Financial position

The principles and objectives applicable to financial management were the same as those described in the 2018 combined management report. The KION Group has issued guarantees to the banks for all of the payment obligations under the senior facilities agreement (SFA) and the acquisition facilities agreement (AFA) and it is the borrower in respect of all the payment obligations resulting from the promissory note. All covenants were complied with as at 30 September 2019.

Analysis of capital structure

Current and non-current liabilities rose by €719.6 million to €10,383.4 million as at the reporting date (31 December 2018: €9,663.7 million). The larger volume of business led to an increase both in liabilities attributable to financing of the long-term leasing business and in trade payables.

Financial liabilities stood at €2,237.3 million as at 30 September 2019 (31 December 2018: €2,045.2 million). Non-current financial liabilities declined to €1,722.7 million due to partial repayment of the borrowing under the AFA (31 December 2018: €1,818.7 million). The significant increase of €288.1 million in current financial liabilities to €514.6 million (31 December 2018: €226.5 million) was predominantly attributable to the financing of the temporary rise in net working capital. As at 30 September 2019, the unused revolving credit facility under the SFA stood at €900.6 million (31 December 2018: €1,048.2 million). Net financial debt (non-current and current financial liabilities less cash and cash equivalents) thus amounted to €2,093.1 million (31 December 2018: €1,869.9 million). This equated to 1.2 times the annualised adjusted EBITDA. > TABLE 11

At €1,359.8 million, the retirement benefit obligation was significantly higher than at the end of last year (31 December 2018: €1,043.0 million), primarily owing to much lower discount rates.

The continuing expansion of the long-term leasing business led to an increase in the funding volume during the period under review. This volume totalled €2,299.3 million as at 30 September 2019 (31 December 2018: €1,905.9 million). Of this total, €1,799.0 million (31 December 2018: €1,165.3 million) related to the financing of the long-term direct and indirect leasing business in the form of liabilities from financial services, which also include the residual value obligations arising from the indirect leasing business in an amount of €304.9 million (31 December 2018: €319.5 million). The remaining amount of €500.3 million was attributable to lease liabilities (31 December 2018: €740.6 million).

A sum of €391.7 million, representing some of the financing of the short-term rental fleet, was recognised under liabilities from financial services (31 December 2018: €307.1 million). Overall, liabilities from financial services rose by €718.3 million to €2,190.7 million (31 December 2018: €1,472.4 million).

Current and non-current other financial liabilities totalled €765.8 million (31 December 2018: €813.2 million). In addition to the remaining €198.9 million for the financing of the short-term rental fleet by means of sale and leaseback sub-lease transactions (31 December 2018: €289.9 million), they include liabilities from procurement leases amounting to €435.6 million (31 December 2018: €421.2 million).

The decline in contract liabilities, from €570.1 million as at 31 December 2018 to €381.0 million, mainly related to the progressive fulfilment of customer orders in the long-term project business.

Consolidated equity rose to €3,396.7 million as at 30 September 2019 (31 December 2018: €3,305.1 million). Net income for the period increased equity by €338.9 million. Currency translation effects had a positive impact of €105.0 million. Conversely, equity was reduced by actuarial losses of €198.8 million (after deferred taxes) arising from the measurement of defined benefit obligations due to the far lower level of interest rates and by KION GROUP AG’s dividend payout of €141.5 million. The equity ratio was 24.6 per cent, which was below the figure of 25.5 per cent as at 31 December 2018 owing to the growth in total assets. > 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 €187.8 million in the first nine months of 2019 (Q1 – Q3 2018: €164.1 million).

Spending in the Industrial Trucks & Services segment continued to be focused on capital expenditure for product development and on the expansion and modernisation of production and technology facilities, including the new plant in Pune, India. The third quarter saw the start of construction of a cutting-edge production site in Poland as part of the groupwide growth strategy. This new factory, for which capital investment totalling more than €60 million has been budgeted, is due to be completed in early 2021. Capital expenditure in the Supply Chain Solutions segment primarily related to development costs.

Analysis of liquidity

Cash and cash equivalents declined to €144.3 million as at 30 September 2019 (31 December 2018: €175.3 million). Taking into account the revolving credit facility that was still freely available, the unrestricted cash and cash equivalents available to the KION Group as at 30 September 2019 amounted to €1,041.7 million (31 December 2018: €1,219.8 million).

Net cash provided by operating activities amounted to €238.0 million (Q1 – Q3 2018: €259.6 million). While the improvement in EBIT made a positive contribution, a significantly larger amount of cash was temporarily tied up in net working capital compared with the prior-year period.

Net cash used for investing activities amounted to €185.0 million, which was a higher amount than in the first three quarters of last year (Q1 – Q3 2018: €153.1 million). Within this figure, cash payments for capital expenditure on product development and on property, plant and equipment (excluding right-of-use assets related to procurement leasing) rose to €187.8 million (Q1 – Q3 2018: €164.1 million).

Free cash flow – the sum of cash flow from operating activities and investing activities – therefore came to €53.0 million (Q1 – Q3 2018: €106.6 million).

The net cash used for financing activities of €86.5 million (Q1 – Q3 2018: €111.4 million) resulted, among other things, from the issuing of a new promissory note and drawdowns from the revolving credit facility, on the one hand, and a further partial repayment of a long-term tranche under the AFA on the other. Overall, financial debt taken on during the reporting period stood at €2,000.6 million (Q1 – Q3 2018: €1,448.0 million); repayments amounted to €1,821.9 million (Q1 – Q3 2018: €1,318.5 million). In addition, the payment of a dividend to the shareholders of KION GROUP AG in May 2019 resulted in an outflow of funds of €141.5 million (Q1 – Q3 2018: net cash outflow of €116.8 million). Payments made for interest portions and principal portions under procurement leases amounted to €91.8 million in the reporting period (Q1 – Q3 2018: €82.4 million). The net cash used for current interest payments decreased from €29.3 million in the first nine months of 2018 to €25.2 million in the reporting period due to a year-on-year fall in average financial debt. > TABLE 12