KION Group Annual Report 2013

Plain-text annual report

We keep the world moving. annual report 2013 KION Group Segments LINde MaterIaL HaNdLING StILL The Linde Material Handling (LMH) seg- ment encompasses the Linde, Fenwick and Baoli brands. The STILL and OM STILL brands are grouped in the STILL segment. €2,881.1 million REVENUE €309.1 million ADJUSTED EBIT 13,776 EMPLOYEES FINaN cIaL ServIceS (FS) €1,717.5 million REVENUE €123.9 million ADJUSTED EBIT 7,704 EMPLOYEES The purpose of the Financial Services (FS) segment is to act as an internal funding partner for LMH and STILL, providing finance solutions that promote sales. FS activities include the internal financing of the short-term rental fleet, the funding of long-term leasing business for the KION Group's external cus- tomers, and the risk management associated with these operations. In the major sales markets with a high volume of financing and leasing, this business is handled by legally independent FS companies. €539.4 million REVENUE €0.7 million ADJUSTED EBIT 118 EMPLOYEES BreaKdOWN OF tOtaL reveNue IN 2013 BreaKdOWN OF adju Sted eBIt IN 2013 58.5 % LINDE MATERIAL HANDLING 33.4 % STILL 7.0 % FINANCIAL SERVICES 1.1 % OTHER 74.2 % 29.7 % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0 % – 10 % 0.2 % – 4.1 % LINDE MATERIAL HANDLING STILL FINANCIAL SERVICES OTHER ¹ including effects of consolidation/reconciliation KION Group Company profile Linde is a global premium brand and a technology leader that has many years' experience of hydrostatic drive technology. It has also been develop- ing and manufacturing electric drive systems for decades and makes the resulting expertise available to exter- nal customers for use in a variety of applications. STILL is predominantly a global pre- mium provider of trucks with electric and diesel-electric drives. It mainly focuses on the European and Latin American markets. Its portfolio consists of forklift trucks and ware- house trucks plus associated services. STILL has also positioned itself as a leading provider of intelli- gent intralogistics solutions. The Baoli brand covers the value and economy segments in China and other emerging markets in Asia, east- ern Europe, the Middle East, Africa, and Central and South America. In France, Linde products are sold under the Fenwick brand. Fenwick is the biggest material-handling provider in France. The product portfolio ranges from warehouse trucks to heavy trucks and caters to all of the major application areas. Fenwick and Linde meet customers' most sophisti- cated requirements in terms of tech- nology, efficiency, functionality and design. PrOductS aNd ServIceS Diesel and LP gas forklift trucks Electric forklift trucks Warehouse handling equipment Platform trucks and tractors In Italy, STILL products are sold under the OM STILL brand. OM STILL is a market leader in Italy and offers both trucks and fully integrated warehouse systems, including automation and fleet management solutions. Voltas is a leading provider of industrial trucks in India. It manufactures diesel trucks, electric forklift trucks and ware- house trucks for the Indian market and can draw on a network of more than 50 dealers providing sales and service. Stock management systems Transport and truck control systems Automation Fleet management Purchase Leasing Racking systems Hire purchase Repair Maintenance Full service Used trucks Driver training RFID systems Hire PrOductS ServIce SYSteMS FINaNcING KION Group Key figures for 2013 KION Group overview in € million order intake revenue order book 1 Results of operation eBItDa adjusted eBItDa 2 adjusted eBItDa margin 2 eBIt adjusted eBIt 2 adjusted eBIt margin 2 2013 4,489.1 4,494.6 693.3 708.8 721.5 16.1 % 374.2 416.5 9.3 % 2012 * 4,590.3 4,559.8 807.8 914.4 700.5 15.4 % 549.1 408.3 9.0 % 2012 4,700.1 4,726.7 807.8 915.4 747.3 15.8 % 550.1 438.2 9.3 % 2011 4,681.9 4,368.4 953.0 569.2 665.3 15.2 % 213.2 364.6 8.3 % Change 2013/2012 – 2.2 % – 1.4 % – 14.2 % – 22.5 % 3.0 % – – 31.9 % 2.0 % – net income (loss) 3 138.4 161.4 161.1 – 92.9 – 14.2 % Financial position 1 total assets equity net financial debt Cash flow Free cash flow 4 Capital expenditure 5 6,026.4 1,610.0 979.3 202.6 125.8 6,213.2 660.7 1,790.1 518.1 155.1 6,213.2 660.3 1,790.1 518.1 155.1 6,066.3 – 487.6 2,631.3 – 3.0 % > 100,0 % – 45.3 % 234.2 133.0 – 60.9 % – 18.9 % Employees 6 22,273 21,215 21,215 21,862 5.0 % * Key figures for 2012 were adjusted due to the retrospective application of IaS 19r (2011); order intake, revenue, adjusted eBIt and adjusted eBItDa were aligned due to the sale of the Hydraulics Business 1 Values as at balance sheet date 31/12/ 2 adjusted for KIon acquisition items and one-off items 3 net income 2012 included a net gain from the Weichai transaction in the amount of €154.8 million 4 Free cash flow is defined as Cash flow from operating activities plus Cash flow used in investing activities 5 Capital expenditure including capitalised r&D costs, excluding leased and rental assets 6 number of employees in full-time equivalents as at balance sheet date 31/12/ all amounts in this annual report are disclosed in millions of euros (€ million) unless stated otherwise. the addition of the totals pre- sented may result in rounding differences of +/– €0.1 million. the percentages shown are calculated on the basis of the respective amounts, rounded to the nearest thousand euros. ANNUAL REPORT 2013 We keep the world moving. The KION Group has a global presence with products, services and solutions provided by its six brand companies. The KION Group is the European market leader and the world's second largest manufacturer of forklift trucks and warehouse technology, and it is one of the leading international suppliers in the sector in China. Linde and STILL serve the premium segment worldwide, while Baoli focuses on the value and economy segments. Fenwick is the material- handling market leader in France, OM STILL is a market leader in Italy and Voltas is one of the two market leaders in India. But these strong foundations were not the only thing that enabled the KION Group to generate revenue of around €4.5 billion in 2013. The key factor was our workforce of more than 22,000 people, who go the extra mile for our customers every day. ONlINE vERsION reports.kiongroup.com REGIstER FOR OuR NEwslEttER kiongroup.com/newsletter INvEstOR RElatIONs kiongroup.com/ir KION GROup wEbsItE kiongroup.com 2 What drives us every day – worldwide Anyone who keeps the world moving – as we do in the KION Group – comes into contact with the lives of millions of people each and every day. Whether it's filling the shelves in super markets, sending a parcel from an online retailer on its way, or getting a part to the assembly line 'justintime': forklift trucks and warehouse technology set the pace of the global economy. Behind all of these activities are the employees of the KION Group, who work each day on the products and services that play such a decisive role in ensuring the efficient flow of goods and trade around the world. Highly motivated, highly qualified and always focused on the needs of the customer. Jan Koepp Post Merger Integration opportunities. WIEsbadE n, GERMANY P. 18 VinCent Halma Marketing team spirit. suMMERVIllE , USA 0 4 P . Cristine sauter Human Resources Perspectives. IndaIatuba /sÃo P aulo, BR A zIl HE AD OFFICE SITES We keep the world moving.KION GROUP AG | Annual Report 20130 1 . P P. 1 6 andreas Kistner Innovation Management Innovation. asCHaFFEnbuRG, GERMANY 3 6 P . 0 luKáš bartí K Assembly Quality. ČEský kR uMlo V, CzECH REPUBlIC P. 14 biKe güVen Material Planning and Marketing Inspiration. Istanbul , TURKE Y P . 1 2 CHen da Sales Passion. FuZHou, CHINA P. 0 8 anup r amaCHandra Kurup Product Development Potential. Pun E , INDIA We keep the world moving.KION GROUP AG | Annual Report 2013 Perspectives. CrIStIne SAuter Human Resources A rapidly growing market. Increasingly complex logistics demands. In emerging markets, forklift trucks and warehouse technology are replacing muscle power and hand trucks to an ever greater degree. And no one knows this better than Cristine Sauter. IndAIAtubA/SÃo pAulo Brazil 5 Attractive market with growth profile above GDP. The KION Group operates in an attractive market that is growing faster than global economic output. The worldwide market for industrial trucks grew at roughly 1.4 times the rate of the global economy between 1980 and 2013. Industry experts reckon that this pace is set to accelerate slightly over the period up to 2017. this scenario is being driven by three global mega-trends: – the industrialisation of the emerging markets, – the advancing globalisation of world trade and, as a consequence, the increasing transportation of goods around the world, – the growing fragmentation of supply chains and value chains: just-in-time logistics and purchases from online retailers create demand for the KION Group’s products and services. Global unit sales of new trucks and global economic output ¹ 8.3 4.1 4.2 3.3 2.8 3.0 2.6 2.7 5.6 3.5 9 % 8 % 7 % 6 % 5 % 4 % 3 % 2 % 1 % 0 % 1980 – 1990 1990 – 2000 2000 – 2010 2010 – 2013 2014 – 2017 Global orders of new trucks Global economic output (world GDP) 1 Average annual growth rates for new truck sales and GDP between 1980 and 2013; Source: WITS/FEM (new trucks 1980 – 2013); McKinsey market survey (forecast for new trucks 2014E – 2017E); IMF 2013 (global GDP) CrIStIne SAuter Human Resources 01 Whether bananas or concrete slabs – virtually all goods are transported by forklift trucks at some point 02 KION’s plant in Indaiatuba, where Linde and STILL trucks are produced 03 Good atmosphere: always ready to listen to KION staff 02 Recently, demand for high-quality Linde and STILL products has risen sharply, with the KION Group’s unit sales in Brazil reaching a record high in 2013. It was only a question of time before the plant in Rio de Janeiro reached full capacity. Cristine Sauter belonged to a small group of KION staff members who organised the relocation and fresh start at a brand-new factory near São Paulo. he mountains of exotic fruit and vegetables She had the expertise required, because Cristine is a are stunning; the displays extend as far as the real Paulista – born and bred in the city. Her grand- 01 T eye can see in the gigantic market halls in the heart of parents migrated there from Hamburg years ago, but the booming Brazilian city of São Paulo. Workers still the 37-year old speaks perfect German, as well as load heavy crates of pineapples, melons and bananas Portuguese, English and Spanish. She could navigate onto traditional carrinhos – slender, makeshift wooden the chaotic traffic on the congested multi-lane streets barrows – and manoeuvre them manually through the of São Paulo in her sleep. narrow aisles between market traders and piles of boxes. Cristine Sauter watches the hustle and bustle looking for staff by loudspeaker with great interest. “We could sell loads of forklift trucks The plant is in Indaiatuba, an hour’s drive from the city. here,” says the 37-year-old HR manager of KION South “When we started in 2012, it was a greenfield site. America. “The potential for us here is enormous.” There were five of us, including the CEO Frank Bender, Everywhere is booming in this city of over eleven million says. With a recently opened freight terminal, Indaia- inhabitants. Newly renovated buildings peek out between tuba offered better infrastructure and greater security and our office started out in a former farmhouse,” she the high-rises, some extremely run-down, while resi- than Rio. dential and office complexes tower into the sky. Despite the heat, suits are the order of the day in broad Avenida Paulista, the Wall Street of São Paulo. 03 juggling it with her private life, which involves four small children, a Labrador puppy and a new house-build. In her spare time, she is also studying for an MBA. For Cristine Sauter, it had to be Brazil. As a young woman she lived in Saarbrücken for a few years where she studied business administration, but afterwards she wanted to go back home. “At that time, things were too slow for me in Germany.” And why did she join the KION Group? “Here I’m free to organise things myself, which is unusual in Brazilian companies. And setting up a new plant was amazing, it was like a start-up.” She cannot get away from her German roots, nor does » The KION Group has a clearly defined growth strategy, and we all work as a team to implement it – that’s what motivates me!« Cristine Sauter Human Resources When the plant was up and the machinery installed, she want to. Her grandfather taught her the importance Cristina had to recruit a qualified workforce of 120 of a good education. “He always said that nobody can within three months. The question was how to do this take that away from you,” she recalls. Cristina passes in a booming region where the unemployment rate is this philosophy on to her staff as well as her children. strikingly low, at around one per cent. “One thing we She works closely with the IFPA German technical did was to send cars with loudspeakers out into the college in São Paulo where young employees study for streets to spread the message that we were offering qualifications in areas such as freight forwarding and attractive jobs,” reports Cristina. This actually helped, industrial management under the dual vocational train- as German employers are popular in Brazil, not least ing system. They get their practical experience at the because they pay wages on time. The HR manager plant in Indaiatuba. This is a new concept for Brazil – selected all the new employees personally. “In Brazil, and it gives the KION Group a distinct competitive edge. direct contact is very important.” It just had to be brazil The new plant, which produces counterbalance trucks and warehouse technology, was officially opened in March 2013. The workforce rose to 200 within a few months – creating plenty of work for Cristine Sauter. She uses two mobile phones to manage her job, Quality. LuKáš BArtíK Assembly Being globally focused yet firmly established in its home market is part of the DNA of the KION Group. Lukáš Bartík and others like him have all the qualities you’d expect of a good mechanic: an eye for precision and a passion for technology and commercially outstanding products. We are the market leaders in Europe thanks to employees such as Lukáš. ČEsKý KrumLOv Czech Republic 7 A global leader – strong home base … Measured in terms of new trucks sold, the KION Group is currently number one in the European market and number two in the market worldwide. And with a presence in more than 100 countries, the company is the world’s biggest specialist provider of materials handling trucks and associated services. Our strong position in western Europe, where we have a market share of 35 per cent (2013), is the basis for the global expansion of the KION Group. The foundation of our business is stable in this region because of replacement purchases and a strong service business. After plunging into a deep crisis, Europe’s mar- ket for industrial trucks is now recovering. Since 2010 the KION Group has benefited from this trend with a double-digit percentage increase in revenue in Germany and the rest of Europe. Strong in key markets – The KION Group’s market shares and market positions in 2013 # 1 35 % WESTERN EUROPE # 1 22 % E ASTERN EUROPE 26 % BR A zIL ¹ # 1 ² # 1 7 % CHINA 1 Electric forklift trucks and warehouse technology systems (in terms of unit sales), market share incl. IC trucks. 2 No. 1 among international providers in China and no. 3 measured by the overall market position in China (in terms of unit sales) 01 01 Quality control: an eye for detail is everything 02 Lukáš Bartík with head of production, Karl Fritsch 03 Axles from the Lipo plant: the heart of Linde and STILL trucks 03 02 » There’s a great deal of satisfaction to be had in sorting out a problem.« Lukáš Bartík Assembly T here are certain headaches that no factory castle where they can watch the brown bears that live is immune to: a problem with a machine is in the moat. Český Krumlov, known as the pearl of the holding up the production process. Something isn’t Bohemian forest, became a UNESCO World Heritage right with an axle that’s already been made. An employee site in 1992. Every year its 14,000 residents are joined calls in sick at short notice. So you can consider your- by over a million tourists. self fortunate if you’ve got someone like Lukáš Bartík in your ranks. The tall 31-year-old is the man for all Efficiency and precision occasions in the assembly of electric drive axles at But there’s more to Český Krumlov than history and Linde Pohony (Lipo) in Český Krumlov, in the far south tourism. It’s not even ten minutes’ drive from the bus- of the Czech Republic. tling old town, up the hill, past the hypermarkets and into Tovární – the factory road. On behalf of the KION In a 2,000 square metre space in hall M1A around three Group, Lipo has been making electric drive axles here dozen men assemble electric drive axles for the KION since 1998 and hydrostatic drive axles since 2010. Vis- Group’s forklift trucks. Almost 28,000 electric drive iting Bartík at work after strolling through Krumlov’s axles and 18,000 hydrostatic drive axles are delivered centre offers quite a contrast. In this functional building, annually to truck plants of the KION brand companies in which everything is focused on efficiency and preci- Linde and STILL in Germany, China and the USA. sion, the cosiness of the old town seems a world away. Electromobility, the technology of the future, has long been part of everyday life here. Hydrostatic and electric The first plant on the current Lipo site was built before drive axles are at the heart of the Linde and STILL the fall of the Iron Curtain. In the mid-1980s, Jihostroj trucks – ensuring their exceptional precision. They pro- made turned parts here for the Czech arms industry. vide the basis for the strong position of the KION Group After the break-up of the Soviet Union, the site pro- in its home market of Europe and increasingly in the duced chassis components for Porsche, before Linde growth markets too. Pohony was founded in April 1997. The company cur- rently has 273 employees. “Quickly solving problems” Bartík has worked on all three production lines at Lipo – Fascinated by technology even as a boy the assembly fitter has been there since 2007 – and This is Bartík’s world – the abundance of highly technical so can be used flexibly wherever his capabilities are devices and machinery, the geometrically arranged work- needed. “If there’s a problem, I try to solve it as quickly stations, the fitters bustling around and the hum of the as possible or I find someone who can help,” he says. forklift trucks. Bartík has been fascinated by machinery “I try to make sure that people are able to do their work and technology since he was a little boy. His father and don’t have to worry about anything else.” The engi- František, a car mechanic by trade, got his two sons neering enthusiast isn’t daunted by difficulties, quite the interested in engineering at an early age. One now opposite in fact: “There’s a great deal of satisfaction to builds motorbikes, the other electric drive axles. be had in sorting out a problem.” Bartík, who lives just a few miles from the factory with People don’t tend to associate Český Krumlov with his wife and his husky dog, even found his way to Lipo cutting-edge industry. In its historical town centre, the through his father: “My father was still working here narrow lanes and beautiful market square teem with when I started,” he says, smiling. “Ever since I was little tourists. They take photos of the pretty little baroque we’ve always tinkered around together. So the fact that and Renaissance houses along the meandering Vltava we were then able to work together was something river, gather in the traditional pubs and visit the medieval really special for me.” Potential. ANuP RAmAChANdRA KuRuP Product Development Around 530 forklift trucks were sold 2013 per million people in western Europe. In India it was just a handful – but that’s about to change. Through the Voltas brand company, the KION Group has made early inroads on the subcontinent, just as it did in China. India is ready and so is Anup Ramachandra Kurup. PuNE India 9 … and well positioned in growth markets. The KION Group’s leading position in emerging markets such as India, China, South America and eastern Europe means that it is excellently placed to fully exploit the growth opportunities available there. In 2013 the KION Group’s brand companies sold 35 per cent of their new trucks in emerging markets – and this proportion is set to rise sharply. A case in point is China, which is the world’s largest individual market for the KION Group’s products. The Company has been firmly established here with its offering of develop- ment, production and services for more than two decades and is the leading non-domestic supplier. The KION Group is the third-largest player in this market, where it employs some 3,200 people. China is now the Company’s second-biggest market in terms of unit sales (behind only Germany). Growing proportion of new trucks ordered from the KION Group in emerging markets (thousand units) + 8.7% average annual growth rate 28 % 34.2 23 % 33.6 35 % 49.9 32 % 45.6 50 40 20 % 30 27.8 20 10 0 2006 2008 2010 2012 2013 China Central and South America Eastern Europe Rest of Asia Other Emerging markets’ share of the KION Group’s total order intake 01 02 A nup’s masterpiece weighs a good four tonnes. It’s painted yellow and grey, has a muscular appearance and is as good as impossible to knock over. The EVX 30 Max is the new forklift truck from Voltas Material Handling (VMH), the KION Group’s Indian brand company. “We took just four months to » Our aim is to develop and manufacture world-class trucks here in India.« Anup Ramachandra Kurup Product Development develop it,” says Anup Ramachandra Kurup, a senior Anup and his colleagues work tirelessly to achieve this, engineer at VMH at the age of just thirty-two. often working above and beyond the call of duty. “Just before a product launch, it’s not unknown for us to pull Anyone who visits Anup will quickly realise that big an all-nighter,” says Anup. “But I don’t mind, because changes are under way here in the Indian city of Pune. since we’ve really been working flat out, everything has The engineer and his colleagues are operating from a been much more fun.” bare-looking office on the second floor, right above the production hall. Some 200 people here make around “delighted that the KION Group is on board” 2,000 forklift trucks a year. The factory is bursting at Anup is well placed to compare the old times with the the seams. “We have big plans for VMH,” says Sunil K new. The man from the southern state of Kerala has Gupta, head of what is still only the second biggest been at VMH since 2008. At that time VMH was still manufacturer of forklift trucks in India. “Our goal is clear: based in the economic hub of Mumbai and was part of we want to be number one in this growth market.” the vast Tata Group. No one in India’s biggest industrial conglomerate was paying proper attention to the rela- tively small forklift truck business, however. “When it was sold to the KION Group in 2011, we were over the moon. We’re now proud to be part of a globally operat- ing group that is focused entirely on forklift trucks.” 03 01 Highly committed: Anup was named “employee of the year” for his development of a truck 02 Riding high in Pune: “Since we’ve really been work- ing flat out, everything has been much more fun.” 03 Precision work: fine-tuning successful technology Things moved very quickly: in summer 2012 VMH moved to the industrial city of Pune, where, as a stop- gap solution, it is leasing production halls. But Indians are well versed in improvisation and he and his col- leagues are comfortable dealing with their temporary surroundings. His colleagues have even built them- To drive forward development, Anup constantly flits selves a small test track in the yard, complete with weights between his office with its large computer and the for the trucks to lift and inclines. ‘proto shop’. Down here the prototypes designed by the engineers are constructed and put through their Synergies help to save huge amounts of time paces. There’s a strong smell of oil, spanners clang The rate at which products are developed in Pune against metal and only the humming of the trucks’ shows how dramatic the changes have been: “Previously engines drowns out the thud of hammers – a paradise we needed one year to design a new truck. We’ve for the engineer. At the edge of this workshop for new since got it down to under four months.” It helps enor- developments, which is out of bounds to visitors, mously that the developers are now able to draw on a stands the DVX 30 KAT. Another of Anup’s favourites: whole raft of modules thanks to the takeover by the “It took half a year for our team to develop that truck,” KION Group: “For the EVX 30 Max we used transmis- he says. “Before starting, even we didn’t believe we sions and axles from our sister brand Baoli in China. could get a machine like that up and running in such a That saved a huge amount of time.” short space of time. But we managed it.” With the newly developed EVX 20 Max and EVX 30 Max, he and his team was even faster. What our young engineer doesn’t say: that he was named ‘employee of the year’ for this achievement. Innovation. AndreAs KIsTner Innovation Management Andreas Kistner doesn’t do well-trodden paths. In search of the next brilliant idea, he and his team love nothing more than going off the beaten track. Their goal: ensuring tomorrow is as successful as today. AschAffenburg Germany 11 Technology leadership drives premium positioning … The KION Group is right in the vanguard when it comes to technology and innovation. By spending in excess of €114 million on research and develop ment in 2013, the Company is a leader in its sector. Over 900 people work at ten research centres in Europe, Asia and the Americas to devise forward looking solutions; more than a quarter of them are based in China so that they are close to their market. This continuous R&D investment means that clients in all markets and segments can expect to have a fully customised range of trucks and services to choose from. In 2013 the KION Group launched more than a dozen new trucks and truck families in the market, thereby providing added impetus for 2014, and a number of new products and services are set to be introduced this year as well. The KION Group’s staff working in research and development ¹ 914 847 ² 944 820 1000 900 800 700 600 500 400 300 200 100 0 2010 2011 2012 2013 1 Fulltime employees working in research and development 2 Excluding staff working in the Hydraulics Business that was sold in 2012 AndreAs KIsTner Innovation Management 01 » Our intention in creating a culture of systematic experimentation is to break away from familiar territory and open up new business oppor- tunities.« Andreas Kistner Innovation Management 01 Never alone while out running or when working as an innovation manager 02 Keeping an eye on several things at once: in production, such as here at the Linde plant in Aschaffenburg … 03 … and in services 02 03 Mr Kistner, as a runner you usually know the In terms of efficiency, Linde trucks are already route to the finishing line before you set off – the best – where do you plan to go next? which must be quite different from your job as Resting on our laurels would not be good enough for head of Innovation Management? us, and it’s also risky. Our ambition is to steadily pro At the end of the working day, I actually look forward duce innovations that result in progress for Linde to well maintained, well lit running tracks. At work Material Handling and our customers. The fundamen things are different: I look for new ways of doing things tals for this are structured procedures and the use of and I like challenges. Even as a child I enjoyed trying appropriate methods. Most innovations then arise from things out when playing with Lego, and this passion has experimentation, intensive teamwork and numerous never left me. I basically grew up in the garage where iterations. Our intention in creating a culture of system I tinkered about with motorbikes. I got on a motorbike atic experimentation is to get off the beaten track and for the first time when I was eight, and I entered my open up new business opportunities. first competition a year later. Now, I’m still involved in international motocross competitions as a scrutineer how does that work in practice? who carries out technical inspections of the motor Today, we don’t know where we will be in 15 or 20 years’ cycles in use. time, or – in other words – what the world and our cus tomers will be like then. Obviously, many factors will When you’re running you’re on your own. Are you change and the speed of these changes will become also alone in your role as innovation manager? ever greater as the world becomes even more complex. Not at all. We work in crossfunctional teams. Our How will logistics systems and the flow of goods change? areas of expertise are wide ranging and include sales, Will our customers still buy equipment in 15 year’s time, service, marketing, research & development and pro or will there be completely different payment models? duction. That’s extremely important, because we need It is important to analyse all these factors on an ongoing to keep our eye on many areas, such as megatrends, basis and to evaluate current and potential business new technologies, different customer groups and opportunities with the upside and downside in mind – potential new customers, markets, competitors, our and then to take action at the right time. company, resources and, consequently, the environ ment. We give our employees the scope to think about the future, which is where our company’s success will lie. It is particularly important for our staff to be crea tive, passionate and daring, for them to work hard on their innovations, to think like business people and to be prepared to break completely new ground. What makes changes into innovations? Innovations are products, processes and business models that inspire customers, who are only prepared to spend money on genuine added value, which ulti mately is what makes innovation – financially – suc cessful. As well as improvements to products, which are often minor, it can also include new products, service optimisations, profitable payment models or new logistics management processes. AndreAs KIsTner – 44 years old – head of Innovation Management – Linde Material handling – Aschaffenburg – Joined the group 18 years ago Andreas Kistner is a qualified car mechanic. He joined Linde Material Handling as an engineer in 1995 and later gained an MBA by combining work with study. His master’s thesis was on the strategic development of counterbalanced trucks using systematic innovation strategies. After working for the KION Group as a module manager in Hamburg, he returned to Aschaffen burg to become Head of Innovation Manage ment at Linde. Passion. CheN DA Sales A willingness to listen to what the customer wants, coupled with a sure sense for the optimum solution – a hallmark of the KION Group, whether in Chemnitz or China. To achieve this, Chen Da is always prepared to go the extra mile. fuzhOu China 13 … and customer value. Customers of the KION Group particularly bene- fit from the industrial trucks’ good handling capacity and very low running costs throughout their lifecycle. The cost benefits for customers mean that the KION Group can set prices at a level that enables it to achieve higher margins than its competitors. After all, personnel expenses and the cost of operating a truck over its lifecycle constitute a significant portion of the purchase price, especially in highly developed markets. The proximity of the KION Group’s brand companies to their customers also ensures a high level of availability for the trucks. Around the world, around 12,900 inhouse and external service engineers work for the KION Group. This business offers considerable potential also outside of Europe: in China, revenue from services has risen substantially in recent years. The KION Group’s service business in China ¹ (€ million) + 15.7% average annual growth rate 78.4 70.5 103.9 91 50.1 50.8 110 100 90 80 70 60 50 40 30 20 10 0 2008 2009 2010 2011 2012 2013 1 The service business consists of aftersales, rentals, used trucks and other trucks. 01 01 Close to the business: visiting a customer’s refrigerated warehouse in sub-zero temperatures 02 Technical expertise adds value 03 Sustenance: a freshly grilled snack after a long day spent in meetings with customers 02 “As well as talking to the managers, it is essential to speak to the drivers and the maintenance team because they are the only ones who know the trucks,” says Chen. The 32-year-old wants to identify potential cy cold emerges from behind the raised shutter. problems before they turn into actual faults; that is An electric forklift truck whirs in and sets down a what spurs him on every day. “I even like it when cus- I pallet of cardboard boxes full of eels. Large fish, loose tomers call me about minor things,” he says and grins. or in boxes and deep frozen at minus 28 degrees, are “No wonder my phone is always ringing.” piled up to the ceiling. The truck rolls back outside into the winter air of the port city of Fuzhou in southern A skilled sales pitch combined with technical China, where the temperature is a mild eleven degrees knowledge above zero. At Mingcheng, a firm that specialises in the This close contact with every customer is a hallmark of cold storage of seafood, more than 100 Linde brand the KION Group’s brand companies. Around the world, electric forklift trucks undergo this temperature change 12,900 in-house and external service staff are in direct several times a day, which puts a severe strain on their contact with product users. Chen Da is also able to motors and batteries. As a result, good maintenance is answer technical questions on the spot, because he vital for durability, says Chen Da, a salesman for Linde was a field service engineer for ten years before work- in Fuzhou, the capital of Fujian Province on the south- ing in sales. He can also drive large trucks himself, so east coast of China. Chen travels to Mingcheng at least his skilled sales pitch is combined with a tremendous once a week to check the condition of the trucks. wealth of technical knowledge. 03 » Understanding precisely what our customers require, presenting them with a professional and tailor-made solution and, in return, earning the respect and trust of our customers – this gives me self-confidence and the feeling that I have achieved something.« Chen Da Sales Every month, Chen Da travels 3,000 to 4,000 kilo- metres by car – on congested urban ring roads, new flyovers and motorways, passing suburbs where it looks The most important visit: delivery as if everything has just been turned inside out. Old If a customer is building a new warehouse, Chen visits residential districts and mills give way to 30-floor apart- at the planning stage and takes a close look at the ment blocks and state-of-the-art factories – Fuzhou specifications to enable him to suggest suitable trucks. is also part of the Chinese boom. Directly behind the “The first thing to do is to listen closely to what the cus- densely populated coastal strip loom steep hills covered tomer needs.” The height of the doorways is crucial. If in lush vegetation. Barges and freighters chug along required, Linde can also help to design the warehouse. the Min river along which, like Mingcheng, many cus- The most important visit, particularly for new custom- tomers have their warehouses. The long hours on the ers, is when the first trucks are delivered. Chen Da is road do not bother Chen, far from it: “I enjoy talking to always on site to check the trucks or to train the drivers customers and getting to know what they want. And himself. He stresses that this visit is when the founda- supporting customers by phone alone does not work tions are laid for future relationships with new custom- in China. You have to sit down together, have a cup of ers, because “the first 30 to 100 hours that the trucks tea and create a pleasant atmosphere.” are in operation are crucial”. There are tea sets on large wooden trays in every Chen considers that one of his greatest successes office in Fujian Province. Tea is a fixed ritual at every was winning back a customer who had left and was meeting. The first brew is poured out of the teapot regarded as difficult. The customer works with metal over the tiny drinking bowls to clean them and it drips that is bent at a high temperature – which puts a great through holes in the tray into a basin beneath. Then strain on trucks. He had tried out several brands until the host infuses the fragrant leaves up to seven times Chen, together with members of the company’s work- and pours the tea. Whilst this is happening, Chen Da force, developed a strategy to ensure that the trucks recommends a new forklift truck model, details prices run reliably despite the harsh conditions. Ever since, or solves problems. Chen laughs a lot and skilfully Chen reports proudly, the customer has only bought combines everyday subjects with business. Linde trucks. Inspiration. BIke Güven Material Planning and Marketing A truck that doesn’t work is no good to anyone. Wherever in the world you might be. And in growth markets in particular, the service business is becoming increasingly important. In Turkey, an important trading hub, Bike Güven makes sure everything runs smoothly for her customers. IsTAnBul Turkey 15 Robust integrated business model with high contribution from services. This provides the basis for the KION Group’s lasting business success. Customer services, truck rentals, used trucks and spare parts together contribute more than 40 per cent of revenue. This business is very resilient to fluctuations in the economic cycle. Moreover, it generates particularly good margins for the KION Group. There are around 1.2 million KION trucks in use around the globe, forming a broad basis for a strong and integrated service business. A comprehensive network of more than 1,200 sales and/or service outlets worldwide ensures that the KION Group is never far from its cus- tomers. This creates strong customer loyalty, which in turn offers more potential for growth and provides a lasting competitive advantage. The KION Group’s strong global network with more than 1,200 sales and/or service outlets 177 NORTH AMERICA 579 EuROPE 316 ASIA 101 CENTRAL AN d SOu TH AMERICA 59 REST OF WORL d 01 A day when the phone doesn’t ring once is a perfect day for Bike Güven because it means 02 that everything is going well. The brand new STILL reach truck from Hamburg has got through Turkish customs, and in Kocaeli Province the engineer has fin- ished the overnight repairs to the defective order picker at the local Ford works in time for the morning shift. “My job is a bit like conducting an orchestra – making sure that everyone comes in at the right moment,” says Her favourite colleague of all is virtual the 30-year old Head of Material Planning and Market- When it comes to service, Bike Güven is in her element; ing at STILL ARSER in Istanbul. Sometimes there’s she has perfected the system at STILL ARSER. A quali- even time for a cup of strong Turkish coffee, although fied interpreter from Ankara with a blonde ponytail, she Bike Güven always has her eyes glued to her smart- was quick to learn how to meet urgent requests. Since phone. she joined Arser eight years ago, she has worked in new truck sales planning and marketing. From the out- Impeccable customer service is the top priority. Service set, the phone scarcely stopped ringing. “The salesmen business now accounts for more than 40 per cent of and dealers used to ring us continuously, asking ques- KION Group’s revenue, and it ranges from after sales, tions such as how quickly can we deliver a two-tonne truck rental and used trucks to fleet management truck with a four-meter mast or how long will it be until systems. Services are also becoming increasingly a new battery arrives.” important in the emerging markets. Last year, STILL acquired a majority stake in its former exclusive dealer Much has improved, with new technology now making Arser İş Makineleri Servis ve Ticaret A.Ş. – a key strate- things much easier for Bike Güven and her customers. gic step for the KION Group. The sign on the office Her favourite colleague is virtual and goes by the name building in the Ümraniye district of Istanbul now shows of e-care. This is the software program that Bike Güven the name of STILL ARSER. played a huge role in developing and it provides dealers and customers in Turkey with real-time online updates. If a telescopic forklift has jammed, the customer sends a help request to e-care and the system notifies all the 01 Expertise: responding rapidly to customer requirements is crucial 02 Perfection: Bike Güven has optimised order processing at STILL ARSER 03 Always on the ball: “My job is a bit like being a conductor” 03 » I think it’s great getting up every morning and not knowing what challenges my customers will throw at me. I then have to find a tailor-made solution for each one of them …« Bike Güven Material Planning and Marketing relevant contact people – including Bike Güven. Even at The importance of personal contact three in the morning, an engineer is sent out to deal But an exclusive focus on customer needs and all the with the repairs and the spare parts. If necessary, the most sophisticated organisation are still not enough in department head has to arrange an urgent delivery of a the fast-growing Turkish market, which is also a major suitable replacement truck. “What I like best about my hub for trade with the Middle East. Little gets done job is getting up in the morning and not knowing what without personal contacts. Recently, a customer in the will happen that day,” she says. east of the country complained that his allocated dealer never called in just for a cup of tea and a chat, he always Just living in Istanbul requires a great deal of organisa- wanted to talk about business. Bike Güven immediately tional skill. On the European side, the slim minarets of took note and passed the message to the dealer. After the Blue Mosque point towards the sky and tourists all, she has to live up to her name; in Turkish Güven push past the carpets, gold jewellery and leather goods means ‘trust’. “If customers have any doubts, trust is in the Grand Bazaar. Bike Güven lives on the Asian our crucial advantage over the competition,” she says side, just 20 minute’s drive from the office, but the route emphatically. to work itself requires careful planning – because there is gridlock on the bridges over the Bosphorus at rush hour in this city of millions. Opportunities. JAN KOePP Post Merger Integration The KION Group is more than the sum of its parts. Pooling the strengths of its brand companies has unleashed huge potential. For customers and investors. Around the world. Jan Koepp creates synergies that add value. WIesbA deN Germany 17 Strong profitability – well prepared for future value creation. Constantly improving efficiency and profitability is a clear objective for the KION Group. Size and synergies – a combination that makes the KION Group stand head and shoulders above other truck manufacturers. This involves collaborating on research and development, improving plant structures and fully exploiting the economies of scale created by a worldwide production network. Other areas of focus are the optimal use of shared, cross-brand modules and platforms and the ongoing expansion of the service business. The KION Group’s earnings before interest and tax (EBIT / margin) 500 450 400 350 300 250 200 150 100 50 0 3.9 139 9.0 8.3 408 417 363 10 % 9.3 9 % 8 % 7 % 6 % 5 % 4 % 3 % 2 % 1 % 0 % 2010 2011 2012 2013 EBIT (€ million) Margin (%) EBIT adjusted for KION acquisition items and non-recurring items; key figures for 2012 have also been adjusted to reflect the sale of the hydraulics business JAN KOePP Post Merger Integration 01 » Travelling to other continents gives me new ideas, sparks my creativity and recharges my mental batteries …« Jan Koepp Post Merger Integration 01 Global: close to the markets and brands 02 Focus on China: knowledge of other cultures creates an advantage 03 Teamwork: “We combine skills with experience” 02 03 Mr Koepp, the brand companies with the short- How do you ensure that the Group’s new brand est histories in the KION Group are baoli and companies are able to meet these requirements? Voltas – both of which are in Asia. You manage It cannot be done by simply transferring funds for capi- their integration into the Group. do you know tal expenditure. Our job only starts in earnest when the how many hours you have spent on planes? agreements have been signed. We assess our part- At a rough estimate, I have flown round the world ners’ internal processes, strategy implementation and about five times, that’s about 200,000 kilometres, conduct. We establish which aspects we want to work and most of the trips were to China. The remarkable on so that we can meet all of our targets and we supply insights that I gain are always worth the long flights. the necessary technologies and methods. The KION This gives me new ideas, sparks my creativity and Group has a duty to provide each new brand company recharges my mental batteries. When I land on another with what it needs. continent, I often don’t arrange to be picked up from the airport, I take public transport. I also like to be The KION Group already had two global brands, adventurous with food, which is probably due to the Linde and sTILL, baoli is the third. What role fact that I have lived abroad for 17 of the past 20 years, does KION’s Chinese brand company play? most of that time in Brazil. Baoli covers the value and economy market range and it has a special role in the multi-brand strategy. The The multi-brand strategy is a key element of the Chinese brand company provides the technical founda- KION Group’s growth policy. What makes it so tion for products for the Indian and South American effective? markets. Baoli receives marketing support from the We want the right product range that covers all market regional KION companies such as KION South America segments. For this reason, we draw on local experts in and KION South Asia. Our Indian brand company every market segment and focus on the requirements Voltas in turn benefits from Baoli technology. of each market – in terms of meeting all needs, ‘one size fits all’ just doesn’t work. We share our knowledge of technology and products and we establish tried-and- tested, standard processes, which makes the brand companies more competitive. The idea is to merge downstream business units and processes and then to make them available to the brand companies. Together, these steps all create value and help to ensure that the KION Group continues to grow profitably and is not just a loose affiliation of brands. JAN KOePP – 45 years old How do you tackle the integration of a new brand – Head of Post Merger Integration company? You have to understand what is needed locally. First, we summarise the expectations brought by the new company and the KION Group. Companies that have – KION Group – Wiesbaden – Joined the Group twelve years ago Jan Koepp worked for the Group back in the times of Linde AG. He started in 2002 at Linde recently joined the Group want to grow faster than Material Handling in Brazil, and initially before. The KION Group would like to occupy a stronger position in a new company’s market. And KION customers have specific expectations in terms of products, their reliability and the service we offer. We then merge the KION Group’s strengths and expe- rience with those of our colleagues in the new brand company. We can only become more successful in the market by working together. developed the brand company’s finance activi- ties. He then managed the merger of Linde and STILL in Brazil (now KION South America) and the construction of the new plant in Indaiatuba, São Paulo. The new plant produces warehouse technology and IC trucks for Linde and STILL. As Head of Post Merger Integration, Jan Koepp now ensures that newly acquired brand compa- nies such as Voltas and Baoli, are well integrated into the KION Group. Team spirit. VINceNT HALmA Marketing The KION Group has its eye firmly on the USA as a high-opportunity market. To make even greater inroads there, we need to do what the Americans do best: show determination and team spirit. Vincent Halma can count on the right products with Linde and STILL – and he can count on the right team as well. SUmmerVILLe USA 19 Highly motivated and qualified employees with proven track record. International, highly qualified and highly moti- vated: the KION Group’s more than 22,000 employees, who demonstrate dedication and creativity day in, day out, are both the heart and the backbone of the company. Their hard work underpins the operational success of the company and ensures a strong financial performance. This was one of the key elements in the successful stock market flotation of the KION Group in June 2013. The company’s growth strategy is reflected in the structure of the workforce. In 2013, the Group recruited extra staff for its service and sales operations and notably invested in new employees in the emerging markets and growth regions. The KION Group is increasingly hiring local management in all its markets in order to utilise their strong market knowledge and expertise. KION Group employees by country (Full-time equivalents as at 31 Dec 2013) 5,930 OTHER 1,823 UNITED KINGDOM 8,050 GERMANy 22,273 WORLDWIDE 3,178 FR ANCE 3,292 CHINA VINceNT HALmA Marketing 01 W hen Vincent Halma talks about his new job location, you can’t help but notice his 02 sense of enthusiasm. “We have tremendous opportuni- ties that haven’t been taken advantage of,” says the Vice President Marketing of KION North America. “We have so much collective knowledge within the KION Group that can make us successful. The point now is to use it.” Halma is backed by the capable team of the global KION network. 