Letter to shareholders

Gordon Riske, Chief Executive Officer (Photo)

Gordon Riske
Chief Executive Officer

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

The events of last year were unprecedented and it will go down in history as the year of coronavirus, with all its effects on our personal and working lives and on our business. Building on our successful KION 2027 strategy, we were able to steer the KION Group through the pandemic relatively well in 2020 despite a business environment that was very difficult at times. For us, not every aspect of COVID-19 has been a challenge. Booming e-commerce and the subsequent demand for automation and material handling technologies used in warehouse logistics opened up opportunities for growth in our supply chain solutions business. As a result, our software-driven solutions for global supply chains proved to be a significant stabilizing factor last year. Our corporate structure with two strong operating segments has proven its worth.

Above all, however, we owe our success to the amazing work of our approximately 36,000 employees worldwide. Even during the hardest phases of the pandemic, they were always there for our customers, supplied them with products, and offered them the best possible service. I would like to offer my heartfelt thanks – and those of the entire Executive Board, the Supervisory Board, and our Company’s owners – to our employees for these outstanding achievements in the most difficult of circumstances. This team showed that the KION Group can be relied upon.

Our response to the changing situation since March 2020 has been rapid and thorough, particularly when it comes to protecting our employees’ health, which is our highest priority. We also liaised closely with workforce representatives in order to make full use of opportunities for internal flexibility. In addition, we provided our suppliers and other business partners with intensive support. We also took action to protect our finances during the crisis, strengthening our funding structure for the long term by issuing a corporate bond that was oversubscribed many times over, and carrying out a highly successful capital increase. Our ongoing strategic capital expenditure on research and development and the construction and expansion of production sites are laying the foundations for our cutting-edge and increasingly digitalized intralogistics solutions of tomorrow. And since the start of this year, our Operating Units have been directly represented on the Executive Board. This new governance model is more appropriate to the size of our Group and allows us to create the structures for the next stage of our growth.

All of this shows that we are able to maintain our course, even in such choppy waters. We are all working our hardest every day to achieve even greater success in the years to come. We are resilient and, at the same time, focused on the future. As a full-service provider with a strong presence on every continent, we were again able to capitalize on our opportunities during the crisis of last year. We also set a course for sustainable, profitable growth.

2020: a challenging year that also offered many opportunities

Despite the coronavirus pandemic, our order intake in 2020 increased by 3.6 percent compared with 2019. However, consolidated revenue fell by 5.3 percent year on year. Adjusted EBIT was also below the prior-year figure at €547 million. Net income amounted to €211 million. As already anticipated during the course of the year, a number of our key performance indicators thus fell behind those of the prior year, albeit that 2019 had been the best year in KION’s history. The Supply Chain Solutions segment performed very well in 2020: It received a huge boost to growth from the sustained expansion of e-commerce and the demand for material handling technologies in warehouse logistics. Software-driven solutions for global supply chains therefore proved to be a stabilizing factor for the KION Group. The impact of the pandemic on market conditions meant that the Industrial Trucks and Services segment was unable to repeat the success that it had enjoyed in the record year of 2019: Its poorer performance in terms of unit sales was mainly due to the challenging conditions in the segment’s main sales market, the EMEA region. In the APAC region, the segment recorded an increase that was primarily driven by disproportionately strong growth in China.

On course for success with KION 2027

Our corporate strategy, KION 2027, continues to provide the basis for our success. Focusing on the growth sectors of automation, digitalization, and high-performance energy systems has again proven its worth. We are on the right track, as can be seen from the high level of order intake in our Supply Chain Solutions segment, for example. We anticipated major trends in our industry at an early stage and are strengthening our solid market position.

Digital transformation is becoming a game changer

Last year delivered further proof that the acquisition of Dematic in 2016, followed by UK logistics software company Digital Applications International Limited (DAI) in 2020, has greatly enriched our business. The trend for fully automated warehouses gathered further pace in 2020. Digital transformation and the steadily increasing degree of automation remain a decisive distinguishing factor in intralogistics because rapid, reliable, and efficient supply chains create a crucial competitive edge in the web economy. This trend will continue to grow and will enable more accurate analysis and activity in real time as the 5G communications standard is introduced. As a result, our customers will be able to operate even more efficiently than at present.

