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KION Group stays on track in tougher market environment and continues to increase revenue and earnings in H1 2008
- Order intake matches last year's high figure - Revenue grows by over 9 percent to €2.3 billion - EBIT[1] margin rises sharply from 7.6 percent to 8.4 percent - Revenue growth and significantly higher earnings forecast for 2008
Wiesbaden, September 4, 2008 - The KION Group continued to expand its business in the first half of 2008 compared with the corresponding period of last year. The Company generated revenue of €2.265 billion in the first six months of the year, which represented a year-on-year increase of 9.3 percent despite the more challenging market conditions (H1 2007: €2.072 billion). The improvement in the KION Group's profitability was even more impressive. Adjusted earnings before interest and tax (EBIT1) advanced by 20.2 percent to €189.5 million (H1 2007: €157.6 million). The EBIT margin of 8.4 percent was significantly higher year on year (H1 2007: 7.6 percent).
"We have managed to offset the sharp rise in our costs - particularly the cost of raw materials, energy and transportation - by continuing to improve our efficiency as part of our GoIPO program, by increasing our prices and by reaping synergies from our multibrand strategy that had previously not been exploited," emphasized Gordon Riske, Chief Executive Officer of the KION Group, announcing the Company's first-half financial results at Thursday's press conference in Wiesbaden. "Our aim is to stay firmly on track in what is an increasingly tough market environment so that we generate robust revenue growth and a signficant rise in earnings for the year 2008 as a whole. The first half of 2008 provides a solid platform on which to achieve these objectives."
Order backlog remains high at just under €1 billion The KION Group's brands reported an order intake (€2.383 billion) that matched the very high prior-year figure (H1 2007: €2.384 billion) in a highly competitive market that contracted in May and June after having grown continuously for more than two years. The level of order intake therefore remained well in excess of revenue. The KION Group's order backlog totaled €987 million as at June 30, 2008.
The KION Group's market share in terms of unit sales declined slightly overall, especially in the field of small and low-tech trucks, owing to the stiff price competition in Europe. By contrast, it managed to expand its share of the market for technologically sophisticated equipment. For example, the division comprising extra heavy-duty trucks and container handlers sold roughly 30 percent more new trucks between January and June of 2008 than it did in the first six months of 2007. In addition, the KION Group raised the number of export orders it won outside Europe. Its global market share in the first six months of 2008 amounted to some 17 percent, with approximately 83,000 newly ordered units. Some 500,000 forklift and warehouse trucks were newly ordered worldwide in the first half of 2008.
The markets in Asia and eastern Europe remained the principal growth drivers. Growth rates in the western European market were lower, while the market in southern Europe contracted. KION's excellent performance in Central and South America compensated for the impact of the downward trend in the US market. The most significant individual markets in eastern Europe were Poland and the Czech Republic. In Asia, the high levels of capital spending in China had a particularly positive effect. KION has had its own production plant in China since 1993, which also manufactures for the entire Asia Pacific region and supplies modules for the assembly lines in Europe.
Linde Material Handling In the first six months of 2008, Linde Material Handling again managed to win a number of major orders from customers in the logistics sector, as well as from the glass, chemical and food industries. Whereas its markets in western Europe and North America were increasingly affected by the economic slowdown, to which Linde Material Handling did not remain immune, the Company increased its order intake in the rapidly growing markets of eastern Europe and Asia, especially in China. Demand for electric counterbalance trucks was particularly strong in the Asian markets.
Linde Material Handling is this year bringing a total of ten new models to market - more new products than ever before in a single year - and a large number of them were successfully launched in the first half of 2008. The Company has invested a total of some €50 million in the development of these new trucks in recent years. The spectrum of these new products ranges from tow tractors fitted with sprung operating units and diesel/LPG forklifts with load capacities of between five and eight tonnes to 30-meter-high empty-container handlers that can stack up to seven containers on top of each other.