01 KION plant in Summerville: capacity for 20,000 trucks 02 “ Plenty of knowledge there to be successful” 03 A strong team: achieving the objectives of the KION Group by pulling together as a team The goals are clear: the market share in North America, The key markets include the old “Rust Belt,” the the second largest individual market in the world for industrial belt stretching across the Midwest and as far KION Group products, will grow substantially in the south as Texas. What is needed are new products. “In coming years. Every morning, when Halma gets out of Europe, for instance, lorrys (tractor trailers) are loaded his car in front of the KION plant in Summerville, South from the side, while in the USA forklifts enter the trailer Carolina, he is reminded of the fact that North America from the back. The US market requires different equip- is more than the USA alone. When he looks up, he sees ment,” explains Vincent Halma. “In addition, the USA the Canadian and Mexican flags fluttering alongside the has totally different philosophies when it comes to Stars and Stripes. US economy is bouncing back warehouse optimization which requires a completely different product design and approach to the market.” After the heavy years of the crisis, the US economy The vehicles tailored for the US market under the Linde has gained traction again and is overtaking Europe in and STILL brands are backed by KION technology from terms of growth. Plus, after the service sector has been Europe and Asia. In terms of production capacity, on on the rise for years, the largest national economy in the other hand, Summerville is in the lead, with the abi- the world wants to regain a prominent position in the lity to produce as many as 20,000 units a year. A cent- manufacturing sector. The buzzword is reindustralizia- ral element of the strategy is to provide a comprehen- tion. “Made in USA” is poised to become a globally sive range of products and to leverage the dense retail recognized standard for quality again. Volkswagen network that the KION Group has access to in the USA. and BMW are establishing US production facilities and Apple is starting to produce products in its home country once more. Motorola is looking to attract new customers for its high-end cell phone with the slogan “Made in USA.” And all of them need forklifts. Approxi- mately 185.000 industrial trucks were sold in the US in 2013, an increase of 12 per cent compared to the previous year. 03 Vincent Halma Marketing returning to an old passion Vincent Halma is looking forward to the tasks ahead: helping to market newly developed products for the American market, expanding sales structures, and cre- ating service offerings. The 43-year-old father of two The US South: a popular location for businesses sons has the right skills for the job. For nine years he And it’s easy to feel at home in the town where Halma was Managing Director of the STILL brand in the lives, 20 minutes from Summerville. Charleston’s histo- Netherlands and was later responsible for Western ric buildings and cobblestone streets from the period Europe. before the Civil War give the town a historic flair. The streets are lined with palm trees, a promenade on the For the native Dutchman, the move to South Carolina Atlantic invites for a stroll, and the spicy Southern food meant returning to an old passion: the USA. After stu- with its oysters and seafood is famous around the dying business management in Leeuwarden, Holland, world. Halma wanted to get international experience with an internship and went to Columbus, Ohio, to do his MBA. What’s more, Charleston’s harbor offers a perfect logi- He stayed for seven years gaining experience in pro- stics infrastructure. Others have discovered the area’s duct development and sales. “The very first job I had in advantages as well. Charleston has attracted compa- my life was in the United States,” he says with pride. So nies like Boeing and Bosch. “KION’s North American he didn’t have to think twice when he got the offer to project is its most ambitious to date,” says Halma. return to his favorite country in 2014. “I’m very proud to be able to contribute.” to our SharehoLderS Contents 21 To our shareholders Letter to SharehoLderS executive Board report of the SuperviSory Board KioN ShareS ServiceS for SharehoLderS 22 24 26 36 41 KION GROUP AG | Annual Report 2013 We keep the world moving. » 2013 was a financially solid year. 9.3 per cent EBIT mar- gin represents a new record.« Gordon riske ChIEf ExECuTIvE OffICEr to our SharehoLderS Letter to shareholders thu, 20 Mar 2014 8:08am From: To: CC: subject: Annual report 2013 Gordon riske KION Group Shareholders Thomas Toepfer, Theodor Maurer, Bert-Jan Knoef, CP Quek, Supervisory Board, Customers, Employees, Business Partners dear shareholders, dear customers, partners and friends of the kion Group, On 28 June 2013 we were able to celebrate the fact that the shares of KION GrOuP AG had been successfully listed on the frankfurt Stock Exchange. Both for our staff and for me personally this day was one of the most moving professional events of the past financial year. We are especially proud that this initial public offering (IPO) was so successful because it took place in such challeng- ing market conditions. The foundations for this high-profile launch in the capital market were laid by our customers, shareholders and partners and, in particular, by the commitment and dedication of our employees around the world. On behalf of the KION Group Executive Board I would like to take this opportunity to thank our highly motivated and expert workforce for this achievement. Today we are publishing our first annual report as a publicly traded company. We are reporting on a year whose financial results were able to build impressively on the previous years. At the same time we have taken the key operational and financial measures needed to ensure that we can continue on our global growth trajectory over the coming years while further enhancing our profitability on a sustainable basis. Funding strengthened by the iPo As far as the implementation of its growth strategy is concerned, the KION Group is now in an even stronger financial position than it was a year ago. The proceeds received from the capital increases carried out as part of the IPO have provided us with a very sound and extensive capital base. Our equity ratio at the end of 2013 came to 26.7 per cent. Our net debt at the reporting date was only around 1.4 times adjusted EBITDA for the previous twelve months. We therefore have a very solid and secure long-term funding base. The prospects for our business and, consequently, for our shareholders and employees are excel- lent, with independent research predicting that the worldwide market for industrial trucks is once again set to grow at roughly 1.5 times the rate of the global economy over the next decade. We intend to benefit disproportionately from this growth. Business stabilised at a high level Global demand for industrial trucks continued to grow in 2013. The total number of units sold in the material handling market exceeded 1 million for the first time, which represented year-on-year growth of 7 per cent. In addition to the united States there was also strong growth in the emerging markets of China, eastern Europe and Brazil, which are particularly important to the KION Group. Inbox 02Sent ItemsAll folders» 35 per cent of our new trucks go to customers in emerging markets.« FOTOto our SharehoLderS Letter to shareholders In this market environment we continued to develop our business at the high level of the outstanding previous year. Despite being impaired by the adverse market conditions in western Europe – which remains the KION Group’s core market – sales of new KION trucks amounted to 142,800 units, in line with the impressive figure achieved in 2012 (141,700 units). The total value of the KION Group’s order intake came to a substantial €4.489 billion. We generated revenue of €4.495 billion – which was in line with the excellent prior-year figure – despite adverse exchange-rate effects. We further increased our adjusted earnings before interest and tax (EBIT) to €416.5 million. Our EBIT margin reached 9.3 per cent, which was a new record for the KION Group. We are deliberately exploiting the economies of scale that we possess compared with our competi- tors. At the same time we are constantly improving the efficiency of our European production net- work. In October, for example, we closed our heavy truck plant in Merthyr Tydfil and transferred the bulk of this production to a contract manufacturing facility. Presence in emerging markets expanded The continuing success of our strategy of expanding our presence in the world’s emerging markets has strengthened our resolve to redouble our efforts in this direction. 35 per cent of the orders that we received for new trucks came from emerging markets, which was more than ever before. And in December our Linde brand company celebrated its 20th anniversary in China when it handed over the 100,000th Linde truck manufactured in China. The material handling market in China presents excellent prospects. Whereas 530 new trucks were sold in western Europe for every 1 million inhabitants in 2013, only 180 were sold in China, which is now the KION Group’s second-largest market in terms of unit sales (behind only Germany). And truck sales in China continue to grow apace. The sales and service organisation that we have estab- lished throughout this country enables us to fully exploit this enormous potential, and we have there- fore been able to successfully introduce our business model – which includes a high proportion of service business – in China as well. The strategic partnership with Weichai Power will provide the KION Group with additional stimulus for its operations in China and the rest of Asia. This unique alliance offers both parties the opportu- nity to enter new business lines together and to reap synergies for their mutual benefit. It also takes us to the next stage in the long-term expansion of our business in Asia. But this was not the only place where we made considerable headway last year. We expanded pro- duction at our Indian brand company voltas, whose plant commenced operations in 2012. We offi- cially opened a completely new KION plant at Indaiatuba, São Paulo, in Brazil last year. In addition to warehouse trucks, KION South America has also been manufacturing IC trucks at this site since then under the Linde and STILL brands for the South American market. Inbox 02Sent ItemsAll folders» One in four of our develop- ers works in China on new products and platforms.« to our SharehoLderS Letter to shareholders Product portfolios intelligently combined In 2013 we also constantly broadened the product ranges offered by our brand companies, intro- ducing more than a dozen new trucks and truck families. Our multi-brand strategy and global reach provide us with a key competitive edge in this respect. We modify successful products in line with specific requirements in other regions where fresh demand for similar trucks arises. In these emerg- ing markets our brand companies Baoli and voltas are the main providers that localise the manufac- ture of established trucks, modify them for specific brands and then launch them in the market. Our development centre in China plays an important role in this aspect of our business. roughly a quar- ter of our total global development staff work there on new products and platforms designed to meet the requirements of the emerging markets in particular. In 2013 we spent more than €114 million, or 2.5 per cent of our revenue, in research and develop- ment, which makes us an industry leader in this respect. The outstanding competitive position occu- pied by our Linde and STILL brands in our European home market is largely based on our technol- ogy leadership. Last year, Linde Material handling presented the BMW factory in Leipzig with a fleet of industrial trucks fitted with fuel-cell hybrid drives for production of the BMW i. having been extensively refined, new engines make Linde’s EvO models the lowest-emission series-production diesel trucks in the market. The pollutants that they produce are on average 69 per cent below the maximum permitted statutory limits, which means that these trucks can even be used inside buildings. The STILL rx 70 hybrid was named International forklift Truck of the Year in 2013 after having already won the federal Ecodesign Award in the previous year. The first-ever hybrid truck manufac- tured in series production, which is equipped with a diesel-electric drive, obtains the energy for its drive system from both the diesel tank and from electric energy storage units known as ‘ultracaps’. STILL extended its rx 70 family range in 2013 by introducing new IC trucks with load capacities of between four and eight tonnes. Their optimum handling capacity is based on a unique combination of power, precision, ergonomics, compactness and safety. new products planned for the Us market however, we are not only focusing on our home market and on emerging markets. We are also con- centrating on other markets where we do not yet have a sufficiently large presence. A case in point is the united States, where we see considerable growth potential for the KION Group’s brands. After all, this is the world’s second-biggest single market after China. In the uS we have a factory with substantial unused capacity as well as an extensive nationwide dealer network. We can build on these over the long term by launching new uS-specific products that are currently being developed. Inbox 02Sent ItemsAll folders» The high- margin service business accounts for more than 40 per cent of the KION Group’s revenue.« FOTOto our SharehoLderS Letter to shareholders sales and service expanded by the addition of new sites We are constantly expanding the sales and service network used by KION Group’s brand compa- nies in order to strengthen our brands in the various regions around the world. In mid-2013 our brand company STILL acquired a majority stake in Turkish dealer Arser in order to increase its foot- print in this important country. Linde opened new branches in Thailand and Malaysia to enable it to serve these markets even more effectively. As the size of its fleets in markets outside western Europe grows, the proportion of revenue accounted for by the service business increases accord- ingly. Stable and profitable, the service business contributes more than 40 per cent of the KION Group’s revenue. The services provided for our installed fleet of some 1.2 million trucks worldwide substantially reduce our reliance on short-term economic cycles and, at the same time, offer attrac- tive margins. experienced workforce is the key driver of our success Our investment in 2013 went beyond sales and service structures and new products. Our workforce grew as well, as more than 1,000 highly qualified people joined our organisation worldwide. At the same time we continued to invest in the best-possible training and development opportunities for these employees. We want to remain a reliable partner for our customers and work with them to put new ideas into practice. By offering highly efficient and economical trucks, we help to ensure that our customers are successful. Some of our 22,000 employees who work each and every day for our customers are featured in the front part of this annual report. You may even meet one of them in person at some point. This is quite possible if you consider that our products and staff travel around the world in the service of our customers: We keep the world moving. I therefore hope that you have an interesting journey of discovery through the world of the KION Group. With best wishes, Gordon riske vorsitzender des vorstands | Chief Executive Officer KION GrOuP AG Abraham-Lincoln-Strasse 21 | 65189 Wiesbaden (Germany) Sitz der Gesellschaft | registered Office: Wiesbaden (Germany) registergericht | Court of registration: Wiesbaden (Germany), hrB 27060 vorsitzender des Aufsichtsrats | Chairman of the Supervisory Board: Dr. John feldmann vorstand | Executive Board: Gordon riske (vorsitzender/CEO), Bert-Jan Knoef, Theodor Maurer, Ching Pong Quek, Dr. Thomas Toepfer Inbox 02Sent ItemsAll folders24 Executive Board 01 02 Theodor MaUrer dr ThoMas ToePFer Member of the Executive Board of KION GrOuP AG CEO of Linde Material handling Chief financial Officer (CfO) and Labour relations Director of KION GrOuP AG born in 1959 in Konstanz born in 1972 in hamburg We keep the world moving. KION GROUP AG | Annual Report 2013 to our SharehoLderS Executive Board 25 03 Gordon riske 04 05 ChinG PonG QUek BerT-Jan knoeF Chief Executive Officer (CEO) of KION GrOuP AG Member of the Executive Board of KION GrOuP AG Chief Asia Pacific Officer Member of the Executive Board of KION GrOuP AG CEO of STILL born in 1957 in Detroit (uSA) born in 1967 in Batu Pahat/Johor (Malaysia) born in 1960 in hengelo (Netherlands) KION GROUP AG | Annual Report 2013 We keep the world moving. 26 Report of the Supervisory Board of KION GROUP AG Dear shareholders, The main event of 2013 for KION GROUP AG was its successful initial public offering (IPO) on 28 June 2013. The business built strongly on the excellent results achieved last year and continued to perform at the same high level. The tasks and responsibilities imposed on the Supervisory Board by the law, the Company’s articles of incorporation and the German Corporate Governance Code were fulfilled with dedication and great diligence. Because of KION GROUP AG’s IPO last year, there were many important decisions, transactions requiring approval and other matters to be discussed and resolved upon. Dr John FElDMann Chairman Any references to KION GROUP AG and its Executive Board in the following section also apply to KION Holding 1 GmbH and its Executive Board, which were in existence prior to the change in legal form to a German public limited company (Aktiengesellschaft). Monitoring and advisory role in dialogue with the Executive Board The Supervisory Board advised the Executive Board on all significant matters relating to managing the Company and monitored the Executive Board’s running of the Company. The Supervisory Board was fully involved in all major decisions affecting the Company from an early stage. There were particularly intensive discussions with the Executive Board on the subjects of funding, the IPO and corporate strategy. The Supervisory Board satisfied itself at all times that the Company was being managed lawfully and diligently. At meetings of the full Supervisory Board, the performance of the business and decisions and transactions that were important for the Company were deliberated on and discussed extensively on the basis of the information provided to the Supervisory Board by the Executive Board. The Executive Board always notified the Supervisory Board of every sig- nificant aspect of these transactions promptly and in detail, providing both written and oral reports. As expected, the main issues covered in 2013 included the issues surrounding the Company’s planned IPO, as well as the Company’s ongoing business performance and financial position, planning of capital expenditure, the employment situation, risk manage- ment and the compliance programme. Other fundamental matters were corporate strategy and corporate planning, in particular in view of the new opportunities presented by the arrival of a new major shareholder, Weichai Power Co. Ltd. We keep the world moving.KION GROUP AG | Annual Report 201327 The Executive Board gave the Supervisory Board sufficient notice of transactions that, according to the law, the Company’s articles of incorporation or the rules of procedure for the Executive Board of KION GROUP AG, require the Supervisory Board’s consent and presented them in good time for resolutions to be adopted. The Supervisory Board exam- ined closely the resolutions proposed by the Executive Board and deliberated on them before adopting them. In urgent cases, written resolutions were also adopted. The Executive Board informed the Supervisory Board about key financial data at regular intervals. Where there was a discrepancy between the actual figures and the business plan- ning, the Executive Board always provided the Supervisory Board with a detailed oral and written explanation of what it considered the main reasons for the discrepancy. This enabled the Executive Board and Supervisory Board to discuss the reasons in detail and, if necessary, to take effective countermeasures. In the periods between meetings of the Supervisory Board and between those of its com- mittees, the chairman of the Supervisory Board, who is also chairman of the Executive Committee created following the change of legal form, remained in close contact at all times with the Chief Executive Officer. This ensured that the Supervisory Board was always kept up to date on the Company’s performance and any significant transactions. Main focus areas discussed by the Supervisory Board In the first half of the year under review, the work of the Supervisory Board focused on the wide-ranging preparations for the Company’s IPO. Its deliberations concentrated on general business conditions, economic conditions and financial parameters as well as corporate governance matters and, in particular, the areas of responsibility assigned to the Supervi- sory Board – such as Executive Board remuneration. In 2013, the Supervisory Board and its committees dealt with these issues and made the necessary decisions at a total of 18 meetings (eight full Supervisory Board meetings and ten committee meetings). Some of the meetings were held in the form of conference calls. There were also several informal conference calls for the purpose of providing the members of the Supervisory Board or the relevant committees with advance information. To our shareholdersReport of the Supervisory BoardWe keep the world moving.KION GROUP AG | Annual Report 201328 KIon 2020 strategy The Executive Board’s plans for the further development of the Company’s strategy, which are aggregated in the KION 2020 strategy, were a key area covered by the Supervisory Board’s deliberations in 2013. The Executive Board provided the Supervisory Board and its Executive Committee with an initial introduction to the strategy on 26 September 2013. A workshop with the Executive Committee devoted exclusively to this subject was then held on 14 October 2013, followed by an extraordinary meeting of the Supervisory Board on 17 October 2013 and a status report for the Supervisory Board and Executive Committee on 19 December 2013. The Supervisory Board provided constructive support on corporate governance considerations relating to the 2020 strategy and followed them with great inter- est. Irrespective of the Supervisory Board’s fundamental approval of the 2020 strategy, specific measures for implementing it still require the separate consent of the Supervisory Board as specified by the rules of procedure for the Executive Board. Corporate governance and comply-or-explain statement The regular reports by the Executive Board and some of the Company’s managers on corporate governance matters were a further important subject area discussed by the Supervisory Board and its committees. As part of its monitoring duties in this area required by stock company law, the Supervisory Board itself ensured that it was informed about corporate governance matters by means of appropriate reports covering the internal control system, risk management, internal auditing and compliance within the Group, in addition to its Audit Committee dealing with these matters on a regular basis. The focus was on the processes in place as well as on the content of the individual reports. As a result of these reviews, the Supervisory Board was able to gain an impression of the processes in place and to examine and comment on the proposed developments in these areas. As part of the further development of its procedures, the Supervisory Board and Audit Committee have decided to hold an extra Audit Committee meeting in the first quarter of every year in addition to its regular meetings. The meeting will address the following matters: the internal control system, risk management, internal audit and compliance within the Group. A further meeting of the full Supervisory Board is to take place in the fourth quarter of every year covering corporate strategy and its further development. The size of the committees and their effectiveness are also to be reviewed in the course of 2014. The Supervisory Board will decide during the year whether a formal efficiency review should take place at the end of 2014. In accordance with section 3.10 of the German Corporate Governance Code, the Executive Board and the Supervisory Board provide a detailed report on corporate governance in the We keep the world moving.KION GROUP AG | Annual Report 201329 KION Group in the corporate governance report. This is combined with the declaration on corporate governance pursuant to section 289a of the German Commercial Code (HGB) and can be found on pages 44 to 52 of the annual report. The report is also available on the KION GROUP AG website at kiongroup.com/GovernanceReport. For details of the remuneration paid to the Executive Board and the Supervisory Board for 2013, please refer to the remuneration report which can be found on pages 57 to 65 of the annual report. At its meeting on 19 December 2013, the Supervisory Board thoroughly discussed the KION Group’s compliance with the recommendations of the current version of the German Corporate Governance Code. The Supervisory Board keeps a close eye on changes to the Code and to governance standards at international level. The Executive Board and Supervisory Board submitted a comply-or-explain statement pursuant to section 161 of the German Stock Corporation Act (AktG) on 19 December 2013. It has been made perma- nently available to the public on the KION GROUP AG website. KION GROUP AG complied with all but one of the recommendations in the German Corporate Governance Code (version dated 13 May 2013) and intends to continue to do so in future. The only recommen- dation of the Code with which KION GROUP AG does not comply is the recommendation in section 3.8 (3) of the Code for an excess in the D&O insurance policies for members of the Supervisory Board. KION GROUP AG’s articles of incorporation do not provide for this type of excess. The Company believes that such an excess is not typical at international level and would therefore make it considerably more difficult to find independent candidates, in particular candidates from outside Germany. Matters relating to the Executive Board The Supervisory Board appointed Hostettler, Kramarsch & Partner (hkp), a leading consul- tancy firm specialising in executive remuneration, to devise the remuneration system. The chairman of the Supervisory Board was provided with technical and administrative assis- tance in this matter, mainly by the Company’s head of human resources and the head of the corporate office. The Executive Board exempted them from their obligation to report to the members of the Executive Board in order to perform this task. External, professional legal advisors were also consulted. Following the transformation of KION Hold ing 1 GmbH into a public limited company with an Executive Committee, a number of meetings were held between the chairman of the Supervisory Board and the members of the Human Resources Committee. During these meetings, the structure of the remuneration system, the individual components of the remuneration package, the vertical and horizontal appropriateness and content of the pension scheme for Executive Board members, including the provisions in the Executive Board service contracts, were discussed in detail and prepared for resolution. At the Supervisory Board meeting on 25 April 2013, the relevant decisions were made and the chairman of the Supervisory Board was authorised to conduct negotiations with the To our shareholdersReport of the Supervisory BoardWe keep the world moving.KION GROUP AG | Annual Report 201330 Executive Board members. The members of the Human Resources/Executive Committee and the full Supervisory Board were constantly updated on the progress of the negotiations and the agreement reached with the Executive Board members.At the end of the negotia- tions, when the Supervisory Board had acknowledged the outcome, the chairman of the Supervisory Board signed the Executive Board service contracts on behalf of the Company. Work of the committees During the period prior to the change of the Company’s legal form to a public limited com- pany, KION Holding 1 GmbH had an audit committee, a human resources committee and a mediation committee pursuant to section 27 (3) of the German Codetermination Act (MitbestG). On 29 May 2013, during the transformation of the Company into a public limited company, the Supervisory Board decided to maintain or create four committees at the future public limited company, the members of which were elected at a subsequent meeting of the Supervisory Board on 27 June 2013. The four committees were the Mediation Committee pursuant to section 27 (3) MitbestG, the Executive Committee, the Audit Committee and the Nomination Committee. These committees, but primarily the Executive Committee, prepare the matters to be discussed at the meetings of the full Supervisory Board. In individual cases, the Supervisory Board’s decision-making powers were delegated to committees within the scope permitted by law. The chairman of the Supervisory Board is also chairman of all committees except the Audit Committee. At the meetings of the full Supervisory Board, the committee chairmen report in detail on the discussions of the committees to ensure that the Supervisory Board as a whole is always fully informed. The Executive Committee consists of four shareholder representatives and four employee representatives. It prepares the meetings of the Supervisory Board and is responsible for ongoing matters between Supervisory Board meetings. The Executive Committee prepares the Supervisory Board’s decisions relating to corporate governance, particularly amendments to the comply-or-explain statement pursuant to section 161 AktG reflecting changed circum- stances and the checking of adherence to the comply-or-explain statement. It also prepares documents for the Supervisory Board when Executive Board members are to be appointed or removed and, if applicable, when a new Chief Executive Officer is to be appointed. Documents relating to any matters in connection with Executive Board remuneration are also compiled by the Executive Committee. The Executive Committee is also responsible for resolutions concern- ing the conclusion, amendment and termination of Executive Board employment contracts and agreements with Executive Board members governing pensions, severance packages, consultancy and other matters and for resolutions about any matters arising as a result of such contracts and agreements, unless they relate to remuneration. The responsibilities of the Executive Committee also include resolutions about the extension of loans to Executive Board We keep the world moving.KION GROUP AG | Annual Report 201331 members and parties related to them and to Supervisory Board members and parties related to them as well as resolutions to approve contracts with Supervisory Board members outside their Supervisory Board remit. The Executive Committee should – in consultation with the Executive Board – regularly deliberate on long-term succession planning for the Executive Board. In 2013, the Executive Committee consisted of Dr John Feldmann (chairman), Dr Alexander Dibelius, Mr Joachim Hartig, Mr Denis Heljic, Mr Johannes P. Huth, Mr Thilo Kämmerer, Mr Jiang Kui and Mr Kay Pietsch. The Executive Committee met four times in 2013, includ- ing one conference call with the Audit Committee concerning the budget. The main topics discussed by the Executive Committee in 2013 were those concerning the Company’s IPO and the KION 2020 strategy. The Mediation Committee comprises the chairman of the Supervisory Board, his deputy, an employee representative and a shareholder representative. If the majority required by section 27 (3) and section 31 (3) MitbestG is not reached in a vote by the Supervisory Board on the appointment of an Executive Board member, the Mediation Committee must pro- pose candidates for the post to the Supervisory Board within a month. The chairman of the Supervisory Board does not have a second vote on the candidates proposed. In 2013, the Mediation Committee consisted of Dr John Feldmann (chairman), Mr Joachim Hartig, Dr Alexander Dibelius (until 27 June 2013) Mr Johannes P. Huth (from 27 June 2013) and Mr Kay Pietsch. The Mediation Committee did not need to be convened in 2013. The Audit Committee comprises four members. Its purpose is to assist the Supervisory Board in performing its task of monitoring accounting processes, compliance matters and reporting. These responsibilities encompass monitoring the quality and integrity of the consolidated and separate financial statements (as well as related disclosures), the internal control mechanisms, risk management and the internal audit system. The Audit Committee also reviews the other work carried out by the independent auditor in connection with the audit and checks that the independent auditor is qualified and independent. It is also responsible for engaging the independent auditor, determining the focus of the audit and agreeing the fee. In addition, the Audit Committee exercises the rights in investee companies set forth in section 32 (1) MitbestG. In 2013, the Audit Committee consisted of Mr Hans-Peter Ring (chairman, from 27 June 2013), Dr Martin Hintze (chairman, until 27 June 2013), Dr John Feldmann (from 27 June 2013), Dr Roland Köstler (until 30 September 2013), Mr Kay Pietsch, Ms Alexandra Schädler (from 2 October 2013) and Ms Silke Scheiber (until 27 June 2013). Mr Hans-Peter Ring is an independent financial expert within the meaning of sections 100 (5) and 107 (4) AktG. To our shareholdersReport of the Supervisory BoardWe keep the world moving.KION GROUP AG | Annual Report 201332 The Audit Committee met seven times in 2013, including one conference call concerning the status of the annual financial statements and one conference call with the Executive Committee concerning the budget. The main topics discussed by the Audit Committee in 2013 were the 2013 annual financial statements, the budget and the regular subject of the key elements of corporate governance within the Company. The Nomination Committee comprises four members, all of whom are shareholder repre- sentatives. The Nomination Committee’s only task is to propose candidates for the Super- visory Board to the Supervisory Board for proposal to the Company’s Annual General Meeting when Supervisory Board elections are due. In 2013, the Nomination Committee consisted of Dr John Feldmann (chairman), Dr Martin Hintze, Mr Jiang Kui and Ms Silke Scheiber. The Nomination Committee did not meet in 2013. In 2013, the Human Resources Committee, whose tasks were taken over by the Executive Committee following the change of legal form, consisted of Mr Johannes Huth (chairman), Mr Joachim Hartig, Dr Alexander Dibelius and Mr Thilo Kämmerer. The Human Resources Committee only met twice before it was replaced by the Executive Committee. At these meetings the Human Resources Committee discussed the future Executive Board service contracts and the remuneration of the members of the Executive Board of the future KION GROUP AG. All members of the Supervisory Board attended the Supervisory Board meetings in 2013 apart from the following exceptions: at one meeting, three members sent their apologies, at four meetings, two members sent their apologies and at two meetings, one member sent apologies. With the exception of three committee meetings at each of which one member sent apologies, all the members of the committees attended all the meetings of each committee. audit of the separate and consolidated financial statements The Company’s independent auditor, Deloitte & Touche GmbH Wirtschaftsprüfungsgesell- schaft, Frankfurt am Main, audited the Company’s separate financial statements and management report and the consolidated financial statements and group management report for the year ended 31 December 2013. Various meetings were held between the chairman of the Audit Committee and the auditors in preparation for the appointment of the auditors. They concerned the suitability and independence of the auditors, the regular rotation of the auditing staff responsible, which was already apparent at the time, and the question of fees. The forthcoming engagement of an auditing firm was discussed at the We keep the world moving.KION GROUP AG | Annual Report 201333 Audit Committee meeting on 13 March 2013 and there was an opportunity to speak to the auditors in person. The key audit issues were discussed and set out accordingly at the Audit Committee’s meetings on 13 March 2013 and 7 August 2013. The auditors were appointed by the chairman of the Supervisory Board on 11 December 2013. The auditor issued an unqualified opinion for the separate financial statements, including the management report, for the year ended 31 December 2013 and the consolidated financial statements, including the group management report, for the year ended 31 December 2013. In order to inform the Supervisory Board and its Audit Committee as soon as possible about the progress of the audit and the individual audit findings that were emerging, the members of both committees were offered two telephone briefings in which the Executive Board and the auditor took part. The auditor submitted his report and the documents relating to the financial statements to the members of the Audit Committee on 3 March 2014 and to the members of the Supervisory Board on 13 March 2014. The report was discussed in depth at the Audit Committee meeting on 10 March 2014 and at the full Supervisory Board meeting on 20 March 2014, both of which were attended by the auditor. At both of those meetings, the auditor reported in detail on the main findings of the audit and provided comprehensive answers to all questions asked by members of the Audit Committee and Supervisory Board. Having itself scrutinised the Company’s separate financial statements, consolidated finan- cial statements, management report and group management report for the year ended 31 December 2013, the Audit Committee then made one recommendation to the full Supervisory Board, which the chairman of the Audit Committee explained in more detail in his report to the meeting of the full Supervisory Board. On this basis, following further discussion of its own, the Supervisory Board approved the results of the independent audit at its meeting on 20 March 2014. Based on the final outcome of the Supervisory Board’s own review, no objections were raised. The Supervisory Board approved the Company’s separate financial statements and consolidated financial statements for the year ended 31 December 2013 prepared by the Executive Board. The annual financial statements were therefore adopted. At its meeting on 20 March 2014, the Supervisory Board also discussed and approved the proposal made by the Executive Board that the distributable profit of KION GROUP AG be appropriated for the payment of a dividend of €0.35 per no-par-value share. In doing so, the Supervisory Board took account of the Company’s financial situation and performance, its medium-term financial and capital-expenditure planning and the interests of the share holders. The Supervisory Board believes the proposed dividend is appropriate. To our shareholdersReport of the Supervisory BoardWe keep the world moving.KION GROUP AG | Annual Report 201334 review of the dependency report The Supervisory Board also considered the report compiled by the Executive Board of KION GROUP AG concerning the Company’s relationships with affiliated entities (depend- ency report). The Company’s auditors, Deloitte & Touche GmbH Wirtschaftsprüfungs- gesellschaft, Frankfurt am Main, reviewed the dependency report, compiled an auditors’ report on it and issued the following unqualified opinion based on their completed audit: auditor’s opinion Based on our audit and evaluation conducted in accordance with our professional duties, we hereby confirm that 1. the factual information presented in the report is accurate, 2. the consideration paid by the company in the legal transactions listed in the report was not inappropriately high, 3. in respect of the transactions listed in the report, there are no circumstances that would support an assessment materially different from the assessment made by the Executive Board. The dependency report and the auditors’ report about it were submitted to all the members of the Supervisory Board in good time and were discussed in detail in the presence of the auditor at the Supervisory Board meeting on 20 March 2014. The auditor reported on the main findings of his audit. The Supervisory Board agreed with the findings of the audit. Based on the final outcome of its own review, the Supervisory Board did not raise any objections to the Executive Board’s declaration at the end of the report concerning relationships with affiliated entities. Personnel changes There were a number of changes to the membership of the KION GROUP AG and KION Holding I GmbH Executive Boards during 2013. Mr Klaus Hofer stepped down from the Executive Board of KION Holding 1 GmbH with effect from 10 January 2013. Mr Bert-Jan Knoef, Chief Executive Officer of STILL GmbH, Mr Theodor Maurer, Chief Executive Officer of Linde Material Handling GmbH, and Mr Ching Pong Quek, Chief Asia Pacific Officer joined the Executive Board of KION Holding 1 GmbH with effect from 11 January 2013. There were also several changes on the Supervisory Board. Following the change of legal form, the size of the Supervisory Board was increased from twelve members to 16. At the Annual General Meeting on 5 June 2013, Mr Hans Peter Ring and Mr Tan Xuguang were also appointed as further shareholder representatives with effect from 9 June 2013. We keep the world moving.KION GROUP AG | Annual Report 201335 Mr Denis Heljic and Mr Özcan Pancarci were appointed as employee representatives by the courts, with effect from 12 June 2013. Ms Alexandra Schädler was appointed by the courts as an employee representative to replace Dr Roland Köstler on the Supervisory Board, with effect from 2 October 2013. The details of this report were discussed thoroughly at the Supervisory Board meeting on 20 March 2014 when it was adopted. My colleagues on the Supervisory Board and I would like to thank the members of the Executive Board, the employees of KION GROUP AG and the Group companies in Germany and abroad for their commitment and outstanding achievements in 2013. Dr John Feldmann Chairman To our shareholdersReport of the Supervisory BoardWe keep the world moving.KION GROUP AG | Annual Report 2013 36 KION shares Strong growth for the equity markets in 2013 Basic information on KION shares >> Table 001 International securities markets exhibited a strong upward trend in 2013. The Euro Stoxx 50 increased from 2,636 points to 3,109 points, a gain of 18.0 per cent. The DAX was even more buoyant, ris- ing by 25.5 per cent to 9,552 points. And the Dow Jones Industrial Index climbed by a substantial 26.5 per cent to 16,577 points. However, there was volatility over the course of the year, primar- ily due to discussions and market expectations about the imminent scaling back by the Federal Reserve of its bond-buying programme, which is aimed at stimulating the economy. The Fed’s announce- ments that it would possibly reduce its bond buying in the short term led to turbulence in international equity markets in late June. How- ISIN WKN Bloomberg Reuters DE000KGX8881 KGX888 KGX.GR KGX.DE Share type No-par-value shares Indices SDAX, MSCI Small Cap Germany ever, this step was postponed and low interest rates and indications A total of 19.8 million shares with an issue volume of €475.4 million of an economic turnaround then boosted share prices in the second were placed with new investors. During the stabilisation period in the half of the year. 30 days after the IPO, 2.6 million of these shares were available for placement again as an over-allotment option. At the end of the stabi- lisation phase, the over-allotment option was exercised for 0.3 million Strong performance of KION shares after the IPO shares, which meant that a total of 17.5 million shares remained in free float. Although the marketing period was characterised by the difficult sit- In the course of KION GROUP AG’s flotation, there were also uation in capital markets caused by uncertainty surrounding the two accompanying capital increases with a total volume of Fed’s bond buying, the KION Group successfully made its initial €446.4 million: €328.4 million to raise the shareholding of Weichai public offering (IPO) on 26 June 2013. Its shares have been listed in Power (Luxembourg) Holding S.à r.l. (Weichai Power) to 30.0 per the Prime Standard segment of the Frankfurt Stock Exchange since cent and €118.1 million through conversion into equity of a 28 June 2013. >> Table 001 shareholder loan of Superlift Holding S.à r.l., whose shares are held in investment funds that are advised by Kohlberg Kravis Roberts & Co. L.P. (KKR) and The Goldman Sachs Group, Inc. (Goldman Sachs). As a result of the three capital increases in connection with the IPO, the KION Group’s equity was increased by a total of €859.9 million before deduction of the directly attributable transac- tion costs. On the first day of trading on 28 June 2013, the shares began trading at €24.19 and closed at €23.70. Investors’ growing con fidence in the business model of the KION Group and the general uptrend on international stock markets had a strong pos- itive impact on the share price over the subsequent months. We keep the world moving.KION GROUP AG | Annual Report 201337 By the end of the year, KION shares were trading at €30.73, an when the KION Group was sold in 2006, are now free to sell increase of 29.6 per cent on the closing price on 28 June, easily out- the shares held on their behalf by KION Management performing the wider market over this period. Between 28 June and Beteiligungs GmbH & Co. KG (MPP KG) or to transfer them into the end of the year, the DAX and SDAX recorded gains of 20.0 per their private investment accounts. As a result, these shares are cent and 17.1 per cent respectively. KION shares were able to carry deemed to be part of the free float. Shares held by members of the over this strong performance into the next year, closing on 7 March KION Executive Board and members of the Management Boards of 2014 at €35.67. >> Diagram 001 Linde Material Handling GmbH and STILL GmbH remain subject to Free float has increased to 31.1 per cent since the IPO a lock-up period of one year following the IPO and are therefore reported as shares held by the KION Group’s management that are still held by MPP KG. Further details about the shareholdings of members of the Executive Board of KION GROUP AG can be found in the Corporate Governance Report on page 52. At the end of the stabilisation phase on 27 July 2013, 17.7 per cent of Until 28 December 2013, Weichai Power had an option to KION shares were in free float. Weichai Power held 30.0 per cent of acquire shares from the stake held by KKR and Goldman Sachs and the shares, while KKR, Goldman Sachs and the KION Group’s man- thereby increase its stake from 30.0 per cent to 33.3 per cent. agement held the other 52.3 per cent. Weichai Power exercised this option on 18 December 2013. The The KION Group purchased a total of 200,000 treasury shares shares were transferred on 15 January 2014. Since completion of on the stock exchange between 28 August and 26 September 2013 this transaction there has been a mutual right of first offer between in preparation for an employee share programme, which will be Weichai Power, on the one hand, and KKR and Goldman Sachs on implemented during 2014. This equated to 0.2 per cent of the total the other with respect to their respective shareholdings. Weichai number of shares. Power has also undertaken not to acquire more than 49.9 per cent Furthermore, many of the participants in the KION management of KION shares between now and 28 June 2018 (as part of a stand- partnership plan (MPP), which was launched for selected managers still agreement). Share price performance from 28 June 2013 to 7 March 2014 >> Diagram 001 €38 €35 €32 €29 €26 €23 KION GROUP + 50.5 % + 24.0 % + 17.5 % XETRA DAX SDAX €23.70 * €35.67 * * Closing price JUNE 2013 JULY 2013 AUGUST 2013 SEPTEMBER 2013 OCTOBER 2013 NOVEMBER 2013 DECEMBER 2013 JANUARY 2014 FEBRUARY 2014 MARCH 2014 To our shareholdersKION shares We keep the world moving.KION GROUP AG | Annual Report 201338 Between the IPO and 28 December 2013, KKR and Goldman SDAX inclusion Sachs were prohibited from selling their shares. After that date, they were free to offer their shares for sale. On 7 January 2014, KKR and On 23 September 2013, following a periodic review of market indi- Goldman Sachs placed 10.7 million shares – 10.8 per cent of KION ces, KION shares were included in the SDAX, the Deutsche Börse shares – on the stock exchange at a price of €29.50 per share. The index of the 50 small public limited companies that follow those listed placement closed within a few hours and was significantly oversub- in the MDAX in terms of free-float market capitalisation and trading scribed. KKR and Goldman Sachs are now prohibited again from volume. This made KION shares attractive to a broader range of selling their shares until 7 April 2014. investors, because many institutional investors are predominantly Whereas 20.3 per cent of shares were in free float as at 31 interested in companies listed on an index. KION GROUP AG’s December 2013, following the exercise of the option by Weichai free-float market capitalisation amounted to €617.8 million as at Power and the share placement by KKR and Goldman Sachs, this 31 December 2013 (€1,098.3 million as at 7 March 2014). The aver- figure has now risen to 31.1 per cent. KKR and Goldman Sachs age daily trading volume for KION shares in 2013 was 104.4 thou- remain KION GROUP AG’s largest shareholders. >> Diagram 002 sand shares. Shareholder structure as at 7 March 2014 >> Diagram 002 Attractive dividend of €0.35 per share planned 0.2 % KION GROUP AG 34.5 % KKR A ND GOLDMAN SACHS ¹ 0.9 % KION MANAGEMENT ² The Executive Board and Supervisory Board of KION GROUP AG will propose a dividend of €0.35 per share to the Annual General Meeting. This equates to a dividend payout rate of 25 per cent of net income. Pro-forma earnings per share for 2013 was €1.40. >> Table 002 31.1 % FREE F LOAT ³ 33.3 % WEICHAI POWER 1 Held via Superlift Holding S.à r.l. 2 Held via KION Management Beteiligungs GmbH & Co. KG for participants in the management partnership plan whose shares are subject to a lock-up period. 