Opportunity report

Principles of opportunity management

Opportunity management, like risk management, forms a central part of the Company’s day-to-day management. Individual areas of opportunity are identified within the framework of the strategy process. Opportunities are determined and managed on a decentralized basis in line with the Group strategy.

There are monthly reports on the opportunity situation as part of the regular Group reporting process. As a result, the KION Group is in a position to ascertain at an early stage whether market trends, competitive trends, or events within the Group require individual areas of opportunity to be re-evaluated. This may lead to reallocation of the budgets earmarked for the realization of opportunities. Such decisions are made on the basis of the potential of the opportunity, drawing on previous experience. There is no management system for the evaluation of opportunities comparable to the system for risk management.

Categorization of opportunities

‘Opportunities’ are understood as positive deviations from the expectations set out in the outlook relating to the economic situation and the KION Group’s business situation. Opportunities are divided into three categories:

Market opportunities describe the potential resulting from trends in the market and competitive environment and from the regulatory situation.
Strategic opportunities are based on implementation of the Group’s strategy. They may lead to positive effects that exceed planning assumptions.
Business-performance opportunities arise in connection with operational activities along the value chain, such as restructuring or cost-cutting measures.

Opportunity situation

Market opportunities

The economy as a whole may fare better in 2023 than has been assumed for the purposes of the outlook. In a positive macroeconomic scenario, order intake and revenue could exceed the target ranges, which would have a positive effect on earnings too. A positive macroeconomic scenario could also mean that energy costs rise less steeply, making customers more willing to invest.

In its outlook for 2023, the IMF notes that the aforementioned obstacles to growth will diminish in the second half of the year. The expectation is that the effects of the pandemic will lessen as a result of higher vaccination rates and effective treatments. It explains that this would not only boost the growth rate but also increase consumer confidence and make companies more willing to invest.

According to the IMF, the pandemic has accelerated the trend toward automation and digitalization, which may result in an even greater rise in productivity.

For the KION Group, faster elimination of the current supply bottlenecks may give rise to positive deviations from the outlook and may be accompanied by an easing of the upward pressure on commodity and energy prices.

In addition, circumstances may occur in the wider market at any time – such as quality problems at competitors or the effects of consolidation – that increase demand for products from the KION Group brands. New, unforeseen regulatory initiatives could be launched, for example the tightening of health and safety regulations or emissions standards, that would push up demand for products offered by the KION Group brands. There may also be positive currency effects and an easing of interest rate policy due to falling inflation that were not factored into the planning.

There are four overarching trends, in particular, that present medium- to long-term market opportunities for the KION Group:

Commercial pressures and pressure from society and governments to forge ahead with the transition to a green economy mean that material handling solutions are increasingly required to be climate neutral. This is stimulating demand for industrial and warehouse trucks powered by electric motors, which is a particular area of strength for the KION Group, especially in regard to lithium-ion technology. The KION Group is also investing in fuel-cell technology as a further building block in the transition to a green economy and an opportunity to improve on its outlook for 2023.
Despite an expected lull in growth in 2023, high rates of expansion are predicted for the KION Group’s main customer segments in e-commerce in the next few years, accelerated by the change in consumer behavior. The increasing trend toward online shopping is driving demand for warehouse automation solutions, including networked automated guided vehicle systems, mobile robotics applications, and industry-specific system solutions.
The rise of the emerging markets, most notably China, is fueling growth in demand for industrial trucks and related services in the APAC region. Particularly good opportunities are available in the fast-growing value segment, in which the KION Group is intending to outstrip the market’s growth thanks to its multi-brand strategy, a modular platform for diesel and electric forklift trucks, and the expansion of local production facilities.
Demographic change is resulting in a shortage of workers. This is creating increased demand for warehouse automation, mobile automation, and robotics solutions.

Strategic opportunities

The positive impact of the strategic activities under the KION 2027 strategy is already appropriately reflected in the expectations regarding the KION Group’s financial performance in 2023. Nevertheless, the individual activities could create positive effects that exceed expectations. There is also a possibility that new strategic opportunities that were not part of the planning may arise over the course of the year, for example in the form of acquisitions and strategic partnerships.

The KION Group’s medium- to long-term strategic opportunities in the Industrial Trucks & Services segment arise, in particular, from:

achievement of a leading global market and technology position with regard to truck automation and innovative drive technologies as an integral element of automated warehouse solutions;
a greater presence in the volume price segment, particularly as a result of the systematic implementation of the segment-wide, modular platform strategy (global value platform);
stronger involvement in the electrification of warehousing and logistics processes, including by ensuring availability of lithium-ion technology across the entire product range and expanding market share in the lightweight warehouse truck sector;
further strengthening of the KION Group’s market-leading position in the EMEA region (measured in terms of units) and achievement of a stronger position in the APAC and Americas regions, in particular by the opening of new production facilities and technology centers, boosting its technological expertise through focused research and development activities, developing new equipment focused on the specific needs of customers in the individual regions, making greater use of shared modules, and harnessing potential for cross-selling between the two segments; and
expansion of the service and financial services portfolio at every stage of the product lifecycle, taking advantage of the high number of trucks in use.

The KION Group’s medium- to long-term strategic opportunities in the Supply Chain Solutions segment arise, in particular, from:

further expansion of the KION Group’s position in the market for intralogistics solutions by focusing on fast-growing market segments with a balanced portfolio of short-term and long-term projects;
continual development of intelligent and networked automation solutions, incorporating software, robotics, and mechatronics; and
ongoing development of a high-margin, lifecycle-oriented service approach and continuous expansion of the installed base of supply chain solutions.

Business-performance opportunities

Business-performance opportunities arise firstly from ongoing activities to modernize and streamline the KION Group’s production facilities and from the worldwide integration of the production network. By investing in new locations and expanding existing ones, products can be assembled nearer to the markets in which they are to be sold, economies of scale can be achieved across the Group, and synergies can be leveraged. Secondly, activities are carried out under the KION 2027 strategy aimed at improving operational excellence in research and development, production, and logistics, and at lowering material and quality costs, for example by reducing the complexity of the product range.

The following may lead to an increase in profitability in the short to medium term:

Measures to improve the general cost structure and internal processes in procurement, production, logistics, and project management may help the KION Group to achieve growth more efficiently in the future. For example, continuing to implement the measures initiated in 2022 and passing on the increased cost of materials and energy to customers in the form of price rises could have a very positive impact on earnings and thus lead to a sustained improvement in the competitive position.
Ongoing efficiency increases in the production network, including through the integration of additional sites, automation projects, and the relocation of production, may boost sales and improve the gross margin.
In the Supply Chain Solutions segment, increasing the scalability of products and solutions by refining sub-systems and standard modules that integrate hardware, control units, and software may help to reduce costs and increase quality.
Effective use and centralized coordination of global development capacities may create synergies and economies of scale.

Summary of opportunities

The outlined opportunities offer significant opportunities for the KION Group in the medium to long term beyond the underlying forecast period. In addition, new opportunities are actively sought, their implementation examined and, if necessary, substantiated. If opportunities arise in addition to the forecast developments or if they materialize more quickly than expected, this could have a positive impact on our net assets, financial position and financial performance. Overall, the KION Group's opportunities have not changed significantly compared with the previous year.