Earnings and profitability

EBIT, EBITDA, and ROCE

Earnings before interest and tax (EBIT) improved by a substantial €492.3 million to €660.6 million in 2023 (2022: €168.3 million). The figure for the prior year had been affected by the disruptions to the global supply chain and by sharp increases in costs for materials, energy, and logistics. The Group’s financial performance improved in 2023 due to the price rises introduced in 2022 in respect of sales to customers, to the combined effect of the general improvement in the availability of materials and the easing of the cost situation, and to the measures – now largely implemented – to enhance operational and commercial agility in the supply chain and in production in both operating segments.

EBIT included budgeted purchase price allocation effects amounting to an expense of €92.7 million in the reporting year (2022: expense of €92.7 million). There were also non-recurring items amounting to a total expense of €37.2 million (2022: expense of €31.5 million), of which an expense of €27.8 million related to the Supply Chain Solutions segment. As market demand is currently muted in the long-term project business of the Supply Chain Solutions segment, staffing capacity was adjusted in 2023 as a short-term countermeasure to reflect the prevailing order situation. The expense reported for non-recurring items in 2022 had predominantly related to impairment losses on assets in connection with the business in Russia.

EBIT adjusted for non-recurring items and purchase price allocation effects (adjusted EBIT) rose sharply to €790.5 million (2022: €292.4 million). The Group’s adjusted EBIT margin improved to 6.9 percent as a result (2022: 2.6 percent). In the breakdown by segment, the Industrial Trucks & Services segment’s adjusted EBIT margin of 10.0 percent put it back into double figures for this metric. The Supply Chain Solutions segment’s adjusted EBIT margin, which had been negative in the prior year, returned to positive territory at 1.5 percent. A reconciliation of adjusted EBIT and adjusted EBITDA, broken down by functional costs, is provided in the following tables ‘EBIT’ and ‘EBITDA’. In both tables, the ‘other’ item mainly comprises the share of profit (loss) of equity-accounted investments, along with other income and expenses in the income statement.

Earnings before interest, tax, depreciation, and amortization (EBITDA) increased to €1,713.6 million in 2023 (2022: €1,201.8 million). Adjusted EBITDA rose to €1,748.7 million (2022: €1,218.7 million), giving an adjusted EBITDA margin of 15.3 percent (2022: 10.9 percent). The non-recurring items included in EBITDA arose mainly in connection with the capacity adjustments initiated in the Supply Chain Solutions segment. The non-recurring items reported in the prior year had predominantly related to impairment losses on current assets in connection with the business in Russia.

Return on capital employed (ROCE), which is the ratio of adjusted EBIT to capital employed, was up sharply year on year at 7.7 percent (December 31, 2022: 2.9 percent). This was because earnings rose while capital employed was virtually unchanged. The largely stable level of net working capital was also a factor. The following table ‘Return on capital employed (ROCE)’ shows how the figure for capital employed is calculated.

Key influencing factors for earnings

The Group’s revenue growth in 2023 was attributable mainly to the Industrial Trucks & Services segment working through the sizeable order book – facilitated by a stable supply chain situation and much improved availability of materials – and to the price rises introduced in 2022. The cost of sales, conversely, fell by 4.0 percent year on year to €8,652.5 million, as the figure for 2022 had been affected by sharp increases in costs for materials, energy, and logistics. The measures to enhance operational and commercial agility – now largely implemented in both operating segments – thus made a significant contribution to improving the Group’s gross margin from 19.1 percent in 2022 to 24.3 percent.

The rise in other functional costs was mainly due to the increased volume of business and was stronger than the rate of revenue growth. Selling and administrative expenses went up by a total of €129.7 million compared with the previous year, with selling expenses rising by 2.2 percent and administrative expenses by 16.0 percent. In addition to an increase in personnel expenses, including variable remuneration components, the sharp rise in administrative expenses was due in particular to the strategic, groupwide Business Transformation project encompassing the rollout of the SAP S/4HANA system.

Research and development expenditure went up by 15.6 percent overall and contributed to the targeted implementation of the KION 2027 strategy in the core fields of action of ‘automation and software’ and ‘sustainability’. Part of this implementation involved a targeted increase in staffing levels at the development sites.

At €92.7 million, the purchase price allocation effects in EBIT included in the cost of sales and in other functional costs were at the same level as in the previous year. The ‘other’ item in the following table ‘Condensed consolidated income statement’ 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 €12.8 million (2022: profit of €14.1 million).

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

Net financial expenses

Net financial expenses, representing the balance of financial income and financial expenses, deteriorated considerably in the reporting period and came to €200.8 million (2022: €30.2 million). This was due mainly to the rise in the level of interest rates. Interest expense on financial debt increased to €67.8 million (2022: €31.4 million) owing to variable interest rates but also because of a year-on-year rise in average financial debt. Net interest income/expense from the lease and short-term rental business amounted to a net expense of €60.9 million (2022: net income of €10.6 million), whereas income of €39.9 million was realized on the interest-rate derivatives used for hedging purposes in the lease business during the reporting year (2022: expense of €0.4 million). In addition, changes in the fair values of interest-rate derivatives and adjustments to the valuation of lease receivables designated as part of a fair value hedge made a negative contribution of €24.7 million to net financial expenses (2022: positive contribution of €34.7 million).

Income taxes

Income tax expenses rose to €145.4 million (2022: €32.2 million) because of the higher level of earnings in 2023. Alongside the improvement in earnings, the tax expense was mainly increased by losses that are unlikely to be utilizable for tax purposes. By contrast, the tax expense for 2022 had been low relative to the level of earnings because of tax rebates for previous years recognized in profit or loss and the utilization of tax reliefs in connection with research and development projects. The Group’s effective tax rate stood at 31.6 percent for 2023 (2022: 23.3 percent).

Net income and appropriation of profit

Net income amounted to €314.4 million (2022: €105.8 million) and included net income attributable to non-controlling interests of €8.6 million (2022: €7.8 million). The net income attributable to the shareholders of KION GROUP AG was €305.8 million (2022: €98.0 million). Basic earnings per share attributable to the shareholders of KION GROUP AG came to €2.33 (2022: €0.75) based on 131.1 million (2022: 131.1 million) no-par-value shares. Diluted earnings per share, which is calculated by adding potentially dilutive no-par-value shares under the Employee Equity Program, also amounted to €2.33 (2022: €0.75) based on a weighted average number of shares of 131.1 million (2022: 131.1 million).

The distributable profit of KION GROUP AG for the 2023 financial year came to €189.1 million (2022: €111.0 million). The Executive Board and the Supervisory Board will propose to the Annual General Meeting in 2024 that an amount of €91.8 million be appropriated for the payment of a dividend of €0.70 per dividend-bearing share. This equates to a proposed dividend payout rate of around 30 percent of the net income attributable to the shareholders of KION GROUP AG.