The technical improvements made to these new trucks provide customers with key benefits, which enable the trucks to be used highly cost-effectively while significantly reducing the total cost of ownership (TCO): these benefits are greater energy efficiency and improved loading and unloading performance, on the one hand, and enhanced driver comfort, safety, and quality of service, on the other. Some of the newly developed products are also aimed at further internationalizing and strengthening Linde Material Handling's market presence, especially in the United States and Asia. By investing a total of around €21 million in its manufacturing facilities and the development of new products, Linde Material Handling is also stepping up its business in heavy duty and container trucks over the next three years, which is being boosted by positive long-term forecasts about the levels of container traffic worldwide.
This forward-looking perspective was the focal point of the Company's exhibition stand at CeMAT in Hannover, the world's largest intralogistics trade fair. It demonstrated the use of three newly designed trucks that were equipped with a hydrogen internal combustion engine, a fuel cell and a hybrid drive, thereby showing that Linde Material Handling is already preparing for the drive technologies that can be expected to appear over the medium to long term. As part of a research program scheduled to run until 2015 a total of 50 industrial trucks equipped with hydrogen technology are being trialed by selected customers as part of an extensive field test. The findings obtained from more than 20,000 hours of operation, covering factors such as wear & tear and energy consumption, are being continuously fed into the ongoing development and optimization process. At the same time, Linde Material Handling is conducting in-depth development activities to optimize conventional drives that run on internal combustion engines and electric motors. By pursuing this combined strategy the Linde brand is continuing to extend its technology leadership.
STILL STILL achieved above-average growth in the first six months of 2008 on the back of big-ticket orders from logistics firms, retail chains, and automotive companies and suppliers. It also generated significant growth from small and medium-sized enterprises.
STILL stepped up the expansion of its distribution and service network in the first few months of 2008. It set up a further subsidiary in response to the rapid growth of its markets in central and eastern Europe. Since June, STILL has been represented in Bucharest by a subsidiary, which enables it to provide its rapidly growing customer base in Romania with the best-possible level of service for its entire product range. DAC Handling Solutions Limited, which is the largest STILL dealer in the United Kingdom, was integrated into the STILL Materials Handling Ltd. division in July. This is enabling STILL to further increase its share of the UK market.
The Company launched a number of new products that complete its RX product family. This enables it to offer each of its clients a customized intralogistics solution that combines TCO-optimized products, cutting-edge software management, and swift aftersales service. For example, STILL redefined its business in trolleys and tow tractors by introducing its innovative Kanvan truck, an unprecedented combination of a truck and a tow tractor. A new generation of tiller-guided pallet stackers rounds off its range of innovative warehouse equipment.
STILL supports the intelligent management of intralogistics by supplying innovative software solutions. Its exhibition stand at the CeMAT trade fair featured not only newly developed trucks but also the networking of state-of-the-art industrial trucks with intelligent software. STILLReport, a web-based software tool, was introduced for fleet operators. It provides its users with comprehensive information on all the industrial trucks they are using and enables them to optimize their fleets.
The development of new products and services has also raised the bar in terms of efficiency and environmental responsibility. STILL's RX 70 diesel truck is already the most fuel-efficient in the world. The Company demonstrated the future of diesel drive technology on this basis at the CeMAT when it exhibited the world's first purely hybrid truck that is ready for series production. Its Blue-Q series constitutes a program for optimizing electric lift trucks. The concept Blue-Q = IQ provides an intelligent way of improving cost-effectiveness and environmental responsibility. In the field of fuel cell technology STILL has already completed four projects involving industrial trucks that run on fuel cells.
OM In the first half of 2008 the OM brand managed to defend its leading position in Italy, its domestic market, with a special success in the core segment of electric counterbalanced trucks with the new line launched at the end of last year. It also intensified its growth strategy in Eastern Europe, especially in Russia and in the former CIS states, where it stepped up the expansion of its dealer network. OM doubled its business in this region in the first six months of 2008 compared with the first half of 2007. Another important growth market for OM is Turkey, where this brand delivered another strong performance. It is also working with new dealers to open up further markets overseas, most recently in Australia.
