Financial position

The principles and objectives applicable to financial management as at September 30, 2020 were largely the same as those described in the 2019 combined management report.

Having repaid the remaining liability of €200.0 million under the acquisition facilities agreement (AFA) ahead of schedule in January 2020, the KION Group took steps in response to the coronavirus crisis to protect the Group’s financial strength and flexibility. In May 2020, KION GROUP AG therefore reached agreement with its core group of banks on the provision of a syndicated liquidity line, with Kreditanstalt für Wiederaufbau (KfW) taking a leading role. This is a bridging measure that can be used as needed during the exceptional circumstances. Of the total liquidity line of €1.0 billion, which is provided on standard commercial terms, €800 million has been put up by KfW and €200 million by the KION Group’s core banks. The credit agreement has a term of twelve months and two extension options, each of six months. Early termination of the agreement is possible at any time. So far, no drawdowns have been made from the new syndicated liquidity line.

The KION Group also agreed with the banks providing its funding that the covenants in respect of the existing credit facility and the additional liquidity line can be temporarily suspended. The Group’s revolving facilities thus had a total volume of €2,150.0 million as at September 30, 2020 (December 31, 2019: €1,150.0 million).

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 ending in 2025. The bond is intended to increase the flexibility of the Group’s funding over the long term. Furthermore, the variable-rate tranches of the promissory note that matures in May 2022 and have a nominal value of €653.5 million will be repaid ahead of schedule on October 30, 2020.

Analysis of capital structure

Current and non-current liabilities had risen by €506.1 million to €10,712.9 million as at the reporting date (December 31, 2019: €10,206.8 million). This was due to the financing of the acquisition of DAI, the growth of pension provisions, and increased liabilities in connection with the financing of the long-term leasing business.

Non-current financial liabilities amounted to €1,382.2 million as at September 30, 2020 (December 31, 2019: €1,716.8 million). The carrying amount of the promissory notes included in this item fell from €1,317.3 million as at the end of 2019 to €667.4 million because the variable-rate tranches of the promissory note with a carrying amount of €652.9 million are now recognized as current due to their early repayment at the end of October 2020. Non-current financial liabilities also included the corporate bond issued amounting to €494.2 million and liabilities to banks of €200.2 million (December 31, 2019: €399.5 million). Current financial liabilities rose to €914.4 million (December 31, 2019: €103.7 million). As well as the tranches of the promissory note now recognized as current, the total includes liabilities under the commercial paper program of €185.0 million. Net financial debt (non-current and current financial liabilities less cash and cash equivalents) had increased to €1,867.6 million as at September 30, 2020 (December 31, 2019: €1,609.3 million). This equated to 1.3 times adjusted EBITDA on an annualized basis (December 31, 2019: 1.0 times). Industrial net operating debt, which is an indicator of the liquidity situation and capital structure, relates to the operating business excluding leasing activities in which KION Group entities operate as lessors. To reconcile the net financial debt with the industrial net operating debt of €2,919.2 million as at September 30, 2020, the liabilities from short-term rental fleet financing of €524.0 million and the liabilities from procurement leases of €527.6 million were added to net financial debt.

Liabilities from financial services had risen to €2,772.3 million as at September 30, 2020 (December 31, 2019: €2,500.2 million). They comprise liabilities from financing the leasing business and the short-term rental fleet on the basis of sale and leaseback sub-leases, as well as the liabilities that arise from financing the leasing business by means of lease facilities and the use of securitizations. A sum of €2,360.1 million was attributable to financing of the direct and indirect long-term leasing business (December 31, 2019: €2,062.9 million). This total also includes residual value obligations resulting from the indirect leasing business. These obligations fell to €265.6 million (December 31, 2019: €297.2 million). Lease liabilities had decreased substantially to €284.1 million as at September 30, 2020 (December 31, 2019: €432.1 million). Overall, liabilities from financial services and lease liabilities together totaling €2,644.1 million were attributable to financing of the direct and indirect long-term leasing business (December 31, 2019: €2,495.0 million). A sum of €412.3 million, representing some of the financing of the short-term rental fleet, was recognized under liabilities from financial services (December 31, 2019: €437.2 million). The remaining amount of €111.7 million (December 31, 2019: €178.6 million) relating to the financing of the short-term rental fleet was recognized under other financial liabilities.