3 Includes shares that are still held by KION Management Beteiligungs GmbH & Co. KG for participants in the management partnership plan but are no longer subject to a lock-up period and can therefore be sold or transferred to participants’ private investment accounts. We keep the world moving.KION GROUP AG | Annual Report 201339 Share data >> Table 002 Opening price as at 28/06/2013 All-time high 2013 All-time low 2013 Closing price as at 31/12/2013 Market capitalisation as at 31/12/2013 Performance 2013 Average daily volume 2013 in shares Average daily volume 2013 in € Share capital Shares outstanding as at 31/12/2013 Pro forma earnings per share 2013 Dividend per share 2013* Pay-out ratio* Total dividend payment* Equity ratio as at 31/12/2013 * Proposed dividend for the fiscal year 2013 €24.19 €31.70 €23.50 €30.73 €3,038.7 million 29.6 % 104.4 thousand €2.7 million €98,900,000 98,900,000 €1.40 €0.35 25 % €34.5 million 26.7 % To our shareholdersKION shares We keep the world moving.KION GROUP AG | Annual Report 2013 40 Majority of financial analysts recommend KION shares As a result of the improved credit profile, the KION Group’s credit rating went up in July 2013. Moody’s upgraded the Corporate Family Rating by three notches, from B3 / positive to Ba3 / stable, Ten brokerage houses published regular studies about KION shares. while Standard & Poor’s also significantly improved its credit rating Six of the analysts recommended KION shares as a buy; four rated for the KION Group, from B / stable to BB– / positive. them as neutral. The median target price specified for the shares was €37.50 as at 7 March 2014. Greatly improved capital structure Many voting right notifications since the IPO Between the IPO and 7 March 2014 KION GROUP AG released 48 publications of voting rights announcements. KKR, Goldman Not only did the IPO significantly strengthen the Company’s equity Sachs and Weichai Power have entered into a shareholder agree- base, it also greatly improved the debt structure and maturity profile. ment regarding the exercise of their voting rights; details of the Among other things, the loans taken up in connection with the agreement can be found in the IPO prospectus. Under this agree- acquisition of the KION Group in 2006 were fully repaid in July 2013 ment, the voting rights of the three shareholders must be added using the proceeds from the IPO. Of the existing bonds due to together by law. This means that any securities transaction involving mature in 2018, the floating-rate tranche of €175 million has also KION shares that Goldman Sachs carries out, in particular as lead been repaid in full. manager or in the course of its normal banking activities, will exceed In February 2013, KION Finance S.A. issued a new bond that will the threshold above which a voting right notification is legally mature in 2020. Of the total volume of €650 million placed, €450 mil- required. A voting right notification is required for such transactions lion is repayable at a fixed nominal interest rate of 6.75 per cent, while and it must relate to all of the voting rights held by KKR, Goldman €200 million carries a floating interest rate based on three-month Sachs and Weichai Power. In addition to the numerous notifications Euribor plus 450 basis points. of voting rights in conjunction with the IPO and the sale of shares in The KION Group’s funding structure consists of the new bond January 2014, there were consequently also a number of further vot- with a volume of €650 million maturing in 2020, the fixed-rate tranche ing right notifications. All notifications of voting rights received and with a volume of €325 million maturing in 2018, which has an interest published by KION GROUP AG can be found on the Company web- rate of 7.875 per cent, and a revolving credit facility (RCF) maturing in site at kiongroup.com/ir/voting_rights_announcements. 2018. The RCF was restructured after the IPO, and up to €1,045 mil- lion can be drawn down as required. We keep the world moving.KION GROUP AG | Annual Report 2013TO Our ShArEhOLdErS Services for shareholders 41 Services for shareholders Investor relations activities A wealth of information is available on the KION website under Inves- tor Relations. Even before its IPO, the KION Group attached great importance to providing a service for syndicate banks and capital market partici- pants, particularly the bond investors. During the IPO process, the Executive Board and KION’s investor relations (IR) team held in-depth discussions with investors and analysts, particularly in Europe and the United States, in order to explain the details of the business model to potential investors and encourage them to invest in KION KION grOup INVESTOr rELATIONS shares. We will maintain and steadily increase this dialogue in future. kiongroup.com/ir After the IPO, we participated in numerous conferences, organised several roadshows unrelated to any specific transaction and held many one-to-one meetings with investors. Overall, the Executive Here you can access data about KION shares and bonds, press Board and IR team talked to investors at conferences and road- releases, presentations and IR events as well as information about shows on 16 days in the second half of the year and also met with a the Annual General Meeting and corporate governance within the number of other investors in individual meetings at KION’s head- Group. You can register for the IR newsletter under IR Services, quarters in Wiesbaden. Besides the details of the business model, which will enable you to receive our press releases and more. The the focus was primarily on the KION Group’s plans to increase its contact details of the IR team and the financial calendar can also be margins and on market performance in our various core regions. found here. The KION Group’s financial reports are available both as In November, we invited investors and analysts to a factory day PDF files and as interactive online versions. The latter also contain a at Linde Material Handling’s site in Aschaffenburg, where they were download section where, for example, you can download all of the able to see Linde forklift trucks and warehouse trucks for themselves tables as an Excel file. and gain an insight into how they are built. Conference calls and online information First Annual General Meeting on 19 May 2014 KION GROUP AG will hold its first Annual General Meeting as a listed Ever since we issued our first bond in 2011, we have held a confer- public limited company at the Rhein-Main-Hallen, Rheinstrasse 20, ence call for investors on the day on which financial reports are pub- Wiesbaden on 19 May 2014. All of the necessary information lished. It is a chance for members of the Executive Board to explain about the event, including the announcement and agenda, will the results and answer questions. be published at the appropriate time on the Company website at kiongroup.com/agm. We keep the world moving.KION GROUP AG | Annual Report 2013Corporate GovernanCe Contents 43 Corporate Governance Corporate GovernanCe report Declaration pursuant Executive board and supervisory board shareholdings and directors’ dealings DisClosures relevant to aCquisitions remuneration report Executive Board remuneration Supervisory Board remuneration 44 44 52 53 57 57 64 KION GROUP AG | Annual Report 2013 We keep the world moving. 44 Corporate governance report Corporate governance covers the whole system of managing and monitoring an enterprise, the principles and guidelines that shape its 1. Comply-or-explain statement pursuant to section 161 (1) AktG business policy and the system of internal and external control and monitoring mechanisms. The Executive Board and Supervisory Section 161 (1) of the German Stock Corporation Act (AktG) requires Board of KION GROUP AG believe that an uncompromising the management board and supervisory board of a publicly listed commitment to the highest standards of corporate governance is company to issue an annual declaration stating that the company essential to the Company’s long-term success. Compliance with has complied with, or intends to comply with, the recommendations these principles also promotes the trust that our investors, of the Code and also stating which recommendations it has not employees, business partners and the public have in the manage- applied or does not intend to apply, and the reasons why. Detailed ment and monitoring of the Company. reasons must be given for any departure from the recommendations There is a close correlation between the corporate governance of the Code. The comply-or-explain statement must be made report required by section 3.10 of the German Corporate Governance permanently available to the public on the company’s website. Code as amended on 13 May 2013 (the Code) and the content of the KION GROUP AG has been a listed company on the regulated corporate governance declaration required by section 289a German market of the Frankfurt Stock Exchange since 28 June 2013. It has Commercial Code (HGB). For this reason, the Executive Board and not previously issued a comply-or-explain statement pursuant to the Supervisory Board of KION GROUP AG have combined the two section 161 (1) AktG. However, the Company has already stated in its statements. IPO prospectus that with one exception, it complies, and will comply DEClARAtION PURSUANt tO SECtION 289a Of thE GERmAN COmmERCIAl CODE (hGB) in future, with the recommendations in the Code. The Executive Board and Supervisory Board have considered the recommendations of the Code in detail and on 19 December 2013 they issued the first comply-or-explain statement of KION GROUP AG as required by section 161 (1) AktG as follows: 1. KION GROUP AG complies, and will continue to comply in future, with all but one of the recommendations of the German Corporate The corporate governance declaration required by section 289a Governance Code government commission (dated 13 May 2013) HGB includes the comply-or-explain statement in accordance with published by the Federal Ministry of Justice in the official part of section 161 AktG (see 1. below), relevant disclosures on corporate the electronic Federal Gazette. management practices extending beyond statutory requirements In departure from section 3.8 (3) of the German Corporate (see 2. below), a description of the working methods of the Governance Code (the Code), the articles of incorporation of KION Executive Board and the Supervisory Board, and a description of GROUP AG do not provide for an excess in the D&O insurance the working methods and composition of the Supervisory Board policies for members of the Supervisory Board. The Company committees (see 3. below). The declaration on corporate believes that such an excess is not typical at international level and governance pursuant to section 289a HGB is part of the manage- would therefore make it considerably more difficult to find ment report. According to section 317 (2) sentence 3 HGB, the independent candidates, in particular candidates from outside information provided in accordance with section 289a HGB does Germany. not have to be included in the audit of financial statements. 2. KION GROUP AG has been a listed company since 28 June 2013 and has not previously issued a comply-or-explain statement pursuant to section 161 AktG. Since its initial public offering (IPO), KION GROUP AG has issued guidelines on diversity in the Company We keep the world moving.KION GROUP AG | Annual Report 2013 45 in order to document its compliance with the recommendations in In 2013 the Executive Board and the Supervisory Board (or its sections 4.1.5, 5.1.2 (1) and 5.4.1 (2) of the Code. Since the IPO, KION committees) regularly discussed corporate governance issues in GROUP AG has complied with all of the recommendations of the accordance with a rolling schedule of topics. This ensured that the government commission (dated 13 May 2013) except for the key elements of corporate governance within the KION Group were recommendation in section 3.8 (3) of the Code, as described above. always on the agenda at meetings of the Company’s main With respect to section 5.4.2 of the Code, the Supervisory decision-making bodies. The Supervisory Board in particular Board believes that, taking account of the employee representatives complied with the supervisory duties incumbent upon it under the on the Supervisory Board, it is appropriate to have two independent German Stock Corporation Act. For example, the Supervisory members of the Supervisory Board, who are elected by the share- Board’s Audit Committee, which was set up partly for this purpose, holders. received regular reports on the accounting processes and the effectiveness of the internal monitoring and risk management Wiesbaden, 19 December 2013 systems and of the audit of financial statements, and then reported For the Executive Board: Gordon Riske Dr Thomas Toepfer For the Supervisory Board: Dr John Feldmann back to the full Supervisory Board on these matters. 2.1 internal control system KION GROUP AG has an internal control system designed to meet the specific needs of the Company. Its processes are intended to ensure the correctness of the internal and external accounting processes, the efficiency of the Company’s business operations and compliance with key legal provisions and internal policies. These control processes also include the Company’s strategic planning, where the underlying assumptions and plans are reviewed on an The comply-or-explain statement is available on the website of ongoing basis and revised as necessary. KION GROUP AG kiongroup.com/comply_statement. The Supervisory Board and in particular the Supervisory Board’s Audit Committee regularly obtain information on the processes put in place as part of the internal control system and are satisfied as to 2. Relevant disclosures on corporate their efficiency. governance 2.2 accounting-related internal control system The corporate governance of KION GROUP AG is essentially, but not exclusively, determined by the provisions of the German Stock For its accounting process, the KION Group has defined suitable Corporation Act and those of the Codetermination Act and also structures and processes as part of its internal control and risk follows the recommendations of the German Corporate Governance management system and implemented them throughout the Group. Code. KION GROUP AG complies with all the Code’s recommenda- Besides defined control mechanisms, it includes, for example, tions, with one exception. These fundamental principles are system-based and manual reconciliation processes, clear separation combined with a commitment to sustainable business, taking of functions, strict compliance with the double-checking principle account of society’s expectations in the markets in which the and written policies and procedures. The overarching aim is for the Company operates. separate financial statements, consolidated financial statements, management report and group management report to be fully com- Corporate GovernanCeCorporate governance report We keep the world moving.KION GROUP AG | Annual Report 2013 46 pliant with the relevant statutory and regulatory requirements and, in KION GROUP’s compliance organisation is made up of the particular, the applicable financial reporting standards. Changes to following committees, functions and duties: these requirements and standards are analysed on an ongoing basis The Executive Board of KION GROUP AG bears collective and taken into account as appropriate. Details can be found in the responsibility for the functioning of compliance management within risk report, which is part of the group management report. the Group; the compliance department reports to the Chief Executive 2.3 risk management system Officer of KION Group AG. Responsibility for implementing compli- ance management has been delegated to the Chief Compliance Officer, the CEOs of the STILL and LMH segments, and the heads of As part of professional and responsible corporate management, the the KION regions. Responsibility for monitoring of course remains Executive Board is required to regularly obtain information from the with the CEO of the Group. The KION compliance department, the Company’s risk management function about existing risks and KION compliance team and the KION compliance committee provide changes to them and then to report on this to the Supervisory Board. operational support to the aforementioned functions. The KION The KION Group’s risk management system is defined in groupwide compliance department focuses mainly on preventing compliance risk guidelines, which contain a standardised catalogue of risks. violations by providing guidance, information, advice and training. It Specific individual risks are then reported by the individual Group manages the KION compliance team, in which local and regional entities using an online reporting tool. Reporting on cross-segment compliance officers of the Group are represented. risks and groupwide risks is carried out by the Accounting & Finance The members of the compliance team at KION GROUP AG are function and the relevant departments. available to advise all Group employees and answer their questions 2.4 Compliance management system compliance programme, particularly for providing advice, information at any time. They are also responsible for the implementation of the and training. The Executive Board and Supervisory Board of KION GROUP AG Actual or suspected incidents of non-compliance can be consider that adhering uncompromisingly to broad-ranging reported by post, email or fax. All employees can also report any compliance standards is essential to sustained financial success. cases of non-compliance via a compliance hotline and can choose That is why a comprehensive compliance programme, centring to remain anonymous. around the KION Group Code of Compliance, has been set up for As part of its work, the compliance department at KION GROUP KION GROUP AG and its Group companies worldwide. AG cooperates closely with the legal and internal audit departments. The KION Group Code of Compliance, which is available in all of The KION compliance committee is staffed by the heads of these the main languages relevant to the Group companies of KION departments and the head of human resources, operating as a GROUP AG, provides every employee with clear guidance on how to cross-functional committee that primarily advises on, examines and, conduct their business in accordance with sound values and ethics if relevant, punishes incidents of non-compliance that are reported. and in compliance with the law. The aim is that all employees should While the KION compliance department is responsible for preventing receive regular training on the most important compliance subjects compliance violations, the internal audit unit is tasked with checking (e.g. competition law, data protection, communication and anti- the facts of reported non-compliance cases. On behalf of the corruption). Desk-based employees can use e-learning tools to Executive Board, the internal auditors also monitor subsidiaries for complete the mandatory training. compliance with regulations. If their audits confirm cases of Compliance activities focus on anti-corruption, foreign trade / non-compliance, it is the task of HR or Legal to remedy the violations export controls, liability of senior management, directors’ and and sanction those responsible, if appropriate. officers’ liability, capital markets compliance, IT security and data The Management Boards of the KION brand parent companies protection. and their subsidiaries are responsible for ensuring compliance. The We keep the world moving.KION GROUP AG | Annual Report 201347 Local Compliance Representatives advise and support the directors The Company’s Chief Executive Officer, Mr Gordon Riske, was and senior managers in ensuring compliance throughout the Group. appointed a non-executive director of Weichai Power with effect 2.5 audit-relevant processes from 24 June 2013. The Supervisory Board had previously given its consent. Appropriate precautions have been taken to ensure that this role at a major shareholder of the Company does not create a The KION Group’s separate financial statements and management conflict of interest relating personally to Mr Riske. Formal processes report, and the consolidated financial statements and group have been put in place to ensure that Mr Riske, in his role as a management report, which are prepared by the Executive Board of non-executive director of Weichai Power, will not be involved in KION GROUP AG, are audited by an independent auditor, discussed transactions that could give rise to a conflict with the interests of the by the Audit Committee and approved by the Supervisory Board. KION Group. Nor will Mr Riske will be involved in transactions relating The independent auditor reviews the condensed consolidated to the exercise of voting rights by Weichai Power or its subsidiaries at interim financial statements and the condensed interim group the Annual General Meeting of KION GROUP AG. It has been management report for the first half of the year. The Executive Board ensured that Mr Riske maintains a strict separation between his discusses all interim reports with the Audit Committee before they duties as a non-executive director of Weichai Power and his duties are published. 2.6 avoiding conflicts of interest as Chief Executive Officer of KION GROUP AG and that he fulfils all of his legal obligations in the interests of the Company. Executive Board member Ching Pong Quek received an incentive bonus of RMB 486,659.00 in the year under review from Conflicts of interest between the governing bodies and other Siming District, Xiamen, China. Based on the average exchange rate decision-makers in the Company or significant shareholders go in 2013, this is equivalent to €59,596.20. This payment was not against the principles of good corporate governance and are harmful related to Mr Quek’s work on the Executive Board; it was paid to the Company. KION GROUP AG and its governing bodies there- exclusively in connection with his role as a member of the Manage- fore adhere strictly to the recommendations in the Code. The ment Team (Chief Executive Officer) of Linde (China) Forklift Trucks employees of KION GROUP AG and its investees are made aware of Corp., Ltd., Xiamen, China. Similar incentives in varying amounts the problem of conflicts of interest as part of compliance training and were also paid to 23 other members of the management team of are bound by rules on how to behave in the event of actual or Linde (China) Forklift Trucks Corp., Ltd., Xiamen, China. The bonuses potential conflicts of interest. are awarded each year by the administrative district of Siming to The Company attaches high priority to preventing possible management teams of local companies who have made a particular conflicts of interest from occurring in the first place and to dispelling contribution to the regional economy over the past twelve months. any impression that they might exist. This is especially important in Such payments are also common in other districts in China and view of the long-standing involvement of major shareholders serve to make these regions more attractive to talented managers Goldman Sachs and KKR, which exerted considerable influence and, in particular, employees from foreign companies who are over the Company’s Executive Board in the years before KION seconded to China. The payment was disclosed to the Chief GROUP AG’s conversion to a public limited company and its IPO, Executive Officer and the Supervisory Board. Weichai Power’s significant investment in KION GROUP AG, and the representation of these shareholders on the Supervisory Board of KION GROUP AG. The Company achieves these aims by avoiding business scenarios or personnel scenarios that could give the impression of a conflict of interest and by taking transparent steps that effectively avoid concerns about conflicts of interest. Corporate GovernanCeCorporate governance report We keep the world moving.KION GROUP AG | Annual Report 201348 3. Working methods of the Executive Board and Supervisory Board and composition of the committees of the Supervisory Board responsibilities within the executive Board >> TabLe 003 executive Board responsibilities The Executive Board and Supervisory Board of KION GROUP AG Gordon Riske have a close and trusting working relationship that focuses on ensuring the sustained success of the Company. The members of the Executive Board regularly attend Supervisory Board meetings, unless the Supervisory Board decides to meet without the Executive Board. The Board of Management promptly, comprehensively and regularly reports to the Supervisory Board on the performance of the KION Group. Besides the reporting obligations defined by law, the Dr Thomas Toepfer rules of procedure for the Executive Board of KION GROUP AG set out further reporting requirements and reservations of approval in favour of the Supervisory Board. 3.1 Working methods of the executive Board The Executive Board of KION GROUP AG comprises five members. It is responsible for managing the Company in the Company’s Bert-Jan Knoef interest, i.e. taking account of shareholders, customers, employees and other stakeholders with the aim of creating sustainable added value. The Executive Board develops the Company’s strategy, discusses it with the Supervisory Board and ensures that it is implemented. Every Executive Board member is responsible for his or her own area of responsibility, and keeps his or her fellow board Theodor Maurer members informed of developments on an ongoing basis. Ching Pong Quek >> TabLe 003 Ceo Kion Group aG Strategy / Business Development Corporate Communications Corporate Office Internal Audit Compliance KION Warehouse Systems KION Synergies / Platforms North America Region South America Region CFo Kion Group aG Accounting, Tax & Financial Services Corporate Finance / Investor Relations / M&A Controlling HR / Labour Relations Director Legal IT Purchasing Data Protection executive Board member Kion Group aG CEO STILL GmbH Logistics / Urban executive Board member Kion Group aG CEO Linde Material Handling GmbH Quality Facility Management / Health Safety Environment executive Board member Kion Group aG / Chief asia pacific officer Asia Pacific Region We keep the world moving.KION GROUP AG | Annual Report 201349 Every Executive Board member must disclose potential conflicts of its work. The Supervisory Board is fully involved from an early stage interest to the Supervisory Board immediately and must also inform in all decisions that are fundamental to KION GROUP AG. the other Executive Board members. All transactions between KION The Supervisory Board of KION GROUP AG consists of 16 mem- GROUP AG and Executive Board members or parties or companies bers, eight of whom are employee representatives and eight are closely associated with them must be concluded on an arm’s-length shareholder representatives. The shareholder representatives are basis. elected by the Annual General Meeting by simple majority. Rules of procedure laid down by the Supervisory Board define The Supervisory Board has drawn up rules of procedure for its the areas of responsibility of the Executive Board members and the work. These apply in addition to the requirements of the articles of way in which they work together. The full Executive Board normally incorporation and also define the Supervisory Board committees. meets every 14 days and is chaired by the CEO. Individual Executive According to these rules, the chairman of the Supervisory Board Board members sometimes take part via video conference. At the coordinates its work and the cooperation with the Executive Board, meetings, the board members discuss measures and business that, chairs its meetings and represents it externally. The Supervisory under the Executive Board’s rules of procedure, require the approval Board meets in person at least twice in each half of a calendar year, of the full Executive Board. Resolutions of the Full Executive Board and adopts its resolutions at these meetings. Between these are passed by simple majority unless a greater majority is required by meetings, resolutions may also be adopted in writing, by telephone law. The chairman has a casting vote in the event of a tied vote. or by other similar forms of voting, provided that the chairman of the Resolutions of the Executive Board may also be adopted between Supervisory Board or, in his absence, his deputy, decides on this meetings. Taking account of the requirements of section 90 AktG, procedure for the individual case concerned. The Supervisory Board the Executive Board provides the Supervisory Board with regular, adopts resolutions by a simple majority of the votes cast unless a timely and comprehensive information on all matters of relevance to different procedure is prescribed by law. If a vote is tied, the matter the business as a whole relating to operating policy, strategic will only be renegotiated if the majority of the Supervisory Board vote planning, business performance, financial position, financial in favour of this option. Otherwise the Board must vote again without performance and business risks. The Chief Executive Officer meets delay. If this new vote on the same matter also results in an equal regularly with the chairman of the Supervisory Board to discuss number of votes for and against, the chairman of the Supervisory these matters too. Board has a casting vote. The working methods of the Executive Board are described in more detail in the rules of procedure laid down by the Supervisory 3.3 objectives for the composition of the Board for the Executive Board, which also set out the business supervisory Board allocation plan and the matters reserved to the full Executive Board. The Executive Board’s rules of procedure reserve certain important The Supervisory Board strives to ensure that its composition is transactions for the approval of the Supervisory Board. The budget appropriate to its responsibilities and obligations. In particular, this planning requires the approval of the Supervisory Board, for example, means considering members’ individual qualities and skills as well as as do major acquisitions or investments. the specific requirements resulting from the global business activities The Company is represented by two members of the Executive of KION GROUP AG and its Group companies. The Supervisory Board, by one member of the Executive Board acting conjointly with Board is therefore of the opinion that the priority in aiming for a a Prokurist (person with full commercial power of representation), or composition based on diversity must be the expertise of the by two Prokurists. individual members and a balanced mix of personal qualities, experience, skills, qualifications and knowledge of all members in 3.2 Working methods of the supervisory Board line with the requirements of the business, and has agreed upon guidelines for the selection of Supervisory Board members in the The Supervisory Board of KION GROUP AG advises and monitors form of a diversity statement. This also means that the Supervisory the Executive Board in its management of the Company and reviews Board’s aim is to have an appropriate number of women on the Corporate GovernanCeCorporate governance report We keep the world moving.KION GROUP AG | Annual Report 201350 Supervisory Board. Given that at present – as in the past – there are appointed. Other documents prepared by the Executive Committee already two female members on the KION GROUP AG Supervisory relate to any matter in connection with Executive Board remunera- Board, it believes that an appropriate proportion has already been tion. The Executive Committee is also responsible for resolutions achieved which takes account of the specifics of the enterprise and concerning the conclusion, amendment and termination of Executive it will make efforts to retain this proportion of women. The Supervisory Board employment contracts and agreements with Executive Board Board would also support the inclusion of other female Board mem- members governing pensions, severance packages, consultancy bers who meet the above criteria, but at present it does not see any and other matters and for resolutions about any matters arising as a need for further increasing the proportion of women on the KION result of such contracts and agreements, unless they relate to GROUP AG Supervisory Board in the short term, or for introducing a remuneration. The responsibilities of the Executive Committee also mandatory quota for female members of the Supervisory Board. At include resolutions about the extension of loans to Executive Board the same time, it is following the debate in society and among members, Supervisory Board members and parties related to them politicians regarding a statutory minimum quota for women on within the meaning of sections 89 and 115 AktG, as well as resolutions supervisory boards and will take any measures that may be required. to approve contracts with Supervisory Board members outside their 3.4 Working methods and composition of the committees consultation with the Executive Board – regularly deliberate on long- of the executive Board and supervisory Board term succession planning for the Executive Board. Supervisory Board remit. The Executive Committee should – in On 29 May 2013, but with effect from the registration of the change in 2013, the members of the executive Committee were: of form to KION GROUP AG, the Supervisory Board of KION Holding 1 GmbH (known as KION GROUP AG (under formation) before the Dr John Feldmann (chairman) effective date of the change of legal form) resolved to create four Joachim Hartig (deputy chairman) committees, whose tasks, responsibilities and work processes Dr Alexander Dibelius comply with the provisions of the German Stock Corporation Act Denis Heljic (AktG) and the German Corporate Governance Code. The chairman Johannes P. Huth of each committee reports regularly to the full Supervisory Board on Jiang Kui his committee’s work. The committees have each drawn up rules of Thilo Kämmerer procedure that define their tasks and working methods. Kay Pietsch executive Committee mediation Committee The Executive Committee consists of four shareholder representa- The Mediation Committee comprises the chairman of the Supervi- tives and four employee representatives. Its chairman is always the sory Board, his deputy, an employee representative and a share- chairman of the Supervisory Board. It prepares the meetings of the holder representative. If a majority of two thirds of votes as required Supervisory Board and is responsible for ongoing matters between by section 27 (3) and section 31 (3) MitbestG is not reached in a vote Supervisory Board meetings. The Executive Committee also by the Supervisory Board on the appointment of an Executive Board prepares the Supervisory Board’s decisions relating to corporate member, the Mediation Committee must propose candidates for the governance, particularly amendments to the comply-or-explain post to the Supervisory Board within one month. The chairman of statement pursuant to section 161 AktG reflecting changed circum- the Supervisory Board does not have a second vote on the candi- stances and the checking of adherence to the comply-or-explain dates proposed. statement. It also prepares documents for the Supervisory Board when Executive Board members are to be appointed or removed and, if applicable, when a new Chief Executive Officer is to be We keep the world moving.KION GROUP AG | Annual Report 201351 in 2013, the members of the mediation Committee were: nomination Committee Dr John Feldmann (chairman) Joachim Hartig (deputy chairman) Johannes P. Huth (from 27 June 2013) Dr Alexander Dibelius (until 27 June 2013) Kay Pietsch audit Committee The Nomination Committee has four members, all of whom are shareholder representatives and are elected by the shareholder representatives on the Supervisory Board. The Nomination Committee’s only task is to propose new candidates for the Super- visory Board to the Company’s Annual General Meeting. members of the nomination Committee: The Audit Committee has four members, who are elected by the Dr John Feldmann (chairman) Supervisory Board. Its purpose is to assist the Supervisory Board in Dr Martin Hintze (deputy chairman) performing its task of monitoring accounting processes, compliance Jiang Kui matters and reporting. These responsibilities encompass monitoring Silke Scheiber the quality and integrity of the consolidated and separate financial statements (as well as related disclosures), the internal control Until 27 June 2013, when its tasks were taken over by the Executive mechanisms, risk management and the internal audit system. The Committee, the members of the Human Resources Committee Audit Committee also reviews the work carried out by the were: independent auditor and checks that the independent auditor is qualified and independent. It is also responsible for engaging the Johannes P. Huth (chairman) independent auditor, determining the focus of the audit and agreeing Joachim Hartig (deputy chairman) the fee. In addition, the Audit Committee exercises the rights in Dr Alexander Dibelius investee companies set forth in section 32 (1) MitbestG. Thilo Kämmerer in 2013, the members of the audit Committee were: Hans Peter Ring (chairman, from 27 June 2013) Dr Martin Hintze (chairman, until 27 June 2013) Kay Pietsch (deputy chairman) Dr John Feldmann (from 27 June 2013) Dr Roland Köstler (until 30 September 2013) Alexandra Schädler (from 2 October 2013) Silke Scheiber (until 27 June 2013) As an independent member of the Audit Committee, the chairman, Hans Peter Ring, has the required expertise in the areas of account- ancy and auditing specified in sections 100 (5) and 107 (4) AktG. Corporate GovernanCeCorporate governance report We keep the world moving.KION GROUP AG | Annual Report 201352 EXECUtIVE BOARD AND SUPERVISORY BOARD ShAREhOlDINGS AND DIRECtORS’ DEAlINGS 1. Shareholdings As at 31 December 2013, the shares in KION GROUP AG or related financial instruments held directly or indirectly by all members of the Executive Board and Supervisory Board equated to less than 1 per cent of all the shares issued by the Company. 2. Directors’ dealings Pursuant to section 15a of the German Securities Trading Act (WpHG), members of the Executive Board and the Supervisory Board and related parties are obliged to disclose transactions involving shares in the Company or related financial instruments if the value of these transactions reaches €5,000 or more within one calendar year. >> TabLe 004 transactions pursuant to section 15a WpHG in 2013 >> TabLe 004 Buyer / seller type of transaction Date of transaction share price (€) number of shares total value (€) Benita Riske Johannes Huth Purchase Purchase Holger Brandt Sale 28 June 2013 1 July 2013 22 November 2013/ 18 December 2013* 23.81984 23.690525 29.5042 3,000 50,000 7,000 71,459.52 1,184,526.25 206,529.40 * The report dated 18 December 2013 refers to the report dated 22 November 2013, in which it was only possible to state a provisional sale price of €28.945 for the 7,000 shares. The report dated 22 November 2013 also stated that a second report concerning these 7,000 shares would be made once the final sale price had been determined. Mr Brandt has known the final sale price since 13 December 2013. It was determined by adjusting the provisional price of €28.945 per share, which was set on the day the shares were transferred to the broker, when the sale of the shares was completed in such a way as to avoid disrupting the market (which required an extended selling period). The price was adjusted by the payment of a premium of €0.5592, which was equiva- lent to the weighted average sale price achieved on each trading day. At the end of the sale period, this produced a final sale price of €29.5042. We keep the world moving.KION GROUP AG | Annual Report 201353 Disclosures relevant to acquisitions, section 315 (4) HGB The disclosures relevant to acquisitions pursuant to section 315 (4) This obligation also includes other securities of the Company, includ- HGB together with the explanatory report form an integral part of the ing securities that can be converted into shares in the Company or group management report. 1. Composition of subscribed capital options that can be exercised or exchanged to obtain shares in the Company. Under this agreement, KMB is not permitted to offer, pledge, allocate, sell or undertake to sell the shares concerned, sell call options or call contracts, buy put options, or grant call options, purchasing rights or subscription rights. The subscribed capital (share capital) of KION GROUP AG amounted The Executive Board understands that KION GROUP AG’s two to €98,900,000 as at 31 December 2013. It is divided into 98,900,000 major shareholders, Superlift Holding S.à r.l. (‘Superlift’) and Weichai no-par-value bearer shares. The share capital is fully paid-up. All of Power (Luxembourg) Holding S.à r.l. (‘Weichai Power’) have entered the shares in the Company give rise to the same rights and into a shareholder agreement in which they have both undertaken to obligations. Each share confers one vote and entitlement to an equal coordinate their voting at the Annual General Meeting of the Company share of the profits. The rights and obligations arising out of the in respect of certain resolutions. Furthermore, the Executive Board shares are defined by legal provisions. As at 31 December 2013, the understands that Superlift and Weichai Power have come to an Company held 200,000 shares in treasury. The primary intention is arrangement in the shareholder agreement to grant each other a to offer these treasury shares to staff as part of an employee share mutual right of first offer in respect of the shares held by the other programme, the details of which are currently being prepared. shareholder. 2. Restrictions on voting rights or the transfer of shares There are generally no restrictions with respect to voting rights or the transfer of shares in the Company. In accordance with the legal provisions applicable to bearer shares, all of the shares in the KION GROUP AG has no rights arising from the treasury shares that it holds (section 71b AktG). 3. Direct or indirect shareholdings in the Com- pany that represent more than 10 per cent of the voting rights Company can be traded freely. As far as the Company is aware, the following companies directly or As at 31 December 2013, KION Management Beteiligungs indirectly held more than 10 per cent of the voting rights in KION GmbH & Co. KG (KMB) held shares in the Company on behalf of GROUP AG as at 31 December 2013: managers in the Company and its subsidiaries. KMB has made an undertaking to the syndicate banks underwriting the IPO regarding – Superlift with a direct shareholding equivalent to 48.6 per cent of the shares held by KMB for members of the Executive Board of the the voting rights Company, the Executive Board of KION Material Handling GmbH and the Management Boards of Linde Material Handling GmbH and Pursuant to the German Securities Trading Act (WpHG), the STILL GmbH at the time the underwriting agreement was signed as shareholding held by Superlift is deemed to belong to the part of the IPO. It has undertaken not to dispose of these shares following other companies: within a period of twelve months from the day after the Company’s >> TabLe 005 first day of trading on the stock exchange, i.e. until 29 June 2014. We keep the world moving.KION GROUP AG | Annual Report 2013Corporate GovernanCeDisclosures relevant to acquisitions 54 Companies to which superlift is deemed to belong >> TabLe 005 – Weichai Power with a direct shareholding equivalent to 30.0 per cent of the voting rights Company KKR & Co. L.P. registered office Wilmington, USA Pursuant to WpHG, the shareholding held by Weichai Power is deemed to belong to the following other companies: KKR 1996 Overseas, Limited George Town, Cayman Islands >> TabLe 006 KKR 2006 Fund (Overseas), Limited Partnership George Town, Cayman Islands KKR 2006 Limited George Town, Cayman Islands KKR Associates 2006 (Overseas), Limited Partnership KKR Associates Europe II, Limited Partnership George Town, Cayman Islands Companies to which Weichai power is deemed to belong >> TabLe 006 Calgary, Canada Company registered office KKR Europe II Limited George Town, Cayman Islands KKR European Fund II, Limited Partnership Calgary, Canada KKR Fund Holdings GP Limited George Town, Cayman Islands KKR Fund Holdings L.P. George Town, Cayman Islands KKR Group Holdings L.P. George Town, Cayman Islands KKR Group Limited George Town, Cayman Islands KKR Management LLC KKR Partners (International), Limited Partnership Wilmington, USA Calgary, Canada KKR PEI Associates, L.P. St. Peter Port, Guernsey KKR PEI GP LIMITED St. Peter Port, Guernsey KKR PEI International Holdings GP Ltd. George Town, Cayman Islands KKR PEI International Holdings L.P. George Town, Cayman Islands KKR PEI Investments, L.P. St. Peter Port, Guernsey GS Capital Partners V Employee Fund, L.P. GS Capital Partners V Employee Funds GP, L.L.C. Wilmington, USA Wilmington, USA GS Capital Partners V Offshore, L.P. George Town, Cayman Islands GS Capital Partners V GmbH & Co. KG GS Advisors V, L.L.C. Frankfurt am Main, Germany Wilmington, USA GSCP V AIV, L.P. George Town, Cayman Islands GS Capital Partners V Institutional, L.P. Wilmington, USA GS Advisors V AIV, Ltd. George Town, Cayman Islands Goldman, Sachs & Co. New York, USA The Goldman Sachs Group, Inc. Wilmington, USA Shandong Heavy Industry Group Co., Ltd. Weichai Group Holdings Limited Weichai Power Co., Ltd. Jinan, People’s Republic of China Weifang, People’s Republic of China Weifang, People’s Republic of China Weichai Power Hong Kong International Development Co., Ltd. Hong Kong, People’s Republic of China other People’s Republic of China registered office Beijing, People’s Republic of China On 18 December 2013, Weichai Power exercised one of the call options granted to it by Superlift, acquiring with the completion of the purchase after the reporting date a further 3.3 per cent of the shares in KION GROUP AG from Superlift. Weichai Power therefore now holds 33.3 per cent of the shares in the Company. In addition, Superlift sold 10.7 million shares in KION GROUP AG to institutional investors in January 2014 as part of an accelerated bookbuilding process. Since then, it has held approximately 34.5 per cent of the shares. Since the reporting date, there may have been further changes to the aforementioned shareholdings of which the Company is unaware. As the shares in the Company are bearer shares, the Company only learns about changes to the size of shareholdings if they are notifiable pursuant to the WpHG or other regulations. We keep the world moving.KION GROUP AG | Annual Report 2013 55 4. Shares with special rights that confer and section 31 MitbestG. Pursuant to article 6 (1) of the articles of authority to exert control over the Company incorporation of the Company, the Executive Board must have a min- imum of two members. The Supervisory Board determines the num- There are no shares with special rights that confer the authority to ber of Executive Board members. Pursuant to section 84 AktG and exert control over the Company. section 6 (3) of the Company’s articles of incorporation, the Supervi- 5. type of voting right controls in cases where employees hold some of the Company’s capital and do not exercise their control rights directly sory Board may appoint a Chief Executive Officer and a deputy. Section 179 (1) sentence 1 AktG requires that amendments to the articles of incorporation be passed by resolution of the Annual General Meeting. In accordance with article 23 of the articles of incorporation in conjunction with section 179 (2) sentence 2 AktG, resolutions at the Annual General Meeting on amendments to the articles of incorporation are passed by simple majority of the votes In connection with the acquisition of the business of the current cast and by simple majority of the share capital represented in the KION GROUP AG from Linde AG in 2006, a relatively large group of voting unless a greater majority is specified as a mandatory managers and executives in the KION Group were given the requirement under statutory provisions. The option to stipulate a opportunity to indirectly acquire shares in KION GROUP AG’s legal larger majority than a simple majority in any other cases has not predecessor, the former KION Holding 1 GmbH, through a been exercised in the articles of incorporation. limited partnership in KMB (see under 2 above). When KION The Supervisory Board is authorised in article 10 (3) of the Holding 1 GmbH was transformed into KION GROUP AG, these articles of incorporation to amend the articles of incorporation holdings were exchanged for shares in the new Company. The provided that such amendments relate solely to the wording. participants (limited partners) in KMB are free to instruct the programme to sell their shares or to transfer them into their private investment accounts unless lock-up provisions apply because the 7. Authority of the Executive Board to issue or executives concerned are members of the Executive Board of KION buy back shares GROUP AG or members of the management board of a consoli- dated German subsidiary (see under 2 above). The Extraordinary General Meeting on 13 June 2013 authorised the At the Annual General Meetings of KION GROUP AG, KMB is Company, in the period up to 12 June 2016, to acquire for treasury represented either by its general partner, KION Management up to 10 per cent of all the shares in issue at the time of the resolution Beteiligungs GmbH, or by its managing limited partners. Before or in issue on the date the authorisation is exercised, whichever is the important resolutions of the Annual General Meeting, these partners lower. Together with other treasury shares in possession of the must convene a partners’ meeting of KMB and obtain the approval Company or deemed to be in its possession pursuant to section 71a of the limited partners with regard to how to vote. The limited partners et seq. AktG, the treasury shares bought as a result of this pass resolutions by simple majority when taking a decision on how authorisation must not exceed 10 per cent of the Company’s share they should vote at the Annual General Meeting of KION GROUP AG. capital at any time. The Company may sell the purchased treasury 6. Appointment and removal of members of the Executive Board; amendments to the articles of incorporation shares through a stock exchange or by means of an offer to all shareholders. It may also sell the shares in return for a non-cash consideration, in particular in connection with the acquisition of a business, parts of a business or equity investments. In addition, the treasury shares may be offered to employees of the Company or of an affiliated company as part of an employee share ownership Members of the Company’s Executive Board are appointed and re - programme. The treasury shares can also be retired. Share buyback moved in accordance with the provisions of sections 84 and 85 AktG for trading purposes is prohibited. We keep the world moving.KION GROUP AG | Annual Report 2013Corporate GovernanCeDisclosures relevant to acquisitions56 The authorisation may be exercised on one or more occasions, In the event that a third party (with the exception of KKR and Goldman for the entire amount or for partial amounts, in pursuit of one or more Sachs, companies affiliated with them or funds or limited partner- aims, by the Company, by a subsidiary or by third parties for the ships / partnerships owned by them or that are advised or managed account of the Company or the account of a subsidiary. At the choice by them) acquires beneficial ownership of more than 50 per cent of of the Executive Board, the shares may be purchased through the all shares in KION GROUP AG, KION GROUP AG will be obliged to stock exchange, by way of a public purchase offer made to all share- submit an offer to acquire the aforementioned debt instruments at a holders or by way of a public invitation to shareholders to tender their price of 101 per cent of their nominal value. This offer must remain shares. valid for a minimum of 30 days from the date of the change of control So far, the Company has only exercised this right when it acquired 200,000 shares between 28 August and 26 September 2013. The intention is to offer these shares to staff at the Company – Senior facility agreement dated 23 December 2006 (and amended on several occasions thereafter), concluded between and certain Group companies in 2014 as part of an employee share KION Group GmbH (now KION Material Handling GmbH) and, programme. among others, the London branch of UniCredit Bank AG The Company did not have any conditional or authorised capital in 2013. 