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 optimize the funding structure and conditions. 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 for profitable growth.

Within the Group, KION GROUP AG manages intercompany cash pooling centrally. KION GROUP AG pools the liquidity of the Group companies and covers their funding requirements. The vast majority of the Group companies participate in KION GROUP AG’s groupwide cash pool. 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 local credit lines for some Group companies with 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 currently has a maturity structure extending until 2030.

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.

The KION Group’s credit ratings remained more or less unchanged in the year under review. Standard & Poor’s confirmed its BBB– rating in April 2023 and changed the outlook from CreditWatch negative to negative. Since October 2022, Fitch Ratings has awarded a long-term issuer default rating of BBB with a stable outlook and a short-term issuer default rating of F2.

KION GROUP AG generally issues guarantees to the banks for Group companies’ existing payment obligations.

The KION Group maintains a liquidity reserve in the form of cash and a revolving credit facility 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 maximum level of leverage (defined as the ratio of industrial net operating debt (INOD) to adjusted EBITDA). As at December 31, 2023, the actual level of leverage was well below the limit of the financial covenant. As contractually agreed, this calculation is currently suspended in respect of the revolving credit facility entered into in 2022, which was extended in 2023, because KION GROUP AG continues to have two investment-grade credit ratings.

Exceeding the agreed maximum level of leverage gives lenders a right of termination.  

The contractually agreed interest terms for the revolving credit facility are linked not only to KION GROUP AG’s credit rating but also to compliance with the Group’s sustainability KPIs. A promissory note issued in October 2023 is also linked to the achievement of ESG targets.

Main corporate actions in the reporting period

KION GROUP AG further secured the funding requirements of the Group in the year under review, responding to the persistent uncertainties in the capital markets.

On October 10, 2023, KION GROUP AG carried out an important financing measure that involved issuing a promissory note in several tranches with a total nominal amount of €375.0 million, thereby extending the maturity profile of the Group’s financial liabilities. The promissory note is linked to sustainability criteria (ESG-linked promissory note); its tranches predominantly have a variable rate and maturity periods of up to seven years. Five bilateral bank loans with a total volume of €475.0 million were repaid in 2023, in some cases ahead of schedule. Total borrowing of €1,147.5 million in the reporting year was offset by repayments of €1,621.7 million.

Analysis of capital structure

Non-current and current liabilities amounted to €11,615.7 million as at December 31, 2023, which was €624.1 million higher than the figure as at December 31, 2022 of €10,991.6 million. This rise was largely due to the increase in non-current and current liabilities from the lease and short-term rental business, which was partly offset in particular by a decrease in financial liabilities. Non-current liabilities included deferred tax liabilities of €448.9 million (December 31, 2022: €492.8 million).

Financial debt

Non-current and current financial liabilities fell to a total of €1,522.4 million (December 31, 2022: €1,988.6 million). Non-current financial liabilities stood at €1,285.6 million (December 31, 2022: €1,361.8 million). The carrying amount of the corporate bond issued, which is included in this line item, amounted to €498.0 million (December 31, 2022: €496.8 million). In addition to the non-current promissory notes, which had a total carrying amount of €626.5 million (December 31, 2022: €319.2 million) and included the ESG-linked promissory note issued in October 2023, non-current financial liabilities predominantly comprised liabilities to banks. The early repayment of bilateral bank loans in the fourth quarter of 2023 meant that non-current liabilities to banks fell to €143.2 million (December 31, 2022: €515.1 million).

Current financial liabilities decreased to €236.8 million as at December 31, 2023 (December 31, 2022: €626.7 million). Repayments in 2023 mainly related to paper issued under the commercial paper program, whose volume as at December 31, 2023 was €20.0 million (December 31, 2022: €305.0 million). Current liabilities to banks were also reduced, standing at €129.2 million as at the end of 2023 (December 31, 2022: €304.2 million). This included the amount of €21.0 million that was drawn down from the syndicated revolving credit facility (RCF) as at the reporting date. The unused portion of the RCF therefore stood at €1,364.7 million (December 31, 2022: €1,271.1 million). Current financial liabilities also included a tranche of the promissory note amounting to €69.5 million that is now recognized as current.

Net financial debt (non-current and current financial liabilities less cash and cash equivalents) stood at €1,210.6 million at the end of 2023, which was well below the prior-year figure (December 31, 2022: €1,670.5 million). This equated to 0.7 times adjusted EBITDA on an annualized basis (December 31, 2022: 1.4 times). To reconcile the net financial debt with the industrial net operating debt (INOD) of €2,566.2 million as at December 31, 2023 (December 31, 2022: €2,799.7 million), the liabilities from the short-term rental business of €716.6 million (December 31, 2022: €544.2 million) and the liabilities from procurement leases of €639.0 million (December 31, 2022: €584.9 million) are added to net financial debt.

Retirement benefit obligation and similar obligations

The KION Group maintains pension plans in many countries. These plans comply with legal requirements applicable to standard local practice and thus the situation in the country in question. They are either defined benefit pension plans, defined contribution pension plans, or multi-employer benefit plans. As at December 31, 2023, the retirement benefit obligation and similar obligations under defined benefit pension plans amounted to a total of €775.7 million, a year-on-year increase of €62.8 million that was due to lower discount rates (December 31, 2022: €712.8 million). The net obligation under defined benefit pension plans amounted to €674.8 million (December 31, 2022: €618.9 million). Changes in estimates relating to defined benefit pension entitlements resulted in a decrease in equity of €58.7 million (after deferred taxes).

