Earnings and profitability

EBIT, EBITDA, and ROCE

Earnings before interest and tax (EBIT) fell sharply, by €626.5 million, to €168.3 million (2021: €794.8 million). EBIT included budgeted purchase price allocation effects amounting to an expense of €92.7 million in the reporting year (2021: expense of €84.8 million). There were also non-recurring items amounting to a total expense of €31.5 million in 2022 (2021: expense of €37.8 million). These essentially reflected impairment losses recognized on assets in connection with business in Russia, although these were partly offset by a boost to earnings from plan adjustments that affected defined benefit obligations. The positive non-recurring items in 2021 had also mainly related to plan adjustments affecting defined benefit obligations, as well as to the reversal of provisions that had been recognized in connection with the capacity and structural program introduced in 2020 during the pandemic.

EBIT adjusted for non-recurring items and purchase price allocation effects (adjusted EBIT) decreased to €292.4 million (2021: €841.8 million). The adjusted EBIT margin fell sharply to 2.6 percent as a result (2021: 8.2 percent).

Earnings before interest, tax, depreciation, and amortization (EBITDA) amounted to €1,201.8 million (2021: €1,735.7 million). Adjusted EBITDA decreased to €1,218.7 million (2021: €1,696.9 million), giving an adjusted EBITDA margin of 10.9 percent (2021: 16.5 percent).

Return on capital employed (ROCE), which is the ratio of adjusted EBIT to capital employed, was down sharply year on year at 2.9 percent (December 31, 2021: 9.1 percent). This was due both to the significant drop in earnings and the increase in capital employed. The latter was attributable to the high level of net working capital, a situation that continued until the reporting date. The following > table ‘Return on capital employed (ROCE)’ shows how the figure for capital employed is calculated.

Key influencing factors for earnings

The cost of sales rose at a much faster rate than revenue, increasing by 16.0 percent to €9,011.5 million (2021: €7,770.7 million). The gross margin was significantly squeezed by the disruptions to supply chains, the resulting inefficiencies in production, and the surge in costs for materials, energy, and logistics in both operating segments. Costs were also driven up by project delays in the long-term project business caused by shortages of materials and resource bottlenecks.

In the Industrial Trucks & Services segment, the raising of list prices during the year did little to compensate for the increase in manufacturing costs as the segment was predominantly working through existing customer orders received before the prices were increased. Furthermore, shortages of materials led to significant inefficiencies, especially in the first half of the year. In the Supply Chain Solutions segment, a rise in the overall project costs expected in the long-term project business weighed heavily on earnings in the third quarter. The segment was able to pass on only a small proportion of the project-related cost increases to customers because adequate price adjustment clauses were not included in new project contracts until half way through the second quarter.

The KION Group’s gross margin therefore deteriorated to 19.1 percent in 2022 (2021: 24.5 percent).

The rise in other functional costs was largely due to the increased volume of business and was stronger than the rate of revenue growth. Selling expenses went up, partly because of the pick-up in travel and marketing activities. The reasons for the year-on-year increase in administrative expenses included the implementation of strategic projects. Selling expenses rose by 15.3 percent and administrative expenses by 6.7 percent, giving an overall increase of 11.9 percent. Research and development expenditure swelled by 16.4 percent in total, in part due to the targeted increase in staffing levels at the development sites. A decline in personnel expenses in connection with variable remuneration components and changes to pension plans helped to keep the cost increases in check.

The change in the cost of sales and in other functional costs is shown in the following table.

Purchase price allocation effects included in the cost of sales and in other functional costs were higher than in the previous year due to currency effects.

The ‘other’ item includes not only income and expense resulting from currency translation but also line items such as the share of profit (loss) of equity-accounted investments, which amounted to a profit of €14.1 million (2021: profit of €13.1 million).

EBIT also included an expense of €35.8 million for non-recurring items relating to business in Russia.

Net financial expenses

The net financial expenses, representing the balance of financial income and financial expenses, improved to €30.2 million (2021: €35.1 million). This was mainly attributable to the level of net interest income/expense from the lease business and positive changes in the fair value of the related interest-rate derivatives. Interest expense on financial liabilities increased to a total of €28.6 million (2021: €21.2 million) owing to borrowing during the year. Currency effects in connection with financing had a more negative impact than in the previous year.

Income taxes

Income tax expenses fell to €32.2 million (2021: €191.7 million), mainly owing to the lower level of earnings in the reporting year and due to tax rebates for previous years recognized in profit or loss. The use of tax reductions in connection with research and development (R&D) projects recognized as an expense also helped to reduce the tax expense compared with the previous year. The effective tax rate therefore stood at 23.3 percent for 2022. The low tax rate for the Group in the previous year (25.2 percent) had also been attributable to tax deductibles and tax credits received. No deferred tax assets were recognized in respect of the impairment losses on assets of the Russian subsidiaries in the year under review.

Net income and appropriation of profit

Net income amounted to €105.8 million (2021: €568.0 million) and included net income attributable to non-controlling interests of €7.8 million (2021: net loss of €0.3 million). Net income included an expense of €36.8 million for effects relating to business in Russia. The net income attributable to the shareholders of KION GROUP AG was €98.0 million (2021: €568.3 million). Basic earnings per share attributable to the shareholders of KION GROUP AG came to €0.75 (2021: €4.34) based on 131.1 million (2021: 131.1 million) no-par-value shares. Diluted earnings per share, which is calculated by adding the potential dilutive no-par-value shares under the Employee Equity Program, also amounted to €0.75 (2021: €4.33) based on a weighted average number of shares of 131.1 million (2021: 131.1 million).

The distributable profit of KION GROUP AG for the 2022 financial year came to €111.0 million (2021: €197.1 million). The Executive Board and the Supervisory Board will propose to the Annual General Meeting in 2023 that an amount of €24.9 million be appropriated for the payment of a dividend of €0.19 per dividend-bearing share. This equates to a proposed dividend payout rate of around 25 percent of the net income attributable to the shareholders of KION GROUP AG.