Earnings and profitability
EBIT, EBITDA and ROCE
Earnings before interest and tax adjusted for non-recurring items and purchase price allocation effects (adjusted EBIT) fell by 35.7 percent to €546.9 million (2019: €850.5 million). This was mainly due to the decline in gross profit as a result of the fall in revenue and a proportionately smaller decrease in selling expenses and administrative expenses. Research and development costs were almost unchanged year on year. The decline in earnings was predominantly attributable to the first half of the year, which was hit hard by the lockdown measures. The adjusted EBIT margin was down significantly year on year at 6.6 percent (2019: 9.7 percent).
Including non-recurring items and purchase price allocation effects, EBIT came to €389.9 million (2019: €716.6 million). This year-on-year fall, which was far more pronounced than the decrease in adjusted EBIT, was primarily due to an expense of €45.8 million for non-recurring items relating to the capacity and structural program that has been initiated. In 2020, this program gave rise to personnel expenses in connection with adjustments to personnel capacity that are being made, particularly in the Industrial Trucks & Services segment. These adjustments include the restructuring of the UK sales organization, which is now largely complete. In total, non-recurring items amounted to an expense of €65.1 million (2019: €42.9 million). The figure for non-recurring items in 2019 had included expenses for restructuring and reorganization-related measures under the KION 2027 strategy.
In addition to expenses under the capacity and structural program, significant non-recurring items in 2020 also included impairment losses on property, plant, and equipment and on the long-term equity investment in Linde Hydraulics GmbH & Co. KG, which is accounted for using the equity method. Negative purchase price allocation effects increased slightly year on year to €91.9 million (2019: €91.0 million).
in € million |
2020 |
in % of revenue |
2019 |
in % of revenue |
|---|---|---|---|---|
EBIT |
389.9 |
4.7% |
716.6 |
8.1% |
Adjustment by functional costs: |
|
|
|
|
+ Cost of sales |
54.9 |
0.7% |
54.3 |
0.6% |
+ Selling expenses and administrative expenses |
84.5 |
1.0% |
73.6 |
0.8% |
+ Research and development costs |
2.9 |
0.0% |
0.9 |
0.0% |
+ Other costs |
14.7 |
0.2% |
5.1 |
0.1% |
Adjusted EBIT |
546.9 |
6.6% |
850.5 |
9.7% |
adjusted for non-recurring items |
65.1 |
0.8% |
42.9 |
0.5% |
adjusted for PPA items |
91.9 |
1.1% |
91.0 |
1.0% |
Earnings before interest, tax, depreciation, and amortization (EBITDA) decreased to €1,327.7 million (2019: €1,614.6 million). Adjusted EBITDA came to €1,383.5 million (2019: €1,657.5 million). The adjusted EBITDA margin fell from 18.8 percent in 2019 to 16.6 percent in 2020.
in € million |
2020 |
in % of revenue |
2019 |
in % of revenue |
|---|---|---|---|---|
EBITDA |
1,327.7 |
15.9% |
1,614.6 |
18.3% |
Adjustment by functional costs: |
|
|
|
|
+ Cost of sales |
14.8 |
0.2% |
14.8 |
0.2% |
+ Selling expenses and administrative expenses |
37.1 |
0.4% |
26.5 |
0.3% |
+ Research and development costs |
2.7 |
0.0% |
0.6 |
0.0% |
+ Other costs |
1.3 |
0.0% |
0.9 |
0.0% |
Adjusted EBITDA |
1,383.5 |
16.6% |
1,657.5 |
18.8% |
adjusted for non-recurring items |
55.8 |
0.7% |
42.9 |
0.5% |
adjusted for PPA items |
0.0 |
0.0% |
0.0 |
0.0% |
Adjusted EBITDA for the long-term leasing business, which is derived from internal reporting and assumes a minimum rate of return on the capital employed, amounted to €326.3 million (2019: €333.3 million).
Return on capital employed (ROCE), which is the ratio of adjusted EBIT to capital employed, was down sharply year on year at 6.2 percent (December 31, 2019: 9.7 percent). This can be explained by the proportionately smaller decrease in capital employed at the end of 2020 than the decrease in earnings.