OM, too, presented a number of new products at the CeMAT trade fair. It has overhauled its entire product range in the past three years as part of a comprehensive research & development program. The Company has redeveloped much of its warehouse equipment as well as trucks fitted with internal combustion engines with load capacities of between 1.5 and 4 tonnes and its electric lift trucks with load capacities of between 1.5 and 2.5 tonnes.
All three brands contributed to the growth in revenue The KION Group's revenue for the first half of 2008 rose by 9.3 percent to €2.265 billion (H1 2007: €2.072 billion). Linde Material Handling grew by 8.6 percent, STILL by 13.9 percent, and OM - partly as a result of the adverse market trend in southern Europe - by 3.1 percent.
EBIT[2] margin rises to 8.4 percent in the first half of 2008 Earnings before interest and tax (EBIT2), adjusted for one-off items, jumped by 20.2 percent to €189.5 million (H1 2007: €157.6 million). The EBIT2 margin therefore improved significantly to 8.4 percent (H1 2007: 7.6 percent), adjusted for one-off items. The KION Group's EBIT2 margin for 2007 as a whole was 7.8 percent. Thanks to their trucks' especially low operating costs and high productivity, the KION Group's three brands managed to pass on the increase in the prices of energy and raw materials as well as of wages to the market in the first half of 2008. Long-term supply agreements also limited the rise in the prices of raw materials. Furthermore GoIPO synergy and improvement program helped to compensate increasing costs.
Net income for the first half of 2008 amounted to roughly €29 million. The net loss of approximately €134 million for the first six months of 2007 was still heavily affected by one-off charges, which were mainly acquisition-related. The net interest expense for the first half of 2008 came to roughly €110 million, some €88 million of which was cash-effective. The tax expense amounted to approximately €24 million.
Free cashflow before interest and tax more than doubled from €56.5 million in the first half of 2007 to €122.5 million on the back of the KION Group's strong performance in the first half of 2008. Net debt[3] as at June 30, 2008 came to €2.298 billion, which was more than €70 million below the figure reported as at December 31, 2007, partly also due to exchange rates.
R&D spending and capital expenditure remain high The KION Group continued to invest heavily in its future in the first half of 2008. Spending on research and development totaled €56 million, which was slightly higher than the corresponding figure of €54 million for the first half of 2007. These activities focused on research into future drive technologies, the development of new trucks and the extension of the Company's hydraulics product range.
Capital expenditure remained high at just over €70 million. Apart from expanding capacities in its heavy-truck operations, in its production of warehouse equipment and in its hydraulics business, the Company focused on modernizing and upgrading its plant and machinery.
GoIPO program is continued "Our GoIPO program continued to provide us with valuable support in achieving our ambitious financial targets in the first half of 2008", said CFO Harald Pinger. "We will continue this program beyond 2008 to secure and enhance our strong financial position. A company's profitability is a key factor determining its competitiveness and ability to prosper in future in what is an increasingly challenging market environment". The objectives of the KION Group's GoIPO synergy and improvement program are to bring about improvements in sales and service, streamline production, optimize product costs and improve purchasing.
Modest increase in the workforce The number of employees (including 523 apprentices and trainees) rose from 21,068 at the end of 2007 to 21,413 on June 30, 2008, which was an increase of just under 2 percent. Of this total, 8,371 people were employed in Germany and 13,042 in other countries. Linde employed 13,195 people, STILL's workforce comprised 6,656 people, and OM had 1,248 employees.
KION 2015 strategy program The second quarter of 2008 saw the successful launch of the KION 2015 strategy program, which is intended to expand the Company's service business and position it more globally whilst reaffirming its multibrand strategy. The brands' product management, marketing, sales and service activities are being considerably strengthened in terms of their product differentiation, independence and P&L responsibility. The Company's ONE KION philosophy of cross-brand cooperation is standardizing the processes and management tools applied to interdisciplinary functions, thereby laying the foundations for the KION Group's expansion over the medium term through the addition of new brands.