8. material agreements that the company has signed and that are conditional upon a change of control resulting from a takeover bid, and the consequent effects In the event that a third party (with the exception of KKR and Goldman Sachs, companies affiliated with them or funds or limited partner- ships / partnerships owned by them or that are advised or managed by them) acquires beneficial ownership of more than 50 per cent of all shares in KION GROUP AG, any loan facilities drawn down would be immediately repayable and any that had not been drawn down would be automatically cancelled. In the event of a change of control resulting from a takeover bid, certain consequences are set out in the following contracts – KION Material Handling GmbH has entered into an agreement with Volkswagen AG for the supply of internal combustion concluded between Group companies of KION GROUP AG and engines. This agreement includes a provision under which either third parties: – Covenant agreement dated 15 April 2011 in connection with the €325,000,000 7.875 per cent senior secured notes maturing in 2018, concluded between Deutsche Trustee party may terminate the agreement without notice if there is a change in ownership involving more than 50 per cent of the shares in either case. Company as trustee, KION Finance S.A. and KION Group 9. Compensation agreements that the GmbH (now KION Material Handling GmbH). – Covenant agreement dated 14 April 2013 in connection with the €450,000,000 6.75 per cent senior secured notes maturing in 2020 and the €200,000,000 senior secured floating rate Company has signed with the Executive Board members or employees and that will be triggered in the event of a takeover bid notes maturing in 2020 of KION Finance S.A., concluded No such agreements have been concluded between the Company between Deutsche Trustee Company Limited as trustee, KION and its current Executive Board members or employees. Finance S.A. and KION Group GmbH (now KION Material Handling GmbH). We keep the world moving.KION GROUP AG | Annual Report 2013 57 Remuneration report This remuneration report forms an integral part of the group man- mer KION Holding 1 GmbH and arising from their respective service agement report for KION GROUP AG. In accordance with statutory contracts with the various subsidiaries. The following information requirements and the recommendations of the German Corporate therefore provides a brief description of the Executive Board remu- Governance Code as amended 13 May 2013 (DCGK), it explains the neration arrangements initially in force in the period from 4 June to 28 main features of the remuneration system used for the Executive June 2013 and then gives a detailed description of the Executive Board and the Supervisory Board of the Company and also dis- Board remuneration system applicable since 29 June 2013. closes the remuneration paid to the individual members of the Exec- utive Board and the Supervisory Board in return for the work that essential features of the executive Board remuneration they carried out on behalf of the Company and its subsidiaries in system in the period 4 June 2013 to 28 June 2013 2013. Remuneration disclosures also include remuneration received by members of the Company’s Executive Board and Supervisory In the period between the effective date of the change in the legal Board and third parties when they were members of the Executive form of the Company to a public limited company and the first day of Board or Supervisory Board of the former KION Holding 1 GmbH trading in the Company’s shares on the Frankfurt Stock Exchange on before new Executive Board service contracts were signed with 28 June 2013, the arrangements applied for the remuneration of the KION GROUP AG for the performance of their duties at the Com- members of the Executive Board remained the same as the arrange- pany and its subsidiaries in 2013. ments that had applied prior to 4 June 2013 under the service con- EXECUtIVE BOARD REmUNERA tION Remuneration system tracts with the various subsidiaries relevant to the persons con- cerned. The total remuneration paid to the members of the Executive Board in this period comprised a non-performance-related salary and non-performance-related non-cash benefits, performance- related (variable) remuneration and pension entitlements. Non-performance-related remuneration consisted of a fixed annual salary (basic remuneration) and additional benefits. The fixed annual salary was paid at the end of each month in twelve equal At its meeting held on 25 April 2013, the Supervisory Board of the instalments, the last payment being made for the full month in which former KION Holding 1 GmbH adopted a resolution as part of the the Executive Board service contract ended. The additional benefits conversion of the Company into a public limited company to approve essentially included use of a company car and the payment of premi- the remuneration system for the future Executive Board of KION ums for accident insurance with benefits at a typical market level. GROUP AG and fix the remuneration to be paid to the individual The performance-related remuneration was a variable remuner- members of the Executive Board. This resolution was in line with the ation component based on performance measured over one year. It Human Resources Committee’s recommendation. The Supervisory was structured differently for each individual Executive Board mem- Board took care not only to ensure compliance with the require- ber. In the case of Mr Riske and Dr Toepfer, who were employed by ments of the German Stock Corporation Act (AktG) and the DCGK, KION GROUP GmbH (now KION Material Handling GmbH) prior to but also to ensure that the remuneration to be paid to the individual the change in legal form of KION Holding 1 GmbH, there was a com- members of the Executive Board was harmonised. Although the bined performance and target-based bonus system based on two Executive Board service contracts were to come into force on the performance targets: adjusted earnings before interest, taxes and effective date of the change in legal form, i.e. on 4 June 2013, the amortisation (EBITA) and unlevered free cash flow (UFCF). For Mr new remuneration system was conditional upon KION GROUP AG’s Knoef, Mr Maurer and Mr Quek, the relevant bonus system was that successful IPO and therefore only came into force on the day after used by the Group companies in which they were a member of the the first day of trading on the Frankfurt Stock Exchange on 28 June management board up to their appointment to the Executive Board 2013. Up to that point, KION GROUP AG continued to use the remu- of the Company and that was based on annual financial perfor- neration arrangements applicable to the board members of the for- mance targets of a varying nature weighted according to brand and We keep the world moving.KION GROUP AG | Annual Report 2013Corporate GovernanCeRemuneration report58 Group criteria. Achievement of the targets for EBIT (40 per cent of the KION Group, its business and financial situation, its perfor- weighting), UFCF (also 40 per cent weighting) and revenue (20 mance and future prospects, the normal amount and structure of per cent weighting) was measured in 2013. executive board remuneration in comparable companies and the In all bonus systems, the possible range for target achievement internal salary structure. The Supervisory Board also took into was 0 per cent to 200 per cent. If the targets derived from the annual account the relationship between the Executive Board remuneration budget were achieved in full, target achievement was 100 per cent. and the remuneration paid to senior managers and the workforce of The target achievement levels for each weighted Company target the Company as a whole, including increases over the course of were added together to give the total target achievement. time. Other criteria used to determine remuneration included the The pension entitlements consisted of contributions for retire- remit and work to be carried out by the individual members of the ment, invalidity and surviving dependants’ benefits. Specifically: Executive Board. The remuneration system was converted with sup- Mr Riske and Mr Knoef participated in a defined benefit scheme port from external consultants working independently of the Execu- funded entirely by the Company. This scheme was a final salary tive Board and the Company. scheme guaranteeing Mr Riske a retirement pension of up to The total remuneration now paid to the Executive Board also 50 per cent of his final basic salary and Mr Knoef a retirement pen- comprises a non-performance-related salary and non-perfor- sion of up to 60 per cent of his final basic salary. Dr Toepfer and Mr mance-related non-cash benefits, performance-related (variable) Maurer also belonged to defined benefit schemes comprising two remuneration and pension entitlements. When the variable remuner- components fully funded by KION: a fixed basic pension to a maxi- ation structure was defined, the emphasis was on creating a meas- mum amount of €36,000 p.a. for Dr Toepfer and to a maximum urement basis covering a number of years, thus providing the mem- amount of €30,000 p.a. for Mr Maurer (the final amount in each case bers of the Executive Board with an incentive to contribute to the being dependent on the duration of the service contract) and a vari- sustained and long-term growth of the Company. The structure also able top-up pension based on 12 per cent of basic salary for Dr takes into account both positive and negative performance. Toepfer and 9 per cent of basic salary for Mr Maurer, from which a In addition, the remuneration for all members of the Executive fixed pension component could be calculated by multiplying the Board is subject to upper limits on the amounts payable, both overall amounts concerned by an age-related annuitisation factor each year. and also in terms of the variable components. Subject to participation in the deferred compensation model offered The pension entitlements consist of entitlements in respect of by the KION Group (KION pension plan), both Dr Toepfer and Mr retirement, invalidity and surviving dependants’ benefits. The Super- Maurer also receive a third component (referred to as the matching visory Board regularly reviews the structure and appropriateness of employer contribution): they were granted an additional Company Executive Board remuneration. contribution to be invested in the KION pension plan (up to a maxi- mum of 6 per cent of basic salary for Dr Toepfer and up to a maxi- non-performance-related remuneration mum of 5 per cent of basic salary for Mr Maurer, depending on the amount of deferred compensation); the amount concerned was con- The Executive Board members of KION GROUP AG receive non-per- verted into guaranteed pension capital by multiplying it by an age-de- formance-related remuneration in the form of a fixed annual salary pendent annuitisation factor each year. Mr Quek was not entitled to (basic remuneration) and additional benefits. The fixed annual salary a company pension. is paid at the end of each month in twelve equal instalments, the last payment being made for the full month in which the Executive Board essential features of the executive Board remuneration service contract ends. The additional benefits essentially comprised system since 29 June 2013 use of a company car and the payment of premiums for accident insurance with benefits at a typical market level. Since the IPO, the remuneration of the Executive Board of KION Additional special benefits have been agreed for Mr Quek GROUP AG has been determined in accordance with the require- because he has been sent from Singapore to China on foreign ments of the AktG and the DCGK. It reflects the size and complexity assignment. We keep the world moving.KION GROUP AG | Annual Report 201359 Mr Quek’s remuneration is therefore structured as if he were lia- The individual performance of the Executive Board members is ble for taxes and social security contributions in Singapore. KION rated using a discretionary performance multiple with a factor of GROUP AG pays the additional taxes and social security contribu- between 0.8 and 1.2. The factor is determined by the Supervisory tions that Mr Quek incurs in China and Germany. In 2013, this amount Board with reference to attainment of the individual targets defined was €227,077. The additional benefits agreed with Mr Quek include by the Supervisory Board in a target agreement form at the start of the cost of trips home to Singapore for Mr Quek and his family, a the year. The factor is applied to total target achievement for the company car, rental payments in Xiamen and private health insur- budget targets and results in payment of the individual target bonus ance. In 2013, the special additional benefits for Mr Quek amounted if the overall target attainment is 100 per cent. The amount paid as to a total of €117,161. These special benefits will be granted for as one-year variable remuneration is capped at 200 per cent of the tar- long as Mr Quek’s designated place of work is Xiamen or until his get bonus. service contract with KION GROUP AG ends. In the event that an Executive Board member is not entitled to remuneration for the entire year on which the calculation is based, performance-related remuneration the remuneration is reduced pro rata temporis. The performance-related remuneration components consist of a multiple-year variable remuneration variable remuneration component measued over one year and a var- iable remuneration component measured over several years in the The multiple-year variable remuneration component is structured in form of a rolling performance share plan with a three-year term. the form of a performance share plan. At the start of the three-year performance period, a conditional entitlement to a certain target one-year variable remuneration number of performance shares is granted. This number is calculated by dividing the allocation value (in euros) for the particular Executive The one-year variable remuneration is a remuneration component Board member by the fair value of one performance share at the time linked to the business profitability and productivity of the KION of grant. The number of preliminary performance shares defined in Group in the relevant financial year. Its amount is determined by the this way is adjusted depending on achievement of the two target val- attainment of targets based on the following KPIs: earnings before ues – total shareholder return (TSR) for KION shares compared with interest, taxes and amortisation (EBITA), return on capital employed the STOXX® Europe Total Market Index (TMI) Industrial Engineering (ROCE), revenue and net debt. They are weighted as follows: index and return on capital employed (ROCE) – over the perfor- 30 per cent for EBITA, 30 per cent for ROCE, 20 per cent for revenue mance period. Each target has a 50 per cent weighting. and 20 per cent for net debt. The target values for the financial com- The possible range for target achievement for both elements is ponents are derived from the annual budget and specified by the 0 per cent to 150 per cent. If KION shares outperform the STOXX® Supervisory Board. Europe TMI Industrial Engineering index by 10 per cent and the The possible range for target achievement is 0 per cent to ROCE targets defined each year on the basis of the budget are 200 per cent. If the targets derived from the annual budget are achieved, total target achievement will be 100 per cent. achieved in full, target achievement is 100 per cent. The target achievement levels for the weighted Company targets (EBITA, ROCE, revenue and net debt) are added together to give the total target achievement. We keep the world moving.KION GROUP AG | Annual Report 2013Corporate GovernanCeRemuneration report60 The amount paid for each tranche is determined by the final The plan is a cash-settled long-term incentive plan that does not number of performance shares multiplied by the price of the include the right to receive any actual shares. The first payment Company’s shares (average price over the preceding 60 trading under the plan will be made in 2016. days) at the end of the performance period. Depending on achieve- Under the requirements of German accounting standard (GAS) ment of the individual targets defined by the Supervisory Board at 17 and IFRS 2, the total expense arising from share-based payments the start of the performance period (three-year target agreement and the fair value of the performance share plan on the date of grant- form), the Supervisory Board can use a discretionary factor to make ing must be disclosed. As the conditional entitlements under the per- a final adjustment to the calculation of the amount to be paid out at formance share plan were only granted for the first time in 2013, the end of the performance period by plus or minus 20 per cent, there are no comparative prior-year figures to disclose >> TabLe 007 although the maximum payment may not exceed 200 per cent of the allocation value. performance share plan Gordon Riske Bert-Jan Knoef Theodor Maurer Ching Pong Quek Dr Thomas Toepfer total Fair value of the performance share plan on the date of grant number of performance shares granted 1 Fair value per performance share on date of grant €1,500,000 €1,000,000 €1,000,000 €830,000 €1,000,000 €5,330,000 73,710 49,140 49,140 40,786 49,140 261,916 €20.35 €20.35 €20.35 €20.35 €20.35 >> TabLe 007 total expense for share-based remuneration in 2013 €349,975 €233,317 €233,317 €193,652 €233,317 €1,243,578 1 The target number of performance shares (PS) is calculated by dividing the allocation value by the fair value of one performance share. In this calculation, the number of performance shares is rounded to the nearest whole number where necessary. We keep the world moving.KION GROUP AG | Annual Report 201361 Prior to the planned IPO, Executive Board member Dr Thomas Toep- For each of the ordinary members of the Executive Board, a fixed fer was granted a special bonus (to be payable in two tranches) annual contribution of €150,000 (€124,500 for Mr Quek) will be paid dependent on a successful IPO and subject to the condition that Dr into their pension accounts for the duration of the member’s period of Toepfer remained employed by KION GROUP AG after the IPO for a service on the Executive Board. Interest is paid on the pension period of twelve months (for tranche 1) and 18 months (for tranche 2). account at the prevailing statutory guaranteed return rate for the life The amount of the bonus depends on the weighted average price of insurance industry (applicable maximum interest rate for the calcula- KION shares in the four weeks immediately preceding the payment tion of the actuarial reserves of life insurers pursuant to section 2 (1) of each tranche. On the basis of the share price of €30.73 as at German Regulation on the Principles Underlying the Calculation of 31 December 2013, the fair value of the bonus as at the reporting the Premium Reserve (DeckRV)) until an insured event occurs. If date was approximately €1.5 million. The pro-rata expense for 2013 higher interest is generated by investing the pension account, it will be ist €0.6 million. If, prior to the due dates for the payment of tranche 1 credited to the pension account when an insured event occurs (sur- or tranche 2, Dr Toepfer dies, suffers permanent incapacity or is plus). The standard retirement age for the statutory pension applies. forced to leave the Company without good cause of his own making, Once Executive Board members have reached their 62nd birthday, he will remain entitled to payment of this bonus.In connection with they are entitled to early payment of the pension. In the event of inva- the provision of this special bonus entitlement, Dr Toepfer paid a lidity or death, the contributions that would have been made until the one-off capital contribution of €200,000 into the Company, which age of 60 are added to the pension account, although only a maxi- the Company has deducted from the net amount of a bonus for 2012 mum of ten contributions will be added. When an insured event due to be paid to Dr Toepfer in 2013. occurs, the pension is paid as a lump sum or, following a written pension entitlements request, in ten annual instalments. termination benefits KION GROUP AG grants its Executive Board members direct enti- tlement to a company pension plan consisting of retirement, inva- In line with the DCGK, all Executive Board service contracts provide lidity and surviving dependants’ benefits. The defined benefit for a severance payment equivalent to no more than two years’ entitlement for Gordon Riske, the Company’s Chief Executive annual remuneration payable in the event of the contract being ter- Officer, which had been granted in his original service contract, minated prematurely without good cause. The amount of annual was transferred to his Executive Board service contract. The ben- remuneration is defined as fixed salary plus the variable remunera- efit amounted to a maximum of 50 per cent of the most recent tion elements, assuming 100 per cent target achievement and fixed annual salary after the end of the tenth year of service based excluding non-cash benefits and other additional benefits, for the on his original service contract. For the other members of the last full financial year before the end of the Executive Board service Executive Board, the present value of the previous defined benefit contract. If the Executive Board service contract was due to end plan was transferred as a starting contribution for new pension within two years, the severance payment is calculated pro rata tem- arrangements in the form of a defined contribution plan. The new poris. If a service contract is terminated for good cause for which the defined contribution plan is structured as a cash balance plan. Executive Board member concerned is responsible, no payments are made to the Executive Board member in question. The Company does not have any commitments for the payment of benefits in the event of a premature termination of Executive Board contracts fol- lowing a change of control. We keep the world moving.KION GROUP AG | Annual Report 2013Corporate GovernanCeRemuneration report62 Executive Board members are subject to a post-contractual non-compete agreement, pension benefits that Mr Riske receives non-compete agreement of one year. In return, the Company pays due to his previous work for other employers and income from other the Executive Board member compensation for the duration of the use of his working capacity (with the exception of remuneration for non-compete agreement amounting to 100 per cent of his final fixed work as a member of a supervisory or advisory board or a board of salary. Other income of the Executive Board member is offset against directors) will be offset against these transitional benefits. the compensation. If an Executive Board member suffers temporary incapacity, he In the event that Mr Riske’s appointment is not extended for rea- will receive for a period of six months a full fixed salary plus the one- sons for which he is not responsible and he has not reached the year variable remuneration. In the event of temporary incapacity for a standard retirement age for the statutory pension or in the event that further six months, the Executive Board member will receive 80 per Mr Riske resigns for good cause before the end of his appointment cent of his fixed salary, but only up to a point at which the service or suffers permanent incapacity after his period of service as a result contract is terminated. of sickness, he will receive transitional benefits of €252,000 per If an Executive Board member ceases to be employed by the annum on the basis of previous contracts. During his current term of Company as a result of death, he or his family members will be enti- office, the amount of the transitional benefits will rise by €12,000 tled to the fixed monthly remuneration for the month in which the each year up to a maximum amount of €300,000 per annum. Sever- service contract ends and for the three subsequent months, but only ance payments in the event of early termination of his appointment up to the point at which the service contract would otherwise have without good cause, compensation for the post-contractual come to an end. remuneration of executive Board members Basic, non-performance- related pay other, non-performance- related benefits 2 one-year performance-related variable remuneration multiple-year, performance-related, share-based remuneration (long-term incentive) 3 total Gordon Riske 1,4 Bert-Jan Knoef 1 Theodor Maurer 1 Ching Pong Quek 1 Dr Thomas Toepfer 1,4 Former Executive Board members, 2012/2013 4,5 2013 €700,000 €440,761 €440,761 €480,566 €462,520 2012 €600,000 €0 €0 €0 €141,680 2013 €25,606 €21,310 €23,495 €123,502 €26,605 2012 €28,257 €0 €0 €0 €11,724 2013 €724,226 €283,483 €319,880 €350,520 €472,131 2012 €1,219,194 €0 €0 €0 €290,718 €10,145 €1,075,000 €1,226 €74,464 €7,023 €2,109,515 total for 2013 €2,534,753 €1,816,680 €221,744 €114,445 €2,157,263 €3,619,427 €5,330,000 €870,713 1 Mr Gordon Riske had been a member of the Executive Board of KION GROUP GmbH since 1 October 2007 and switched to the Executive Board of KION GROUP AG with effect from 4 June 2013. Dr Thomas Toepfer had been a member of the Executive Board of KION GROUP GmbH since 1 September 2012 and switched to the Executive Board of KION GROUP AG with effect from 4 June 2013. Mr Bert-Jan Knoef, Mr Theodor Maurer and Mr Ching Pong Quek had been members of the Executive Board of KION GROUP GmbH since 11 January 2013 and switched to the Executive Board of KION GROUP AG with effect from 4 June 2013. 2 Other, non-performance-related benefits include expenses and / or benefits in kind, such as the use of a company car and housing costs. 3 Fair value on the date of grant. 4 The value for one-year variable remuneration for 2013 also includes the difference between the 2012 bonus reserve and the actual bonus paid for 2012. 5 Former members of the Executive Board of KION Holding 1 GmbH. performance share plan ipo bonus ipo bonus performance share plan 2013 2012 2012 2013 €1,500,000 €1,000,000 €1,000,000 €830,000 €1,000,000 €0 €0 €0 €0 €0 €0 €870,713 €0 €0 €0 €0 €0 €0 €0 >> TabLe 008 2012 €1,847,451 €0 €0 €0 €444,122 2013 €2,949,832 €1,745,554 €1,784,136 €1,784,588 €2,831,969 €0 €0 €0 €0 €0 €0 €0 €18,394 €11,114,473 €3,258,979 €5,550,552 We keep the world moving.KION GROUP AG | Annual Report 2013 63 Remuneration paid to members of the Executive Board in 2013 may vary by + / – 20 per cent of the variable remuneration. For multiple-year variable remuneration, the fair value at the date of grant is shown as a preliminary notional variable. The first payment will be The total remuneration granted to Executive Board members for made in 2016, provided the Company’s long-term targets are 2013, including the remuneration paid for the period when they were achieved. members of the Executive Board of KION Holding 1 GmbH was Excluding the period in which they were members of the Execu- €11,114,473. Of this amount, €2,534,753 was attributable to fixed tive Board of KION Holding 1 GmbH, i.e. for the period since the IPO non-performance-related remuneration components, €8,357,976 to on 28 June 2013 only, the total remuneration granted to Executive variable one-year and multiple-year performance-related remunera- Board members for 2013 was €8,671,538. Of this amount, €1,412,752 tion components and €221,744 to other non-performance-related was attributable to fixed non-performance-related remuneration benefits. The figure shown for one-year variable remuneration is components, €7,143,197 to variable one-year and multiple-year per- based on a preliminary total target achievement rate calculated using formance-related remuneration components and €115,589 to other preliminary earnings figures at the beginning of 2014. This prelimi- non-performance-related benefits. nary variable remuneration for each Executive Board member is also The additional benefits were measured at the value calculated subject to adjustment by the Supervisory Board in line with the indi- for tax purposes. >> TabLe 008 vidual performance of the Executive Board member. This adjustment >> TabLe 008 2012 €1,847,451 €0 €0 €0 €444,122 2013 2012 2012 2013 €2,949,832 €1,745,554 €1,784,136 €1,784,588 €2,831,969 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €18,394 €11,114,473 €3,258,979 €5,550,552 remuneration of executive Board members Basic, non-performance- other, non-performance- one-year performance-related related pay related benefits 2 variable remuneration multiple-year, performance-related, share-based remuneration (long-term incentive) 3 total performance share plan ipo bonus performance share plan ipo bonus Gordon Riske 1,4 Bert-Jan Knoef 1 Theodor Maurer 1 Ching Pong Quek 1 Dr Thomas Toepfer 1,4 Former Executive Board members, 2012/2013 4,5 2013 €700,000 €440,761 €440,761 €480,566 €462,520 2012 €600,000 €0 €0 €0 2013 €25,606 €21,310 €23,495 €123,502 €26,605 2012 €28,257 €0 €0 €0 2013 €724,226 €283,483 €319,880 €350,520 €472,131 2012 €1,219,194 €0 €0 €0 €141,680 €11,724 €290,718 2013 €1,500,000 €1,000,000 €1,000,000 €830,000 €1,000,000 €0 €0 €0 €0 €870,713 €10,145 €1,075,000 €1,226 €74,464 €7,023 €2,109,515 total for 2013 €2,534,753 €1,816,680 €221,744 €114,445 €2,157,263 €3,619,427 €0 €0 €5,330,000 €870,713 1 Mr Gordon Riske had been a member of the Executive Board of KION GROUP GmbH since 1 October 2007 and switched to the Executive Board of KION GROUP AG with effect from 4 June 2013. Dr Thomas Toepfer had been a member of the Executive Board of KION GROUP GmbH since 1 September 2012 and switched to the Executive Board of KION GROUP AG with effect from 4 June 2013. Mr Bert-Jan Knoef, Mr Theodor Maurer and Mr Ching Pong Quek had been members of the Executive Board of KION GROUP GmbH since 11 January 2013 and switched to the Executive Board of KION GROUP AG with effect from 4 June 2013. 3 Fair value on the date of grant. 2 Other, non-performance-related benefits include expenses and / or benefits in kind, such as the use of a company car and housing costs. 4 The value for one-year variable remuneration for 2013 also includes the difference between the 2012 bonus reserve and the actual bonus paid for 2012. 5 Former members of the Executive Board of KION Holding 1 GmbH. We keep the world moving.KION GROUP AG | Annual Report 2013Corporate GovernanCeRemuneration report 64 There were also termination benefits of €6,001,370 and share-based The total remuneration paid to former members of the Executive remuneration of €39,050 for members of the Executive Board in Board in 2013 amounted to €207,561 (2012: €165,396). Provisions 2012, which were not included in the table above. for defined benefit obligations to former members of the Executive The table below shows the contributions (additions to the plan) Board or their surviving dependants amounting to €5,171,114 (2012: attributable to each individual Executive Board member and the cor- €3,635,970) were recognised in accordance with IAS 19. responding present values. >> TabLe 009 In the year under review, no advances were made to members of the Executive Board, and no loans were granted. pensions Gordon Riske Bert-Jan Knoef Theodor Maurer Ching Pong Quek Dr Thomas Toepfer >> TabLe 009 2013 service cost 2012 service cost present value (DBo) 31 Dec 2013 present value (DBo) 31 Dec 2012 €422,727 €89,965 €56,967 €0 €58,758 €299,605 €0 €0 €0 €5,714 €3,180,565 €1,642,647 €492,380 €265,443 €341,416 €2,225,444 €0 €0 €0 €89,670 SUPERVISORY BOARD REmUNERA tION Remuneration system Additional remuneration is paid for being a member or chairman of a committee, although this does not apply in the case of the Nom- ination Committee or the Mediation Committee pursuant to section 27 (3) German Codetermination Act (MitbestG). The annual remuner- ation for members of a committee is €8,000, while the chairman of a committee receives double this amount. The Supervisory Board’s remuneration is defined in article 18 of If a member of the Supervisory Board or one of its committees KION GROUP AG’s articles of incorporation. Members of the Super- does not hold the position for a full financial year, remuneration is visory Board receive fixed remuneration plus reimbursement of out- reduced pro rata temporis. of-pocket expenses. The annual remuneration amounts to €45,000 The members of the Supervisory Board receive an attendance for ordinary members of the Supervisory Board, €75,000 for the fee of €1,250 per day for meetings of the Supervisory Board and its deputy chairman of the Supervisory Board and €105,000 for the committees, although they only receive this amount once if they chairman of the Supervisory Board. attend more than one meeting on the same day. We keep the world moving.KION GROUP AG | Annual Report 201365 The Company reimburses each member for any VAT incurred in on 4 June 2013 only, the total remuneration paid to the Supervisory connection with his remuneration. Board members for 2013 was €745,826. Of this amount, €649,703 A D&O insurance policy without an excess has been taken out was attributable to remuneration for activities carried out by the for the members of the Supervisory Board. Supervisory Board. The remuneration paid for committee work Remuneration paid to members of the Super- visory Board in 2013 totalled €96,123. The table below shows the remuneration paid to each Supervisory Board member for 2013, including the remunera- tion paid for the period when they were members of the Supervisory Board of KION Holding 1 GmbH. >> TabLe 010 The total remuneration paid to Supervisory Board members for In 2013, no company in the KION Group paid or granted any remu- 2013, including the remuneration paid for the period when they were neration or other benefits to members of the Supervisory Board for members of the Supervisory Board of KION Holding 1 GmbH, was services provided as individuals, such as consulting or brokerage €1,207,018. Excluding the remuneration for the period in which they activities. No advances or loans were granted to members of the were members of the Supervisory Board of KION Holding 1 GmbH, Supervisory Board either. i.e. for the period since the effective date of the change of legal form supervisory Board remuneration >> TabLe 010 Dr John Feldmann (Chairman) Joachim Hartig (Deputy Chairman) Holger Brandt Dr Alexander Dibelius Denis Heljic Dr Martin Hintze Johannes P. Huth Thilo Kämmerer Dr Roland Köstler Jiang Kui Özcan Pancarci Kay Pietsch Hans Peter Ring Alexandra Schädler Silke Scheiber Tan Xuguang Hans-Peter Weiß total Fixed remuneration €102,356 €74,188 €38,671 €46,019 €29,783 – €56,578 €46,019 €32,522 €56,578 €29,783 €46,019 €30,810 €13,351 €56,578 €37.879 €46,019 Committee remuneration €14,710 €5,503 €5,503 €4,903 – €1,539 €5,503 €3,104 €6,029 – €10,407 €9,807 €2,373 €770 – – attendance fees total remuneration €48,493 €46,117 €23,500 €31,240 €10,413 – €21,220 €34,215 €31,240 €26,701 €8,925 €41,060 €8,925 €2,975 €28.898 €1.829 €27,965 €165,559 €125,808 €62,171 €82,762 €45,099 – €79,338 €85,737 €66,865 €89,308 €38,708 €97,485 €49,542 €18,699 €86.246 €39.708 €73,984 €743,151 €70,152 €393,715 €1,207,018 We keep the world moving.KION GROUP AG | Annual Report 2013Corporate GovernanCeRemuneration reportGroup manaGement report Contents 67 Group management report Fundamentals oF the KIon Group Profile of the KION Group Strategy of the KION Group Management system FInancIal report Macroeconomic and sector-specific conditions Business performance Financial position and financial performance Non-financial performance indicators events aFter the reportInG date outlooK, opportunIty and rIsK report Outlook Risk report Opportunity report 68 68 75 77 79 79 82 83 102 110 111 111 112 120 KION GROUP AG | Annual Report 2013 We keep the world moving. 68 Fundamentals of the KION Group PROFIle OF the KION GROUP Organisational structure As far as the Company is aware, Weichai Power indirectly held a stake of 30.0 per cent, while Superlift Holding held 48.6 per cent as at 31 December 2013. Transactions after the 2013 reporting date caused Superlift Holding’s stake to fall to 34.5 per cent and, as far as the Company is aware, Weichai Power’s indirect stake to rise to 33.3 per cent (see ‘Events after the reporting date’ on page 110). The KION Group’s segment structure did not change in the The KION Group began a new chapter in its history when its parent reporting year (see page 73). company, KION GROUP AG, was successfully floated on the stock market on 28 June 2013. The IPO and a number of accompanying measures have resulted in substantial changes to the Group’s Management and control organisational structure and shareholder structure. KION Group Holding 1 GmbH, the strategic management corporate governance holding company of the KION Group, was converted into KION GROUP AG before the IPO. Since then, it has indirectly held all The KION Group follows generally accepted standards of sound, shares in KION Material Handling GmbH (formerly KION GROUP responsible corporate governance. The German Corporate Govern- GmbH), the operational parent company of the KION Group. ance Code (DCGK) provides the framework for management and A total of 17.5 million shares – equating to 17.7 per cent of the control. As required by section 289a of the German Commercial share capital – were placed with new investors. Of this number, Code (HGB), the corporate governance standards that the Group 17.2 million new shares originated from a capital increase in June applies are set out in the declaration on corporate governance. This 2013, while 0.3 million shares came from the stake held by existing declaration also contains the comply-or-explain statement pursuant shareholder Superlift Holding S.à r.l., Luxembourg, as an over- to section 161 German Stock Corporation Act (AktG), which was allotment option. issued by the Executive Board and Supervisory Board of KION KION GROUP AG’s IPO was accompanied by two capital GROUP AG on 19 December 2013, and the corporate governance increases: – Weichai Power (Luxembourg) Holding S.à r.l., Luxembourg, report pursuant to section 3.10 of the German Corporate Govern- ance Code, which also provides information about the compliance standards in the Group. The declaration on corporate governance acquired 13.7 million new shares immediately before completion can be viewed and downloaded on the Company’s website of the IPO. This company is a subsidiary of Weichai Power Co. (kiongroup.com/comply_statement). It also forms part of this annual Ltd. (referred to below as Weichai Power), which is a strategic report. anchor shareholder of KION GROUP AG. – Also before completion of the IPO, Superlift Holding S.à r.l., The essential features of the remuneration system are described in the remuneration report, which is part of the 2013 group manage- Luxembourg, (referred to below as Superlift Holding) acquired ment report and can be found on pages 57 to 65 of the annual 4.0 million shares by way of converting an existing loan into report. The total amounts for Executive Board remuneration and equity and transferring the shares in Superlift Funding. The Supervisory Board remuneration are reported in the notes to the shareholders of Superlift Holding are investment funds that are consolidated financial statements (note [43]). advised by group companies of The Goldman Sachs Group, Inc. (Goldman Sachs) and companies that are advised by or affiliated disclosures relevant to acquisitions with Kohlberg Kravis Roberts & Co. L.P. (KKR). The disclosures relevant to acquisitions (pursuant to section 315 (4) HGB) together with the explanatory report form an integral part of the We keep the world moving.KION GROUP AG | Annual Report 201369 group management report and can be found on pages 53 to 56 of members to 16 members when the legal form of the Company was the annual report. executive Board changed in advance of the IPO. On 5 June 2013, Hans Peter Ring and Tan Xuguang were elected as shareholder representatives. Hans Peter Ring qualifies as both an independent member within the meaning of clause 5.4.2 of the German Corporate Governance Code Since 4 June 2013, the Executive Board of KION GROUP AG has and as an independent member with expertise in the fields of been responsible for the operational management of the KION accounting and auditing as required by section 100 (5) AktG. Denis Group and is the successor to the Executive Board of the former Heljic and Özcan Pancarci were appointed as additional members KION GROUP GmbH. As at 31 December 2013, the responsibilities representing the Company’s employees. Alexandra Schädler has of the Executive Board members were allocated as follows: been an employee representative since 2 October 2013. She Gordon Riske, Chief Executive Officer (CEO), is responsible, replaced Dr Roland Köstler, who stepped down from the Super- among other things, for the strategic management of the Group, visory Board on 1 October 2013. The composition of the Supervisory communications, governance and compliance, internal audit, KION Board is presented in note [44] in the notes to the consolidated Warehouse Systems and the North and South America regions. financial statements. Dr Thomas Toepfer, Chief Financial Officer (CFO), is in charge of The Supervisory Board advises the Executive Board in its finance, the Financial Services (FS) segment, IT activities, mergers & handling of significant matters and business transactions. In order to acquisitions, investor relations, purchasing, human resources, legal increase efficiency and meet the standards required for a publicly affairs and data protection. He is also the Company’s Labour listed company, the Supervisory Board reformulated its committees Relations Director. at the end of May 2013. Consequently, the Mediation Committee Bert-Jan Knoef is CEO and Labour Relations Director of pursuant to section 27 (3) MitbestG and the Audit Committee, which the brand company STILL GmbH. He oversees all cross-brand were already in existence, have been supplemented by the logistics activities and manages the intra-group logistics service Nomination Committee and the Executive Committee. When the provider, Urban. new members were appointed to the committees on 27 June 2013, Theodor Maurer is CEO and Labour Relations Director of the Hans Peter Ring took over as chairman of the Audit Committee. brand company Linde Material Handling GmbH and holds cross- Before the IPO, the Supervisory Board signed new contracts of brand responsibility for quality, facility management, health, safety employment with all Executive Board members. At the same time, the and the environment. term of CEO Gordon Riske’s new contract was extended until 2017. Ching Pong Quek is Chief Asia Pacific Officer and heads up the KION Group’s entire Asia business. Until his departure on 11 January 2013, Klaus Hofer was Business model responsible for human resources, legal affairs, health & safety and internal audit. He was also the KION Group’s Labour Relations The KION Group has an integrated business model that incorporates Director. His responsibilities were transferred to Gordon Riske, products and services and covers every step of the value chain so Dr Thomas Toepfer and Theodor Maurer. that it can offer comprehensive support to customers worldwide: The Executive Board maintains a relationship of trust with, and is product development, manufacturing, sales and logistics, spare monitored by, the Company’s Supervisory Board. parts business, truck rental and used trucks, financial services and supervisory Board system and software solutions. The KION Group earns most of its consolidated revenue from the sale of industrial trucks. In the reporting year, new products The Supervisory Board, which was formed in accordance with the accounted for 56.1 per cent of the Group’s revenue, while the stable German Codetermination Act (MitbestG), was increased from twelve and profitable service business generated 43.9 per cent. Group manaGement reportFundamentals of the KION GroupWe keep the world moving.KION GROUP AG | Annual Report 201370 The KION Group operates a multi-brand strategy involving the business strengthens customer relationships and therefore con- three global brands Linde, STILL and Baoli plus the three regional tributes to new truck sales. brands Fenwick, OM STILL and Voltas MH. This requires an extensive global sales and service network. The Worldwide research and development activities (R&D) enable KION brand companies have more than 1,200 outlets staffed by the KION Group to consolidate and extend its technology leadership. almost 13,000 service employees in over 100 countries worldwide. The Company plays a pioneering role in hydrostatic and diesel- Approximately half of them are employed by the KION Group. In electric drive systems and in innovative energy-efficient and other cases, the Company relies on external dealers. low-emission drive technologies (electric drives, hybrid drives, fuel In established markets, services are often provided in the con- cells). As at the end of 2013, the KION Group employed a total of text of leasing arrangements and are agreed over the entire term of 944 developers, of whom 232 worked in Asia. Development costs the lease. There are also individual orders for repairs and mainte- corresponded to 2.5 per cent of consolidated revenue in the year nance work as well as for spare parts. under review, putting the KION Group above the industry average. In addition, the KION Group looks after entire customer fleets, The focus of the Group’s R&D activities is described on page 105. using special fleet management software to monitor the trucks in the The KION Group offers customers tailor-made solutions and fleets. only makes trucks specifically to order. A large proportion of new In the year under review, 26.1 per cent of consolidated revenue trucks are fitted with technical components developed especially for was attributable to services in connection with maintenance, repairs, a particular order. The Linde and STILL brands’ premium positioning fleet management and spare parts. is underpinned by advantages for customers in terms of total cost of The service business is complemented by rental truck and used ownership (TCO). The trucks’ hallmarks are cost-efficiency, high pro- truck business, allowing peaks in capacity requirements to be met ductivity, comparatively low maintenance and high residual values. and customers to be supported after their leases have expired. New truck sales increase the installed base in the market, pro- Trucks can be rented on a flexible, short-term basis, for example. viding a basis for service business (spare parts, maintenance and This business is integrated into the LMH and STILL segments in repairs) within the KION Group’s integrated business model. The terms of its operations and is financed internally by Financial brand companies also have extensive used truck and rental truck Services. businesses. Once a lease has expired, the truck is serviced at a recondition- New truck business is supported by financial services in many ing centre before being sold as a used truck. markets. The KION Group has therefore integrated its financial services offering into the truck sales process. In the main sales markets with a high volume of financing and leasing, financial Market and influencing factors services are handled by legally independent financial services companies. Their activities include the internal financing of the brand Industrial trucks are deployed for a wide variety of applications. companies’ short-term rental fleets and long-term leasing to Material handling products are used for tasks such as loading and customers. unloading, linking production steps and moving pallets in logistics Many financing agreements are linked to service contracts. centres or in retail / wholesale operations. They therefore form part of Financial services are therefore a further cornerstone of the service the production processes and supply chains of many different business within the integrated business model. industries around the world. In the reporting year, approximately 50 per cent of revenue from Measured in terms of unit sales of new trucks, the growth of the new trucks involved some form of financing via KION companies, market for industrial trucks has exceeded global economic growth external banks or dealers. over the past ten years (2003-2013), rising at an average of around An installed base of some 1.2 million trucks worldwide enables 5.0 per cent per year. In the KION Group’s view, the significant the KION Group to run a high-margin service business. The service influencing factors for this market growth are as follows: We keep the world moving.KION GROUP AG | Annual Report 201371 – Industrialisation in China and other emerging markets is fuelling capital expenditure. The need for new infrastructure supports Market position economic growth and is creating disproportionately strong The KION Group is one of the world’s leading manufacturers of demand for inexpensive industrial trucks. – As globalisation gathers pace, the value chain is becoming industrial trucks. Measured in terms of units sold, it consolidated its position as the number one in Europe and the number two world- increasingly segmented and additional transport services are wide in the year under review. Based on the sales figures for 2013, required between the individual steps of the value chain. – Companies are becoming more specialised and focusing on their the KION Group’s market share was 14.1 per cent worldwide and 35.3 per cent in western Europe. The KION Group is ranked third in core competences, leading to the fragmentation of supply chains. China behind two domestic manufacturers, making it the largest The growth of internet-based commerce is making the logistics foreign producer. It is one of the leading manufacturers in Brazil – the processes for consumer products more segmented and more largest individual market in South America – and is the market leader complex. Both of these factors push up demand for transport for electric forklift trucks and warehouse trucks. The Company is services. – The large number of trucks in use in mature markets provides a also among the leading providers in eastern Europe and India. The product portfolio includes counterbalance trucks powered strong base for replacement business. The KION Group esti- by an internal combustion engine or electric drive, warehouse tech- mates that around 90.0 per cent of sales in western Europe are nology (ride-on and hand-operated industrial trucks) and towing currently accounted for by replacement investments. – Measured in terms of units ordered, around 46.0 per cent of the global market was attributable to counterbalance trucks with an vehicles for industrial applications. It covers all load capacities, from 1 tonne to 18.0 tonnes. Revenue from the high-margin service business stabilises con- internal combustion engine in 2013. Counterbalance trucks with solidated revenue and reduces dependency on market cycles. The an electric drive accounted for around 16.0 per cent and ware- KION Group makes use of its own sales and service network and, in house technology for 38.0 per cent. In western Europe and other some countries, draws on the services of external dealers. highly developed