Key influencing factors for earnings
The cost of sales decreased at a slower rate than revenue, falling by 2.7 percent to €6,296.8 million (2019: €6,474.6 million). The KION Group’s gross margin therefore dropped to 24.5 percent (2019: 26.5 percent). This was primarily due to the fact that fixed costs fell at a disproportionately low rate compared to the reduction in the volume of business. Overall, the other functional costs included in EBIT were virtually unchanged year on year. There was a moderate 1.0 percent decrease in selling expenses and administrative expenses compared with 2019. The restrictions on sales activities led to a 2.6 percent reduction in selling expenses. However, administrative expenses rose by 1.7 percent year on year, primarily due to the non-recurring items in connection with the capacity and structural program and despite the savings measures initiated. The implementation of a number of projects in the context of the KION 2027 strategy resulted in a 0.9 percent rise in research and development costs.
The change in the cost of sales and in other functional costs is shown in the following table.
in € million |
2020 |
2019 |
Change |
|---|---|---|---|
Revenue |
8,341.6 |
8,806.5 |
–5.3% |
Cost of sales |
–6,296.8 |
–6,474.6 |
2.7% |
Gross profit |
2,044.8 |
2,331.9 |
–12.3% |
Selling expenses and administrative expenses |
–1,471.8 |
–1,487.1 |
1.0% |
Research and development costs |
–156.8 |
–155.3 |
–0.9% |
Other |
–26.2 |
27.2 |
< −100% |
Earnings before interest and tax (EBIT) |
389.9 |
716.6 |
–45.6% |
Net financial expenses |
–88.3 |
–95.1 |
7.1% |
Earnings before tax |
301.6 |
621.6 |
–51.5% |
Income taxes |
–90.7 |
–176.8 |
48.7% |
Net income |
210.9 |
444.8 |
–52.6% |
The ‘other’ item is a net figure and includes not only other operating income and expenses but also line items such as the share of profit (loss) of equity-accounted investments, which amounted to a loss of €2.2 million (2019: profit of €12.1 million). Currency translation losses and impairment losses on non-current assets also had a negative impact on the ‘other’ item, which meant that it deteriorated from €27.2 million in 2019 to minus €26.2 million in 2020.
Net financial expenses
The net financial expenses, representing the balance of financial income and financial expenses, improved to €88.3 million (2019: €95.1 million) despite commitment fees and expenses incurred in connection with the financing measures and the unused syndicated liquidity line. The positive factors influencing net financial expenses included low interest expense from loans and, in particular, lower interest expense from pensions as a result of the fall in interest rates.
Income taxes
Income tax expenses fell significantly year on year to €90.7 million (2019: €176.8 million), reflecting the decrease in earnings. The effective tax rate rose to 30.1 percent (2019: 28.4 percent). This was partly attributable to non-tax-deductible expenses, which did not decrease to the same extent as earnings before tax.
Net income and appropriation of profit
Net income declined to €210.9 million (2019: €444.8 million). This figure included a net loss attributable to non-controlling interests of €4.4 million (2019: €10.0 million). The net income attributable to the shareholders of KION GROUP AG was €215.3 million (2019: €454.8 million). Basic earnings per share fell to €1.81 (2019: €3.86) based on 118.9 million no-par-value shares (2019: 117.9 million no-par-value shares); this was the weighted average number of shares outstanding during the reporting year. Taking account of the full number of no-par-value shares of 131.2 million at the end of the year would give basic earnings per share (pro forma) of €1.64. Diluted earnings per share, which is calculated by adding the potential dilutive no-par-value shares under the Employee Equity Program, amounted to €1.81 (2019: €3.86) based on a weighted average number of shares of 118.9 million (2019: 117.9 million).
KION GROUP AG made a net loss of €6.5 million in 2020. The Executive Board and the Supervisory Board will propose to the Annual General Meeting to be held on May 11, 2021 that an amount of €53.7 million be appropriated for the payment of a dividend of €0.41 per dividend-bearing share. This equates to a proposed dividend payout rate of around 25 percent of the net income attributable to the shareholders of KION GROUP AG.