Other financial liabilities also included liabilities from procurement leases amounting to €527.6 million (December 31, 2019: €486.1 million), for which right-of-use assets were recorded.

Current and non-current other financial liabilities totaled €754.6 million as at September 30, 2020 (December 31, 2019: €784.9 million).

Contract liabilities, of which a large proportion related to the long-term project business, decreased to €448.4 million in line with progress on projects (December 31, 2019: €504.9 million).

The retirement benefit obligation and similar obligations had increased to €1,408.7 million as at September 30, 2020 (December 31, 2019: €1,263.4 million), mainly due to lower discount rates.

At €3,472.3 million, consolidated equity was lower than the figure at the end of 2019 of €3,558.4 million. This was because the level of net income for the period was unable to compensate for currency translation losses recognized in other comprehensive income and actuarial losses arising from the measurement of the defined benefit obligation. The equity ratio had fallen to 24.5 percent as at September 30, 2020 (December 31, 2019: 25.9 percent).

Analysis of capital expenditure

The KION Group’s total capital expenditure on property, plant and equipment and on intangible assets (excluding right-of-use assets from procurement leases) totaled €189.9 million in the reporting period (Q1–Q3 2019: €187.8 million). Spending in the Industrial Trucks & Services segment continued to be focused on capital expenditure on product development and on the expansion and modernization of production and technology facilities. Capital expenditure in the Supply Chain Solutions segment primarily related to development costs.

Analysis of liquidity

Cash and cash equivalents had increased by €217.8 million to €429.0 million as at September 30, 2020 (December 31, 2019: €211.2 million). Taking into account the credit facility that was still freely available and the additional liquidity line, the unrestricted cash and cash equivalents available to the KION Group as at September 30, 2020 came to a total of €2,573.6 million (December 31, 2019: €1,357.4 million).

Net cash provided by operating activities totaled €170.1 million. This represented a significant decline compared with the figure of €238.0 million in the prior-year period and was mainly due to the fall in earnings from operations. In the third quarter, however, the stabilization of business and the success of the measures implemented to secure liquidity meant that cash flow from operating activities was well into positive territory again. The change in net working capital resulted in a total cash outflow of minus €277.0 million that was significantly smaller than the outflow of minus €470.7 million in the first three quarters of 2019. Furthermore, net cash payments from the leasing business increased to minus €110.2 million (Q1–Q3 2019: minus €90.6 million) and net cash payments from the short-term rental business grew to minus €148.8 million (Q1–Q3 2019: minus €124.6 million).

The net cash used for investing activities amounted to minus €284.4 million in the reporting period (Q1–Q3 2019: minus €185.0 million). Within this figure, cash payments for capital expenditure on production facilities, product development, and purchased property, plant and equipment amounted to minus €189.9 million, which was up slightly year on year (Q1–Q3 2019: minus €187.8 million). In addition, cash payments for the acquisition of subsidiaries and other entities totaled minus €109.2 million (after deduction of cash and cash equivalents acquired); this includes a net cash payment of minus €89.3 million for the acquisition of DAI.

Free cash flow – the sum of cash flow from operating activities and investing activities – came to minus €114.3 million (Q1–Q3 2019: €53.0 million).

The net cash provided by financing activities of €347.7 million (Q1–Q3 2019: net cash used of minus €86.5 million) was primarily attributable to the issuance of the new corporate bond and issuances under the commercial paper program launched in November 2019. These easily offset the net cash outflow for the early repayment of the outstanding liability under the acquisition facilities agreement (AFA). Overall, financial debt taken on during the reporting period amounted to €2,977.6 million (Q1–Q3 2019: €2,000.6 million); repayments amounted to minus €2,518.1 million (Q1–Q3 2019: minus €1,821.9 million). Payments made for interest portions and principal portions under procurement leases totaled minus €98.2 million (Q1–Q3 2019: minus €91.8 million). Current interest payments declined to minus €18.8 million thanks to the further optimization of the interest on financial debt (Q1–Q3 2019: minus €25.2 million). The payment of a dividend to the shareholders of KION GROUP AG in May 2019 had resulted in an outflow of funds of minus €141.5 million in the prior-year period. The corresponding payment in the reporting period amounted to just minus €4.7 million, which equates to a dividend of €0.04 per share.