Contributions to pension plans that are entirely or partly funded via funds are paid in as necessary to ensure sufficient assets are available and to be able to make future pension payments to pension plan participants. These contributions are determined by factors such as the funded status, legal and tax considerations, and local practice. Payments totaling €85.9 million (2022: €35.5 million) were made in 2023 for the main pension entitlements in the KION Group. They mostly comprised pension benefits of €26.1 million (2022: €22.3 million) granted directly by the Company and employer contributions to plan assets amounting to €59.7 million (2022: €13.2 million), which included the non-recurring addition of €50.0 million made in 2023 in order to increase the funding ratio of the pension plans.

Liabilities from lease and short-term rental business

The ongoing expansion of the lease business led to higher funding needs in the reporting period. Non-current and current liabilities from the lease business increased to €3,756.2 million as at December 31, 2023 (December 31, 2022: €3,214.6 million). Of this total, €3,620.5 million was attributable to financing of the direct lease business (December 31, 2022: €3,048.4 million) and €135.7 million to the repurchase obligations resulting from the indirect lease business (December 31, 2022: €166.3 million).

Non-current and current liabilities from the short-term rental business totaled €716.6 million (December 31, 2022: €544.2 million).

Other provisions

Non-current and current other provisions rose to €452.3 million as at December 31, 2023 (December 31, 2022: €370.2 million). In addition to provisions for product warranties and for personnel-related obligations, this includes provisions for onerous contracts mainly related to project business in the Supply Chain Solutions segment and other obligations.

Other financial liabilities

Non-current and current other financial liabilities rose to €884.5 million as at December 31, 2023 (December 31, 2022: €764.6 million). This item included liabilities from procurement leases amounting to €639.0 million (December 31, 2022: €584.9 million), for which right-of-use assets were recorded.

Contract liabilities

Contract liabilities, which mainly relate to prepayments received from customers in connection with the long-term project business in the Supply Chain Solutions segment, decreased to €773.3 million (December 31, 2022: €826.1 million).

Equity

Consolidated equity went up by €164.9 million to €5,772.7 million as at December 31, 2023 (December 31, 2022: €5,607.8 million). The net income of €314.4 million earned during the year under review contributed to the rise in equity. However, this was partly offset by the actuarial gains and losses arising from the measurement of pensions, which amounted to a net loss of €58.7 million (after deferred taxes), and currency translation losses of €79.0 million, both of which were recognized in other comprehensive income. KION GROUP AG’s dividend payout reduced equity by €24.9 million. The equity ratio decreased only slightly to 33.2 percent as at the end of 2023 (December 31, 2022: 33.8 percent).

Analysis of capital expenditure

The KION Group’s capital expenditure on property, plant and equipment and on intangible assets in the reporting year (excluding right-of-use assets from procurement leases) gave rise to cash payments of €442.8 million (2022: €382.7 million). The focus in the Industrial Trucks & Services segment was on product development and the expansion and modernization of production and technology facilities. Capital expenditure in the Supply Chain Solutions segment predominantly related to development costs and the construction of a new plant for supply chain solutions in the Chinese city of Jinan, Shandong province. Purchase commitments for capital expenditure on non-current assets amounted to €68.5 million as at the reporting date (December 31, 2022: €117.0 million); they are financed almost entirely from the KION Group’s own resources. 

Analysis of liquidity

Liquidity management is an important aspect of central financial management in the KION Group. The sources of liquidity are cash and cash equivalents, cash flow from operating activities, and amounts available under credit facilities. Using cash pools, liquidity is managed in such a way that the Group companies can always access the cash that they need.

Cash and cash equivalents declined to €311.8 million as at the reporting date (December 31, 2022: €318.1 million). In addition, cash of €8.9 million was recognized under assets classified as held for sale (December 31, 2022: €14.1 million).

Taking into account the credit facility of €1,364.7 million that was still freely available (December 31, 2022: €1,271.1 million), the unrestricted cash and cash equivalents available to the KION Group at the end of 2023 amounted to €1,674.4 million (December 31, 2022: €1,577.3 million).

In 2023, the KION Group’s cash flow from operating activities amounted to a substantial net cash inflow of €1,144.0 million thanks to the significant increase in operating profit and the improved management of working capital. By contrast, the prior-year figure – amounting to a net cash outflow of minus €345.9 million – had been adversely affected, in particular, by the considerable growth of net working capital as a result of the extensive supply chain disruptions.

Net cash used for investing activities amounted to minus €428.8 million and was therefore higher than in the previous year (2022: minus €369.7 million). Within this total, cash payments for capital expenditure on production facilities, product development, and purchased property, plant and equipment rose to minus €442.8 million (2022: minus €382.7 million).

As a result, free cash flow – the sum of cash flow from operating activities and investing activities – improved significantly to €715.2 million in the reporting year (2022: minus €715.6 million).

Net cash used for financing activities amounted to minus €721.7 million in 2023 (2022: net cash provided of €562.8 million), largely due to the repayment of financial debt on the back of the very good level of free cash flow. Additions to and repayments of financial debt mainly related to current additions and repayments under the commercial paper program and the syndicated revolving credit facility (RCF) as well as the repayment of bank loans. Payments made for interest portions and principal portions under procurement leases totaled minus €157.9 million (2022: minus €151.7 million). Due to higher market interest rates and the higher average level of debt during the year, current interest payments went up substantially to minus €69.7 million (2022: minus €32.6 million). The payment of a dividend to the shareholders of KION GROUP AG resulted in an outflow of funds of minus €24.9 million, which equates to €0.19 per share.