Business performance in the Group

The KION Group continued to pursue its key objective of expanding its market position in the Chinese material handling market, which is expected to see strong long-term growth, and in August began construction of a new factory for manufacturing Linde and Baoli counterbalance trucks in the eastern Chinese city of Jinan. The construction project, for which capital expenditure of around €100 million has been budgeted, is due to be completed in 2022. More than 800 new jobs are to be created in Jinan by 2025. The new plant will enable the KION Group to capitalize on opportunities for growth in the value segment and on the increasing electrification of industrial trucks in China. The operator of the new plant will be KION (Jinan) Forklift Co., Ltd., which was established with Weichai Power Co., Ltd. at the start of the year and in which the KION Group holds a 95.0 percent stake.

The new strategic partnership formed with Shanghai-based Quicktron, a leading Chinese manufacturer of autonomous mobile robots (AMRs), is aimed at expanding the product portfolio for the Chinese market and beyond. The distribution agreement, which was signed in August 2020, enables Quicktron’s mobile automated warehouse solutions to be distributed directly via the global sales and service networks of the KION brands Linde, STILL, and Dematic.

In March 2020, the KION Group acquired UK specialist software company Digital Applications International Limited (DAI), thereby significantly expanding its software offering in the Supply Chain Solutions segment. The total expenditure is around €120 million, of which €98.0 million was included in the calculation of free cash flow in the period under review. The integration of the solutions offered by DAI in the areas of logistics automation and supply chain engineering gives the Supply Chain Solutions segment additional capacity in these areas, enabling it to provide even better support for the transportation, storage, and distribution of goods along the entire supply chain.

The KION Group’s third factory building at its Stříbro site in the Czech Republic went into operation in September 2020 and manufactures items for the Supply Chain Solutions segment such as conveyor belts, pouch sorting systems, and storage and retrieval equipment – known as Multishuttle systems – that ensure the smooth flow of goods in warehouses and distribution centers. The segment’s increased production capacity enables it to take even greater advantage of the growing demand for omnichannel solutions and the rapid expansion of e-commerce.

In the third quarter, the KION Group was able to scale back some of the short-term measures introduced in the Industrial Trucks & Services segment during the first half of the year in order to deal with the economic impact of the coronavirus pandemic. The major production facilities that had temporarily closed largely went back into operation. A variety of personnel measures – including the using up of accumulated credit hours in working-time accounts and the introduction of short-time working – continued to help to flexibly manage the capacity adjustments. Alongside the changes in production, supply logistics were also adapted to the new situation, partly in response to the disruptions to global supply chains. As a result, some of the buffer of parts that had been built up at the plants in the first half of the year was reduced as production began to be ramped up again.

In the Supply Chain Solutions segment, the plants remained busy and continued to operate almost continually in the reporting period. Disruptions in the project business caused by regional restrictions on access for project engineers were no longer an issue in the third quarter, which meant it was possible to make up for some of the project delays.

In May 2020, the KION GROUP AG reached agreement with its core group of banks on the provision of a syndicated liquidity line, with Kreditanstalt für Wiederaufbau (KfW, Germany’s state-owned development bank) taking a leading role. The liquidity line has been arranged as a precaution to protect the Group’s financial strength. It has a volume of €1.0 billion and has not been utilized so far. The KION GROUP AG also agreed with the banks providing its funding that the covenants in respect of the current credit facility and the additional liquidity line can be temporarily suspended. In another move to preserve liquidity, the Annual General Meeting on July 16, 2020 approved a reduction in the dividend to €0.04 per dividend-bearing share.

On September 24, 2020, KION GROUP AG issued a corporate bond on the capital markets with a total volume of €500.0 million and a term of five years in order to increase the flexibility of the Group’s funding over the long term. The variable-rate tranches of the promissory note that matures in May 2022 with a total nominal value of €653.5 million will be repaid ahead of schedule on October 30, 2020.

The aforementioned liquidity-related measures were accompanied by the postponement of capital expenditure on selected projects as well as various cost-cutting programs. As part of these countermeasures, a capacity and structural program was initiated over the course of 2020 in order to further stabilize the operating business and secure the Group’s competitiveness. The program, which mainly affects the Industrial Trucks & Services segment, is aimed at streamlining and optimizing the organizational structures and capacity in production, sales, and service in the EMEA region in order to reflect the anticipated medium-term market environment after the coronavirus pandemic.