economies, counterbalance trucks with an The industrial trucks are manufactured in strategically favourable electric motor and warehouse technology make up the bulk of the locations within the global network. Owing to the particular require- market volume, whereas the focus in China and other emerging ments of its business, the KION Group manufactures major compo- markets is frequently on simple counterbalance trucks with an nents itself – notably lift masts, axles, counterweights and safety internal combustion engine. equipment – in order to ensure security of supply and the availability The products in the premium price segment, which is the KION of spare parts for critical components. Other components – such as Group’s main area of activity, are characterised by an above-aver- electronic components, rechargeable batteries, engine components age useful life, high productivity, comfort and high performance, and industrial tyres – are purchased through the KION Group’s combined with lower running and energy costs. According to the global procurement organisation. Long-term supply agreements for KION Group’s estimates, this segment accounts for roughly one hydraulic components have also been signed with Weichai Power in four new trucks, with a higher proportion in developed markets. and its controlling interest Linde Hydraulics GmbH & Co. KG (referred Measured in terms of the number of units ordered, the middle to below as Linde Hydraulics), in which the KION Group holds a price segment (value) is almost twice as big. The economy price 30.0 per cent stake as a strategic investment. The KION Group oper- segment, which is particularly important in emerging markets, ates a total of 14 production facilities in eight countries. >> Table 011 accounts for around a quarter of the global market. As a result of the KION Group’s global presence and integrated business model, its financial situation is influenced not only by economic conditions but also by exchange rates and changes in commodity prices. Group manaGement reportFundamentals of the KION GroupWe keep the world moving.KION GROUP AG | Annual Report 2013 72 production sites of the KIon Group >> Table 011 location products / use linde material handling Germany Aschaffenburg Weilbach Kahl France Châtellerault czech republic Český Krumlov united states Summerville china Xiamen Jingjiang stIll Germany Hamburg Reutlingen Geisa Italy Luzzara Brazil Counterbalance trucks with IC engine or electric drive, warehouse technology Component production Spare parts warehouse, component production Warehouse technology Component production Counterbalance trucks with IC engine or electric drive, warehouse technology Counterbalance trucks with IC engine or electric drive, container handlers and extra heavy-duty trucks, warehouse technology Counterbalance trucks with IC engine or electric drive, warehouse technology Counterbalance trucks with IC engine or electric drive, warehouse technology, components Very narrow aisle trucks Component production Warehouse technology Indaiatuba / São Paulo Counterbalance trucks with IC engine, warehouse technology other (voltas mh) India Pune Counterbalance trucks with IC engine or electric drive, warehouse technology We keep the world moving.KION GROUP AG | Annual Report 201373 the segments and their products and services For internal management purposes, the KION Group has divided its business into operating segments that correspond to the reportable The KION Group is represented in the market by three global brands – segments, as required by international financial reporting standards Linde, STILL and Baoli – and three regional brands: Fenwick (France), (IFRS 8). OM STILL (Italy) and Voltas MH (India). While the brand companies have full operational and commercial responsibility within their mar- kets, KION GROUP AG is the strategic management holding com- pany and is responsible for the groupwide strategy and groupwide business standards. >> Table 012 segments 2013* in € million LMH STILL Financial Services Other Consolidation / reconciliation total >> Table 012 revenue adjusted eBIt 1 employees 2 2013 2,881.1 1,717.5 539.4 235.1 – 878.5 4,494.6 2012 2,965.4 1,676.6 509.3 250.9 – 842.4 4,559.8 2013 309.1 123.9 0.7 73.5 – 90.6 416.5 2012 301.0 122.2 1.4 44.4 – 60.6 408.3 2013 13,776 7,704 118 675 – 2012 13,148 7,253 112 702 – 22,273 21,215 * Key figures for 2012 were adjusted due to the retrospective application of IAS 19R (2011); Revenue and Adjusted EBIT were aligned due to the sale of the Hydraulics Business 1 Adjusted for KION acquisition items and one-off items 2 Number of employees in full-time equivalents as at 31 December Group manaGement reportFundamentals of the KION GroupWe keep the world moving.KION GROUP AG | Annual Report 201374 linde material handling (lmh) segment Financial services (Fs) segment The Linde Material Handling (LMH) segment encompasses the The purpose of the Financial Services (FS) segment is to act as an Linde, Fenwick and Baoli brands. internal funding partner for LMH and STILL, providing finance solu- Linde is a global premium brand and a technology leader. tions that promote sales. FS activities include the internal financing of Among its other selling points, it has decades of experience with the short-term rental business of the LMH and STILL operating seg- hydrostatic drive technology and meets customers’ highest require- ments, the financing of long-term leasing business for external cus- ments regarding technology, efficiency, functionality and design. The tomers of the KION Group and the related risk management. In the product portfolio ranges from warehouse trucks to extra heavy-duty large sales markets with a high volume of financing and leasing, this trucks and caters to all of the major application areas. Linde has business is handled by legally independent FS companies. been developing and manufacturing electric drive systems for When long-term leasing business is being conducted, FS itself decades and makes the resulting expertise available to external acts as the contractual partner to external customers and offers customers for use in a variety of applications. various financing models. In France, Linde products are sold under the Fenwick brand. Operational responsibility for the short-term rental business The Baoli brand covers the value and economy segments in (short-term fleet) lies with the LMH and STILL brand segments. FS China and other growth markets in Asia, eastern Europe, the Middle acts as the contractual partner to the brand segments, providing East, Africa and Central and South America. the financing for this short-term fleet. FS refinances both long-term leasing with end customers and the short-term fleet mostly on the stIll segment basis of sale and leaseback agreements. In addition, the bulk of sales financing for external customers is The STILL and OM STILL brands are grouped in the STILL segment. offered indirectly, with an external leasing company to which the STILL is predominantly a global premium provider of trucks with business is referred by the KION Group acting as lessor rather than electric and diesel-electric drives. It mainly focuses on the European the KION Group. The financial services provider purchases the truck and Latin American markets. from the KION Group and provides the finance to the end customer. The segment’s portfolio consists of forklift trucks and ware- The KION Group carries out the majority of the servicing for the truck house trucks plus associated services. STILL has also positioned and, once the financing has expired, assists with its reconditioning itself as a leading provider of intelligent intralogistics solutions, offer- and remarketing. ing trucks and fully integrated warehouse systems, including auto- mation and fleet management solutions. other segment The Other segment mainly comprises holding companies and ser- vice companies, the latter providing cross-segment services such as IT and logistics. The Indian subsidiary Voltas Material Handling Pvt. Ltd. (referred to below as Voltas MH) also belongs to this segment. Voltas MH manufactures diesel trucks and electric forklift trucks as well as warehouse trucks for the Indian market. It has a network of more than 50 dealers providing sales and service. We keep the world moving.KION GROUP AG | Annual Report 201375 StRAteGy OF the KION GROUP 2. Expand the range of services in European markets and in growth regions The KION Group’s strategy is centred on international growth and The KION Group is continually extending its portfolio of services and strong profitability. The aim is to seize the opportunities presented by improving their quality at every stage of the product lifecycle. This the attractive conditions in the global material handling market and to includes servicing, maintenance and spare parts as well as fleet comprehensively and sustainably harness them for the benefit of management solutions, intralogistics processes, efficient supply shareholders while managing risk at all times. Building on their lead- chains and IT systems. Financial services are also a key component ing position in western Europe and in the premium price segment, of the service portfolio. The KION Group has an installed base of the companies of the KION Group want to increase their market around 1.2 million trucks from which to expand its service business. share in the core markets and in fast-growing markets outside western The Company also intends to increase its market share by, for exam- Europe in future. This is accompanied by a greater presence in the ple, opening additional service outlets in attractive growth markets value and economy price segments. The crucial requirement is that and stepping up the short-term rental business. It is expanding its they offer superior customer benefits in all regions and price seg- service business in the major sales region of China, where service ments. That is why the KION Group is securing its position as a lead- revenue has more than doubled since 2008 and now accounts for ing technology provider by investing heavily in research and develop- about a quarter of total revenue in China. The target is for service ment. It operates cost-efficiently throughout the value chain and business to continue to contribute approximately 40.0 per cent of applies its solid service model as a global benchmark. revenue over the next few years. This will stabilise business perfor- mance, reduce susceptibility to economic downturns and boost profitability. Growth-oriented strategy 1. Continue to strengthen the KION Group’s leading position in west- ern European core markets by investing in research and develop- The KION Group wants to take full advantage of buoyant demand in 3. Harness the full market potential of growth regions ment the BRIC countries (Brazil, Russia, India, China) and other emerging markets. Another focus is the North American market, which offers The KION Group is consolidating its position as the number one in comparatively high growth potential. That is why the Company is Europe’s industrial truck market with customer-focused technologi- launching region-specific products in the value and economy cal innovations and a high proportion of trucks with customer- segments and strengthening its local production and sales network. specific equipment. In recent years, the proportion of revenue spent To achieve its strategic objectives, the KION Group is making on research and development has been above the industry average targeted investments in production capacity, product development and stood at 2.5 per cent in the year under review. The KION Group and the sales and service network. It also continually analyses the aims to increase customer benefits in all price segments by introduc- market and, if necessary, weighs up whether to acquire other ing innovative drive systems, advanced ergonomics, intelligent companies. The strategic partnership entered into with Weichai intralogistics solutions and more. Power has already begun to strengthen the KION Group’s position in China and is expected to help in harnessing the potential of other Asian markets, while Voltas MH is opening up access to the Indian volume market. The range of products and services is tailored to region-specific requirements. To this end, the KION Group operates a multi-brand strategy in the different regions. Region-specific products based on low-cost product platforms are the preferred option in the emerging Group manaGement reportFundamentals of the KION GroupWe keep the world moving.KION GROUP AG | Annual Report 201376 markets of Asia, Central America and South America, where the 6. Continually improve operational performance and robustness Baoli and Voltas MH brand companies play a key role. Other external opportunities for growth are examined on an ongoing basis, includ- There are also a number of research and development initiatives ing in relation to the sales and service network. aimed at cutting costs, improving quality and speeding up the efficiency-oriented strategy development process. The KION Group also adapts products to country-specific requirements so that they can be launched successfully in those countries. Over the next few years, it plans to increase its purchasing volume from emerging markets from 26.9 per 4. Optimise production and thereby reduce costs cent in 2013 to as much as 40.0 per cent. The strategic partnership with Weichai Power will contribute to this significantly. Over the past few years, the KION Group has streamlined its produc- Processes in all functions are also constantly analysed to identify tion capacity in developed markets, bringing about improvements to potential for improvement. STILL, for example, restructured the back capacity utilisation and cost efficiency. At the same time it has office of its regional branches in Scandinavia after conducting such created new capacity in Brazil, India and China. The aim is to an analysis. continue to monitor the degree of inhouse production as well as to increasingly manufacture trucks locally to serve the emerging markets. The same is happening with product development, particu- larly for the value and economy price segments. The development site in China, which was expanded again in 2013, is playing a key role here. 5. Leverage groupwide synergies Although the brand companies in the KION Group are largely respon- sible for their own market activities, the KION Group harnesses groupwide synergies and uses resources efficiently by centralising certain functions. Central departments are responsible for purchasing, quality and production control, logistics, financial services and IT. This makes it possible to establish best practice across the Group. In product development, a cross-brand, cross- regional modular and platform strategy enables a greater number of common parts, bringing advantages in terms of product costs and development costs yet retaining distinct identities for each brand. We keep the world moving.KION GROUP AG | Annual Report 2013 77 MANAGeMeNt SySteM Key performance indicators (KPIs) The KION Group’s strategy, which centres on value and growth, is reflected in how the Company is managed. It uses four main key per- formance indicators (KPIs) to continuously monitor market success, profitability, financial strength and liquidity. The performance targets of the Group and the segments are based on selected financial KPIs, as is the performance-related remuneration paid to managers. Each month, the KPIs are measured and made available to the Executive Board in a comprehensive report. This enables the management team to take prompt corrective action in the event of discrepancies. >> Table 013 Key performance indicators >> Table 013 in € million 2013 2012 * 2012 2011 order intake revenue adjusted eBIt ¹ Free cashflow 4,489.1 4,590.3 4,700.1 4,681.9 4,494.6 4,559.8 4,726.7 4,368.4 416.5 408.3 438.2 364.6 202.6 518.1 518.1 234.2 * Key figures for 2012 were adjusted due to the retrospective application of IAS 19R (2011); Order intake, Revenue and Adjusted EBIT were aligned due to the sale of the Hydraulics Business 1 Adjusted for KION acquisition items and one-off items Group manaGement reportFundamentals of the KION GroupWe keep the world moving.KION GROUP AG | Annual Report 201378 KpIs related to business volume Besides the aforementioned core KPIs, the KION Group uses additional financial and non-financial KPIs. Net debt is now becom- order intake and revenue are broken down by region, segment and ing less important than the other financial KPIs because the Group’s product category in the KION Group’s management reporting so financial position improved substantially in the year under review. that growth drivers and pertinent trends can be identified and ana- The non-financial KPIs essentially relate to customers, employees, lysed at an early stage. Order intake is a leading indicator for reve- sustainability and technology. Some of them are used operationally nue. The length of time between receipt and invoicing of an order as leading indicators for the financial KPIs. varies between business units and product groups. The KPIs used to manage the brand segments are order intake, revenue and adjusted EBIT. Earnings before tax (EBT) and return on equity (ROE) are the KPIs used to manage the Financial Services segment. earnings-related KpI adjusted eBIt: The key figure used for the operational management and analysis of financial performance is adjusted earnings before interest and tax (EBIT). It is calculated in the same way as EBIT, except that it does not take account of the KION Group purchase price allocation or any non-recurring items. liquidity-related KpI Free cash flow: Free cash flow is the main KPI for managing lever- age and liquidity. It is determined by the KION Group’s operating activities and investing activities. Free cash flow does not include interest arising from financing activities. The performance measure- ment of free cash flow is supported by the carefully targeted man- agement of working capital and by detailed planning of capital expenditure. We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement report Financial report 7979 Financial report MACROeCONOMIC ANd SeCtOR-SPeCIFIC CONdItIONS Macroeconomic conditions emerged from the crisis. This also held back growth in neighbouring countries. Many eastern European countries, including Russia, achieved lower rates of growth than in 2012. Among the Asian emerging markets, China registered growth at almost the same level as in the previous year and quickly overcame a short-lived period of economic weakness. Other Asian countries, including Indonesia and Thailand, generated weaker growth than in The global economy grew by 2.2 per cent in 2013. This was slightly 2012. Brazil continued along its upward trajectory, although the pace less than in the previous year, which was due, above all, to a slower of growth was slower. Despite muted growth, emerging markets rate of growth in many emerging markets. Although the mood in remained the economic powerhouses of the global economy with Europe and the United States brightened considerably in the second gains of 4.5 per cent. >> Diagram 003 half of the year, global economic growth was sluggish. Economic performance in the European Union stabilised over Demand for industrial trucks is largely driven by investment confi- the course of 2013. Despite contracting significantly in the first quar- dence and world trade volumes as well as GDP growth. Like GDP, ter, gross domestic product (GDP) over the year as a whole reached worldwide spending on capital equipment increased only cautiously the same level as in 2012. Germany and the United Kingdom were as ongoing uncertainty about growth prospects have continued to the main drivers of the recovery in western Europe during the year. dampen companies’ willingness to invest, particularly in the euro- However, negative growth rates in Italy and Spain and increasing zone. Global trade in 2013 was once again well behind the medium- problems in France demonstrate that the eurozone has not yet term trend. >> Diagram 003 7.6 % 4.7 % Gross domestic product in 2013 – real year-on-year change CHINA INDIA WORLD BRAzIL UNITED STATES JAPAN RUSSIA GERMANy 0.5 % EU 0.0 % 2.2 % 2.2 % 1.9 % 1.7 % 1.2 % Source: Oxford Economics (as at 17 January 2014) 1.0 % 2.0 % 3.0 % 4.0 % 5.0 % 6.0 % 7.0 % 8.0 % We keep the world moving.KION GROUP AG | Annual Report 20138080 Sectoral conditions sales markets Growth rates in the KION Group’s main sales markets varied in 2013. Western Europe, which had seen a decline of 7.1 per cent in 2012, remained flat in 2013 with growth of just 0.3 per cent – despite stabilisation and a slight recovery towards the end of the year. The Measured in terms of the number of new trucks ordered, the global main reason for this was the marked weakness of the market in Ger- market for industrial trucks expanded by 6.9 per cent in 2013, many, which experienced a 4.3 per cent decline in the number of exceeding the threshold of one million trucks for the first time. The trucks ordered, above all due to declining demand in the first half of market therefore more than made up for the decline of 3.1 per cent the year. However, the markets in France, Italy and the United King- in the previous year, despite subdued macroeconomic conditions. dom were largely stable. Eastern Europe grew by a substantial Diesel trucks (up by 8.0 per cent) and warehouse technology prod- 7.8 per cent, although the biggest individual market, Russia, was ucts (up by 7.1 per cent) grew at a similarly high rate, whereas growth unable to maintain its pace from the previous year and recorded in electric forklift trucks (up by 3.6 per cent) was more muted. growth of just 0.7 per cent. China generated double-digit growth, The bulk of the unit increase (47.6 per cent) was accounted for picking up pace as the year progressed, while the other Asian by the Chinese market, which generated growth of 14.4 per cent. emerging markets grew at comparatively moderate rates. By con- The KION Group estimates that the main beneficiaries of this growth trast, the material handling market in Brazil – the largest individual were the value and economy price segments, predominantly diesel market in South America – enjoyed a boom although it partly trucks. North America also made a substantial contribution to the stemmed from special government programmes designed to boost global market’s recovery, registering growth of 10.9 per cent. investment. Measured in terms of the number of trucks, order intake grew by about a third in Brazil. >> Table 014 Global industrial truck market (order intake) >> Table 014 in thousand units Western Europe Eastern Europe North America Central & South America Asia (excl. Japan) Rest of world World Source: WITS / FEM 2013 259.4 58.0 201.0 52.3 327.0 114.5 1,012.2 2012 258.7 53.8 181.2 48.6 292.2 112.2 946.7 change 0.3 % 7.8 % 10.9 % 7.5 % 11.9 % 2.0 % 6.9 % We keep the world moving.KION GROUP AG | Annual Report 20138181 procurement markets Financial markets Commodity prices continue to have a direct impact on around a The KION Group bills the bulk of its revenue in euros; the proportion quarter of the cost of the materials needed to manufacture an indus- was 62.8 per cent in 2013 (2012: 65.5 per cent). The remainder is trial truck in the KION Group. billed in foreign currencies, notably the Chinese renminbi, pound The average price over the year for steel, the most important sterling and the Brazilian real. China’s renminbi proved comparatively commodity, fell significantly compared with 2012 owing to weaker stable over the year. Pound sterling depreciated against the euro, economic conditions. Prices for lead-acid batteries, which make up with the average price for the year down by 4.7 per cent compared a significant proportion of the total price of electric trucks, are par- with 2012. Despite various market interventions by the Brazilian cen- ticularly dependent on lead prices on the metal exchanges. How- tral bank, the value of the real fell by a considerable 14.3 per cent. ever, these price fluctuations are borne by customers owing to the Overall, currency effects had a negative impact on the KION Group’s way in which contracts are formulated. Manufacturing costs are also order intake and revenue. Excluding currency effects, consolidated influenced to a slight extent by the prices for copper and rubber, revenue would have been €74.8 million or 1.7 per cent higher and which were also down year on year. order intake would have been €73.8 million or 1.6 per cent higher. Energy prices were slightly lower in 2013 than they had been in >> Table 015 the previous year. The price of Brent crude oil, which is quoted in US dollars and affects the price of other fuels and plastic, went up con- siderably during 2013 owing to the crisis in Syria, although the aver- age price over the year was 5.8 per cent below the price for the pre- vious year. currencies Average rate per Euro Australia (AUD) Brazil (BRL) Switzerland (CHF) China (CNy) United Kingdom (GBP) Russia (RUB) U.S.A. (USD) Source: Reuters >> Table 015 2012 1.24 2.51 1.21 8.11 0.81 39.92 1.29 2013 1.38 2.87 1.23 8.17 0.85 42.33 1.33 We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report8282 Regulatory situation In Germany, Linde Material Handling increased its stake in Wil- lenbrock Fördertechnik Holding GmbH – an exclusive dealer focus- The products and services of companies in the KION Group have to ing on the Bremen and Hannover sales regions – from 23.0 per cent comply with specific legal requirements in their respective markets. to 74.0 per cent at the end of 2013. This transaction was part of the Compliance with the different requirements has to be verified or cer- succession planning for a founding shareholder who was leaving tified. Many of the legal requirements are enshrined in product-spe- Willenbrock. As yet unaudited figures show that the company cific and other standards (e.g. EN, ISO and DIN). employed more than 500 people and generated revenue of around The tightening of emissions standards is not only taking place in €165.0 million in 2013. developed markets, it is also increasingly observable in emerging In Turkey, STILL acquired 51.0 per cent of the shares in Arser İş markets such as China. This trend benefits the KION Group with its Makineleri Servis ve Ticaret A.Ş. (referred to below as Arser) in high-tech products. August. The company was already the exclusive dealer for the sub- Legal requirements also apply to the construction and operation stantial Turkish market – a major hub for European trade with the of production facilities, including in relation to air pollution avoidance, Middle East – and will enable the KION Group to step up its busi- noise reduction, waste production & disposal and health & safety. ness here. Furthermore, the KION Group fulfils all of the legal requirements per- The KION Group has also strengthened its presence in France taining to exports and financing business. by purchasing the remaining shares in two dealers. The outstanding BUSINeSS PeRFORMANCe Ipo 45.7 per cent stake in Bretagne Manutention S.A. (Pacé), a dealer for LMH, was acquired on 23 July 2013, followed on 11 September 2013 by the outstanding stake of 49.9 per cent in Manusom SAS (Rivery), which sells STILL products. Within the production organisation, LMH’s container handler and heavy truck business was restructured. Product rights and other assets from the container handler division were sold to Konecranes, KION GROUP AG’s IPO and the accompanying capital increases a global market leader in the lifting business. Since then, Konecranes have greatly improved the KION Group’s financial situation and has been a long-term supplier of container handlers for Linde Mate- increased its financial flexibility. The Group used the proceeds to sig- rial Handling’s global distribution network. The alliance is improving nificantly reduce its net financial debt and create a basis from which efficiency in research and development and will enable LMH to con- to drive forward its successful policy of global expansion. Details can tinue to offer a broad range of reach stackers and container han- be found in the ‘Financial position’ section (see page 94). dlers. LMH’s extra heavy-duty truck plant in Merthyr Tydfil (Wales, As a result of the IPO and the subsequent reduction in financial UK) was closed in October 2013, with the bulk of production initially debt, there was a significant improvement in the KION Group’s credit transferring to a contract plant in the Czech Republic. The Czech profile, and consequently in its credit rating. Rating agency Moody’s plant reached full production volume, with the customary high level upgraded its corporate family rating by three notches, from B3 / posi- of quality and security of supply, in the fourth quarter. The restructur- tive to Ba3 / stable, while Standard & Poor’s improved its rating for the ing is enabling the KION Group to make further efficiency gains in the KION Group from B / stable to BB- / positive. As a result, the KION European production network. In the medium term, extra heavy-duty Group will be able to obtain funding on the bond market on better truck production is to transfer to China. terms in future. Key strategic measures in 2013 In Brazil, KION South America officially opened its new plant in Indaiatuba (São Paulo) in March 2013. This has doubled production capacity in Brazil, the largest individual market in South America; capacity utilisation was good. By pooling production in São Paulo The KION Group boosted its sales organisation in the European mar- and stepping up cross-brand cooperation, the KION Group can lev- ket in the year under review by acquiring four companies. erage synergies and respond faster to customer requirements. At We keep the world moving.KION GROUP AG | Annual Report 20138383 the same time, KION South America works closely with the Chinese reduce debt, which had been initiated in late 2012, and the full repay- KION brand Baoli (Jiangsu) Forklift Co., Ltd., whose truck platform is ment of the acquisition finance after the IPO, combined with cheaper used to meet South American demand and is fitted with local com- funding under the new credit facility, quickly resulted in a marked ponents. The increase in production capacity was accompanied by reduction in interest cost in 2013. A vastly improved funding struc- expansion of the sales organisation. ture provides greater flexibility for generating profitable growth in the The joint venture JULI Motorenwerk s.r.o., in which LMH and future. STILL together hold 50.0 per cent of shares, has established a pro- duction facility for electric motors in China in order to achieve faster penetration of the Chinese market, particularly in the value and econ- omy segments. The start-up phase was a success. This will make it possible to fit locally built motors into electric forklift trucks and ware- Business situation and financial performance of the KION Group house trucks from 2014. Key influencing factors FINANCIAl POSItION ANd FINANCIAl PeRFORMANCe The sale of Linde Material Handling’s hydraulics business in Decem- ber 2012 means that the key figures for the LMH segment and for the KION Group are not fully comparable with the key figures from the previous year. For this reason, the revenue, order intake and the profit contributions of the hydraulics business have been excluded from adjusted EBIT and adjusted EBITDA. The adjustments were Overall assessment of the economic situation made on the basis of the financial results for the hydraulics business that were reported as part of the LMH segment in 2012. The KION Group can look back on a very solid 2013. Despite chal- The first-time adoption of new financial reporting standards (see lenging economic conditions, particularly in western Europe, and the notes to the consolidated financial statements) did not have a customers’ marked reluctance to invest during the first nine months major impact on the financial performance or financial position of the of the year, the Group maintained its strong market position over the KION Group. Because the rules governing transition to the new IAS year as a whole. Global market share amounted to 14.1 per cent, 19R ‘Employee Benefits’ require it to be adopted retrospectively, the with a slight increase for the service business. The KION Group prior-year figures have been restated. The profit-and-loss transfer therefore again proved that its business model is robust, even in a agreement concluded between KION Material Handling GmbH and challenging economic climate. Owing to currency effects, revenue Linde Material Handling GmbH in April 2013 led to a sharp increase in was slightly lower than in 2012 (excluding the hydraulics business). deferred tax assets in the reporting year. The target of a year-on-year increase for the adjusted EBIT margin was achieved, despite the difficult market conditions. The margin’s rise from 9.0 per cent in 2012 (excluding the hydraulics business) to 9.3 per cent in 2013 can be attributed, above all, to an optimised cost structure and the ability to command higher prices. The more flexible cost structure achieved to date gives the KION Group a sig- nificant competitive edge. Nonetheless, the Group invested in its future growth in the reporting year. Spending on research and devel- opment equated to 2.5 per cent of revenue, which was once again higher than the industry average. The net income generated of €138.4 million was very encourag- ing. Free cash flow stood at €202.6 million. The successful steps to We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report8484 level of orders effects of €73.8 million were eliminated, the KION Group would have been at virtually the same high level as 2012. The number of trucks ordered rose moderately in 2013. However, the The KION Group’s global market share was around 14.1 per cent KION Group was unable to keep up with the pace of growth in the in 2013, 0.9 percentage points less than in 2012. Regional factors sector globally. The main reason for this was that western European played a role here, for example the Group does not have a large markets remain crucial to the Group’s new orders. This meant that presence in the fast-growing North American market. The decline in the Group was particularly affected by continued weak demand in unit sales of counterbalance trucks also had a negative impact. Germany and western Europe in the first nine months of the year. Outside western Europe, the number of trucks ordered went up by revenue 6.9 per cent and the KION Group was therefore roughly at the aver- age for the global market. It was able to keep pace with the rate of Revenue totalled €4,494.6 million, down 4.9 per cent year on year growth in the eastern European market, while in South America it (2012: €4,726.7 million). Excluding the hydraulics activities, revenue grew at a far faster rate than the market. Order numbers in China would have been just 1.4 per cent below the 2012 level. Currency were also up significantly. However, the market there, which is dom- effects of €74.8 million had a negative impact, the main contributing inated by the economy price segment, grew at an even faster rate. factors being the devaluation of the Brazilian real and pound sterling. Overall, the emerging markets accounted for 35.0 per cent of new Adjusted for these effects, revenue grew by 0.2 per cent on a like-for- orders in 2013 (2012: 32.1 per cent). This was a new record for the like basis. KION Group, both in percentage terms and in absolute numbers. The total value of order intake was €4,489.1 million, just revenue by product category 2.2 per cent short of its value in the corresponding period of the pre- vious year (excluding the hydraulics business). There was a decline in Revenue from new trucks amounted to €2,519.6 million, which was the volume of orders in the Linde Material Handling segment, down significantly on the previous year (2012: €2,651.5 million) owing whereas the STILL segment saw a sharp rise. If exchange rate to negative currency and structural effects, among other reasons. revenue by product category in € million New business Hydraulics Service offering - After sales - Rental business - Used trucks - Other total 2013 2,519.6 0.0 1,975.0 1,174.2 443.1 226.4 131.3 2012 2,651.5 167.8 1,907.4 1,149.8 427.6 213.0 117.0 4,494.6 4,726.7 >> Table 016 change – 5.0 % – 100.0 % 3.5 % 2.1 % 3.6 % 6.3 % 12.2 % – 4.9 % revenue – excluding hydraulics Business 4,494.6 4,559.8 – 1.4 % We keep the world moving.KION GROUP AG | Annual Report 2013 8585 Rising unit sales of warehouse trucks were unable to fully offset the German market, which did however stabilise again during the sec- decline in counterbalance trucks. ond half of the year. The KION Group registered a small rise in reve- After a subdued start to the year, revenue generated by the ser- nue in western Europe outside Germany. vice business rose substantially in subsequent quarters and climbed In eastern Europe, the KION Group brand companies slightly by 3.5 per cent year on year to €1,975.0 million (2012: €1,907.4 mil- exceeded the strong level of revenue earned in the previous year. lion). This largely offset the decline in the new truck business, which Revenue increased particularly significantly in the Russian market, was mainly caused by currency effects. The proportion of revenue although the pace of growth tailed off in the second half of the year. attributable to the service business grew from 41.8 per cent in 2012 There was a year-on-year decline in revenue in Asia: with increasing (adjusted for the hydraulics business) to 43.9 per cent. All areas of unit sales in the lower price segment, revenue decreased in the first the service business saw a year-on-year increase. In rental and leas- six months and was not fully offset in the third and fourth quarters. A ing business, the growth was accounted for by long-term business sharp increase in revenue in Brazil was attributable to the rise in and fleet management. There was also a rise in demand for after- demand for the KION brands’ industrial trucks that are tailored spe- sales services, with orders placed at short notice and spare parts cifically to the local market. Expansion of capacity at the Indaiatuba generating particularly strong growth. The increase confirms the plant to meet the increased demand had a positive impact. KION Group’s view that the postponement of orders for new trucks Overall, the proportion of consolidated revenue generated by the to replace old ones is pushing up demand for services. The volume KION Group outside Germany climbed from 74.1 per cent in 2012 to of revenue from the used truck business was also higher than in the 75.2 per cent in 2013. In 2013, 25.3 per cent of consolidated revenue previous year. >> Table 016 revenue by customer location was earned in the fast-growing emerging markets, compared with 24.4 per cent in the previous year. The KION Group therefore moder- ately reduced its dependency on the western European market again in 2013 thanks to its strategy of growth in the emerging markets. Revenue broken down by customer location predominantly reflects >> Table 017 the absence of revenue from hydraulics activities in Germany, west- ern Europe, Asia and the United States. Moreover, the declining vol- ume of business in western Europe was primarily attributable to the revenue by customer location in € million Western Europe Eastern Europe Americas Asia Rest of world total revenue 2013 3,223.9 369.7 279.4 453.5 168.1 2012 3,363.3 362.8 324.2 485.6 190.7 4,494.6 4,726.7 >> Table 017 change – 4.1 % 1.9 % – 13.8 % – 6.6 % – 11.9 % – 4.9 % revenue – excluding hydraulics Business 4,494.6 4,559.8 – 1.4 % We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report 8686 earnings eBIt and eBItda Non-recurring items totalled €42.3 million, of which €29.5 mil- lion was attributable to KION acquisition items. The remaining amount was accounted for by, among other things, costs for the IPO and accompanying capital increases, which were taken directly to Total earnings before interest and tax (EBIT) amounted to €374.2 mil- income, follow-up costs in connection with the closure of production lion. As expected, this was substantially below EBIT for the previous sites and expenses related to restructuring. These were partly offset year (2012: €549.1 million), which had included a net gain from the by income of €7.0 million arising from remeasurement of the previous sale of the hydraulics business of €211.8 million. The 2012 figure had shares in connection with the acquisition of a further 51.0 per cent of also included the contribution to operating profit of the hydraulics the shares in Willenbrock Fördertechnik Holding GmbH. There was business for the whole year. further non-recurring income of €8.1 million relating to the hydraulics A more meaningful comparison is provided by EBIT adjusted business that was sold in December 2012, but also purchase- for non-recurring items, which went up by 2.0 per cent to price-related losses for equity-accounted investments. The net €416.5 million (2012: €408.3 million excluding the hydraulics busi- income from non-recurring items and KION acquisition items of ness). Price increases that the KION Group was able to implement €112.0 million (or €140.8 million excluding the operating profit of the thanks to its strong technological and competitive position had a hydraulics business) in 2012 included the net gain from the sale of noticeable effect, as did product innovations and a greater pro- the hydraulics business, the income arising from remeasurement of portion of higher-margin trucks with customer-specific equip- shares and, in particular, depreciation, amortisation and impairment ment. Efficiency increases at production sites and other cost sav- charges and administrative fees in connection with the purchase ings also had a beneficial impact. The adjusted EBIT margin price allocation. In the previous year, the expense arising from the therefore improved from 9.0 per cent in 2012 to 9.3 per cent. purchase price allocation had been €41.5 million. >> Table 018 eBIt* in € million Net income Income taxes Financial result eBIt + Non-recurring items + KION acquisition items adjusted eBIt >> Table 018 change – 14.2 % 89.4 % 7.7 % – 31.9 % > 100.0 % – 28.7 % 2.0 % 2012 161.4 – 149.5 – 238.2 549.1 – 182.2 41.5 408.3 2013 138.4 – 15.9 – 219.8 374.2 12.8 29.5 416.5 * Key figures for 2012 were adjusted due to the retrospective application of IAS 19R (2011); Adjusted EBIT were aligned due to the sale of the Hydraulics Business We keep the world moving.KION GROUP AG | Annual Report 20138787 EBITDA was down by 22.5 per cent year on year at €708.8 million (2012: €914.4 million). Adjusted EBITDA amounted to €721.5 million, which was above the comparable figure for 2012 of €700.5 million (adjusted for the hydraulics business). The adjusted EBITDA margin was 16.1 per cent, compared with 15.4 per cent in the previous year. >> Table 019 eBItda* in € million EBIT Amortisation and depreciation eBItda + Non-recurring items + KION acquisition items adjusted eBItda >> Table 019 change – 31.9 % – 8.4 % – 22.5 % > 100.0 % – 64.5 % 3.0 % 2012 549.1 365.3 914.4 – 215.0 1.2 700.5 2013 374.2 334.6 708.8 12.3 0.4 721.5 * Key figures for 2012 were adjusted due to the retrospective application of IAS 19R (2011); Adjusted EBITDA were aligned due to the sale of the Hydraulics Business Key influencing factors for earnings hydraulics business, however. Despite more extensive international business, selling expenses were down by €24.3 million on 2012, The cost of sales fell by 5.1 per cent to €3,255.2 million (2012: while administrative expenses fell by €23.2 million year on year. As a €3,430.8 million). The main reason was the absence of the hydraulics result, the costs of the IPO, which were recognised as administrative business. Other factors included the cost benefits derived from the expenses, were more than offset by various savings. successful restructuring of the production sites and the resultant As expected, the ‘other’ item of €76.6 million was lower than the increase in capacity utilisation as well as favourable price move- previous year’s figure of €253.4 million. The other expenses and ments in the commodity markets. Gross profit came to €1,239.4 mil- other income reported under this item amounted to net income of lion (2012: €1,295.9 million). Consequently, the KION Group was able €75.0 million. This was considerably below the €237.5 million to slightly improve its gross margin to 27.6 per cent (2012: reported in 2012, which had included non-recurring income from the 27.4 per cent) despite the sale of the high-margin hydraulics business. sale of the hydraulics business. In the reporting year, this transaction Cost-cutting measures introduced at the start of the reporting generated subsequent income of €8.1 million. Other income also year also had a positive impact on selling and administrative included earnings from commission collected, which are not expenses. The comparative prior-year figures had included the reported under revenue. We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report8888 The income from companies accounted for under the equity method, which is also reported under ‘other’, declined from €15.9 mil- lion in 2012 to €1.7 million in 2013. The decisive factor for the fall in the share of profit of equity-accounted investments was the pro-rata loss made by Linde Hydraulics of €14.2 million. This loss was partly offset by the remeasurement of the 23.0 per cent stake in Willen- brock Fördertechnik Holding GmbH (which had previously been accounted for under the equity method) when additional shares were acquired to increase the stake to 74.0 per cent in 2013. This resulted in income of €7.0 million. >> Table 020 condensed income statement of the KIon Group* >> Table 020 in € million Revenue Cost of sales Gross profit Selling expenses Research and development costs Administrative expenses Other earnings before interest and taxes (eBIt) Net financial expenses earnings before taxes Income taxes net income * Condensed income statement for 2012 was adjusted due to the retrospective application of IAS 19R (2011) 2013 4,494.6 2012 4,726.7 – 3,255.2 – 3,430.8 1,239.4 – 538.2 – 113.6 – 290.0 76.6 374.2 – 219.8 154.3 – 15.9 138.4 1,295.9 – 562.5 – 124.5 – 313.2 253.4 549.1 – 238.2 310.9 – 149.5 161.4 change – 4.9 % 5.1 % – 4.4 % 4.3 % 8.7 % 7.4 % – 69.8 % – 31.9 % 7.7 % – 50.4 % 89.4 % – 14.2 % We keep the world moving.KION GROUP AG | Annual Report 20138989 net financial income / expenses represents diluted and basic earnings per share of €1.69 (2012: €2.52). Average pro-forma earnings per share in 2013, based on There was an improvement in the balance of financial income and 98.9 million no-par-value shares, amounted to €1.40. financial expenses, leading to net financial expenses of €219.8 mil- lion (2012: €238.2 million). Nevertheless, the decrease did not fully appropriation of profit reflect the vastly improved funding structure and funding conditions. Non-recurring items in connection with the repayment and refinanc- The Executive Board and Supervisory Board of KION GROUP AG ing of financial debt had a negative impact on net financial income. will propose a dividend of €0.35 per share to the Annual General The repayment of debt as part of the IPO did not lead to an increase Meeting on 19 May 2014. As there are 98,700,000 dividend-bearing in net financial income until the middle of the year. Following repay- shares, this equates to a total dividend payout of €34.5 million. A ment in full of the acquisition finance and the early repayment of the total of 25 per cent of the net income accruing to the KION Group floating-rate portion of the 2011/2018 corporate bond (floating rate shareholders will therefore be distributed in dividends. note, €175.0 million), capitalised borrowing costs of €24.5 million were recognised as an expense. Other finance costs of €18.3 million were attributable to the ending of interest-rate hedges related to the acquisition finance, which was repaid after the IPO. The required Business situation and financial performance of the segments remeasurement of the options recognised in connection with the 30.0 per cent equity investment in Linde Hydraulics resulted in addi- lmh segment tional financial expenses of €14.7 million in the reporting year. Adjusted for these three negative one-off items, net financial Business performance and order intake expenses amounted to €162.4 million, equating to a significant year- on-year improvement of €75.8 million. The Linde Material Handling segment, which comprises the Linde, Income taxes Fenwick and Baoli brand companies, generated order intake of €2,901.8 million in 2013, defending its number-one market position in Europe and in the Chinese premium segment. However this was Income taxes of €149.5 million in 2012 contrasted with a far lower tax 4.1 per cent down on the figure achieved last year of €3,026.1 million burden of €15.9 million in the reporting year. The tax rate was there- (excluding the hydraulics business) due, above all, to the difficult fore 10.3 per cent (2012: 48.1 per cent). Current tax expenses fell to sales situation in Germany and negative currency effects. The €59.0 million in the reporting year (2012: €122.1 million). The higher increased volume of orders in eastern Europe and Asia only partly prior-year figure was mainly due to the effect of taxable profit from offset the decline in the western European market. the sale of the hydraulics business. There was also deferred tax During the reporting year, LMH improved its position throughout income of €43.1 million, compared with deferred tax expenses of the value chain by acquiring a majority stake in German dealer Wil- €27.4 million in 2012. The main reason for this was the profit-and-loss lenbrock Fördertechnik Holding GmbH (see page 82), expanding transfer agreement concluded between KION Material Handling service capacity and the sales network with Weichai Power in China GmbH and Linde Material Handling GmbH in April 2013. In connec- and restructuring its container handler and heavy truck business tion with this agreement, deferred tax assets with deferred tax (see page 82). The transfer of heavy truck production to a contract income totalling €41.8 million were recognised on loss carryforwards plant in the Czech Republic went to plan, and the production site in that it had previously not been possible to utilise. Measurement of Wales had largely been shut down by the end of the year. LMH also the deferred taxes as at the reporting date led to net additional collaborated successfully with Linde Hydraulics, with which it has a deferred tax income of €1.3 million as a result of other items. Net ten-year exclusive supply agreement. income after taxes came to €138.4 million (2012: €161.4 million). This We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report9090 revenue earnings Currency effects and difficult market conditions for new truck busi- Adjusted EBIT totalled €309.1 million, which was just up on the ness meant that the segment’s revenue fell by 2.8 per cent to adjusted prior-year result of €301.0 million (excluding the hydraulics €2,881.1 million (2012: €2,965.4 million excluding the hydraulics busi- business). The decline in revenue was offset by the ability to com- ness). Introduced at the start of 2013, the EVO models – which are mand higher prices and the increase in productivity, including the among the lowest-emission counterweight trucks with an internal reduction in fixed costs. The adjusted EBIT margin therefore combustion engine – made a positive contribution to revenue. The improved significantly, from 10.2 per cent in 2012 to 10.7 per cent in same was true of the new generation of reach trucks, which came on 2013. the market in March. However, unit sales of diesel-powered trucks In 2012, EBIT of €522.9 million had included non-recurring gains and warehouse trucks declined overall, whereas there was a slight arising in connection with the sale of the majority of the hydraulics gain for electric forklift trucks in nearly every region. There was also business (€247.0 million) and remeasurement in connection with the stronger demand for used trucks than in 2012. Coupled with the fur- acquisition of the outstanding 51.0 per cent of shares in Linde ther growth in service and spare-parts business, this offset most of Creighton (€12.6 million). the downturn in new truck business and segment revenue was only Adjusted EBITDA in the LMH segment came to €444.5 million slightly below the 2012 level. (2012: €432.2 million), corresponding to an adjusted EBITDA margin of 15.4 per cent (2012: 14.6 per cent). >> Table 021 Key figures – lmh – in € million Order intake 1 Revenue 1 EBITDA Adjusted EBITDA 1 EBIT Adjusted EBIT 1 Adjusted EBITDA margin 1 Adjusted EBIT margin 1 1 Key figures for 2012 were adjusted due to the Hydraulics Business >> Table 021 change – 4.1 % – 2.8 % – 38.6 % 2.8 % – 46.0 % 2.7 % – – 2012 3,026.1 2,965.4 720.4 432.2 522.9 301.0 14.6 % 10.2 % 2013 2,901.8 2,881.1 442.1 444.5 282.4 309.1 15.4 % 10.7 % We keep the world moving.KION GROUP AG | Annual Report 20139191 stIll segment revenue Business performance and order intake Revenue advanced by 2.4 per cent to €1,717.5 million (2012: €1,676.6 million), with gains for both new truck business and service The STILL segment, which comprises the STILL and OM STILL business. The strongest revenue growth was generated in Russia brand companies, performed encouragingly in 2013, increasing the and Brazil, although the devaluation of the Brazilian real eroded total value of its order intake by 2.6 per cent to €1,692.0 million (2012: some of the gain. Despite the weak market environment, STILL also €1,648.6 million) despite the negative impact of currency effects. The boosted its revenue in Germany and the rest of Europe due to both order volume bucked the trend in the declining German market and volume and price effects. remained largely stable, whereas there were decreases in the United Kingdom and Spain. By contrast, Italy and France experienced a earnings strong uptrend. STILL’s orders were up significantly in eastern Europe – thanks in part to the expansion of sales in Russia and Tur- Adjusted EBIT came to €123.9 million, which was just up on the pre- key – and Brazil, and the segment also gained market share in these vious year (2012: €122.2 million). The adjusted EBIT margin stood at regions. 