Earnings
EBIT and EBITDA
In the reporting period, earnings before interest and tax (EBIT) more than halved to €272.8 million (Q1–Q3 2019: €554.1 million). However, the decline in earnings was less pronounced in the third quarter at 30.6 percent. EBIT included budgeted negative effects from purchase price allocations totaling €66.4 million (Q1–Q3 2019: €65.2 million). Negative non-recurring items of €24.6 million were also recognized in the period under review (Q1–Q3 2019: €5.4 million). These items mainly related to the Industrial Trucks & Services segment and included the impairment loss of €10.7 million recognized on the long-term equity investment in Linde Hydraulics GmbH & Co. KG, which is accounted for using the equity method. An amount of €12.1 million was recognized as a negative non-recurring item in connection with the capacity and structural program that has been initiated. This amount also included the expenditure of €8.5 million on the restructuring of the UK sales organization that is already in progress in the Industrial Trucks & Services segment. EBIT adjusted for non-recurring items and purchase price allocation effects (adjusted EBIT) fell by 41.8 percent to €363.8 million (Q1–Q3 2019: €624.7 million). The adjusted EBIT margin was down significantly year on year at 6.1 percent (Q1–Q3 2019: 9.6 percent) but was showing clear signs of recovery compared with the figure of 5.2 percent for the first half of 2020.
in € million |
Q3 |
Q3 |
Change |
Q1 – Q3 |
Q1 – Q3 |
Change |
|---|---|---|---|---|---|---|
EBIT |
135.2 |
194.9 |
–30.6% |
272.8 |
554.1 |
–50.8% |
+ Non-recurring items |
2.2 |
0.8 |
>100% |
24.6 |
5.4 |
>100% |
+ PPA items |
21.6 |
21.4 |
0.8% |
66.4 |
65.2 |
1.8% |
Adjusted EBIT |
159.1 |
217.1 |
–26.7% |
363.8 |
624.7 |
–41.8% |
Adjusted EBIT margin |
7.7% |
10.1% |
− |
6.1% |
9.6% |
− |
Earnings before interest, tax, depreciation, and amortization (EBITDA) decreased to €962.1 million (Q1–Q3 2019: €1,218.7 million). Adjusted EBITDA declined to €986.7 million (Q1–Q3 2019: €1,224.1 million), giving an adjusted EBITDA margin of 16.4 percent (Q1–Q3 2019: 18.8 percent).
in € million |
Q3 |
Q3 |
Change |
Q1 – Q3 |
Q1 – Q3 |
Change |
|---|---|---|---|---|---|---|
EBITDA |
365.0 |
419.3 |
–12.9% |
962.1 |
1,218.7 |
–21.1% |
+ Non-recurring items |
2.2 |
0.8 |
>100% |
24.6 |
5.4 |
>100% |
+ PPA items |
0.0 |
0.0 |
− |
0.0 |
0.0 |
− |
Adjusted EBITDA |
367.3 |
420.1 |
–12.6% |
986.7 |
1,224.1 |
–19.4% |
Adjusted EBITDA margin |
17.7% |
19.4% |
− |
16.4% |
18.8% |
− |
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 €248.6 million in the reporting period (Q1–Q3 2019: €245.6 million).
Key influencing factors for earnings
The cost of sales decreased at a slower rate than revenue, falling by 5.8 percent to €4,508.7 million (Q1–Q3 2019: €4,787.4 million). The KION Group’s gross margin therefore stood at 24.9 percent for the nine-month period (Q1–Q3 2019: 26.6 percent). This was primarily due to the reduced coverage of fixed costs as a result of the lower volume of business. The implementation of strategic projects meant that research and development costs went up by 2.3 percent and administrative expenses by 5.0 percent year on year. The temporary restrictions on sales activities, however, caused selling expenses to fall by 3.9 percent. One of the aforementioned strategic projects is the capacity and structural program, which has been initiated in the EMEA region in connection with the coronavirus pandemic. Purchase price allocation effects included in the cost of sales and in other functional costs were only slightly higher than in the first three quarters of 2019. The ‘other’ item included, among other effects, the share of profit (loss) of equity-accounted investments, which amounted to a loss of €4.9 million (Q1–Q3 2019: profit of €10.7 million). Currency translation losses also had a negative impact on the ‘other’ item.
The change in the cost of sales and in other functional costs is shown in the following table.
in € million |
Q3 |
Q3 |
Change |
Q1 – Q3 |
Q1 – Q3 |
Change |
|---|---|---|---|---|---|---|
Revenue |
2,072.9 |
2,160.0 |
–4.0% |
6,000.2 |
6,524.2 |
–8.0% |
Cost of sales |
–1,543.8 |
–1,569.5 |
1.6% |
–4,508.7 |
–4,787.4 |
5.8% |
Gross profit |
529.0 |
590.5 |
–10.4% |
1,491.5 |
1,736.8 |
–14.1% |
Selling expenses and administrative expenses |
–355.8 |
–364.1 |
2.3% |
–1,090.6 |
–1,098.6 |
0.7% |
Research and development costs |
–35.8 |
–36.5 |
1.9% |
–113.4 |
–110.9 |
–2.3% |
Other |
–2.2 |
4.9 |
< −100% |
–14.7 |
26.9 |
< −100% |
Earnings before interest and tax (EBIT) |
135.2 |
194.9 |
–30.6% |
272.8 |
554.1 |
–50.8% |
Net financial expenses |
–17.2 |
–25.4 |
32.4% |
–64.1 |
–75.9 |
15.6% |
Earnings before tax |
118.0 |
169.4 |
–30.3% |
208.8 |
478.2 |
–56.3% |
Income taxes |
–36.2 |
–48.8 |
25.9% |
–76.3 |
–139.3 |
45.2% |
Net income |
81.9 |
120.7 |
–32.2% |
132.5 |
338.9 |
–60.9% |
Net financial expenses
The net financial expenses, representing the balance of financial income and financial expenses, improved from €75.9 million in the prior-year period to €64.1 million in the first nine months of this year due to further optimization of the interest on financial debt.
Income taxes
Income tax expenses fell significantly year on year to €76.3 million (Q1–Q3 2019: €139.3 million), reflecting the level of earnings. Nevertheless, the effective tax rate rose to 36.6 percent (Q1–Q3 2019: 29.1 percent). This year-on-year change was primarily attributable to non-tax-deductible expenses, which did not decrease to the same extent as earnings before tax. Furthermore, the level of losses that could not be utilized for tax purposes was higher than in the prior-year period owing to the decline in earnings. The figure for the prior-year period had included positive effects such as the adjustment of tax provisions for prior periods and tax breaks for R&D activities in the United States.
Net income for the period
At €132.5 million, net income for the period was significantly lower than the figure for the prior-year period (Q1–Q3 2019: €338.9 million). Basic earnings per share attributable to the shareholders of KION GROUP AG came to €1.18 (Q1–Q3 2019: €2.88) based on 118.0 million (Q1–Q3 2019: 117.9 million) no-par-value shares.