Opportunity report

Principles of opportunity management

Opportunity management, like risk management, forms a central part of the Company’s day-to-day management. The aggregate opportunity position improved slightly compared with the previous year. In particular, recovery from the Corona pandemic offers market opportunities for the Group. The resulting volume increases will improve capacity utilization in the plants and, in conjunction with the implementation of the capacity and structural program, could lead to a significant increase in profitability. Individual areas of opportunity are identified within the framework of the strategy process. Opportunities are determined and managed on a decentralized basis in line with the Group strategy.

There are monthly reports on the opportunity situation as part of the regular Group reporting process. As a result, the KION Group is in a position to ascertain at an early stage whether market trends, competitive trends, or events within the Group require individual areas of opportunity to be re-evaluated. This may lead to reallocation of the budgets earmarked for the realization of opportunities. Such decisions are made on the basis of the potential of the opportunity, drawing on previous experience. There is no management system for the evaluation of opportunities comparable to the system for risk management.

Categorization of opportunities

‘Opportunities’ are understood as positive deviations from the expectations set out in the outlook relating to the economic situation and the KION Group’s business situation. Opportunities are divided into three categories:

Market opportunities describe the potential resulting from trends in the market and competitive environment and from the regulatory situation.
Strategic opportunities are based on implementation of the Group’s strategy. They may lead to positive effects that exceed planning assumptions.
Business-performance opportunities arise in connection with operational activities along the value chain, such as restructuring or cost-cutting measures.

Opportunity situation

Market opportunities

The economy as a whole may exceed the positive expectations for 2021. Following the regulatory approval of vaccines and the vaccination programs that began in late 2020 and early 2021, it now seems more likely that the coronavirus pandemic will be brought under control soon. Although further developments remain very uncertain, this could trigger positive effects along the KION Group’s entire value chain. The biggest benefits would be in terms of the security of supply chains and production processes and the willingness of customers to invest in both operating segments. In a positive macroeconomic scenario, order intake and revenue could exceed the target ranges, which would also have a positive effect on earnings.

In addition, circumstances may occur in the wider market at any time – such as quality problems at competitors or the effects of consolidation – that increase demand for products from the KION Group brands. New, unforeseen regulatory initiatives could be launched, for example the tightening of health and safety regulations or emissions standards, that would push up demand for products offered by the KION Group brands. Average prices for procuring commodities over the year may be cheaper than anticipated. Moreover, a weakening of the euro could bring positive currency effects that have not been factored into the planning.

Medium- to long-term market opportunities are presented, in particular, by:

growing demand for intralogistics products, solutions, and services as a consequence of globalization, industrialization, and fragmentation of supply chains as well as efficiency increases that are needed due to limited warehouse space and changing consumer requirements
high demand for replacement investments, especially in developed markets
the trend toward outsourcing of service functions for industrial trucks, outsourcing of entire logistics processes in the supply chain solutions business, and growth in demand for finance solutions
increased use of industrial and warehouse trucks powered by electric motors – one of the KION Group’s particular strengths, including in regard to lithium-ion technology
the trend for online shopping, which has been strengthened by the coronavirus pandemic and is leading to even higher rates of growth in e-commerce
growing demand for automation solutions and fleet management solutions, including networked automated guided vehicle systems and industry-specific system solutions, in connection with the rapidly expanding e-commerce sector and the implementation of networked intralogistics solutions
the advancing digitalization and automation of production and supply chains through the use of robotics solutions and their integration into the respective software application environment

Strategic opportunities

The positive impact of the strategic activities under the KION 2027 strategy is already appropriately reflected in the expectations regarding the KION Group’s financial performance in 2020. Nevertheless, the individual activities could create positive effects that exceed expectations. There is also a possibility that new strategic opportunities that were not part of the planning may arise over the course of the year, for example in the form of acquisitions and strategic partnerships.

The KION Group’s medium- to long-term strategic opportunities in the Industrial Trucks & Services segment arise, in particular, from:

achievement of a leading global market and technology position with regard to truck automation and innovative drive technologies as an integral element of automated warehouse solutions
a greater presence in the economy and volume price segments, particularly as a result of the systematic implementation of the segment-wide platform strategy
stronger involvement in the electrification of warehousing and logistics processes, including by ensuring availability of lithium-ion technology across the entire product range and expanding market share in the lightweight warehouse truck sector
further strengthening of its market-leading position in the EMEA region and achievement of a stronger position in the APAC and Americas regions, in particular by opening new production facilities and technology centers, strengthen its technological expertise through focused research and development activities, making greater use of shared modules, and harnessing potential for cross-selling
expansion of the service portfolio, including financial services, at every stage of the product lifecycle, taking advantage of the high number of trucks in use and the installed base of supply chain solutions

The KION Group’s medium- to long-term strategic opportunities in the Supply Chain Solutions segment arise, in particular, from:

further expansion of its position in the market for intralogistics solutions based on the growing acceptance of automation concepts
the development and establishment in the market of industry-specific solutions for systems and subsystems that enable specific customer requirements to be met, for example automated and rapid fulfillment in close proximity to end customers
further strengthening of its market position in automated guided vehicle systems (AGVs)
expansion of the market position in the EMEA region, particularly in central and eastern Europe, and in the APAC region by sharing sales and production structures with the Industrial Trucks & Services segment

Business-performance opportunities

Business-performance opportunities arise firstly from ongoing activities to modernize and streamline the KION Group’s production facilities and from the worldwide integration of the production network. By investing in new locations and expanding existing ones, products can be assembled nearer to the markets in which they are to be sold, economies of scale can be achieved across the Group, and synergies can be leveraged. Secondly, activities are carried out under the KION 2027 strategy aimed at improving operational excellence in logistics, technology & product development, and production and at lowering material and quality costs, for example by reducing the complexity of the product range.

The following may lead to an increase in profitability:

Activities to improve operational excellence and lower costs may help the KION Group to achieve future growth with a disproportionately small rise in costs. For example, implementation of the capacity and structural program may have a significant positive influence on the cost structure, resulting in long-term improvements in competitiveness.
Ongoing efficiency increases in the production network, including through the integration of additional sites, may boost sales and improve the gross margin.
Effective use and centralized coordination of global development capacities may create synergies and economies of scale.