7.2 per cent, slightly below the margin of 7.3 per cent in 2012. Additions to STILL’s product range included a diesel truck in the Adjusted EBITDA rose to €223.0 million (2012: €217.9 million), RX 70 series that has a load capacity of four to eight tonnes. A new while the adjusted EBITDA margin remained unchanged year on year series of trucks with internal combustion engines was introduced to at 13.0 per cent. >> Table 022 cater specifically to the needs of customers in the South American market. Key figures – stIll – in € million Order intake Revenue EBITDA Adjusted EBITDA EBIT Adjusted EBIT Adjusted EBITDA margin Adjusted EBIT margin >> Table 022 change 2.6 % 2.4 % 7.1 % 2.3 % 12.5 % 1.4 % – – 2012 1,648.6 1,676.6 200.2 217.9 97.7 122.2 13.0 % 7.3 % 2013 1,692.0 1,717.5 214.4 223.0 109.9 123.9 13.0 % 7.2 % We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report 9292 Financial services (Fs) segment Business performance ments relating to the financing of the short-term rental fleet. Another €240.7 million was attributable to leased assets under operating leases relating to external customer contracts. Leasing business, which generated lease originations of €436.0 million, continued to As the central funding partner of the LMH and STILL brand segments, focus on the core European markets of France, Germany, Italy, Spain the Financial Services (FS) segment benefited from a further increase and the United Kingdom. The volume of business in eastern Europe, in demand for lease finance, particularly in Europe outside Germany. China and Brazil remained at a low level. Operational responsibility for the short-term rental business (short- term rental fleet) lies with the LMH and STILL brand segments. FS acts Financial performance as the contractual partner to the brand segments, providing the financing both for long-term leasing and for the short-term rental fleet, Segment revenue, including internal revenue from the financing of mostly on the basis of sale and leaseback agreements. the LMH and STILL segments’ short-term rental fleet, advanced by In 2013, long-term business with external end customers grew at 5.9 per cent to €539.4 million (2012: €509.3 million). Revenue gener- a somewhat stronger rate than finance for the LMH and STILL seg- ated from external customers went up by 6.0 per cent, from ments’ short-term rental business. The assets of the Financial Ser- €296.8 million to €314.7 million. The FS segment’s earnings before vices segment had increased to €1,249.4 million as at 31 December tax came to €4.7 million, which was just below the figure for 2012 of 2013 (31 December 2012: €1,039.0 million). Of this amount, €458.1 mil- €4.8 million. As at 31 December 2013, return on equity (ROE) lion was accounted for by lease receivables from external customers remained unchanged on the prior year at 13.0 per cent. and €449.1 million by lease receivables from the LMH and STILL seg- >> Table 023 Key figures – Financial services – >> Table 023 in € million Revenue Adjusted EBITDA Adjusted EBIT EBT Lease receivables 1 thereof to third parties Lease liabilities 2 thereof liabilities from funding of the short-term rental business Net financial debt Equity 3 Return on equity 3 1 Includes intra-group lease receivables from LMH and STILL segments from funding of the short-term rental business 2 Includes liabilities from financing of the short-term rental fleet reported as other financial liabilities 3 Earnings before taxes / Average equity tied up during the reporting period excluding the net income of the period 2013 539.4 66.2 0.7 4.7 907.2 458.1 935.2 319.7 163.6 41.7 2012 509.3 59.2 1.4 4.8 753.3 379.9 730.3 263.7 174.9 41.7 change 5.9 % 11.8 % – 52.1 % – 2.7 % 20.4 % 20.6 % 28.1 % 21.2 % – 6.4 % – 0.0 % 13.0 % 13.0 % – We keep the world moving.KION GROUP AG | Annual Report 20139393 other segment Business performance Financial performance Earnings and revenue in the Other segment also include intra-group contributions from consolidated subsidiaries that are eliminated at Group head office functions that do not come under any other seg- Group level. Revenue decreased from €250.9 million in 2012 to ment, plus the Voltas brand company, are reported in the Other €235.1 million. As in the previous year, the main revenue drivers were segment. Voltas MH, the leading provider in the Indian market, reg- internal IT and logistics services as well as Voltas MH. The segment’s istered a rise in order intake for electric forklift trucks and ware- revenue from external customers rose to €48.2 million (2012: house trucks, while diesel trucks proved stable. It stepped up its €42.9 million), predominantly due to contributions from Voltas MH. collaboration with Baoli on product development and production. EBIT grew to €71.8 million (2012: minus €12.2 million), while This enables the KION Group to serve the Indian volume market adjusted EBIT rose to €73.5 million (2012: €44.4 million). This increase even more efficiently. Key figures – other – in € million Order intake Revenue EBITDA Adjusted EBITDA EBIT Adjusted EBIT compared with the previous year was largely due to the year-on-year improvement in subsidiaries’ earnings and the related rise in intra- group income from investments in the Other segment, which is elimi- nated at Group level during consolidation. >> Table 024 >> Table 024 change – 6.3 % – 6.3 % > 100.0 % 45.4 % > 100.0 % 65.7 % 2012 250.9 250.9 5.6 62.2 – 12.2 44.4 2013 235.1 235.1 88.7 90.4 71.8 73.5 We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report 9494 Financial position and restrictions were comfortably complied with in the past financial year. The ending of the acquisition finance meant that many restric- principles and objectives of financial management tions were lifted in the second half of the year, thereby greatly improv- ing flexibility as far as funding is concerned. By pursuing an appropriate financial management strategy, the Depending on requirements and the market situation, the KION KION Group ensures that sufficient cash and cash equivalents are Group will also avail itself of the funding facilities offered by the public available at all times to meet the Group companies’ operational and capital markets in future. The KION Group therefore seeks to main- strategic funding requirements. In addition, the KION Group opti- tain an investment-grade credit rating in the capital and funding mar- mises its financial relationships with customers and suppliers, man- kets by rigorously pursuing a value-based strategy, implementing ages any collateral security offered and mitigates the financial risk to proactive risk management and ensuring a solid funding structure. its enterprise value and profitability, notably currency risk, inter- The KION Group maintains a liquidity reserve in the form of unre- est-rate risk, price risk, counterparty risk and country risk. In this stricted, bindingly committed credit lines and cash in order to ensure way, the KION Group creates a stable funding position from which to financial flexibility and solvency. maintain profitable growth. The KION Group only uses derivatives to hedge underlying The financial resources within the KION Group are provided operational transactions; in particular, hedging for currency and based on an internal funding approach. The KION Group collects interest-rate risks. Only cash flow hedges were used for this purpose liquidity surpluses of the Group companies in central or regional in the reporting year. The interest-rate swaps and currency swaps cash pools and, where possible, covers subsidiaries’ funding that had been used in 2012 to hedge interest-rate risk and currency requirements with intercompany loans. This funding enables the risk arising out of acquisition finance had been terminated in connec- KION Group to present a united front in the capital markets and tion with the repayment of this finance by the middle of 2013. strengthens its hand in negotiations with banks and other market participants. main financing activities in the reporting period As a listed group of companies that also obtains funding using corporate bonds and loan facilities, the KION Group considers the The placement of 17.2 million new shares at €24.00 per share gener- interests of shareholders, bond holders and banks in its financial ated €413.4 million for the KION Group (before deduction of bank management. For the sake of these stakeholders, the KION Group charges). A further €328.4 million was generated by a capital increase makes sure that it maintains an appropriate ratio of internal funding of 13.7 million shares, which were acquired by Weichai Power imme- to borrowing. diately before completion of the IPO. In connection with the IPO, The KION Group’s borrowing is based on a long-term approach. Superlift Holding acquired 4.0 million shares at a price of €29.21 per The core elements – a revolving loan facility of €1,045.0 million and share by way of converting an existing loan and its stake in Superlift two secured corporate bonds of €325.0 million and €650.0 million Funding into equity. This boosted equity by a further amount of respectively – are due to mature between 2018 and 2020. The Group approximately €118.1 million. Overall, equity rose by €859.9 million as occasionally arranges additional credit lines for KION Group compa- a result of the three capital increases. After deduction of transaction nies with local banks or leasing companies in order to comply with costs of €13.9 million (adjusted for tax effects) that were recognised legal, tax and other regulations. directly in equity, the net increase in the Group’s equity amounted to Among other things, the loan facility and the contractual condi- €845.9 million. The portion of the transaction costs for the capital tions relating to the issuance of the corporate bonds require compli- increases that exceeded the amounts recognised in equity was ance with loan conditions (‘covenants’). The loan facility also requires recognised directly as an expense. compliance with specific financial covenants during the term of the agreement. Non-compliance may, for example, give lenders the right to terminate the loan or permit bondholders to put the corporate bonds back to the issuer prior to their maturity date. All covenants We keep the world moving.KION GROUP AG | Annual Report 20139595 In connection with the IPO, the KION Group agreed a new analysis of capital structure revolving loan facility with a group of banks for €995.0 million with a term to maturity of five years after the IPO. The loan facility was Financial debt increased to €1,045.0 million in December 2013. Combined with the current lower level of interest rates, this loan facility offers far more Following its full repayment of the acquisition finance of €1,078.1 mil- favourable credit terms than the previous funding. lion and the floating rate note with a volume of €175.0 million, the The inflows from the IPO, along with part of the new loan facility KION Group’s long-term borrowing has comprised two secured cor- and existing cash reserves, was used to repay in full the long-term porate bonds with a total volume of €975.0 million. The bond issued bank loans under the acquisition finance arrangements (Senior Facil- in the reporting year consisted of a fixed-rate tranche with a volume ities Agreement or SFA). In addition, the floating rate note, which was of €450.0 million and a floating-rate tranche with a volume of due to mature in 2018 and amounted to €175.0 million, was repaid €200.0 million. The fixed-rate tranche of a bond issued in 2011, early in full. which has a volume of €325.0 million and a maturity date of 2018, Back in February 2013, KION Finance S.A. placed a senior remains unchanged. secured bond with a total volume of €650.0 million and a maturity As at the reporting date, €184.4 million had been drawn down date of 2020. The proceeds, net of the bank commission, were used under the newly agreed revolving loan facility of €1,045.0 million – to refinance all loans maturing in 2014 and 2015. including other loan liabilities of individual Group companies outside Following completion of the main funding activities, the KION Germany and contingent liabilities. The KION Group therefore had Group was able to report a healthy equity ratio of 26.7 per cent as at unused loan facilities worth €860.6 million that it could draw down at 31 December 2013. As at the reporting date, net debt was roughly short notice as at 31 December 2013. Gross financial debt totalled 1.4 times adjusted EBITDA for the past twelve months. The remain- €1,215.3 million on the reporting date; including capitalised borrow- ing long-term financial debt has a comfortable maturity profile. ing costs, the financial debt recognised in the statement of financial Between 28 August and 26 September 2013, KION GROUP AG position stood at €1,198.6 million. After deduction of cash and cash used cash and cash equivalents to buy treasury shares for an equivalents, the remaining net financial debt came to €979.3 million employee share programme. As at 31 December 2013, 0.2 million as at 31 December 2013 (31 December 2012: €1,790.1 million). shares were held in treasury. The volume of funding required was >> Table 025 €5.6 million. We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report9696 net financial debt in € million Corporate bond – fixed rate (2011/2018) – gross Corporate bond – floating rate (2011/2018) – gross Corporate bond – fixed rate (2013/2020) – gross Corporate bond – floating rate (2013/2020) – gross Liabilities to banks (gross) Liabilities to non-banks (gross) ./. Capitalised borrowing costs Financial debt ./. Cash and cash equivalents net financial debt >> Table 025 change 0.0 % – 100.0 % – – – 87.6 % 47.1 % 51.2 % – 49.0 % 61.0 % – 45.3 % 2012 325.0 175.0 – – 1,882.1 4.5 – 34.1 2,352.4 – 562.4 1,790.1 2013 325.0 – 450.0 200.0 233.7 6.6 – 16.7 1,198.6 – 219.3 979.3 retirement benefit obligation Further details about the retirement benefit obligation are pro- vided in note [28] in the notes to the consolidated financial state- The KION Group supports pension plans in many countries. These ments. plans comply with legal requirements, local practice and the situa- tion in the country in question. They are either defined benefit pen- lease liabilities sion plans, defined contribution pension plans or multi-employer benefit plans. As at 31 December 2013, the retirement benefit obli- Lease liabilities arising from financial services activities totalled gation under defined benefit pension plans amounted to €560.1 mil- €617.1 million as at 31 December 2013 (31 December 2012: lion. The moderate year-on-year rise was largely due to ongoing €475.0 million). These resulted solely from sale and leaseback trans- additions to pension provisions. After deduction of pension assets actions used to finance leases with external customers. Of this total, amounting to €22.4 million, the net obligation stood at €537.7 million €403.7 million was accounted for by non-current lease liabilities (31 (31 December 2012: €524.8 million). December 2012: €329.2 million) and €213.3 million by current lease Contributions to pension plans that are entirely or partly funded liabilities (31 December 2012: €145.8 million). The rise in non-current via funds are paid in as necessary to ensure sufficient assets are lease liabilities is attributable, above all, to new leases and the first available and to be able to make future pension payments to pension consolidation of the dealer Willenbrock. plan participants. These contributions are determined by various factors, such as the funded status, legal and tax considerations, and local practice. The payments made by the KION Group to retired employees in 2013 totalled €25.1 million, which included €13.1 mil- lion for direct pension payments and €11.6 million for employer con- tributions to plan assets. Transfers to external pension funds resulted in further payments of €0.4 million. We keep the world moving.KION GROUP AG | Annual Report 2013 9797 Short-term rentals and procurement leases are allocated to the receivables, future inflows of funds from sub-leases with customers brand companies. The corresponding liabilities are reported under and revenue from the sale of used trucks. other financial liabilities (see note [32] in the notes to the consolidated financial statements). These include, among other things, liabilities of equity €327.5 million from sale and leaseback transactions used to finance the short-term rental fleet. They also contain liabilities arising from Equity rose substantially due to the capital increases carried out dur- residual-value guarantees amounting to €17.3 million. These residu- ing the reporting year. It stood at €1,610.0 million on 31 December al-value liabilities relate to residual-value guarantees, provided in 2013, compared with €660.7 million at the end of 2012. There was an connection with the sale of assets to leasing companies, where the even greater increase in the equity ratio, which went up from guaranteed amount is more than 10.0 per cent of the fair value of the 10.6 per cent at the end of 2012 to 26.7 per cent at the end of 2013, asset in question. The lease liabilities are mostly covered by lease because of the simultaneous reduction of debt. >> Table 026 condensed balance sheet, equity and liabilities* >> Table 026 in € million equity non-current liabilities thereof: Corporate bond Financial liabilities Deferred tax liabilities Lease liabilities current liabilities thereof: Financial liabilities Trade payables Lease liabilities 2013 1,610.0 in % 26.7 % 2012 660.7 in % change 10.6 % > 100.0 % 2,709.8 45.0 % 3,929.0 63.2 % – 31.0 % 958.3 12.8 306.2 403.7 15.9 % 0.2 % 5.1 % 6.7 % 489.5 1,811.2 308.8 329.2 7.9 % 29.2 % 5.0 % 5.3 % 95.8 % – 99.3 % – 0.8 % 22.6 % 1,706.6 28.3 % 1,623.5 26.1 % 5.1 % 227.5 550.5 213.3 3.8 % 9.1 % 3.5 % 51.8 646.0 145.8 0.8 % 10.4 % 2.3 % > 100.0 % – 14.8 % 46.3 % total equity and liabilities 6,026.4 6,213.2 – 3.0 % * Condensed balance sheet for 2012 was adjusted due to the retrospective application of IAS 19R (2011) We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report9898 Funding vehicles not reported on the statement of financial analysis of liquidity position Liquidity management is an important aspect of central financial The KION Group makes limited use of funding vehicles not reported management. The sources of liquidity are cash and cash equivalents on the statement of financial position. As part of its financing activities, (including pledged cash deposits), cash flow from operating activi- the KION Group has entered into leases both for its own use and for ties and amounts available under loan facilities. Cash and cash transfer to customers. In accordance with the relevant IFRS require- equivalents totalled €219.3 million as at 31 December 2013. The fig- ments, such leases are not reported as either an asset or a liability on ure for the previous year of €562.4 million had been boosted by the statement of financial position. The nominal amount of the con- inflows from the transactions with Weichai Power at the end of 2012. tractual obligations arising from such leases not reported in the state- Taking into account the loan facility that was still available, the KION ment of financial position was €206.0 million as at 31 December 2013 Group had access to cash and cash equivalents amounting to (31 December 2012: €194.2 million; see note [33] in the notes to the €1,079.6 million as at the reporting date, compared with €930.9 mil- consolidated financial statements). lion as at 31 December 2012. analysis of capital expenditure Net cash provided by the KION Group’s operating activities totalled €336.1 million (2012: €414.0 million). The significant decrease was largely due to one-off tax payments of €57.7 million in connec- Capital expenditure (excluding leased and rental assets) was again tion with the sale of the hydraulics business in 2012. EBIT of funded by cash flow from operating activities and by withdrawals €549.1 million in 2012 included, among things, income of €211.8 mil- from the revolving part of the SFA in the reporting year. lion from the sale of the hydraulics business that did not impact on Capital expenditure amounted to €125.8 million in 2013, down by cash flow from operating activities. 18.9 per cent on 2012 (€155.1 million). The decrease was mainly attrib- Net cash used for investing activities totalled €133.5 million. By utable to the sale of the hydraulics business at the end of 2012, which contrast, the net cash provided by investing activities in 2012 came had high levels of capital expenditure. Another reason for the decrease to €104.1 million, which included proceeds of €259.7 million from the was the ending of special projects, which in 2012 were the construc- sale of the hydraulics business. Cash payments for capital expendi- tion of a new plant in São Paulo and the relocation of production in ture on non-current assets and property, plant and equipment, Europe. By contrast, there were no special projects of comparable which make up the biggest outflow of funds, fell from €155.1 million magnitude in the LMH and STILL segments in 2013. Capital expendi- in 2012 to €125.8 million in 2013. In both the Linde Material Handling ture on developing products and expanding production sites and on and STILL operating segments, the volume of capital expenditure the ongoing modernisation of the IT infrastructure increased slightly was below that of the comparable prior-year period, which for the year on year. LMH segment had still included the hydraulics business and for the A significant portion of capital expenditure went on the develop- STILL segment the new plant in Brazil. Major projects related to ment and refinement of counterbalance trucks, reach trucks and other improvement of the performance of the global spare parts ware- warehouse trucks and on innovations such as lithium-ion batteries. house in Kahl, the expansion of production and development capac- Operational investments predominantly related to equipment and ities in China in the LMH segment and various measures to modern- machinery for the production of new industrial trucks and compo- ise the German sites in the STILL segment. Capital expenditure nents. IT investment projects related to areas such as standardisation (excluding leased and rental assets) was again funded in the report- of the global sales systems. ing year. Net cash used for acquisitions amounted to €25.1 million (after deduction of the cash received). The acquisitions were the Arser Group in Turkey (€3.9 million) and 51.0 per cent of the shares in the Ger- man dealer Willenbrock Fördertechnik (€21.2 million). In the previous year, €9.7 million of the outflow of funds was attributable to the acqui- We keep the world moving.KION GROUP AG | Annual Report 20139999 sition of a majority stake in Linde Creighton. The main inflows from than in 2012 and amounted to €119.6 million in the reporting period. investing activities related to dividend payments from equity invest- These interest payments included a non-recurring outflow of funds ments, interest income and net inflows from non-current assets. of €14.4 million resulting from the termination of interest-rate hedging Free cash flow – the sum of cash flow from operating activities instruments in connection with the previous acquisition finance and investing activities – was €202.6 million in the reporting period. arrangements. The net cash outflow from financing activities in 2012 This was below the prior-year figure of €518.1 million, which had (€330.1 million) was also largely attributable to the repayment of been affected by non-recurring items. loans. The positive free cash flow and the existing cash from 2012 Cash flow from financing activities amounted to minus were predominantly used for the repayments. >> Table 027 €538.6 million. Inflows resulted from the issuance of the corporate bond in February 2013 (€649.0 million), capital contributions in con- nection with the IPO (€741.8 million) and a drawdown from the new Net assets loan facility (€184.4 million). Gross repayments of all financial liabili- ties, including the early redemption of the 2011/2018 floating rate non-current assets note, amounted to a total outflow over the period as a whole of €2,201.6 million. This amount was partly offset by taking up financial Non-current assets grew only slightly year on year, advancing by debt of €1,095.9 million – including the corporate bond issued in 4.8 per cent to €4,435.8 million (31 December 2012: €4,231.0 million). 2013. Cash and cash equivalents of €5.6 million were used to buy There was a small rise in intangible assets, which reached 200,000 shares for an employee share programme. The cash pay- €2,428.7 million. The main reasons were the acquisitions in the ments for costs incurred in connection with the debt and equity reporting year, which increased goodwill by €23.1 million. There was transactions mentioned above amounted to €56.3 million (2012: further capitalisation of development costs, software and other €15.6 million). Regular interest payments were €10.1 million lower intangible assets, while amortisation totalled €73.6 million. condensed cash flow statement* in € million EBIT Cash flow from operating activities Cash flow from investing activities Free cash flow Cash flow from financing activities Currency effects on cash change in cash and cash equivalents * Condensed cash flow statement for 2012 was adjusted due to the retrospective application of IAS 19R (2011) >> Table 027 change – 31.9 % – 18.8 % < – 100.0 % – 60.9 % – 63.2 % < – 100.0 % < – 100.0 % 2012 549.1 414.0 104.1 518.1 – 330.1 1.0 188.9 2013 374.2 336.1 – 133.5 202.6 – 538.6 – 7.0 – 343.0 We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report 100100 The change in leased assets reflects the growth in the volume of new long-term leases signed and consolidation of the leasing busi- financial services business conducted by the KION Group with ness of the dealer Willenbrock. external end customers, which stood at €251.9 million at the end of Other financial assets changed only insignificantly and stood at 2013 (31 December 2012: €191.3 million). The increase can primarily €51.7 million (31 December 2012: €50.2 million). be attributed to the greater volume of industrial truck operating An explanation of the change in deferred tax assets is provided leases with external customers and the consolidation of the leasing in note [14] in the notes to the consolidated financial statements. business of the dealer Willenbrock. Beneficial ownership remains with KION as the lessor. current assets Rental assets, which mostly consist of the rental fleets of the LMH and STILL operating segments, had risen to €461.2 million as Current assets reduced year on year, falling by 19.8 per cent to at the reporting date (31 December 2012: €395.1 million). €1,590.7 million (31 December 2012: €1,982.2 million). The main rea- Other property, plant and equipment had declined slightly year son for this was the use of cash and cash equivalents to repay debt. on year, falling to €499.4 million (31 December 2012: €500.3 million). Overall, there was very little change in other current assets. The Additions of property, plant and equipment in the reporting period of decline in inventories to €511.8 million (31 December 2012: €64.4 million were offset by depreciation of €67.8 million. €549.9 million) was attributable to improved management of working Equity-accounted investments declined to €138.6 million capital. Likewise, trade receivables decreased to €558.7 million (31 (31 December 2012: €154.8 million) largely due to the losses incurred December 2012: €625.5 million). Lease receivables advanced from by the 30.0 per cent stake in Linde Hydraulics. €132.1 million as at 31 December 2012 to €170.8 million on the Long-term lease receivables arising from finance leases with reporting date owing to the increase in business volume. external customers increased by 15.6 per cent to €308.8 million, >> Table 028 reflecting – as was the case with leased assets – the high number of Inventories in € million Materials and supplies Work in progress Finished goods and merchandise Advances paid total inventories >> Table 028 change – 9.7 % – 11.0 % – 5.1 % – 6.9 % – 6.9 % 2012 120.0 75.0 349.0 5.9 549.9 2013 108.3 66.7 331.2 5.5 511.8 We keep the world moving.KION GROUP AG | Annual Report 2013 101101 Working capital (inventories and trade receivables less trade paya- bles) was €520.0 million as at the reporting date, which was less than it had been a year earlier (31 December 2012: €529.3 million). >> Table 029 condensed balance sheet, assets* >> Table 029 in € million non-current assets thereof: Goodwill Brand names Deferred tax assets Rental assets Leased assets Lease receivables current assets thereof: Inventories Trade receivables Lease receivables Other current assets Cash 2013 4,435.8 in % 73.6 % 2012 4,231.0 in % 68.1 % change 4.8 % 1,494.7 24.8 % 1,473.2 23.7 % 594.7 295.5 461.2 251.9 308.8 9.9 % 4.9 % 7.7 % 4.2 % 5.1 % 593.9 264.9 395.1 191.3 267.1 9.6 % 4.3 % 6.4 % 3.1 % 4.3 % 1.5 % 0.1 % 11.5 % 16.7 % 31.7 % 15.6 % 1,590.7 26.4 % 1,982.2 31.9 % – 19.8 % 511.8 558.7 170.8 114.7 219.3 8.5 % 9.3 % 2.8 % 1.9 % 3.6 % 549.9 625.5 132.1 106.8 562.4 8.9 % 10.1 % 2.1 % 1.7 % 9.1 % – 6.9 % – 10.7 % 29.2 % 7.4 % – 61.0 % – 3.0 % total assets 6,026.4 6,213.2 * Condensed balance sheet for 2012 was adjusted due to the retrospective application of IAS 19R (2011) We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report102102 NON-FINANCIAl PeRFORMANCe INdICAtORS headcount The average number of employees (full-time equivalents (FTEs), including trainees and apprentices) in the KION Group was 21,632 in The KION Group’s enterprise value is determined not only by finan- 2013 (2012: 22,232 FTEs). As at 31 December 2013, the KION Group cial KPIs but also to a significant extent by non-financial ones. These companies employed 22,273 FTEs, 1,058 more than a year earlier. are based on the Company’s relations with its customers and Much of this increase was accounted for by the first-time consol- employees, on its technological position and on environmental con- idation of the trading and sales companies acquired in the year siderations. Together, they enable conclusions to be drawn about under review. The acquisition of Willenbrock Fördertechnik increased the extent to which the KION Group succeeds in: headcount by 542 employees, while the acquisition of Arser added a competent and committed employees; – being an attractive and responsible employer that can retain – developing products that meet customers’ needs and environ- – continually increasing the customer benefits provided by its – designing production processes in such a way that resources mental requirements now and in future; products and services; further 122. Besides the acquisitions, companies in the KION Group also continued to strengthen their sales and service functions. The sharp rise in the number of people employed in these functions more than offset the slight decline in production employees. Closure of the Merthyr Tydfil site and the transfer of production to a contract pro- duction facility contributed to this decline (see page 82). Implement- ing the job losses with the minimum possible social impact had utmost priority during the process of closing the site. The number of are conserved and emissions are avoided as far as possible. staff in administrative functions rose only moderately due to the cost-cutting measures initiated. The KION Group firmly believes that these aspects are crucial to At regional level, there were only slight changes in headcount its positioning as a pioneering company in a highly competitive overall. The number of employees rose in Germany, France and Tur- environment. employees hr strategy key, primarily due to the acquisition of trading companies. As at 31 December 2013, headcount in China (excluding Hong Kong) had increased by approximately 5 per cent compared with the end of 2012. The research and development, production and sales func- tions were all expanded in China. >> Table 030 The KION Group’s success is founded on the capabilities and com- mitment of its employees. Its human resources (HR) strategy is geared towards providing the best possible support for strategic development and international growth. The KION Group aims to always have a sufficient number of qualified, committed employees at all levels of its operations and to offer them attractive working con- ditions and the opportunities afforded by working for an international group of companies. This strategy also enables the Company to tackle the challenges of demographic change. We keep the world moving.KION GROUP AG | Annual Report 2013103103 employees (full-time equivalents) >> Table 030 31/12/2013 Western Europe Eastern Europe Americas Asia Rest of world total 31/12/2012 Western Europe Eastern Europe Americas Asia Rest of world total lmh 8,689 1,048 122 3,360 557 stIll 6,553 625 526 0 0 13,776 7,704 8,259 1,034 122 3,195 538 6,214 582 457 0 0 13,148 7,253 Fs 80 16 1 10 11 118 71 16 1 13 11 112 other 519 0 0 156 0 675 534 0 0 168 0 702 total 15,841 1,689 649 3,526 568 22,273 15,078 1,632 580 3,376 549 21,215 Personnel expenses amounted to €1,143.8 million – a year-on-year decrease of 4.9 per cent – owing to the smaller average headcount for the year, which was primarily attributable to the sale of the hydraulics business. This easily offset the countervailing effect caused by adjust- ments to wages and salaries. >> Table 031 personnel expenses in € million Wages and salaries Social security contributions Post-employment benefit costs and other benefits total 2013 900.5 203.7 39.5 2012 946.6 222.1 34.0 1,143.8 1,202.7 >> Table 031 change – 4.9 % – 8.3 % 16.2 % – 4.9 % We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report 104104 diversity tial, high performers and experts in key functions. Organised in cooperation with the European School of Management and Technol- The KION Group sees itself as a global manufacturer with strong ogy (ESMT), KION Campus is an international, cross-brand execu- intercultural awareness: as at 31 December 2013, people from 66 tive development programme aimed at the Group’s 300 or so top different countries were employed across the KION Group. executives. In addition, new managers at STILL receive support One of the ways in which the Company promotes international under the First Leading programme during their first few years. Pro- collaboration between employees is the KION expat programme, spective managers can enhance their skills through STILL’s young which gives employees the opportunity to transfer to different coun- Professional programme, while international staff with high potential tries where the KION Group is represented. can participate in the International Junior Circle. The STILL Academy The KION Group tackles the challenges of demographic change offers subject-specific and interdisciplinary training courses. Oppor- by providing working conditions that are suited to employees’ tunities at Linde Material Handling include a virtual assessment cen- age-related requirements and organising healthy-living programmes tre for future managers. so that it can continue to benefit from older employees’ experience. As at 31 December 2013, 23.5 per cent of employees were over the training and professional development age of 50 (31 December 2012: 22.6 per cent). A total of 250 employ- ees were participating in partial retirement models as at the reporting The companies in the KION Group currently offer training for 19 pro- date (31 December 2012: 333). fessions in Germany. They employed a total of 591 trainees and Another aspect of diversity is increasing the proportion of female apprentices as at 31 December 2013 (31 December 2012: 543). This employees, which rose from 15.9 per cent to 16.1 per cent in 2013. represents a significant increase in the number of trainees and Women occupied 8.0 per cent of management positions (2012: apprentices, which will enable the KION Group to meet its ongoing 8.6 per cent). The Executive Board has resolved to double the pro- recruitment needs. Work placements for students combining voca- portion of women in management positions by 2020. Going forward, tional training with a degree course are also offered in cooperation the KION Group intends to fill more management positions with with various universities. employees from outside Germany in order to better reflect the Com- The continuing professional development on offer was expanded pany’s international make-up. in 2013, for example by using e-learning platforms. This included The KION Group offers flexible working-time models that pro- PC-based training on the KION Group’s code of conduct. mote a good work-life balance. In addition, Linde Material Handling has implemented a company agreement about ‘teleworking / home Ideas management office’, which stipulates the terms on which employees can work at home on a mutually agreed and voluntary basis. The companies in the KION Group regularly reward employees for development of specialist workers and executives its ideas management scheme over the past two years. New sugges- their good ideas. STILL, in particular, has placed greater emphasis on tions are quickly processed using a web tool and then receive recog- Finding highly qualified people to fill specialist and executive posi- nition in regular reports on the intranet. In 2013, 724 ideas were sub- tions is crucial to the KION Group’s success. As a result, one of the mitted, of which 184 were rewarded and put into practice. focuses of HR work across the Group was again the recruitment and development of suitable young talent in 2013. health and safety in the workplace The KION Group endeavours to offer its employees interesting career opportunities and flexible, family-friendly working-time mod- The steps that the KION companies must take with regard to work- els. The Group companies also collaborate closely on areas such as place safety, health and the environment are laid down in a corporate talent management and training & development programmes. This policy. According to this document, the KION Group’s obligations helps to systematically identify and support staff with strong poten- include taking comprehensive precautions to create a safe working We keep the world moving.KION GROUP AG | Annual Report 2013105105 environment and ensuring employees know how to avoid risks and technology provider. Total R&D spending, including depreciation, accidents. amortisation and impairment, as well as capitalisation of develop- At 97.1 per cent, the health rate remained at the same high level ment expenses, amounted to €114.2 million in 2013 (2012: €120.2 mil- as in the previous year. The number of workplace accidents and the lion). The decline is essentially attributable to the sale of the hydrau- workdays lost as a result had fallen slightly compared with 2012. lics business. Research and development (R&D) is therefore geared Analysis of accidents and detailed action plans help to reduce risks towards the overarching aim of containing customers’ total cost of in the workplace. ownership (TCO) – including purchase price, maintenance and repair In addition, LMH has launched a programme for changing the costs and fuel consumption – while complying with environmental culture of health and safety at four German plants. It developed the targets and regulatory requirements. Another aim is to integrate the programme in collaboration with experts at DuPont Sustainable KION Group’s logistics solutions into customers’ value chains and Solutions. harness the potential of new application areas. The medium-term aim is for all sales outlets to implement an Brand-specific and cross-brand modular and platform strate- occupational health and safety management system in accordance gies are pursued to ensure research and development is as cost-ef- with OHSAS 18001. To assist with this, a safety expert has been ficient as possible, the complexity and variety of products is reduced recruited for the Aschaffenburg site. In 2013, STILL’s occupational and development times are shortened. The cross-brand R&D plat- health and safety management system was certified in accordance form enables research results and technological expertise to be with OHSAS 18001. shared, although responsibility for product development lies mainly Besides conventional measures to ensure workplace safety, with the individual companies. increasing attention is being paid to employees’ general health. Since 2013, Linde Material Handling’s German plants have offered Key r&d figures free health checks for all employees. Five key health factors are checked and discussed during an appointment with a company The KION Group spent a total of €114.2 million on R&D in 2013, a doctor. employee share programme similar amount to the previous year. As in 2012, this corresponded to 2.5 per cent of revenue, or 4.5 per cent of revenue from new truck business. Spending on research and development was therefore higher than the industry average once again in 2013. The total Having successfully floated on the stock exchange, the KION Group includes capitalised development costs of €45.7 million (2012: wants to set up a share programme to enable its employees to share €51.2 million) as well as depreciation and amortisation in the amount in the Company’s success. To this end, 200,000 treasury shares of €45.1 million (2012: €55.5 million) (see note [17] in the notes to the were repurchased over a four-week period, which represented consolidated financial statements). around 0.2 per cent of the Company’s share capital. The intention is The number of full-time jobs in R&D teams stood at 944 at the to launch the programme in Germany in 2014 before rolling it out at end of 2013 (31 December 2012: 847). There was particularly strong other sites around the world, wherever possible. growth at the R&D centre in Xiamen (China), which had 232 FTEs at the end of 2013. This centre carries out cross-brand development work, focusing mainly on the economy and value price segments in Research and development emerging markets. strategic focus of research and development In 2013, the KION Group again channelled a considerable proportion of its product revenue into research and development in order to enhance its portfolio so that it can secure its position as a leading We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report106106 total r&d spending* in € million Research and development costs (P&L) Amortisation expense Capitalised development costs total r&d spending R&D spending as percentage of revenue * Total R&D spending for 2012 was adjusted due to the retrospective application of IAS 19R (2011) >> Table 032 change – 8.7 % 18.9 % – 10.9 % – 5.0 % – 2012 124.5 – 55.5 51.2 120.2 2.5 % 2013 113.6 – 45.1 45.7 114.2 2.5 % External costs predominantly related to engineering services, under review found that the Linde diesel trucks were the cleanest materials for prototype development and IT. Linde Hydraulics, which trucks in the highest-volume market segment, i.e. trucks with a load was spun off in 2012, and Linde Material Handling collaborate closely capacity of between 2.5 and 3.5 tonnes. on the development of new hydraulics products. >> Table 032 STILL is expanding its RX 70 range with the RX70-60/80 and RX70-40/50 models. The focus is on adhering to emissions legisla- The KION Group takes comprehensive measures to protect the tion, with diesel particulates being reduced by more than products it develops against imitations. In 2013, the KION compa- 92.0 per cent. Technical aspects – handling capacity, driving perfor- nies were granted a total of 85 patents (2012: 63). As at 31 December mance and the ergonomics of the driver’s workstation – have also 2013, the companies of the KION Group held a total of 1,596 patent been improved. Energy consumption by industrial trucks has been applications and issued patents (31 December 2012: 1,495 patent reduced substantially yet again thanks to the tried-and-tested hybrid applications and issued patents). version and STILL’s Blue-Q energy-efficiency programme. Focus of r&d in 2013 region-specific and customer-specific design reduction of emissions and fuel consumption In 2013, the KION Group’s R&D centre in Xiamen again focused on developing platform concepts for China and other emerging mar- Both Linde and STILL launched updated diesel trucks at the start of kets. The core task was to develop three models with different drive the year in response to new EU emissions standards (97/68/EC systems and in different price categories. A basic, low-cost variant stage IIIB). The pollutants produced by Linde’s H20 to H50 (EVO) (drive unit with a torque converter) was successfully launched on the series of IC counterbalance trucks are well below the maximum per- Chinese market at the start of the year. The model is now being mar- mitted statutory limits thanks to new, low-emission engines as well keted in Brazil as well, having been adapted to meet local require- as a particulate filter fitted as standard. The value for emitted partic- ments. Two more models in the counterbalance truck series are cur- ulate matter (PT) is 84.0 per cent below the limit, hydrocarbons (HC) rently being developed in Xiamen that have more sophisticated drive and nitrogen oxides (NOx) are 26.1 per cent below the limit and the systems. The Indian company Voltas MH is also collaborating with figure for carbon monoxide (CO) is 99.5 per cent below the limit. As the R&D centre in Xiamen and is using an axle developed there for its a result, the trucks are even suitable for use in enclosed spaces. The new electric forklift truck. new trucks are also more energy-efficient and offer improved driver Bespoke solutions play an important role, especially in devel- ergonomics and safety. An analysis of exhaust emissions in the year oped markets. In the year under review, Linde Material Handling We keep the world moving.KION GROUP AG | Annual Report 2013 107107 pushed ahead with customising industrial trucks in accordance with networking customer requirements in the western European market, resulting in a new generation of reach trucks, Linde R14 to R20, which have a The automation and networking of supply chains remains an impor- load capacity of between 1.4 and 2 tonnes. A far greater number of tant subject. In 2013, STILL launched the iGoEasy system, which mast, chassis and battery variants, combined with optional features, can be installed, operated, and adjusted intuitively using an iPad. enable customer-specific solutions to be created from series pro- iGoEasy has been designed for use in plants with low transport vol- duction trucks. At the same time, the chassis and other modules umes where, until now, the best option has been to manage the flow form the basis for other models of the KION Group. This is in line with of goods with just a manually operated truck. The system enables the Group’s modular and platform strategy, which involves a higher simple transport tasks carried out by a single truck to be fully auto- proportion of common parts. mated for the first time, without the need for specially trained staff. drive technology Workplace safety and ergonomics As in the previous year, development of new drive technologies cen- To move heavy loads in explosion protection areas, LMH has tred on powerful lithium-ion batteries for electric and hybrid trucks. brought out two new diesel trucks that meet the EC requirements LMH and STILL launched the first hand pallet trucks and towing for use in zone-two explosive atmospheres (EN 1755), while the vehicles fitted with such batteries at the end of 2013. They store con- Atex version has been type-tested in accordance with 94/9/EC by siderably more energy and can be charged faster than lead-acid bat- TÜV Rheinland. teries. In addition, LMH and STILL are also pushing forward with the The LMH and STILL optical driving path warning system development of lithium-ion batteries for counterbalance trucks in BlueSpot, which warns of approaching trucks in aisles and at blind higher weight categories. Another project is concerned with devel- crossings, has also been available with red LEDs at LMH since oping high-performance booster batteries for hybrid trucks. November, so that the light that stands out most against the colour The KION companies are also