generate profitable growth and further improve our market position in 2020. In recent years, we have become industry leaders in terms of profitability and achieved a strong cash flow position. This will allow us to make substantial strategic investments in 2020, creating an even stronger foundation for profitable growth in future.

The KION Group has evolved a great deal over the past twelve months. Nonetheless, we remain true to the aspiration that is embodied by our name: In the east African Masai language, the word ‘Kion(gozi)’ means the one who leads. To be a leader, we need an edge. We work tirelessly for this every day on behalf of our customers, deploying the most effective technology, the best people and outstanding ideas.

With best wishes,

Gordon Riske
Chief Executive Officer
KION GROUP AG