Summary of business performance

Sales markets

Based on the KION Group’s assessment, the global material handling market was unable to maintain its relatively high prior-year level in the first three quarters of 2022. This can primarily be explained by the war in Ukraine, the downturn in the global economy in combination with high inflation, and measures still being taken in Asia to contain the coronavirus pandemic. In the KION Group’s view, the energy crisis in Europe, tighter monetary policy at the central banks, the negative impact on households’ real incomes, and ongoing supply restrictions took their toll on the market as a whole.

According to the KION Group, momentum in the market for industrial trucks declined across all sales regions in the third quarter, which meant that the worldwide market contracted in the first nine months of the year compared with the same period of 2021. Order numbers for the reporting period are likely to be lower than in the prior-year period in the EMEA region. For the Americas region, the KION Group anticipates a slight year-on-year rise. In the APAC region, order numbers were probably down compared with the prior-year period, partly due to the ongoing measures taken in Asia to contain the coronavirus pandemic.

Because the relevant trade association has changed the publishing dates for market data on order intake for industrial trucks, no robust data on order numbers in the overall market is available for the reporting period.

The KION Group estimates that the global market for supply chain solutions continued to expand in the reporting period, albeit at a slower pace than in previous years, which saw high growth. According to the KION Group, demand was driven by the general merchandise, food and beverage, grocery retail/wholesale, and apparel customer segments. In the e-commerce segment, however, demand contracted markedly over the course of the year.

Despite the announcement by a major e-commerce provider that it will slow down its construction and expansion of fulfillment hubs, the research institute Interact Analysis anticipates a positive trend for the warehouse automation market in the long term. Based on the KION Group’s assessment, the medium- to long-term growth trend in the global market for supply chain solutions and industrial trucks and services is intact and this is backed up by market studies.

Business performance in the Group

High inflation and growing economic uncertainty continued to take a heavy toll on business in the KION Group during the third quarter. The ongoing supply chain disruptions and the sharp increase in costs had a significant adverse impact on financial performance and free cash flow in the third quarter and, by extension, the first nine months of 2022.

Earnings in the third quarter of 2022 were depressed by hugely increased costs in the project business of the Supply Chain Solutions (SCS) segment. Moreover, the supply chain disruptions increasingly reduced the availability of key parts at project sites. The resulting inefficiencies due to project delays pushed up overall project costs. In the Industrial Trucks & Services (ITS) segment too, sharp increases in the cost of materials, energy, and logistics, coupled with persistent shortages of bought-in parts and components, continued to weigh on earnings. The in-year dynamic price increases for industrial trucks that were introduced in response to the spike in costs in the second quarter did not yet have any noticeable positive influence on the ITS segment’s revenue and earnings in the third quarter.

The KION Group’s free cash flow remained under pressure in the reporting period, primarily as a result of the performance of the project business in the third quarter. In the first nine months of the year, the sharp rise in net working capital had a significant adverse impact. It was predominantly due to the increase in inventories, postponed milestone payments as a result of project delays, and the volume-related growth of receivables from customers.

Given the persistent uncertainties in the capital markets and the still elevated level of capital commitment mainly driven by the increase in net working capital KION GROUP AG took further steps to secure its funding requirements in the period under review. This included increasing the commercial paper program by €250.0 million to €750.0 million in April 2022. Additional long-term loans totaling €200.0 million were arranged with banks in July 2022. In June 2022, loans with an aggregate volume of €300.0 million were taken out, including €100.0 million in short-term loans, bringing the total loan volume to €500.0 million as at the reporting date. Then in September 2022, the term of the variable-rate revolving credit facility (RCF) with a total volume of €1,000.0 million was extended by one year until October 2027. On October 7, 2022, an additional longer-dated loan of €100.0 million with a two-year term was agreed.

Taking into account the total amount of €1,191.6 million as at the reporting date resulting from the credit facility that was still freely available and from cash and cash equivalents, the KION Group has created the financial flexibility for itself that it needs to be able to meet its likely short-term funding requirements at all time. From the current perspective, the KION Group therefore believes that it is on a solid footing in terms of its future funding capability.

The KION Group is continuing with its ongoing capital expenditure projects – including the construction of a new plant for supply chain solutions in the Chinese city of Jinan, Shandong province, and a cutting-edge parts distribution center in Kahl am Main, Germany – although the timelines are being adjusted to reflect the demand and capacity situation in each case.

Since the first quarter of 2022, neither operating segment has shipped any products to Russia or Belarus due to the international sanctions imposed in response to the war in Ukraine. In this context, business in Russia was remeasured and a substantial volume of impairment losses were recognized, especially in respect of assets located there. Non-recurring items relating to business in Russia reduced net income for the first three quarters of 2022 by around €34 million in total. The Executive Board of KION GROUP AG has decided to withdraw from all business in Russia. The options for doing so are being analyzed. Moreover, the KION Group will continue to comply with all applicable sanctions.