conducting fundamental research of the floor can be selected. BlueSpot directional is another new fea- into alternative drive technologies. In a field trial for the production of ture: the LED lights project a blue arrow onto the floor to indicate the the BMW i, the KION Group is currently working with the BMW direction in which the approaching truck is travelling. Group and Munich University of Technology to investigate a hydro- To ascertain how the ergonomics of truck workstations can be gen drive for industrial trucks. The E-LOG-Biofleet research project, further improved, the KION Group and students from Munich Univer- which was launched in 2011 to test the suitability of the fuel-cell sity of Technology carried out a research project in which they devel- hybrid drive developed by Linde and Fronius, officially started a year- oped a working environment based on the principles of universal long field test at DB Schenker in June. Four STILL trucks fitted design. However, more research and testing are required before the with fuel cells built by Danish manufacturer H2-Logic are also being concept can be applied. trialled at a Danish DIy chain. The LMH unit New Business & Products, which is responsible for marketing existing electric drive concepts, teamed up with sweeping technology manufacturer Val’Air S.A.S at MobiliTec 2013 to present a compact hybrid sweeping machine for use in city cen- tres and on industrial sites. LMH won the 2013 Industriepreis in the power transmission and fluid technology category for its ROTRAC E2 and E4 road-rail shunting vehicles. We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report108108 Customers customer satisfaction Sustainability The KION Group endeavours to achieve a balance between environ- mental, economic and social considerations in its business activities. The KION companies gauge customer satisfaction in feedback This focus on sustainability is reflected in its eco-friendly and safe discussions and from the degree of customer loyalty. STILL regularly products that help customers to conserve energy, reduce emissions carries out such surveys in service and sales. A CRM project has and comply with strict workplace safety standards (see ‘Research also been launched with the aim of finding out more about the and development’). Furthermore, the KION Group ensures that its customer structure and customer needs so that resources can be production processes have as minimal an impact on the environ- deployed in an even more targeted manner. ment as possible and that it offers safe and discrimination-free work- The KION Group’s leading market position is underpinned by the ing conditions. accolades that it has earned. In 2013, Linde Material Handling was The corporate policy on workplace safety, health and the envi- again voted the best industrial truck brand when it received the ronment was revised in the year under review. It defines a number of Image Award from the trade magazine VerkehrsRundschau. As part requirements for the companies in the KION Group, including: of a 2013 study to produce an image ranking for the warehousing and transshipment sector, the magazine had commissioned TNS Emnid to analyse the reputations and profiles of the biggest brands in the industrial truck sector. sales and marketing activities The number and quality of contacts with customers at trade fairs enable conclusions to be drawn about existing and new customers’ interest in product innovations. The KION Group has particularly stepped up its activities in the Asia-Pacific region. In mid-May, the KION brand companies Linde, STILL and Baoli jointly presented their product portfolios in the necessary training; of conduct and industry standards; – as a minimum, complying with all relevant national laws, codes – ensuring safe working conditions and providing employees with – avoiding the release of pollutants, discharge and emissions into – reducing the volume of waste by making better use of raw mate- – using materials, products and processes that comply with best – using resources, energy and raw materials efficiently. rials and using recyclable materials; the environment as far as possible; environmental practice; the Indonesian capital, Jakarta. The Indonesia-China Mechanical Strict rules governing health, safety and the environment (HSE) apply and Electrical Products Trade Fair is the biggest of its kind in in all areas of the company. In the reporting year, KION plants around south-east Asia. the world were audited in accordance with a groupwide standard In October, Linde Material Handling presented its Linde H100 to and HSE data was collected for the fourth time. These activities H180 IC trucks with hydrostatic drive at a roadshow that visited increased awareness of workplace safety and environmental protec- Poland, Slovakia, Hungary, Romania and the Czech Republic. LMH tion and identified areas that could still be improved. A groupwide was also represented at last year’s MobiliTec in Hannover, where it system of KPIs was introduced in 2013 to keep better track of the showed three innovative electric trucks. And LMH exhibited along- progress made with HSE matters. The goal is to bring HSE stand- side partners at LogiMAT 2013. Both LMH and STILL also had ards into line worldwide and create a shared culture of awareness stands at CeMAT in Brazil. regarding the environment and safety. At the international ‘transport logistic’ fair in Munich, STILL Safety experts at the KION Group’s various production facilities showcased its expertise in developing and applying alternative began to collaborate more closely last year. Besides monthly confer- drive systems as used in the RX 70 Hybrid, the first series- ence calls, there was also an international HSE conference, at which production hybrid forklift truck. STILL also appeared at the India experts from the individual sites and country organisations presented warehousing&logistics fair in New Delhi. their successful workplace safety activities (see the HR report). For the We keep the world moving.KION GROUP AG | Annual Report 2013109109 first time, numerous representatives from the sales companies also Checking compliance with fundamental human rights and mini- took part. mum social standards has always had the highest priority in the pur- All plants capture data about their energy consumption, vol- chasing function. To satisfy its own requirements and the wish of umes of waste and recycling, water consumption, CO2 emissions many big-ticket customers for end-to-end monitoring of the supply and volatile organic compounds (VOC). This data is included in an chain, the KION Group has developed a supplier policy that forms annual internal environmental report. Data for 2013 was not available the basis for incorporating environmental and ethical stipulations into at the time this group management report was compiled. the supplier management process. According to the 2012 environmental report, energy consump- Furthermore, all KION Group brands acknowledge their respon- tion had declined slightly compared with 2011. Just under half sibilities as corporate citizens. This is demonstrated by the fact that (46.7 per cent) of the energy consumed was electricity and both the Executive Board and employees personally support numer- 27.5 per cent was gas. Approximately 92.2 per cent (2011: ous charities in different countries. Providing support in the event of 92.5 per cent) of waste was recycled. Compared with the previous disasters is a particular priority. For example, trucks from KION com- year, water consumption and CO2 emissions fell slightly while VOC panies were deployed to help build barriers against flooding on the emissions declined significantly. Elbe river in 2013. In addition, Linde Material Handling began to implement a sys- tem for analysing environmental impact using lifecycle assessments. The first step involved investigating and comparing the exhaust emissions of IC trucks in the product portfolio, which revealed that the new EVO models had particularly good emission levels. At its core plant in Hamburg, STILL had its occupational health and safety management system certified in accordance with the BS.OHSAS 18001 standard and its environmental and energy man- agement systems certified in accordance with ISO 14001 and ISO 50001 respectively in 2013. STILL intends to reduce its energy con- sumption considerably over the next few years by using energy effi- ciently and conserving resources. We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportFinancial report110110 Events after the reporting date On 18 December 2013, Weichai Power exercised its option to acquire a further 3.3 per cent of the shares of KION GROUP AG from the stake held by KKR and Goldman Sachs, thereby increasing its stake from 30.0 per cent to 33.3 per cent. The shares were transferred on 15 January 2014. Furthermore, the Executive Board understands that Superlift and Weichai Power have come to an arrangement in the shareholder agreement to grant each other a mutual right of first offer in respect of the shares held by the other shareholder. On 7 January 2014, KKR and Goldman Sachs sold 10.7 million shares – 10.8 per cent of their KION stake – on the stock exchange at a price of €29.50 per share. Following this step, KKR and Gold- man Sachs are now prohibited from selling shares until 7 April 2014. As result of Weichai exercising its option and of the placement of shares, the stake held by KKR and Goldman Sachs has declined from 48.6 per cent to 34.5 per cent. At the same time, the free float grew to 31.1 per cent. We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement report Events after the reporting date Outlook, opportunity and risk report 111111 Outlook, opportunity and risk report OUtlOOK Assumptions Forward-looking statements The forecasts in this section are derived from the KION Group’s mul- tiple-year market, business and financial plan, which is based on certain assumptions. Market planning takes into account macroeco- nomic and industry-specific performance, which is described below. The forward-looking statements and information given below are Business planning and financial planning are based on expected based on the Company’s current expectations and assessments. market performance, but also draw on other assumptions, such as Consequently, they involve a number of risks and uncertainties. those relating to changes in the cost of materials, the KION Group’s Many factors, several of which are beyond the control of the KION ability to command higher prices from customers and movements in Group, affect the Group’s business activities and profitability. Any exchange rates. unexpected developments in the global economy would result in the KION Group’s performance and profits differing significantly from expected macroeconomic conditions those forecast below. The KION Group does not undertake to update forward-looking statements to reflect subsequently occurring events In the opinion of the International Monetary Fund (IMF), the pace of or circumstances. Furthermore, the KION Group cannot guarantee global economic growth will pick up slightly in 2014. The global that future performance and actual profits generated will be consist- economy is expected to grow at a rate of 3.7 per cent and the euro- ent with the stated assumptions and estimates and can accept no zone at 1.0 per cent. The economic situation in emerging markets liability in this regard. is stabilising, and moderate growth is anticipated in those coun- Actual business performance may deviate from our forecasts tries. The forecast for economic conditions is based on the due, among other factors, to the opportunities and risks described assumption that the eurozone will continue to stabilise, monetary here. Performance particularly depends on macroeconomic and policy will become increasingly more restrictive and be adjusted to industry-specific conditions and may be negatively affected by reflect the faster pace of growth, and fiscal policy will remain cau- increasing uncertainty or a worsening of the economic and political tious. The Chinese government is not expected to launch any major situation. growth initiatives. Forecast for 2013 expected sectoral conditions The overall market for industrial trucks will continue to depend heav- The KION Group achieved the forecasts that it had made despite ily on economic conditions in key sales markets, with the level of challenging conditions in the economy as a whole and in the material capital investment and the growth in global trade being particularly handling sector. Order intake and revenue were almost at the same crucial. In 2013, the global market for industrial trucks expanded by level as in 2012. Currency effects had a negative impact on these fig- around 7 per cent, reaching a record level of more than one million ures, which is why the original forecasts made in the 2012 group new trucks ordered. This was primarily driven by a recovery of management report were adjusted slightly downwards in the interim demand in China and North America. Given the positive economic financial report for the third quarter of 2013. There was another prospects and more optimistic investment climate, the KION Group increase in adjusted EBIT and the EBIT margin, as had been antici- anticipates a further increase, albeit moderate, in the worldwide mar- pated. One of the contributing factors here was the further rise in the ket volume in 2014. The major driving forces are likely to be the fur- proportion of total revenue generated by the service business, which ther stabilisation of demand in western Europe, a sustained uptrend increased to 43.9 per cent – above the target of 40 per cent. The in North America and growth in fast-growing Asian and eastern KION Group generated much higher net income of €138.4 million, as European markets. had been forecast in the 2012 consolidated financial statements. We keep the world moving.KION GROUP AG | Annual Report 2013112112 Market expectations are also positive over the longer-term per- expected financial position spective. Based on current macroeconomic forecasts and in view of the rise in global trade volumes, the KION Group predicts an average The KION Group improved the maturity profile of its borrowing in annual growth rate (in units) of about 4 per cent for the global market February 2013 by issuing a bond and then significantly reduced its over the next few years and does not expect there to be significant debt in June when it made its initial public offering. These meas- changes in the proportion of total revenue generated by each prod- ures, combined with its good operating performance, meant that uct segment. the KION Group had reduced net debt to below €1 billion by the expected business situation and financial per- formance end of 2013. The Group intends to continue down this path in 2014, using cash flow from operating activities to further lower net debt and further optimising its capital structure and funding structure. The KION Group aims to unlock the full potential of the western Euro- pean markets and emerging markets in 2014. Overall statement on expected performance The KION Group expects a slight increase in both its order intake and its consolidated revenue compared with 2013. Contributing fac- The basis for the long-term success of the KION Group is the strong tors here will be a recovery of the markets in western Europe and position occupied by its global and regional brands in western increased market share, above all in fast-growing markets, where the Europe and the emerging markets. The global brands Linde Material KION Group also wants to build on its strong position. Service busi- Handling and STILL, in particular, safeguard their technology leader- ness in western Europe and the emerging markets will continue to ship and underline their status as premium brands by maintaining play a significant role in 2014. From a regional perspective, the KION high levels of capital expenditure and R&D spending. Group expects Asia, eastern Europe and the United States to pro- Overall, the KION Group is forecasting profitable growth for 2014 vide particularly strong impetus, assuming only moderate exchange- and aims to achieve a sustained improvement in its market positions rate fluctuations. worldwide. The successful IPO in 2013 lays the foundations for fur- Based on market expectations, the Group forecasts a significant ther optimisation of the Group’s financial position. year-on-year rise in adjusted EBIT resulting from the anticipated rise in revenue and further improvements to processes and cost struc- tures, for example in sales and development. The margin is also likely to increase compared with 2013 owing to the Group’s continued ability to command higher prices, a more favourable cost situation following the closure of the Merthyr Tydfil RISK RePOR t plant, implementation of the modular strategy and better production Risk strategy capacity utilisation at existing plants. In addition, the forecast is based on the assumption that the cost of materials will rise only The business activities of the KION Group necessarily involve risk. moderately and that there will be negative currency effects. Dealing responsibly with risk and managing it in a comprehensive Free cash flow is also expected to be considerably higher in manner is an important element of corporate management. The 2014 than in the previous year. The main factor will be cash flow from overarching aim is to fully harness business opportunities while operating activities, which will be boosted by increased EBIT, among ensuring that risk always remains under control. Using its groupwide other things. Taxes that were paid in 2013 in connection with the sale risk management system, the KION Group contains all identified of the hydraulics business will not be due in 2014. With regard to risks by implementing suitable measures and takes appropriate pre- cash flow from investing activities, the KION Group anticipates higher cautions. This ensures that the losses expected if these risks arise capital expenditure than in 2013. We keep the world moving.KION GROUP AG | Annual Report 2013113113 will be largely covered and therefore will not jeopardise the Compa- statements. The risks reported by the individual companies are com- ny’s continuation as a going concern. bined to form divisional risk reports as part of a rigorous reporting At the KION Group, risk management has always been embed- process. To this end, minuted risk management meetings are held ded in the Accounting & Finance function and now plays an active once a quarter. Moreover, material risks are discussed at the quar- and wide-ranging role due to the strategic focus of Accounting & terly business review meetings. The divisional risk reports are then Finance. The operational units’ business models, strategic perspec- used to compile an overall risk portfolio for the KION Group as a tives and specific plans of action are examined systematically. whole. To support this, the relevant departments of the holding com- Principles of risk management pany are consulted each quarter in order to identify and assess risk – particularly Company-wide, cross-brand risk affecting areas such as treasury, purchasing, tax, human resources and financial services. The Executive Board of KION GROUP AG and the Supervisory To ensure that the risk management systems are fully integrated into Board’s Audit Committee are informed of the Group’s risk position the KION Group’s overall financial planning and reporting process, once a quarter. The Internal Audit department audits the risk man- they are located in the Group Accounting & Finance function. agement system at regular intervals. The procedures governing the KION Group’s risk management activities are laid down in internal risk guidelines. For certain types of risk, such as financial risk or risks arising from financial services, the relevant departments also have guidelines that are specifically geared to these matters and describe how to deal with inherent risks. Risk management is organised in such a way that it directly Material features of the internal control and risk management system pertaining to the (Group) accounting process reflects the structure of the Group itself. Consequently, risk officers principles supported by risk managers have been appointed for each company and each division. A central Group risk manager is responsible for The main objectives of the special accounting-related internal control the implementation of risk management processes in line with pro- system are to avoid the risk of material misstatements in financial cedures throughout the Group. His or her remit includes the defini- reporting, to identify material mismeasurement and to ensure com- tion and implementation of standards to ensure that risks are cap- pliance with the applicable regulations and internal instructions. This tured and evaluated. includes verifying that the consolidated financial statements and The risk management process is organised on a decentralised group management report comply with the relevant accounting basis. Firstly, a groupwide risk catalogue is used to capture the risks standards. There can, however, be no absolute certainty that these attaching to each company. Each risk must be captured individually. objectives are achieved in full and at all times. If the losses caused by a specific risk or the likelihood of this risk occurring exceed a defined limit, the KION Group’s Executive Board material processes and controls in the and its Accounting & Finance function are notified immediately. Each (Group) accounting process risk is documented in a specially developed module within the inter- net-based reporting system that is used for the entire planning and For its (Group) accounting process, the KION Group has defined reporting process. Risks affecting more than one Group company, suitable structures and processes within its internal control and risk such as market risks, competition risks, financial risks and risks aris- management system and implemented them in the organisation. ing from financial services are not recorded individually but are Changes to the law, accounting standards and other pro- instead evaluated at Group level. Consequently, such risks are not nouncements are continually analysed with regard to their relevance quantified. and effect on the consolidated financial statements and group man- The scope of consolidation for risk management purposes is the agement report; the relevant changes are then incorporated into the same as the scope of consolidation for the consolidated financial Group’s internal policies and systems. We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportOutlook, opportunity and risk report114114 All consolidated entities must follow the KION GROUP IFRS Internal control mechanisms and ongoing analysis of the regulatory Accounting Manual when preparing their IFRS reporting packages. framework enable any risks that might jeopardise compliance of the This manual contains the recognition, measurement and disclosure consolidated financial statements and group management report rules to be applied in the KION Group’s accounting in accordance with accounting standards to be identified as soon as possible so with IFRS. The accounting guidelines primarily explain the financial that appropriate countermeasures can be taken. Such risks form reporting principles specific to the KION Group’s business. In addi- part of the KION Group’s overall risk profile and are classified as tion, all companies must adhere to the schedule defined by head operational risk. office for preparing the consolidated financial statements and group management report. The accounting-based internal control and risk management Risks system encompasses defined control mechanisms, automated and manual reconciliation processes, separation of functions, the dou- aggregate risk ble-checking principle and adherence to policies and instructions. The employees involved in the Group’s accounting process In 2013, the KION Group’s overall risk position improved substantially receive regular training in this field. Throughout the accounting pro- compared with the previous year due to repayment in full of the cess, the local companies are supported by central points of con- acquisition finance. With regard to 2014, the risks in the risk matrix tact. The consolidated accounts are drawn up centrally using data below will be continually observed and evaluated. For example, we from the consolidated subsidiaries. A consolidation department with consider the probability of market risk materialising as low because specially trained employees carries out the consolidation activities, of the fairly positive market expectations. However, the possible reconciliations and monitoring of the stipulated deadlines and pro- impact of market risk continues to be rated at a medium risk level cesses. Monthly checklists have been drawn up for the consolidation because of the importance of the market for the KION Group’s busi- process and are worked through in a standardised manner. All post- ness situation and financial performance. As things stand at present, ings are managed centrally and documented. This team also moni- there are no indications of any risks that could jeopardise the Com- tors the system-based controls and supplements them with manual pany’s continuation as a going concern. >> Diagram 004 checks. The entire accounting process contains a number of spe- cific approval stages, for which extensive plausibility checks have been set up. Employees with the relevant expertise provide support on specialist questions and complex issues. The central Internal Audit department also checks, among other things, the reliability of the accounting work by the subsidiaries in Germany and abroad. It focuses primarily on the following aspects: tive Board, other policies and internal instructions; – compliance with legal requirements, directives from the Execu- – integrity and effectiveness of the internal control systems for – correct performance of tasks and compliance with business – correctness of the accounting (and of the financial reporting that avoiding financial losses; principles; is based on the accounting) in terms of form and substance. We keep the world moving.KION GROUP AG | Annual Report 2013115115 risk matrix >> Diagram 004 L E V E L K S R I H G H I I M U D E M W O L • Market risk • Procurement risk • Production risk • Sales risk • Legal risk • Competition risk • R&D risk • IT risk • Financial risk • Risk arising from financial services • Human resources risk of new trucks. Although demand for services is less cyclical, it corre- lates with the degree of utilisation in the truck fleet – which usually declines during difficult economic periods. As the KION Group can only adjust its fixed costs to fluctuations in demand to a limited extent, reductions in revenue impact on earnings. Despite the KION Group’s strong growth in emerging markets, the proportion of revenue it earns in the eurozone remains high. As a result, the market conditions that prevail there impact significantly on the KION Group’s financial performance. Although economic perfor- mance has stabilised somewhat, the eurozone remains susceptible to disruption. Doubts surrounding the stability of the financial system and the ability of the single currency to survive have not been allayed, either. Overall, these factors could reduce eurozone customers’ will- ingness to invest and consequently the demand for the KION Group’s products. Slower than forecast macroeconomic growth in emerging mar- kets could also have a negative impact on global trade volumes and thus on growth in the material handling market. LOW MEDIUM HIGH Various measures aimed at making cost structures more flex- PROBABILITy OF OCCURRENCE HIGH RISK MEDIUM RISK LOW RISK ible – such as the consolidation of production facilities – help to con- tain the earnings risk arising from reductions in revenue caused by economic conditions. Diversification of the customer base in terms of industry and region as well as expansion of service activities also play a role in mitigating risk. Moreover, the KION Group closely mon- The market risks and competition risks described, the risks along the itors the market and its competitors so that it can identify market value chain, the human resources risks and the legal risks largely risks at an early stage and adjust its production capacities in good relate to the Linde Material Handling and STILL segments. By con- time. Besides global economic growth, the KION Group also analy- trast, risks arising from financial services mainly affect the Financial ses exchange rates, price stability, the consumer and investment cli- Services segment, while financial risks predominantly impact on the mate, foreign trade activity and political stability in its key sales mar- Other segment. kets. The risk management function continually analyses the possible impact of the situation in the eurozone on the Group’s financial posi- market risks and competition risks tion and financial performance. In addition to ongoing screening and monitoring, the risk reports regularly include a separate assessment market risk can arise when the economy as a whole or a particular of the risks arising from the sovereign debt crisis. sector does not perform as well as had been anticipated in the out- competition risk describes the risk that growing competitive look. Cyclical fluctuations in macroeconomic activity affect the mar- pressure will prevent the KION Group from achieving its predicted ket for industrial trucks. Customers’ decisions on whether to invest, margins and market share. The markets in which the KION Group particularly in new trucks, depend to a large degree on the macro- operates are characterised by strong competition, often price- economic situation and conditions in their particular sector. During driven. Manufacturers from Asia have cost advantages in production an economic downturn, customers tend to postpone their purchases due to the currency situation and also because local labour costs are We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportOutlook, opportunity and risk report 116116 lower. Competition is therefore fierce, particularly in the lower and risks along the value chain middle price segments, and the impact is especially strong in emerg- ing markets. Building on their local competitive advantages, Asian research and development risks: The KION Group’s market posi- manufacturers – above all those in China – are also looking for tion and business performance depend to a large extent on its ability opportunities to expand. Although the high quality expectations and to remain a leading provider of technology. This requires the Group service needs of customers in developed markets present a barrier to continually develop products that meet customer expectations to growth for many of these manufacturers, this situation is likely to and comply with changing regulatory and technological require- intensify competitive pressures in future. ments. To this end, the KION Group must anticipate customers’ It is also conceivable that competitors will join forces and their needs and quickly bring new products to market. If the Company resulting stronger position will be detrimental to the KION Group’s does not succeed in doing this, its technological and competitive sales opportunities. Moreover, predictions of higher volumes and position could be compromised in the long term. margins may lead to overcapacity, which would put increased pres- The innovations developed by the KION Group are comprehen- sure on prices. sively protected by intellectual property rights, in particular patents. Although the KION Group’s strengths have enabled it to charge Nevertheless, there is always the possibility that products or product appropriate prices until now, it is taking a variety of steps to contain components will be imitated. There is also a risk that patent applica- competition risk. Alliances, partnerships, acquisitions and other tions will not be successful. measures are playing an increasing role in improving the KION The KION Group contains research and development risk by Group’s competitiveness in terms of resources, market access and focusing firmly on customer benefit when developing products. product range. The steps that the KION Group is taking to mitigate Close collaboration between sales and development units ensures its competition risk also include making its plants more efficient and that customer needs are incorporated into the development process securing low-cost sources of supply. on an ongoing basis. The KION Group also continually evaluates its options for procurement risks: Procurement activities constitute a poten- strengthening and consolidating its position in emerging markets, in tial risk for the KION Group in terms of the lack of availability of parts particular through strategic partnerships, the creation of joint ven- and components for logistical or quality reasons and the rising cost tures or acquisition of local manufacturers. One of the risks of such of raw materials, energy, base products or intermediate products. As alliances and acquisitions is that the expected benefits will material- a result, there is always the possibility that the KION Group will face ise only partly or not at all. For example, the organisational integration backlogs in the supply of individual raw materials and components. of new units can harm financial performance for a variety of reasons. KION obtains some of its key components, such as combustion It is also possible that a partner will collaborate with competitors if engines, tyres, high-performance forged and electronic parts, from a exclusivity agreements are not in place. limited number of core suppliers. Other risks arise as a result of constant changes in the Compa- The risk of supply bottlenecks – for example in the event of a ny’s political, legal and social environment. Because it operates in shortage of raw materials or financial difficulties at core suppliers – countries in which the political or legal situation is uncertain, the cannot be ruled out in future. The KION Group mitigates this risk KION Group is exposed to the consequent risk of government reg- through appropriate diversification of its supplier structure in the ulation, capital controls and expropriations. The KION Group miti- context of a global procurement organisation. In addition, the sup- gates such strategic risks by, for example, carrying out in-depth plier development department, which focuses on improving suppli- market research, conducting thorough evaluation procedures to ers’ production processes, helps suppliers to ensure that their pro- assess political and economic conditions and drafting contracts cesses are cost-efficient and offer excellent quality. To build its appropriately. industrial trucks, Linde Material Handling requires hydraulic compo- nents that are manufactured by the affiliated company Linde Hydrau- We keep the world moving.KION GROUP AG | Annual Report 2013117117 lics. Because LMH is highly dependent on these components, their ever. It is also conceivable that customers would face a liquidity supply is secured by detailed long-term contractual agreements. shortfall and therefore be unable to fulfil their payment obligations LMH also has access to patents and other intellectual property rights immediately or even at all. Currently, there is little dependence on that are important to its business activities. individual sectors in the KION Group’s customer portfolio. The KION Price changes present another procurement-related risk. In Group’s reliance on individual customers also remains low. Its busi- 2013, around 26.4 per cent of the cost of materials for new trucks ness is also highly diversified from a regional perspective. In addition, was directly influenced by changes in commodity prices. Moreover, the KION Group supplies companies of all sizes. Experience has conditions on the commodity markets typically affect component shown that the KION Group’s exposure to the risk of possible pay- prices after a delay of three to six months. The KION Group endeav- ment defaults is low, but this risk can be further mitigated by recov- ours to pass on price increases to customers but cannot always do ering any collateral. so entirely due to market pressures. It risks: A high degree of interconnectedness between sites production risks are largely caused by quality problems, possi- and with customers and other companies means that KION also ble operational disruptions or production downtime at individual relies on its IT systems working flawlessly. The KION Group under- sites. In such cases, the KION Group’s closely integrated manufac- takes ongoing further development of a reliable, extendable and flex- turing network presents a heightened risk to its ability to deliver ible IT system environment with the aim of countering any IT-related goods on time. There is also a risk that structural measures and reor- risks that may arise from the failure of IT systems and IT infrastruc- ganisation projects will not be implemented owing to disruption of ture. Internal IT resources are pooled in KION Information Manage- production or strikes. Delays in delivery or a rise in the number of ment Services GmbH, which has well-established processes for complaints could harm the KION Group’s premium positioning and, portfolio management and project planning and control. Independ- as a result, its financial situation. ent external audits are conducted to provide additional quality assur- To mitigate these risks, the KION Group carries out preventive ance. Various technical and organisational measures protect the maintenance, implements fire protection measures, trains its staff data of the KION Group and its Group companies against unauthor- and builds a pool of external suppliers. The Company has taken out ised access, misuse and loss. These measures include procedures a commercially appropriate level of insurance cover against loss. to validate and log access to the Group’s infrastructure. Quality assurance is a high priority throughout the value chain and reduces possible quality-related risks arising from the products and Financial risks services provided. The KION Group mitigates its quality-related risks significantly by applying rigorous quality standards to its develop- Group Treasury is responsible for ensuring that sufficient financial ment activities, conducting stringent controls throughout the pro- resources are always available for the KION Group’s international cess chain and maintaining close contact with customers and sup- growth. The main types of financial risk managed by Group Treasury, pliers. To mitigate risks resulting from restructuring measures, the including risks arising from funding instruments, are liquidity risk, KION Group undertakes such measures only after a comprehensive currency risk, interest-rate risk and counterparty risk. Credit risk planning process and works closely with employee representatives consists solely of counterparty risks attaching to financial institu- to ensure HR measures are implemented with the minimum possible tions. Risk management procedures issued by Group Treasury stip- social impact. ulate how to deal with the aforementioned risks. The main sales risks – besides a drop in revenue caused by The KION Group reduced its financial risk considerably during market conditions – result from dependence on individual customers the year under review by increasing its equity and repaying the and sectors. For example, it is possible that customers would post- acquisition finance in full. Long-term borrowing by the KION Group pone or cancel orders during a period of economic difficulty. There consists of two secured corporate bonds with a total volume of have not been any significant cancellations in previous years, how- €975.0 million, which are due to mature in 2018 and 2020, and a We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportOutlook, opportunity and risk report118118 revolving loan facility of €1,045.0 million, which will mature in mid- Pursuant to IFRS, these assets are not amortised and their measure- 2018. Taking into account the other loan obligations of individual for- ment depends, above all, on future expectations. If these future eign companies and contingent liabilities, €184.4 million of this expectations are not fulfilled, there is a risk that impairment losses amount was being utilised in the form of loans and guarantees as at will have to be recognised on these assets. 31 December 2013. This meant that undrawn credit lines amounted The individual Group companies directly manage counterparty to €860.6 million. Risk arising out of the more favourable lending risks involving customers. These counterparty risks have not conditions that have been agreed were not regarded as material as changed significantly, despite the financial crisis. Each individual at 31 December 2013. The more favourable conditions, which were Group company has established a credit management system for agreed as part of the IPO, particularly relate to the restrictions in identifying customer-related counterparty risks at an early stage and respect of complying with financial covenants and upper limits for initiating the necessary countermeasures. Analysis of the maturity certain transactions and in respect of the obligation to submit special structure of receivables is an integral element of monthly reporting. regular reports. The KION Group complied with all the lending cove- nants in the reporting year. risks arising from financial services The Company generally refers to credit ratings to manage coun- terparty risk when depositing funds with a financial institution. The KION Group’s leasing activities mean that it may be exposed to The KION Group only uses derivatives to hedge underlying residual value risks from the marketing of trucks that are returned by operational transactions; they are not used for speculative purposes. the lessee at the end of a long-term lease and subsequently sold or It is exposed to currency risk because of the high proportion of its re-leased. Residual values in the markets for used trucks are there- business conducted in currencies other than the euro. Normally, at fore constantly monitored and forecast. The KION Group regularly least 50.0 per cent of the currency risk related to the planned oper- assesses its overall risk position arising from financial services. ating cash flows based on liquidity planning is hedged by currency The risks identified are immediately taken into account by the forwards in accordance with the relevant guideline. The interest-rate Company in the costing of new leases by recognising writedowns or swaps and currency swaps that had been used in 2012 to hedge valuation allowances and adjusting the residual values. Risk-mitigat- interest-rate risk and currency risk arising out of acquisition finance ing factors include the demand for used trucks, which stabilises the had been terminated in connection with the repayment of this finance residual values of the KION Group’s industrial trucks. The majority of by the middle of 2013. the residual values have underlying remarketing agreements that Group Treasury rigorously complies with and monitors the strict transfer any residual-value risk to the leasing company. This had a separation of functions between the front, middle and back offices. positive impact on the financial results in 2013. Groupwide standards Each Group company’s liquidity planning is broken down by cur- to ensure that residual values are calculated conservatively, com- rency and incorporated into the KION Group’s financial planning and bined with an IT system for residual-value risk management, reduce reporting process. Group Treasury checks the liquidity planning and risk and provide the basis on which to create the transparency uses it to determine the funding requirements of each company. required. The funding terms and conditions faced by the lenders them- The KION Group mitigates its liquidity risk and interest-rate risk selves (manifested, for example, in the payment of liquidity premiums by ensuring that most of its transactions and funding loans have on interbank lending) may result in a future shortage of lines of credit matching maturities and by constantly updating its liquidity planning. and / or increased financing costs for companies. However, the Long-term leases are primarily based on fixed-interest agreements. Group currently does not expect any further changes in its lines of The credit facilities provided by various banks and an effective dun- credit or any excessive increases in margins. ning process ensure that the Group has sufficient liquidity. Goodwill and the brands represented 34.7 per cent of total In order to exclude currency risk, the KION Group generally assets as at 31 December 2013 (31 December 2012: 33.3 per cent). funds its leasing business in the local currency used in each market. We keep the world moving.KION GROUP AG | Annual Report 2013119119 Because of low default rates, counterparty risk has not been sig- the existing risk provision in the form of insurance or provisions will nificant to date in the Group. The KION Group has not identified any be sufficient in each individual case. However, the KION Group is material changes between 2012 and 2013. The Group also mitigates not expecting any of these existing legal proceedings to have a any losses from defaults by its receipt of the proceeds from the sale material impact on its financial position or financial performance. of repossessed trucks. In addition, receivables management has These lawsuits relate, among other things, to liability risks, espe- been improved by enhancing the dunning process. The credit port- cially as a result of legal action brought by third parties because, for folio management system was updated during 2013. Besides the example, the Company’s products were allegedly faulty or the design of the business processes, it also encompassed the risk Company allegedly failed to comply with contractual obligations. management and control processes. Further legal risk may arise as a result of the environmental restora- Moreover, the KION Group offers the majority of financial ser- tion of sites that have been shut down in recent years, for example vices indirectly via selected financing partners that bear the risks of work required due to contamination. Any damage to the environ- the finance transaction. As far as these financial services are con- ment may lead to legal disputes and give rise to reputational risk. cerned, the KION Group bears the counterparty risk in under The KION Group has taken measures to prevent it from incur- 3 per cent of cases. ring financial losses as a result of these risks. Although legal dis- putes with third parties have been insignificant both currently and human resources risks and legal risks in the past, the Company has a centralised reporting system to record and assist pending lawsuits. In addition to the high quality The KION Group relies on having highly qualified managers and and safety standards applicable to all users of the Company’s experts in key roles. If they left, it could have a long-term adverse products, with which it complies when it develops and manufac- impact on the Group’s prospects. tures the products, it has also taken out the usual types of insur- That is why the KION Group actively engages in HR work ance to cover any third-party claims. These issues are also tackled aimed at identifying and developing young professionals with high by teams whose members come from a variety of functions. The potential who already work for the Company and retaining them aim of the teams is to identify and avoid risks, for example the risks over the long term, thereby enabling succession planning for key arising from inadequate contractual arrangements. A further objec- roles across the Group. The KION Group also positions itself in the tive of this cooperation across functions is to ensure compliance external market as an employer of choice. This will enable it to with mandatory laws, regulations and contractual arrangements at make strategic additions to its portfolio of existing staff and, in this all times. way, avert the risk of possibly losing expertise and thereby becom- Owing to the KION Group’s export focus, legal risk and reputa- ing less competitive. tional risk arise due to the numerous international and local export Restructuring measures may result in a risk of strikes and reac- controls that apply. The Company mitigates these risks with a variety tions of other kinds by the workforce. As demonstrated several of measures. Consequently, export controls are an important part of times in the past, this risk is contained by collaborating closely with the compliance activities carried out by the Group companies. employee representatives and, if job losses are necessary, taking comprehensive steps to ensure they are achieved with the mini- mum possible social impact. The legal risks arising from the KION Group’s business are typ- ical of those faced by any company operating in this sector. The Group companies are a party in a number of pending lawsuits in various countries. The individual companies cannot assume with any degree of certainty that they will win any of the lawsuits or that We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportOutlook, opportunity and risk report120120 OPPORtUNIty RePOR t Management of opportunities Opportunity situation market opportunities The economy as a whole may perform better than expected in 2014. For example, the eurozone might stabilise at a faster rate than pre- Opportunity management, like risk management, forms a central dicted by economic research institutes. This could also have a posi- part of the Company’s day-to-day management. Individual areas of tive impact on growth rates in eastern Europe and other emerging opportunity are identified within the framework of the strategy pro- markets. Moreover, circumstances may occur in the wider market at cess. Opportunities are determined and managed on a decentral- any time – such as quality problems at competitors or the effects of ised basis in line with the Group strategy. consolidation – that boost demand for products from the KION There are monthly reports on the opportunity situation as part of Group brands. New, unforeseen regulatory initiatives could be the regular Group reporting process. As a result, the KION Group is launched, for example the tightening of health and safety regulations in a position to ascertain at an early stage whether market trends, or emissions standards, that would push up demand for the pre- competitive trends, or events within the Group require individual mium products offered by the KION Group brands. Average prices areas of opportunity to be re-evaluated. This may lead to reallocation for procuring commodities over the year may be cheaper than antic- of the budgets earmarked for the realisation of opportunities. Such ipated. decisions are made on the basis of the potential of the opportunity, Medium- to long-term market opportunities are presented, in drawing on empirical values. There is no management system for the particular, by: evaluation of opportunities comparable to the system for risk man- agement. – growing demand for intralogistics products and services as a consequence of globalisation, industrialisation and fragmenta- Categorisation of opportunities By ‘opportunities’, we mean positive deviations from the expecta- tions set out in the outlook relating to the economic situation and the KION Group’s position. Opportunities are divided into three catego- tion of supply chains; oped markets; – high demand for replacement investments, especially in devel- – the trend towards outsourcing service functions to industrial – the trend towards trucks powered by electric motors – one of the truck manufacturers; ries: KION Group’s particular strengths. Market opportunities describe the potential resulting from trends in the market and competitive environment and from the regulatory strategic opportunities situation. Strategic opportunities are based on implementation of the The realisation of strategic opportunities is already largely reflected in Group’s strategy. They may lead to positive effects that exceed plan- the expectations regarding the KION Group’s financial performance ning assumptions. in 2014. Nonetheless, its actual performance may be even more pos- Business-performance opportunities arise in connection with itive if the effects of individual measures exceed expectations. New operational activities along the value chain, such as restructuring or strategic opportunities that were not part of the planning may arise cost-cutting measures. over the course of the year, for example acquisitions and strategic partnerships. We keep the world moving.KION GROUP AG | Annual Report 2013121121 The KION Group’s medium- to long-term strategic opportunities arise, in particular, from: – strengthening of its market-leading position in core western European markets, especially in view of its leading technology and high proportion of customer-specific fittings; lifecycle, taking advantage of the high number of trucks in use; – expansion of the service portfolio at every stage of the product – harnessing of market potential in fast-growing regions; – expansion of business in North America. Business-performance opportunities The expected consequences of the planned measures for increasing efficiency and restructuring – such as the closure of the plant in Mer- thyr Tydfil, which was the final phase in the restructuring of the Euro- pean production sites – and the harnessing of intra-group synergies have also been incorporated into the 2014 forecast. Nevertheless, effects might occur that are better than had been expected. The following occurrences may lead to profitability increases in the medium term: – ongoing efficiency increases at production sites; – use of global development capacities and product ranges; – modular and platform strategy for products across the Group. We keep the world moving.KION GROUP AG | Annual Report 2013Group manaGement reportOutlook, opportunity and risk reportConsolidated finanCial statements Contents 123 Consolidated Financial Statements Consolidated inCome statement Consolidated statement of Comprehensive inCome Consolidated statement of finanCial position Consolidated statement of Cash flows Consolidated statement of Changes in equity notes to the Consolidated finanCial statements Basis of presentation Notes to the consolidated income statement Notes to the consolidated statement of financial position Other disclosures auditors’ opinion responsibility statement 124 125 126 128 130 132 132 152 162 197 238 239 KION GROUP AG | Annual Report 2013 We keep the world moving. 