Summary of business performance
Sales markets
According to the KION Group, the global market for industrial trucks registered sharp falls in order numbers during the reporting period. This decline had been expected due to the high volume of orders brought forward in 2022, especially in the first half of last year. The EMEA and Americas regions saw a year-on-year reduction in market volumes in the nine-month period, whereas the APAC region experienced solid growth. The KION Group estimates that the EMEA region’s order numbers in the third quarter were only just below the level of the prior-year period, which had been affected by weak market demand.
According to the KION Group, the global market for supply chain solutions continued to be affected by economic uncertainties in the period under review. Furthermore, the higher cost of capital and a slowdown in e-commerce demand – particularly in major customer segments such as grocery wholesale and retail, apparel, and general merchandise – had an adverse impact on decisions relating to investment in the construction of new warehousing and thus on investment in warehouse automation. The latest analysis from research institute Interact Analysis forecasts a fall in new warehousing for 2023 as a whole, compared with the very strong figure for the previous year. According to Interact Analysis, demand for automation solutions is still being boosted by sustained demand for mobile automation solutions as these require less capital investment and can be deployed flexibly.
Business performance in the Group
Thanks to the measures introduced in 2022 to enhance operational and commercial agility in the two operating segments, the KION Group was able to generate year-on-year earnings and margin growth – with significant increases in some cases – despite emerging signs of weakness in the global markets for industrial trucks and supply chain solutions.
Moreover, the ongoing improvement in the availability of materials over the course of the year has enabled the Industrial Trucks & Services (ITS) segment to complete the manufacture and delivery of warehouse trucks and other trucks without any major disruptions and, in so doing, to reduce much of the backlog of orders that had built up in the prior year. The price adjustments implemented in 2022 and the improved availability of materials meant that the ITS segment saw its revenue and adjusted EBIT margin increase substantially compared with the prior-year period.
In the Supply Chain Solutions (SCS) segment, the focus in the reporting period was on the more efficient management of project delivery across all phases of the project cycle. The supply chain situation for components in the customer project business remained challenging, especially in the first half of 2023, and this delayed work on customer projects. The ongoing postponement of order placement by customers in the long-term project business in recent quarters also had an adverse impact on revenue and earnings. The timely implementation of measures in 2022 aimed at improving project execution and project management, combined with the growing proportion of higher-margin customer projects in the order book, meant that the SCS segment’s adjusted EBIT improved in the third quarter compared with the first two quarters of 2023.
Investment in the implementation of growth plans in selected regions served by the KION Group was delivered as planned. In Jinan, China, works to complete the new SCS plant are progressing on schedule. The ITS plant in Jinan has been able to increase its capacity utilization substantially within a very short period of time thanks to high demand from customers. In the US, work commenced on expansion of the industrial truck assembly plant in South Carolina. And in Kahl am Main, Germany, KION Group commenced construction in February 2023 of a new distribution center from which spare parts will be delivered to customers in both operating segments. This highly automated facility will be equipped with warehouse technology solutions from SCS.
The production facility for fuel cell systems for industrial trucks – initially warehouse trucks – that is currently being built at the Hamburg site is scheduled to go into operation by the end of 2023. Moreover, the KION Group’s lithium-ion batteries that have reached the end of their technical life span are now recycled at a facility in Magdeburg, Germany, under a partnership with Canadian company Li-Cycle Holdings Corp.
At the start of July, the KION Group signed up to the Science Based Targets initiative (SBTi) in order to provide transparency regarding its efforts to reduce greenhouse gas emissions. In line with the SBTi principles, the KION Group has set itself the goal of operating on a net-zero emissions basis along its entire value chain by 2050. The commitment to climate-neutral business practices is based on a fundamental scientific framework and is designed to help to achieve the objective of the United Nations Paris climate agreement of limiting global warming to 1.5°C.
MSCI, one of the leading index providers, raised the KION Group’s sustainability rating to AAA at the end of September, putting the KION Group in the top 10 percent for its sector.
On October 10, 2023, KION GROUP AG carried out a financing measure that involved issuing several tranches of promissory notes 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. In return, among other things, a bilateral bank loan of €75.0 million was repaid ahead of schedule in October 2023.
On June 16, 2023, the KION Group signed an agreement for the sale of the ITS business in Russia as part of a management buyout. As at the reporting date, the transaction was still waiting for approval from the Russian authorities.