Key functions have been merged across brands as part of the Company's 3P organizational structure (Product Planning, Product Development, and Purchasing). The Product Planning unit draws up the ten-year budgets and projections for the brands' products. In Product Development, the KION Group's brands can draw on R&D capabilities that are unrivaled in the industry and therefore significantly shorten their development periods. The multibrand Purchasing function makes the Company and its brands even more attractive as a strong, long-term partner to suppliers.
The Central Operations unit defines globally uniform standards and processes for the KION brands' production plants that comply with the KION Group's best practice in each case and make production-related and logistics expertise equally available to all plants.
Cross-brand cooperation in the Administration function also creates synergies.
Outlook The KION Group is forecasting robust revenue growth and aims to achieve a significant increase in adjusted EBIT[4] for 2008 as a whole.
"The KION Group has started 2008 on a vigilant note. Recent economic trends have reaffirmed that this is the correct attitude to adopt. Over the coming weeks and months we will continue to keep a close eye on the market as well as commodity and energy prices so that we can respond quickly to changing market conditions. This explicitly includes the option of further price increases by our brand companies as well as measures to improve efficiency and cut costs", stressed Pinger.
CEO Gordon Riske expects market conditions to be tougher in the second half of 2008 and in 2009. "Although the growth markets of Asia and eastern Europe should continue to perform well, we expect growth in the global markets to slow significantly overall in the second half of the year, and this trend will continue in 2009." However, Riske believes that the KION Group is well-equipped to face these challenges as a result of its extensive distribution and service network: "As the level of capital expenditure of our customers falls across the board, long-term considerations will become more important again. Customers will then focus even more on criteria such as quality, service, energy efficiency and productivity when choosing their trucks for intralogistics purposes. As a technology leader we will continue to pursue a pricing policy that is guided by the product benefits that our customers value. Profitability and the consequent ability to prosper in future lie at the heart of our long-term strategy. We believe that sustaining our financial strength over the long term is more important than temporarily increasing our market share. In general, intralogistics remains an attractive long-term market that holds out the prospect of strong growth and fairly low volatility."
The KION Group in the first half of 2008
€ million H1 2008 H1 2007 Change Order intake 2,383 2,384 +/- 0.0% Revenue 2,265 2,072 + 9.3% Linde Material 1,427 1,313 + 8.6% Handling[5] STILL5 766 672 + 13.9% OM5 186 181 + 3.1% EBITDA adjusted 362.0 323.6 + 11.9% EBITDA margin 16.0% 15.6% EBITDA reported 337.6 173.9 + 94.1% EBIT[6] adjusted 189.5 157.6 + 20.2% EBIT margin 8.4% 7.6% EBIT reported 162.5 12.0 Net income 28.7 (133.7) n.a. Free cashflow 122.5 56.5 +116.8% (before interest and tax) Capital expenditure 70.2 71.8 (2.2)% Research & development 55.6 54.1 + 2.8% total
Employees as at June 30 21,413 21,086 + 1.6% (FTEs, incl (Dec. 31, 2007) apprentices & trainees)
The Company
The KION Group, with its Linde, STILL and OM brands, is the European market leader in industrial trucks and the global number two in the industry. In 2007, it employed over 21,000 people and generated revenue of more than €4.3 billion.
For further information please contact
Michael Hauger Head of Communications and Investor Relations Tel.: +49 (0)611 770 655 Email: michael.hauger@kiongroup.com
Frank Kopfinger Head of Investor Relations Tel.: +49 (0)611 770 220 Email: frank.kopfinger@kiongroup.com
[1] Adjusted for one-off items, before PPA [2] Adjusted for one-off items, before PPA [3] Bank debt minus cash and cash equivalents (cash including securities) [4] Adjusted for one-off items, before PPA [5] Before consolidation [6] Adjusted for one-off items, before PPA
