Earnings

EBIT and EBITDA

Earnings before interest and tax (EBIT) increased by 25.4 percent to €294.1 million (H1 2022: €234.6 million). EBIT included budgeted purchase price allocation effects amounting to an expense of €47.7 million in the first six months of 2023 (H1 2022: expense of €45.0 million). There were also non-recurring items amounting to a total expense of €6.5 million. The expense of €32.1 million reported in the prior-year period had predominantly related to impairment losses on assets in connection with the business in Russia.

Earnings before interest and taxes adjusted for non-recurring items and purchase price allocation effects (adjusted EBIT) increased significantly to 348.3 million (H1 2022: 311.7 million). The deterioration in earnings in the Supply Chain Solutions segment was more than offset by the substantial rise in earnings in the Industrial Trucks & Services segment, which was driven by higher prices and volume growth. The adjusted EBIT margin improved from 5.6 percent in the prior-year period to 6.2 percent in the reporting period.

EBIT
in € million	Q2 2023	Q2 2022	Q1 – Q2 2023	in % of revenue	Q1 – Q2 2022	in % of revenue
EBIT	164.6	116.8	294.1	5.2%	234.6	4.2%
Adjustment by functional costs:
+ Cost of sales	12.5	11.1	22.1	0.4%	28.6	0.5%
+ Selling expenses and administrative expenses	14.9	13.3	30.3	0.5%	34.4	0.6%
+ Research and development costs	0.6	0.0	0.6	0.0%	0.0	0.0%
+ Other costs	–0.3	0.2	1.3	0.0%	14.2	0.3%
Adjusted EBIT	192.3	141.4	348.3	6.2%	311.7	5.6%
adjusted for non-recurring items	5.3	1.6	6.5	0.1%	32.1	0.6%
adjusted for PPA items	22.4	23.0	47.7	0.8%	45.0	0.8%

EBITDA rose to €816.8 million in the first half of 2023 (H1 2022: €739.6 million) and adjusted EBITDA to €826.1 million (H1 2022: €759.2 million). The non-recurring items in the prior-year period had mainly related to write-downs of current assets in connection with the business in Russia. The adjusted EBITDA margin for the reporting period stood at 14.7 percent (H1 2022: 13.7 percent).

EBITDA
in € million	Q2 2023	Q2 2022	Q1 – Q2 2023	in % of revenue	Q1 – Q2 2022	in % of revenue
EBITDA	429.8	366.5	816.8	14.5%	739.6	13.4%
Adjustment by functional costs:
+ Cost of sales	3.7	0.8	4.6	0.1%	8.4	0.2%
+ Selling expenses and administrative expenses	2.7	0.6	5.8	0.1%	9.5	0.2%
+ Research and development costs	0.5	0.0	0.5	0.0%	0.0	0.0%
+ Other costs	–0.3	0.4	–1.6	–0.0%	1.8	0.0%
Adjusted EBITDA	436.5	368.2	826.1	14.7%	759.2	13.7%
adjusted for non-recurring items	6.7	1.7	9.3	0.2%	19.7	0.4%
adjusted for PPA items	0.0	0.0	0.0	0.0%	0.0	0.0%

Key influencing factors for earnings

In spite of the growth in revenue, the cost of sales fell to €4,296.5 million in the first six months of 2023 (H1 2022: €4,346.6 million). As a result, the gross margin improved to 23.5 percent (H1 2022: 21.5 percent). The ongoing systematic implementation of measures to enhance operational and commercial agility in the supply chain and in production in both operating segments played a significant part in this achievement in the reporting period. Moreover, price increases that had been introduced in 2022 started to have a tangible effect in the Industrial Trucks & Services segment as the processing of the order book was accelerated while material costs remained largely stable.

At 9.0 percent, the year-on-year increase in selling and administrative expenses was greater than the growth in revenue. This disproportionate rise in costs was due not only to salary and wage increases but also to the intensification of sales activities and the KION Group’s strategic projects in procurement and IT. Research and development expenditure also rose substantially (up by 14.9 percent). This was attributable to the implementation of the KION 2027 strategy in the areas of ‘automation and software’ and ‘sustainability’, where groundbreaking development work was carried out in the fields of new energy, automation, and digitalization.

Purchase price allocation effects included in the cost of sales and in other functional costs were slightly higher than in the first half of 2022. The ‘other’ item amounted to income of €26.6 million (H1 2022: €5.9 million). The prior-year figure had been adversely affected primarily by impairment losses on non-current assets in connection with the business in Russia. The share of profit (loss) of equity-accounted investments included in this item amounted to a profit of €6.3 million (H1 2022: €10.9 million).

The change in the cost of sales and in other functional costs is shown in the following condensed income statement.

Condensed consolidated income statement
in € million	Q2 2023	Q2 2022	Change	Q1 – Q2 2023	Q1 – Q2 2022	Change
Revenue	2,836.4	2,802.2	1.2%	5,617.4	5,536.7	1.5%
Cost of sales	–2,159.2	–2,216.3	2.6%	–4,296.5	–4,346.6	1.2%
Gross profit	677.3	585.9	15.6%	1,320.9	1,190.1	11.0%
Selling expenses and administrative expenses	–475.0	–430.7	–10.3%	–942.7	–865.1	–9.0%
Research and development costs	–56.0	–49.4	–13.4%	–110.7	–96.4	–14.9%
Other	18.4	11.0	67.8%	26.6	5.9	> 100%
Earnings before interest and tax (EBIT)	164.6	116.8	41.0%	294.1	234.6	25.4%
Net financial expenses	–40.8	–7.4	< –100%	–76.5	–10.1	< –100%
Earnings before tax	123.9	109.4	13.2%	217.6	224.5	–3.1%
Income taxes	–51.1	–29.8	–71.2%	–71.2	–64.7	–10.2%
Net income	72.8	79.6	–8.6%	146.3	159.8	–8.4%

Net financial expenses

Net financial expenses, representing the balance of financial income and financial expenses, deteriorated considerably in the reporting period and came to €76.5 million (H1 2022: €10.1 million). Key factors that contributed to this increase in expenses were higher interest rates, higher net debt than in the prior-year period, net interest expenses from the lease and short-term rental business, and the marking-to-market of interest-rate derivatives.

Income taxes

Income tax expenses amounted to €71.2 million in the first half of 2023 (H1 2022: €64.7 million). The effective tax rate in the reporting period was 32.7 percent and therefore higher than that for the corresponding prior-year period (H1 2022: 28.8 percent). Increases in non-tax-deductible operating expenses and in losses unlikely to be utilizable for tax purposes were key factors that drove up the effective tax rate year on year.

Net income for the period

Net income for the period amounted to €146.3 million, down by €13.5 million on the figure of €159.8 million achieved in the first half of 2022. Basic earnings per share attributable to the shareholders of KION GROUP AG came to €1.09 (H1 2022: €1.21) based on a weighted average of 131.1 million no-par-value shares (H1 2022: 131.1 million).