Driverless industrial trucks will also offer huge potential in the future. They are already used wherever there are recurring processes. Based on revenue generated in 2019, the KION Group is one of the leading players in this rapidly expanding market. That is why it entered into a strategic partnership with Quicktron, a young Chinese manufacturer of autonomous mobile robots for warehouses, last year. The partnership enables Quicktron products to be sold worldwide through the KION Group’s sales and service networks.

Competitive edge with sustainable drive systems

New energy systems are a particular focus of research and development in the KION Group. We have observed that energy efficiency is also becoming an increasingly important issue in material handling. To reflect this, we offer our customers the full range of drive technologies, from internal combustion engines to electric drives and fuel cells. Our recently formed subsidiary, KION Battery Systems GmbH (KBS), is a joint venture between KION GROUP AG and BMZ Holding GmbH and went into full production of state-of-the-art lithium-ion batteries for industrial trucks in the autumn. The new production facility in Karlstein am Main, Germany, has the capacity to manufacture more than 12,000 batteries per year for forklift trucks and other industrial trucks.

Groundbreaking innovation

The development work of the KION brand companies embodies the KION Group’s capacity to innovate. Dematic, for example, has developed a new generation of the successful Multishuttle, which increases the speed of transportation and improves accuracy and availability in warehouses and distribution centers. The Multishuttle 2.0 is even more efficient and reliable than its predecessor.

OPX iGo neo, an autonomous order picker developed by STILL, uses ultra-modern sensors to detect its surroundings, obstacles, and distances. It makes its own decisions using the transmitted data and defined algorithms. OPX iGo neo thus reduces picking errors and significantly increases picking performance. STILL has also launched the RX 60 electric forklift truck (3.5 to 5.0t load capacity). This latest member of the RX 60 family boasts impressive handling capacity and high availability, but without emitting any exhaust gases.

Linde Material Handling is setting new standards for counterbalance trucks with its 1202 H20-H35 series with combustion engines. This latest generation offers excellent performance and versatility and is robust, user-friendly, and digitally connected. Its developers have responded to the growing demands placed on users on a daily basis.

Investment in global growth

With a view to further growth, we are also continuously forging ahead with the optimization of our manufacturing operations and investing in the expansion of our worldwide capacity. The fast-growing Chinese market is critical to these plans and, last summer, we began to construct an additional plant for counterbalance trucks in Jinan, China. We are expanding our portfolio of industrial trucks in order to seize our opportunities for growth in the value segment in one of the world’s biggest markets for material handling. To this end, we are investing around €100 million and intend to create more than 800 new jobs by 2025. Moreover, the minority interest of our anchor shareholder Weichai Power – also headquartered in Shandong province – ensures that we have a strong local presence in the region. Our second plant in the Xiamen region, where we began manufacturing warehouse trucks last year, will also help us to unlock further potential in the Chinese market. At the same time, we want to increase sales in China and benefit from the trend toward the electrification of industrial trucks in the country.

The KION Group is also continuing to grow in the EMEA region. In 2020, we expanded our site in Stříbro, near Plzeň in the Czech Republic, and brought a new, third factory building on stream for Dematic’s manufacturing operations. More than €60 million has been invested in the construction of a cutting-edge industrial truck plant in Kołbaskowo, Poland, which is now almost complete. In 2020, the KION Group invested a total of around €284 million in its sites worldwide and in research and development, of which approximately €139 million was accounted for by Germany.

Continuing the story of success

KION’s story is and remains one of success. We began in 2006 with the organizational structures of a mid-sized business. Today, the KION Group is a global group of companies with a broad portfolio of products and services that operates in more than 100 countries and, in 2020, reported revenue of around €8.3 billion – almost three times as much as a decade ago. We want to build on this track record in 2021. Our successful KION 2027 strategy, our extensive and high-performance intralogistics portfolio, our strengthened balance sheet, our flexibility, and the allocation of direct responsibility for individual Operating Units to members of the Executive Board have laid the foundations on which we intend to generate profitable growth going forward. Our global positioning and the strength of our service business provide us with excellent prospects for long-term growth. The positive trend in e-commerce and the long-term trends driving the expansion of our automation technology project business also give us cause for optimism.

That is why we are looking to 2021 with confidence – for us and for our customers.

With best wishes,

Gordon Riske
Chief Executive Officer