Summary of business performance
During the reporting period, the world economy showed signs that it was stabilizing in comparison with the end of 2022. However, the situation remains very challenging. In its economic outlook published at the beginning of April 2023, the International Monetary Fund (IMF) therefore revised its forecast for global economic growth in 2023 to 2.8 percent, after it had projected growth of 2.9 percent for the same period in January 2023. The IMF points out that the recovery remains fragile and that there are still significant risks of a downturn. It cites as central factors the uncertainty as to how Russia’s war against Ukraine will unfold, the lingering effects of the coronavirus pandemic on national economies, and the effects of the tightening of monetary policy by central banks, which could result in further risks arising in the financial and banking sectors.
In the first quarter of 2023, according to the KION Group, the global market for industrial trucks contracted in the EMEA and Americas regions but grew slightly in the APAC region. Order numbers for industrial trucks had been boosted in 2022, mainly during the first half of the year, by the effect of customers bringing forward their purchases in response to extended shipping times resulting from the limited availability of parts and materials. In terms of units sold, the global market for industrial trucks shrank by 6.7 percent over the course of 2022 (World Industrial Truck Statistics). Official figures for the growth trend in the overall market for industrial trucks in the first quarter of 2023 were not available at the time this report was published.
According to the KION Group, the current geopolitical and economic uncertainties meant that customers were still reluctant to invest in supply chain solutions in the first three months of 2023, which also led to the postponement of new orders in the project business. The KION Group, backed by data from research institute Interact Analysis, believes that the positive, medium- to long-term market trends for supply chain solutions remain intact overall.
Business performance in the Group
The KION Group delivered a generally encouraging business performance in the first quarter of 2023 thanks to its Industrial Trucks & Services (ITS) segment. The significant slowdown in the market for industrial trucks, particularly in the main EMEA sales region, caused order numbers in the Industrial Trucks & Services segment to drop by 32.0 percent. However, because the segment was working through the sizeable order book built up in the prior year, this decline did not affect revenue growth in the reporting quarter. The improving supply chain situation and the Group’s own steps to stabilize the availability of materials meant it was possible, in the reporting period, to further reduce inventories of unfinished trucks for which only individual components were missing and to ship the trucks to customers. Because of the progress that could then be made in working through the sizeable order book, allowing newer orders to be brought forward, the price increases that the KION Group had implemented in 2022 for new trucks to compensate for higher manufacturing costs began to have a positive impact on the Industrial Trucks & Services segment’s revenue and earnings in the first quarter of 2023.
In the Supply Chain Solutions (SCS) segment, the ongoing normalization of growth in the market for supply chain solutions led to a sharp decline in order intake in the project business (business solutions). In addition, the continued unwillingness of customers to make capital expenditure decisions resulted in them putting back new orders. The Supply Chain Solutions segment’s quarterly results were weak because it was working through generally lower-margin orders from the order book, because projects were delayed by a lack of bought-in parts, and because of the persistent shortage of skilled workers, particularly in North America. Nevertheless, the segment’s adjusted EBIT returned to profit in the reporting quarter, due in no small part to improvements that had already been achieved in project execution and project management and to an expanded supplier base.
The KION Group’s free cash flow was comfortably back into positive territory in the first quarter of 2023. A key factor in addition to the level of operating profit was that net working capital remained at virtually the same level as at the end of 2022.
Further progress was made with 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 state-of-the-art distribution center for spare parts in Kahl am Main, Germany. In January 2023, the KION Group announced that it would also be setting up a production facility for fuel cell systems – initially for warehouse trucks – at its Hamburg site. At the same time, it is investing in proprietary hydrogen production, including the use of electrolyzers, at its Aschaffenburg site.
In March 2023, the KION Group entered into a strategic partnership with Li-Cycle Holdings Corp., a leading North American recycler of lithium-ion batteries. Starting in the second half of 2023, this will see a process put in place to reuse up to 95 percent of the materials from these batteries.