Financial position
Principles and objectives of financial management
The KION Group pursues a sound financial policy of maintaining a strong credit profile with reliable access to capital markets. By pursuing an appropriate financial management strategy, the KION Group makes sufficient cash and cash equivalents available at all times to meet the Group companies’ operational and strategic funding requirements. As part of its financial management activities, the KION Group aims to continually reduce its financial liabilities and optimize the financing of the long-term lease business. In addition, the KION Group manages its financial relationships with customers and suppliers and mitigates the financial risk to its enterprise value and profitability, notably currency risk, interest-rate risk, price risk, counterparty risk, and country risk. In this way, the KION Group creates a stable funding position from which to maintain profitable growth.
The financial resources within the KION Group are provided on the basis of an internal funding approach. The KION Group collects liquidity surpluses of the Group companies in central or regional cash pools and, where possible, covers subsidiaries’ funding requirements with intercompany loans. This funding enables the KION Group to present a united front in the capital markets and strengthens its hand in negotiations with banks and other market participants. The Group occasionally arranges additional credit lines for KION Group companies with local banks or leasing companies in order to comply with legal, tax, and other regulations.
The KION Group is a publicly listed corporate group and therefore ensures that its financial management takes into account the interests of shareholders, the banks providing its funding, and other lenders. For the sake of all stakeholders, the KION Group makes sure that it maintains an appropriate ratio of internal funding to borrowing. The KION Group’s borrowing is based on a generally long-term approach and currently has an age structure extending until 2027.
Depending on requirements and the market situation, the KION Group also avails itself of the funding facilities offered by the capital markets. The KION Group therefore seeks to implement proactive risk management by rigorously pursuing its corporate strategy and to maintain an investment-grade credit rating in the capital and funding markets by ensuring a solid funding structure.
There was a further improvement in the credit ratings awarded to the KION Group by the two rating agencies in the year under review. In September 2021, Fitch Ratings raised the Group’s long-term issuer default rating from BBB– to BBB with a stable outlook. At the same time, the short-term issuer default rating was upgraded from F3 to F2. In May 2021, Standard & Poor’s initially confirmed its issuer rating of BB+ and raised the outlook from stable to positive. It then raised this rating to BBB– with a stable outlook in August 2021.
As a rule, KION GROUP AG has issued guarantees to the banks for Group companies’ existing payment obligations.
The KION Group maintains a liquidity reserve in the form of agreed and confirmed credit lines and cash in order to ensure long-term financial flexibility and solvency.
In addition, it uses derivatives to hedge currency risk. Interest-rate swaps are entered into in order to hedge interest-rate risk.
The revolving credit facility and a number of promissory notes taken out by KION GROUP AG stipulate adherence to covenants. The agreed financial covenant involves ongoing testing of adherence to a defined maximum level of leverage. This calculation is currently suspended in respect of the new revolving credit facility entered into in October 2021 because KION GROUP AG has had two investment-grade credit ratings since August 2021. Less favorable interest terms may be imposed if the level of leverage is increased significantly. Exceeding the maximum level of leverage as at a particular reference date may give lenders a right of termination.