124 Consolidated income statement Consolidated income statement in € million Revenue Cost of sales gross profit Selling expenses Research and development costs Administrative expenses Other income Other expenses Profit from at-equity investments earnings before interest and taxes Financial income Financial expenses net financial expenses earnings before taxes income taxes Current taxes Deferred taxes net income Attributable to shareholders of KION GROUP AG Attributable to non-controlling interests earnings per share according to ias 33 (in €) Basic earnings per share Earnings per share – diluted * Adjusted due to the retrospective application of IAS 19R (2011), for details see also ‘Accounting policies’ note [8] 2013 4,494.6 – 3,255.2 1,239.4 >> table 033 2012 * 4,726.7 – 3,430.8 1,295.9 [9] [10] [11] [12] [13] [14] [16] – 538.2 – 113.6 – 290.0 121.7 – 46.7 1.7 374.2 48.5 – 268.4 – 219.8 154.3 – 15.9 – 59.0 43.1 138.4 138.8 – 0.4 1.69 1.69 – 562.5 – 124.5 – 313.2 297.0 – 59.5 15.9 549.1 40.5 – 278.7 – 238.2 310.9 – 149.5 – 122.1 – 27.4 161.4 159.3 2.1 2.52 2.52 We keep the world moving.KION GROUP AG | Annual Report 2013 Consolidated finanCial statements Consolidated income statement Consolidated statement of comprehensive income 125 Consolidated statement of comprehensive income Consolidated statement of comprehensive income >> table 034 in € million net income items that will not be reclassified subsequently to profit or loss Gains / losses on employee benefits thereof changes in unrealised gains and losses thereof tax effect items that may be reclassified subsequently to profit or loss Impact of exchange differences thereof changes in unrealised gains and losses thereof realised gains (–) and losses (+) Gains / losses on cash flow hedges thereof changes in unrealised gains and losses thereof realised gains (–) and losses (+) thereof tax effect Gains / losses from at-equity investments thereof changes in unrealised gains and losses other comprehensive loss total comprehensive income Attributable to shareholders of KION GROUP AG Attributable to non-controlling interests * Adjusted due to the retrospective application of IAS 19R (2011), for details see also ‘Accounting policies’ note [28] [37] 2013 138.4 2012 * 161.4 0.7 – 152.3 0.7 1.8 – 1.1 – 16.7 – 34.0 – 34.4 0.4 17.4 66.3 – 41.4 – 7.5 – 0.1 – 0.1 – 152.3 – 215.4 63.1 8.8 2.8 2.8 0.0 6.1 27.3 – 19.7 – 1.6 – 0.0 – 0.0 – 15.9 – 143.5 122.5 123.1 – 0.6 17.9 15.9 2.0 We keep the world moving.KION GROUP AG | Annual Report 2013126 Consolidated statement of financial position Consolidated statement of financial position – assets >> table 035 in € million Goodwill Other intangible assets Leased assets Rental assets Other property, plant and equipment At-equity investments Lease receivables Other non-current financial assets Deferred taxes non-current assets Inventories Trade receivables Lease receivables Current income tax receivables Other current financial assets Cash and cash equivalents Current assets total assets * Adjusted due to the retrospective application of IAS 19R (2011), for details see also ‘Accounting policies’ note [17] [17] [18] [19] [20] [21] [22] [23] [14] [24] [25] [22] [14] [23] [26] 2013 1,494.7 934.0 251.9 461.2 499.4 138.6 308.8 51.7 295.5 2012 * 1,473.2 934.0 191.3 395.1 500.3 154.8 267.1 50.2 264.9 4,435.8 4,231.0 511.8 558.7 170.8 15.4 114.7 219.3 549.9 625.5 132.1 5.5 106.8 562.4 1,590.7 1,982.2 6,026.4 6,213.2 We keep the world moving.KION GROUP AG | Annual Report 2013 Consolidated finanCial statements Consolidated statement of financial position 127 Consolidated statement of financial position – equity and liabilities >> table 036 in € million Subscribed capital Capital contributions for carrying out the approved capital increase Capital reserve Retained earnings Accumulated other comprehensive loss Non-controlling interests equity Retirement benefit obligation Non-current financial liabilities Lease liabilities Other non-current provisions Other non-current financial liabilities Deferred taxes non-current liabilities Current financial liabilities Trade payables Lease liabilities Current income tax liabilities Other current provisions Other current financial liabilities Current liabilities total equity and liabilities * Adjusted due to the retrospective application of IAS 19R (2011), for details see also ‘Accounting policies’ note [27] [28] [29] [30] [31] [32] [14] [29] [35] [30] [14] [31] [32] 2013 98.7 – 2,223.2 – 524.9 – 192.0 5.0 1,610.0 560.1 971.1 403.7 76.5 392.1 306.2 2012 * 0.5 1,132.6 348.5 – 650.7 – 176.3 6.2 660.7 547.6 2,300.7 329.2 87.7 355.1 308.8 2,709.8 3,929.0 227.5 550.5 213.3 27.7 110.3 577.3 51.8 646.0 145.8 85.0 137.9 557.0 1,706.6 1,623.5 6,026.4 6,213.2 We keep the world moving.KION GROUP AG | Annual Report 2013 128 Consolidated statement of cash flows Consolidated statement of cash flows >> table 037 in € million earnings before interest and taxes Amortisation, depreciation and impairment charges of non-current assets Other non-cash income (–) and expenses (+) Gains (–) / losses (+) on disposal of non-current assets Changes in leased assets (excluding depreciation) and lease receivables / liabilities Change in rental assets (excluding depreciation) Change in inventories Change in trade receivables / payables Cash payments for defined benefit obligations Change in other provisions Change in other operating assets / liabilities Taxes paid = Cash flow from operating activities Cash payments for purchase of non-current assets Cash receipts from disposal of non-current assets Dividends received Interest income received Acquisitions of subsidiaries, net of cash acquired Divestments of subsidiaries, net of cash Cash payments for sundry assets = Cash flow from investing activities note [15] [18], [22], [30] [19] [24] [25] [28] [31] [34] [34] [34] [5] [34] 2013 374.2 334.6 14.9 – 5.0 – 65.8 – 170.3 33.8 – 17.2 – 25.1 – 45.0 26.6 – 119.8 336.1 2012 549.1 365.3 – 141.5 – 103.8 – 101.3 – 165.5 20.5 52.9 – 23.3 – 39.9 55.9 – 54.4 414.0 – 125.8 – 155.1 9.9 7.2 7.0 – 25.1 0.0 – 6.7 – 133.5 7.4 5.3 4.5 – 9.7 259.7 – 8.0 104.1 We keep the world moving.KION GROUP AG | Annual Report 2013Consolidated finanCial statements Consolidated statement of cash flows 129 Consolidated statement of cash flows (continued) >> table 037 in € million note 2013 2012 Capital contribution from shareholders for the carried out capital increase Acquisition of own shares Dividends paid to non-controlling interests Cash payments from changes in ownership interests in subsidiaries without loss of control Capital contributions for carrying out the approved capital increase Financing costs paid Proceeds from borrowings Repayment of borrowings Interest paid Cash receipts for other financing activities = Cash flow from financing activities Effect of foreign exchange rate changes on cash and cash equivalents = Change in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year [34] [27] [34] [34] [34] [34] [34] [34] [34] 741.8 – 5.6 – 2.1 – 16.3 0.0 – 56.3 1,095.9 – 2,201.6 – 119.6 25.1 – 538.6 0.0 0.0 – 2.4 – 10.2 467.0 – 15.6 7.7 – 664.6 – 129.7 17.8 – 330.1 – 7.0 1.0 – 343.0 188.9 562.4 219.3 373.5 562.4 We keep the world moving.KION GROUP AG | Annual Report 2013 130 Consolidated statement of changes in equity Consolidated statement of changes in equity in € million balance as at 01/01/2012 Effects from first-time adoption IAS 19R* balance as at 01/01/2012 (restated) Net income for the year* Other comprehensive income (loss)* Comprehensive income (loss) Capital increase Transaction costs Dividends Effects from the acquisition / disposal of non-controlling interests Other changes balance as at 31/12/2012 (restated) balance as at 01/01/2013 Effects from first-time adoption IAS 19R* balance as at 01/01/2013 (restated) Net income for the year Other comprehensive income (loss) Comprehensive income (loss) Capital increase Transaction costs Dividends Acquisition of own shares Effects from the acquisition / disposal of non-controlling interests balance as at 31/12/2013 note [7] [27] [27] [27] [27] [7] [27] [27] [27] [27] [27] * Adjusted due to the retrospective application of IAS 19R (2011), for details see also ‘Accounting policies’ Contributions for carrying out the approved capital increase subscribed capital Capital reserves 348.5 348.5 0.0 0.0 1,137.8 – 5.2 accumulated other comprehensive income (loss) gains / losses equity attribu- retained earnings Cumulative translation adjustment on defined gains / losses gains / losses table to share- non- benefit on cash flow from equity holders of Kion controlling obligation hedges investments group ag interests – 806.4 – 3.3 – 809.8 159.3 159.3 – 0.4 0.2 – 647.7 – 3.0 – 650.7 138.8 138.8 – 13.0 – 524.9 – 35.5 – 35.5 2.8 2.8 – 32.8 – 32.8 – 33.7 – 33.7 20.9 4.3 25.2 – 152.2 – 152.2 – 130.4 3.4 – 127.0 0.7 0.7 – 23.0 – 23.0 6.1 6.1 – 16.9 – 16.9 17.4 17.4 0.4 0.4 – 0.0 – 0.0 0.4 0.4 0.4 – 0.1 – 0.1 – 66.5 – 126.3 0.5 0.3 – 494.7 1.0 – 493.6 159.3 – 143.4 15.8 1,137.8 – 5.2 – 0.4 0.2 654.5 654.2 0.3 654.5 138.8 – 15.7 123.1 859.9 – 13.9 – 5.6 – 13.0 1,605.0 7.1 7.1 2.1 – 0.0 2.0 – 2.4 – 0.5 6.2 6.2 6.2 – 0.4 – 0.2 – 0.6 – 2.1 1.6 5.0 total – 487.6 1.0 – 486.5 161.4 – 143.5 17.9 1,137.8 – 5.2 – 2.4 – 1.0 0.2 660.6 660.3 0.3 660.7 138.4 – 15.9 122.5 859.9 – 13.9 – 2.1 – 5.6 – 11.4 1,610.0 1,132.6 348.5 – 650.7 – 32.8 – 127.0 – 16.9 1,132.6 348.5 1,132.6 348.5 0.0 – 1,132.6 0.0 1,894.0 – 13.9 – 5.4 2,223.2 0.5 0.5 0.0 0.5 0.5 0.5 0.0 98.4 – 0.2 98.7 We keep the world moving.KION GROUP AG | Annual Report 2013 Consolidated statement of changes in equity >> table 038 Consolidated finanCial statements Consolidated statement of changes in equity 131 in € million balance as at 01/01/2012 Effects from first-time adoption IAS 19R* balance as at 01/01/2012 (restated) Net income for the year* Other comprehensive income (loss)* Comprehensive income (loss) Capital increase Transaction costs Dividends Effects from the acquisition / disposal of non-controlling interests Other changes balance as at 31/12/2012 (restated) balance as at 01/01/2013 Effects from first-time adoption IAS 19R* balance as at 01/01/2013 (restated) Net income for the year Other comprehensive income (loss) Comprehensive income (loss) Capital increase Transaction costs Dividends Acquisition of own shares Effects from the acquisition / disposal of non-controlling interests balance as at 31/12/2013 * Adjusted due to the retrospective application of IAS 19R (2011), for details see also ‘Accounting policies’ Contributions for carrying out the subscribed approved note capital capital increase 0.0 1,137.8 – 5.2 0.0 – 1,132.6 1,132.6 348.5 1,132.6 348.5 Capital reserves 348.5 348.5 0.0 0.0 1,894.0 – 13.9 – 5.4 2,223.2 0.5 0.5 0.0 0.5 0.5 0.5 0.0 98.4 – 0.2 98.7 [7] [27] [27] [27] [27] [7] [27] [27] [27] [27] [27] 1,132.6 348.5 – 650.7 – 32.8 – 127.0 – 16.9 accumulated other comprehensive income (loss) Cumulative translation adjustment gains / losses on defined benefit obligation gains / losses on cash flow hedges gains / losses from equity investments equity attribu- table to share- holders of Kion group ag non- controlling interests – 35.5 – 35.5 2.8 2.8 20.9 4.3 25.2 – 152.2 – 152.2 – 23.0 – 23.0 6.1 6.1 – 32.8 – 32.8 – 33.7 – 33.7 – 130.4 3.4 – 127.0 0.7 0.7 – 16.9 – 16.9 17.4 17.4 retained earnings – 806.4 – 3.3 – 809.8 159.3 159.3 – 0.4 0.2 – 647.7 – 3.0 – 650.7 138.8 138.8 – 13.0 – 524.9 0.4 0.4 – 0.0 – 0.0 0.4 0.4 0.4 – 0.1 – 0.1 – 494.7 1.0 – 493.6 159.3 – 143.4 15.8 1,137.8 – 5.2 – 0.4 0.2 654.5 654.2 0.3 654.5 138.8 – 15.7 123.1 859.9 – 13.9 – 5.6 – 13.0 1,605.0 7.1 7.1 2.1 – 0.0 2.0 – 2.4 – 0.5 6.2 6.2 6.2 – 0.4 – 0.2 – 0.6 – 2.1 1.6 5.0 total – 487.6 1.0 – 486.5 161.4 – 143.5 17.9 1,137.8 – 5.2 – 2.4 – 1.0 0.2 660.6 660.3 0.3 660.7 138.4 – 15.9 122.5 859.9 – 13.9 – 2.1 – 5.6 – 11.4 1,610.0 – 66.5 – 126.3 0.5 0.3 We keep the world moving.KION GROUP AG | Annual Report 2013 132 Notes to the consolidated financial statements Basis of presentation [1] General information on the Company standards. All of the IFRSs and IFRICs that had been enacted by the reporting date and that were required to be applied in the 2013 finan- cial year have been applied in preparing the consolidated financial statements. In addition, the changes to the disclosure requirements pursuant to IAS 36 ‘Impairment of Assets’ for non-financial assets, At the Shareholders’ Meeting on 25 April 2013, it was decided to which must be adopted for financial years commencing on or after transform KION Holding 1 GmbH, whose registered office is at Abra- 1 January 2014, were adopted in advance. ham-Lincoln-Strasse 21, 65189 Wiesbaden, Germany, into a public In order to improve the clarity of presentation, certain items are limited company with the name KION GROUP AG. The transforma- aggregated on the face of the statement of financial position and the tion became legally effective when KION GROUP AG was entered in income statement. The items concerned are disclosed and explained the commercial register at the Wiesbaden local court under refer- separately in the notes. Assets and liabilities are broken down into ence HRB 27060 on 4 June 2013. KION GROUP AG is the parent current and non-current items in accordance with IAS 1.60. The con- company of the KION Group in Germany. Superlift Holding S.à r.l., solidated income statement is prepared in accordance with the cost Luxembourg, was the parent company of KION GROUP AG as at of sales (function-of-expense) method. 31 December 2013. The consolidated financial statements are prepared in euros, The KION Group is a leading global supplier of industrial trucks which is the Group’s functional currency and reporting currency. All (forklift trucks and warehouse trucks). It generated revenue of amounts are disclosed in millions of euros (€ million) unless stated €4,494.6 million in the 2013 financial year from its Linde, Fenwick, otherwise (disclosed in thousands of euros in the 2012 report). The STILL, OM-STILL, Baoli and Voltas brands (2012: €4,726.7 million). addition of the totals presented may result in rounding differences of The consolidated financial statements and the group manage- + / – €0.1 million. The percentages shown are calculated on the basis ment report were prepared by the Executive Board of KION GROUP of the respective amounts, rounded to the nearest thousand euros. AG on 10 March 2014. [2] Basis of preparation The separate financial statements included in the consolidation were prepared as at the same reporting date as the annual financial state- ments of KION GROUP AG. financial reporting standards to be adopted for the first time in the current financial year The consolidated financial statements of the KION Group for the financial year ended 31 December 2013 have been prepared in The following financial reporting standards were adopted for the first accordance with section 315a of the German Commercial Code time in 2013: (HGB) in conjunction with the International Financial Reporting Standards (IFRSs) of the International Accounting Standards Board (IASB) applicable as at the reporting date as well as the associated interpretations (IFRICs) of the IFRS Interpretations Committee (IFRS IC) as adopted by the European Union in accordance with Regula- tion (EC) No. 1606/2002 of the European Parliament and of the – Amendments to IFRS 1 ‘First-time Adoption of International Financial Reporting Standards’: amendments relating to fixed transition dates and severe hyperinflation – Amendments to IFRS 1 ‘First-time Adoption of International Financial Reporting Standards’: amendments relating to govern- Council concerning the application of international accounting ment loans with a below-market rate of interest We keep the world moving.KION GROUP AG | Annual Report 2013133 financial reporting standards released but not yet adopted In its consolidated financial statements for the year ended 31 Decem- – Amendments to IFRS 7 ‘Financial Instruments: Disclosures’: off- – IFRS 13 ‘Fair Value Measurement’: The publication of IFRS 13 setting of financial assets and financial liabilities ’Fair Value Measurement’ introduces a separate standard con- taining general rules on the measurement of fair value. The KION ber 2013 the KION Group has not applied the following standards Group applied these rules for the first time in the 2013 financial and interpretations, which have been issued by the IASB but are not year. The main impact of this is enhanced disclosures in the yet required to be adopted in 2013: notes to the financial statements. – Amendments to IAS 1 ‘Presentation of Financial Statements’: amendments relating to the presentation of items of other com- prehensive income. The amended IAS 1 results in a revised presentation of the statement of comprehensive income. Fol- lowing the amendment to the standard, the items of other com- prehensive income and loss must be split into items that will never be reclassified to profit or loss and items that might be reclassified to profit or loss in future periods. – Amendments to IAS 12 ‘Income Taxes’: limited amendment to – Amendments to IAS 19 ‘Employee Benefits’: elimination of the IAS 12 relating to the recovery of underlying assets use of the ‘corridor’ approach and amendments relating to the presentation of items of pension expense. The effects of the amendments to IAS 19 are described in note [7] ‘Accounting policies’. – Amendments to IAS 36 ‘Impairment of Assets’: clarification of recoverable amount disclosures required for non-financial assets – IFRIC 20 ‘Stripping Costs in the Production Phase of a Surface – Annual Improvements to IFRSs (2009-2011). Mine’ closures about the transition to IFRS 9 ‘Financial Instruments’ – Amendments to IFRS 7 ‘Financial Instruments: Disclosures’: dis- – IFRS 9 ‘Financial Instruments’ – Amendments to IFRS 9 ‘Financial Instruments’: mandatory – Hedge Accounting and Amendments to IFRS 9, IFRS 7 and IAS 39 – IFRS 10 ‘Consolidated Financial Statements’ – Amendments to IFRS 10 ‘Consolidated Financial Statements’, effective date IFRS 12 ‘Disclosure of Interests in Other Entities’ and IAS 27 ‘Separate Financial Statements’: amendments relating to the consolidation of investment entities plans: employee contributions – IFRS 11 ‘Joint Arrangements’ – IFRS 12 ‘Disclosure of Interests in Other Entities’ – Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12) – Amendments to IAS 19 ‘Employee Benefits’: defined benefit – IAS 27R ‘Separate Financial Statements’ – IAS 28R ‘Investments in Associates and Joint Ventures’ – Amendments to IAS 32 ‘Financial Instruments: Presentation’: – Amendments to IAS 39 ‘Financial Instruments: Recognition and offsetting of financial assets and financial liabilities Measurement’: amendments relating to the novation of deriva- The first-time adoption of these standards and interpretations has had no significant effect on the presentation of the financial perfor- mance, financial position or notes to the financial statements of the KION Group. tives and continuation of hedge accounting – IFRIC 21 ‘Levies’ – Annual Improvements to IFRSs (2010 – 2012) – Annual Improvements to IFRSs (2011 – 2013). These standards and interpretations will only be applied by the com- panies included in the KION Group from the date on which they must be adopted for the first time. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsBasis of presentation134 We do not currently expect the first-time adoption of IFRS 10 In the case of acquisitions in stages, previously held equity inter- ‘Consolidated Financial Statements’, IFRS 11 ‘Joint Arrangements’ ests are recognised at their fair value on the date they were acquired. and IFRS 12 ‘Disclosure of Interests in Other Entities’ to have any The difference between their carrying amount and fair value is recog- material effect on the presentation of the financial position or finan- nised in the consolidated income statement. cial performance of the KION Group. The first-time adoption of For the purpose of impairment testing, goodwill is allocated to IFRS 12 is likely to result in enhanced disclosures in the notes to the cash-generating units that are likely to benefit from the business financial statements. The effects of the first-time adoption of the combination. other standards and interpretations on the presentation of the finan- Transaction costs are immediately taken to income. Contingent cial position and financial performance of the KION Group are consideration elements are included at fair value at the date of acqui- expected to be insignificant. [3] prinCiples of Consolidation sition when determining the purchase consideration. Contingent consideration elements may consist of equity instruments or finan- cial liabilities. Depending on the category, changes in their fair value are included in subsequent measurements. The consolidated financial statements include all of the parent company’s subsidiaries. Intragroup balances, transactions, income and expenses, and gains and losses on intercompany transactions Acquisitions are accounted for using the acquisition method. In are eliminated in full. Deferred taxes are recognised on temporary accordance with IFRS 3, the identifiable assets and the liabilities differences arising from consolidation transactions. assumed on the acquisition date are recognised separately from Transactions with non-controlling interests are treated as trans- goodwill, irrespective of the extent of any non-controlling interests. actions with the Group’s equity providers. Differences between the The identifiable assets acquired and the liabilities assumed are consideration paid for the acquisition of a non-controlling interest measured at their fair value. and the relevant proportion of the carrying amount of the subsidi- The amount recognised as goodwill is calculated as the amount ary’s net assets are recognised in other comprehensive income. by which the acquisition cost, the amount of non-controlling interests Gains and losses arising from the sale of non-controlling interests are in the acquiree and the fair value of all previously held equity interest also recognised in other comprehensive income, provided there is at the acquisition date exceeds the fair value of the acquiree’s net no change in control. assets. If the cost of acquisition is lower than the fair value of the Associates and joint ventures that are of material importance to acquiree’s net assets, the difference is recognised in income. the presentation of the financial position and financial performance For each acquisition, the Group decides on a case-by-case of the KION Group are accounted for using the equity method. basis whether the non-controlling interest in the acquiree is recog- nised at fair value or as a proportion of the net assets of the acquiree. The option to recognise non-controlling interests at fair value is not currently exercised. Consequently, non-controlling interests are rec- ognised at the proportionate value of the net assets attributable to them excluding goodwill. We keep the world moving.KION GROUP AG | Annual Report 2013135 [4] Basis of Consolidation A joint venture is an equity interest in which the entity is jointly managed by companies in the KION Group and one or more part- ners on the basis of a contractual agreement. Associates are entities in which companies in the KION Group KION GROUP AG’s equity investments include subsidiaries, joint are able to exercise significant influence, either directly or indirectly, ventures, associates and financial investments. over the financial and operating policies of the entity concerned. Sig- In addition to KION GROUP AG, the consolidated financial state- nificant influence is assumed when KION GROUP AG holds between ments of the KION Group include, using the acquisition method, all 20 per cent and 50 per cent of the voting rights. material subsidiaries in which KION GROUP AG holds a majority of All other equity interests over which KION GROUP AG is unable the voting rights, either directly or indirectly, or in which it exercises to exercise control or a significant influence, or that are not jointly control i.e. has the power to govern the financial and operating poli- controlled by KION GROUP AG, are classified as financial invest- cies of the entity so as to obtain benefits from its activities. Subsidi- ments and are not consolidated. aries acquired in the course of the financial year are consolidated The following table shows the number of equity investments from the date at which control is transferred, i.e. the date from which broken down by category: >> Table 039 it is possible to govern their financial and operating policies such that benefit is obtained. Companies sold in the course of the financial year are deconsolidated from the date on which control is lost. Shareholdings by categories >> Table 039 Consolidated subsidiaries Domestic Foreign At-equity investments in Joint Ventures and Associates Domestic Foreign Subsidiaries and financial investments at amortised cost Domestic Foreign 01/01/2013 Additions Disposals 31/12/2013 98 19 79 10 8 2 39 7 32 6 4 2 – – – 14 6 8 5 1 4 2 2 – – – – 99 22 77 8 6 2 53 13 40 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsBasis of presentation 136 A total of 22 German and 77 foreign subsidiaries were fully consol- Ltd., Weifang, China (referred to below as Weichai Power). Linde idated in addition to KION GROUP AG as at 31 December 2013. Material Handling GmbH (referred to below as LMH GmbH) contin- On 11 June 2013, Superlift Holding S.à r.l., Luxembourg, made a ues to hold the remaining 30 per cent. Linde Hydraulics is included non-cash capital contribution – including all of the shares in Superlift in the scope of consolidation as an associate accounted for using Funding S.à r.l., Luxembourg – to KION GROUP AG as part of a cap- the equity method. ital increase. Superlift Funding S.à r.l. was therefore consolidated as Eight joint ventures and associates were accounted for under part of the KION Group for the first time in June 2013. the equity method as at 31 December 2013 (31 December 2012: In July 2013, the KION Group also acquired the remaining shares ten). Two insignificant equity investments are no longer accounted (45.7 per cent) in the French dealer Bretagne Manutention S.A. for a for using the equity method. In each case, measurement under the purchase consideration of €16.2 million. As a result, as at 31 Decem- equity method was performed on the basis of the last available ber 2013, KION GROUP AG indirectly held all the capital and voting annual financial statements. shares in Bretagne Manutention S.A., Pacé, France, via Fen- 53 (2012: 39) companies with minimal business volumes or no wick-Linde S.à r.l., Elancourt. The shortfall of €13.0 million between business operations were not included in the consolidation. The the amount of the non-controlling interest and the fair value of the unconsolidated subsidiaries and the associates not accounted for consideration paid is recognised in retained earnings. using the equity method are of minor importance to the presentation Furthermore, in September 2013, the KION Group acquired the of the financial position and financial performance of the KION remaining shares (49.9 per cent) in the French dealer MANUSOM Group, both individually and as a whole. SAS for a purchase consideration of €0.4 million. As a result, as at 31 Where other requirements are met, the following fully consoli- December 2013, KION GROUP AG indirectly held all the capital and dated companies are exempt from the requirement to prepare voting shares in MANUSOM SAS, Rivery, via STILL SAS, Marne la annual financial statements and management reports in accordance Vallée, France. with sections 264 (3) and 264b HGB on account of their inclusion in Five insignificant subsidiaries were deconsolidated in 2013. In the consolidated financial statements: >> Table 040 2012, the KION Group sold and deconsolidated its controlling inter- est of 70 per cent in Linde Hydraulics GmbH & Co. KG, Aschaffen- A detailed overview of all the direct and indirect shareholdings of burg (referred to below as Linde Hydraulics), to Weichai Power Co., KION GROUP AG is shown in the list of shareholdings in note [45]. German entities exempted from disclosure requirements Entities exempted KION Holding 2 GmbH Klaus Pahlke GmbH & Co. Fördertechnik KG Schrader Industriefahrzeuge GmbH & Co. KG LMH Immobilien GmbH & Co. KG LMH Immobilien Holding GmbH & Co. KG >> Table 040 Head office Wiesbaden Haan Essen Aschaffenburg Aschaffenburg We keep the world moving.KION GROUP AG | Annual Report 2013 137 [5] aCquisitions further strengthen the leading position of STILL and the brand com- pany’s Turkish distribution and service network. The incidental acquisition costs incurred by this business com- bination amounted to €0.3 million and have been recognised as an In May 2013, STILL agreed to acquire 51.0 per cent of the capital and expense for the current period and reported as administrative voting shares in Arser İş Makineleri Servis ve Ticaret A.Ş. (referred to expenses on the face of the consolidated income statement. The below as Arser), which had previously acted as exclusive dealer for impact of this acquisition on the consolidated financial statements of the important Turkish market. The transaction was closed on KION GROUP AG based on the provisional figures available at the 14 August 2013. The acquisition has enabled the KION Group to acquisition date is shown in >> Table 041. Impact of the acquisition on the financial position of the KION Group >> Table 041 in € million Goodwill Other intangible assets Leased / Rental assets Lease receivables Cash and cash equivalents Other assets Total assets Financial liabilities Lease liabilities Other liabilities Total liabilities Total net assets thereof non-controlling interests Cash payment Consideration transferred Previously held share of equity (23 per cent in Willenbrock Fördertechnik Holding GmbH) Total Arser Fair value as at 14/08/2013 Willenbrock Fair value as at 31/12/2013 Fair value at the acquisition date total 4.9 2.3 1.0 20.2 1.6 15.1 45.1 10.4 19.4 9.3 39.0 6.0 0.6 5.5 5.5 0.0 5.5 18.1 13.0 76.7 17.8 0.0 37.7 23.0 15.3 77.7 38.0 1.6 52.8 163.3 208.4 20.1 51.8 56.1 128.0 35.3 4.5 21.3 21.3 9.6 30.8 30.5 71.2 65.4 167.1 41.3 5.0 26.7 26.7 9.6 36.3 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsBasis of presentation 138 The gross amounts of the receivables acquired as part of this trans- The equity-accounted carrying amount of the investment in Wil- action, which constitute trade receivables, totalled €5.8 million lenbrock Fördertechnik Holding GmbH, Bremen, immediately prior to (including insignificant irrecoverable receivables). The acquisition has the acquisition date came to €2.6 million. Remeasurement of the not had any material impact on the KION Group’s revenue or net investment of 23.0 per cent previously held resulted in a fair value of income (loss). If this business combination had been completed €9.6 million. The difference of €7.0 million was taken to income and by 1 January 2013, this would have had no material impact on either recognised under the share of profit (loss) of equity-accounted invest- the revenue or the net income (loss) reported by the KION Group for ments in the consolidated income statement. the first nine months of this year. The purchase price allocation for The incidental acquisition costs incurred by this business combi- the acquisition described above was only provisional as at 31 Decem- nation were insignificant and have been recognised as an expense for ber 2013 because some details, particularly in the area of leasing, the current period and reported as administrative expenses in the con- had not yet been fully evaluated. Goodwill constitutes the strategic solidated income statement. and geographical synergies that the KION Group expects to derive The impact of this acquisition on the consolidated financial from this business combination. The goodwill arising from this acqui- statements of KION GROUP AG based on the final figures at the sition is currently not tax deductible. acquisition date is shown in >> Table 041. The KION Group acquired the German dealer Willenbrock on The gross amounts of the receivables acquired as part of this 31 December 2013 by purchasing 51.0 per cent of the capital and transaction, which constitute trade receivables, totalled €12.8 million voting shares in Willenbrock Fördertechnik Holding GmbH, Bremen, (of which from affiliated companies: €2.3 million). At the acquisition Germany. Before this acquisition on 31 December 2013, the KION date, it was assumed that the trade receivables were fully recovera- Group already held 23.0 per cent of the capital and voting shares in ble. Consolidated revenue did not increase as a result of the acquisi- Willenbrock Fördertechnik Holding GmbH, Bremen. As at 31 Decem- tion on 31 December 2013. The net income (loss) reported for 2013 ber 2013, KION GROUP AG therefore indirectly held (via Linde Mate- therefore does not contain any profit attributable to the entity acquired. rial Handling GmbH, Aschaffenburg, Germany) 74.0 per cent of the If the business combination had been completed by 1 January 2013, capital and voting shares in Willenbrock Fördertechnik Holding this would have generated additional revenue of €90.8 million and GmbH, Bremen (and, indirectly, in its subsidiaries). Through Willen- additional net income of €1.8 million for the KION Group in 2013. brock Fördertechnik Holding, Bremen, the KION Group holds signif- Goodwill constitutes the strategic synergies that the KION Group icant equity investments in Willenbrock Arbeitsbühnen GmbH & Co. expects to derive from this business combination. The goodwill aris- KG, Bremen (74.0 per cent), Willenbrock Fördertechnik GmbH & Co. ing from this acquisition is currently not tax deductible. KG, Bremen (74.0 per cent) and Willenbrock Fördertechnik GmbH & Co. KG, Hannover (74.0 per cent). Willenbrock – including its assets, equity and liabilities – was consolidated as a subsidiary of the KION Group for the first time as at 31 December 2013. The acquisition has enabled the KION Group to further strengthen the leading position of Linde and the brand’s German distribution and service network. We keep the world moving.KION GROUP AG | Annual Report 2013139 [6] CurrenCy translation are translated at the average rate for the year. With the exception of income and expenses recognised as other comprehensive income (loss), equity is recognised at historical rates. The resulting translation differences are not taken to income and are recognised in other com- Financial statements in foreign currencies are translated in accord- prehensive income (loss) until subsidiaries are disposed of. ance with the functional currency concept (IAS 21 ‘The Effects of Transactions of the consolidated companies in foreign currencies Changes in Foreign Exchange Rates’). The functional currency is the are translated into the relevant company’s functional currency at the currency of the primary economic environment in which a company rate prevailing on the transaction date. On the reporting date, mone- operates. The modified closing-rate method is used for currency tary items are translated at the closing rate and non-monetary items at translation. the rate prevailing on the transaction date. Currency translation differ- The assets and liabilities of foreign subsidiaries, including good- ences are taken to income and recognised in other income / expenses. will, are translated at the middle spot exchange rate, i.e. at the average The translation rates below were used for currencies that are of the bid or offer rates on the reporting date. Income and expenses material to the financial statements: >> Table 042 Major foreign currency rates in € >> Table 042 Australia (AUD) Brazil (BRL) Switzerland (CHF) China (CNY) United Kingdom (GBP) Russia (RUB) USA (USD) Average rate Closing rate 2013 1.3782 2.8706 1.2308 8.1659 0.8492 42.3328 1.3284 2012 1.2420 2.5114 1.2052 8.1138 0.8112 39.9190 1.2863 2013 1.5414 3.2470 1.2276 8.3218 0.8302 45.2175 1.3746 2012 1.2693 2.7033 1.2079 8.2218 0.8129 40.3252 1.3197 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsBasis of presentation 140 [7] aCCountinG poliCies According to IAS 19R, the return on plan assets is assumed to equal the discount rate underlying the measurement of the defined benefit obligation. Net income for the 2012 financial year has also increased by €1.0 million, while other comprehensive income (after The accounting policies applied in these consolidated financial state- deferred taxes) has gone down by €1.0 million owing to the align- ments are fundamentally the same as those used for the year ended ment of the expected return on plan assets with the discount rate. 31 December 2012. These consolidated financial statements are The change in the accounting treatment of provisions for partial based on the financial statements of the parent company and its retirement obligations has resulted in a decrease in net income (after consolidated subsidiaries prepared in accordance with the standard income taxes) of €0.8 million for the 2012 financial year. The conse- accounting policies applicable throughout the KION Group. quences of the above effects for the 2013 financial year were a rise Changes to accounting policies of around €0.4 million in net income (after income taxes) and a decline of €1.4 million in other comprehensive income (loss). Immediate recognition of past service cost from previous years led to an increase in the retirement benefit obligation of €1.1 million The amendments in IAS 19R ‘Employee Benefits’ are required to be as at 31 December 2012 and of €1.0 million as at 31 December 2013. applied on a retrospective basis to financial statements for financial years commencing on or after 1 January 2013. In the KION Group, actuarial gains and losses, including deferred taxes, were already revenue recognition recognised in other comprehensive income (loss). It is not permitted to reclassify remeasurements recognised in other comprehensive Revenue is the fair value received for the sale of products and ser- income (loss) to profit or loss in future periods. Past service cost vices and rental and lease income (excluding VAT) after deduction of resulting from a retrospective plan amendment is recognised imme- trade discounts and rebates. In accordance with IAS 18, revenue is diately in full. There are also additional disclosures required in the recognised when it is sufficiently probable that a future economic notes to the consolidated financial statements. benefit will accrue to the company and that it can be reliably meas- First-time adoption of the revised IAS 19 in the KION Group for ured. Other criteria may arise, depending on each individual transac- the 2013 financial year has led to an overall decrease in retained tion, such as: earnings / net income of €3.3 million with effect from 1 January 2012. Firstly, this is the result of the revised definition of termination bene- Sale of goods fits, according to which partial-retirement bonus payments must be accumulated as other long-term benefits for employees on a pro-rata With the exception of items classified as ‘sale with risk’, revenue from basis over the vesting period. This has led to an increase in retained the sale of goods is recognised when the KION Group delivers earnings / net income of €1.8 million with effect from 1 January 2012. goods to a customer, the goods are accepted by the customer and Secondly, because the amendment to IAS 19R requires the past ser- the flow of benefits to the Group is considered to be probable. If a vice cost to be recognised immediately, retained earnings / net customer is expected to accept goods but has yet to do so, the corre- income declined by €0.8 million. Furthermore, alignment of the sponding revenue is only recognised when the goods are accepted. expected return on plan assets with the discount rate caused Appropriate provisions are recognised for risks relating to the sale of retained earnings / net income to fall by €4.3 million with effect from goods. In the case of revenue from agreements classified as ‘sale 1 January 2012, while there was an equivalent rise in gains / losses on with risk’, the revenue is recognised pro rata over the term of the employee benefits recognised in other comprehensive income (loss). agreement. The term ‘sale with risk’ and the corresponding revenue recognition are discussed in the following section and in the section ‘Rental assets’. We keep the world moving.KION GROUP AG | Annual Report 2013141 Rendering of services Government grants Revenue from the rendering of services is recognised in the year in Government grants are recognised at fair value provided that the which the services are rendered. For services provided over several Group has satisfied the necessary conditions for receiving the grant. periods, revenue is recognised in accordance with the proportion of Grants not related to capital expenditure are recognised in the the total services rendered in each period (stage of completion). Rev- income statement, under other income, in the period in which the enue from long-term service agreements is therefore recognised on expense intended to be covered by the grant is incurred. Grants for the basis of the average term of the service agreements and in line capital expenditure are deducted from the cost of the asset con- with progressive costs (constant margin). cerned and result in a corresponding reduction in depreciation over Revenue from financial service transactions is recognised in the subsequent periods. the amount of the sales value of the leased asset if classified as a finance lease and in the amount of the lease payments if classified as an operating lease. As part of the financial services provided by the financial income and expenses Group, industrial trucks are also sold to finance partners who then enter into leases directly with the end customer (‘indirect leasing’). Net financial income mainly consists of interest expenses on finan- If significant risks and rewards remain with the KION Group as a cial liabilities, interest income from financial receivables, gains and result of an agreed residual value guarantee that accounts for more losses on financial instruments recognised through profit or loss, than 10 per cent of the asset’s value or as a result of an agreed cus- exchange rate gains and losses on financial activities and the interest tomer default guarantee (‘sale with risk’), the proceeds from the expenses on pension provisions. The expected return on plan assets sale are deferred and recognised as revenue on a straight-line relating to pension provisions is also included in financial income. basis over the term until the residual value guarantee or the default Interest income and expenses are recognised in profit and loss guarantee expires. Interest income and royalties in accordance with the effective interest method. The effective inter- est method is used for calculating the amortised cost of a financial asset or financial liability and the allocation of interest income and interest expenses over the relevant periods. The effective interest Interest income is recognised pro rata temporis in accordance with rate is the interest rate at which the estimated future payments the effective interest method. Income from royalties is deferred in (including all fees that are part of the effective interest rate, transac- accordance with the substance of the relevant agreements and rec- tion costs and other premiums and discounts) are discounted to the ognised pro rata temporis. net carrying amount of the financial asset or liability over the expected Information on the deferral of lease income is contained in the term of the financial instrument. disclosures on the accounting treatment of leases. Dividends are recognised in income when a resolution on distri- bution has been passed. They are reported in the consolidated income statement under other financial income / expenses, provided they are dividends from subsidiaries carried at amortised cost. Cost of sales The cost of sales comprises the cost of goods and services sold and includes directly attributable material and labour costs as well as directly attributable overheads, including depreciation of production equipment and amortisation of certain intangible assets, as well as write-downs of inventories. Cost of sales also includes additions to warranty provisions, which are recognised in the amount of the esti- mated cost at the date on which the related product is sold. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsBasis of presentation142 Goodwill The recoverable amount of a CGU is determined by calculating its value in use on the basis of the discounted cash flow method. Goodwill has an indefinite useful life and is not amortised. Instead, it The cash flows forecast for the next five years are included in the is tested for impairment in accordance with IAS 36 (‘Impairment of calculation for the impairment test in accordance with IAS 36.33(b). Assets’) at least once a year, and more frequently if there are indica- The financial forecasts are based on assumptions relating to the tions that the asset might be impaired. development of the global economy, commodity prices and Impairment testing is performed at the level of the individual exchange rates. The budget for 2014, the medium-term planning cash-generating units (CGUs) or groups of CGUs. A CGU is defined for 2015/2016 and the projections for 2017 to 2018 were used to as the smallest identifiable group of assets that generates cash determine the cash flows. Cash flows beyond the five-year plan- inflows from continuing use that are largely independent of the cash ning horizon were extrapolated for the LMH and STILL CGUs using inflows from other assets or groups of assets. CGUs are generally a growth rate of 1 per cent (2012: 1 per cent). A growth rate of based on the lowest level of an entity at which – for internal manage- 5.0 per cent (2012: 3.0 per cent) was used for VMH on a perpetuity ment purposes – the management systematically monitors and con- basis to take account of forecast trends for the high-growth market trols the contribution to earnings made by the assets concerned, of India and the high level of inflation. including goodwill. However, a CGU may not be larger than an oper- CGU cash flows are discounted using a weighted average cost ating segment as defined in IFRS 8 ‘Operating Segments’. In particu- of capital (WACC) that reflects current market assessments of the lar, CGUs are considered to be clearly defined and independent if the specific risks to individual CGUs. The underlying capital structure for entity’s management has prepared independent forecasts relevant the LMH and STILL CGUs is determined by comparing peer group to decision-making for the individual CGUs. companies in the same sector. The beta factor derived from the peer For the purposes of internal and external reporting, the activities group was 1.07 (2012: 1.08). Yield curve data from the European of the KION Group are broken down into the LMH, STILL, Financial Central Bank (three-month average, rounded) was used; the risk-free Services and Other segments on the basis of their characteristics interest rate as at 1 November 2013 was 2.75 per cent (2012: and risk profile. The 2013 forecast, the budget for 2014, the 2.5 per cent). The market risk premium derived from empirical stud- medium-term planning for 2015 to 2016 and the KION Group’s inter- ies of the capital markets was set at 5.75 per cent (2012: 6.0 per cent) nal projections for 2017 to 2018 were drawn up on the basis of this and was within the bandwidth recommended by the technical com- segment structure. mittee for business valuation and administration (FAUB) of the Ger- The relevant CGUs for the purposes of goodwill impairment test- man Institute of Auditors (IDW), which is 5.5 per cent to 7.0 per cent. ing and the CGUs to which brand names have been allocated are the The market risk premium decreased by 0.25 percentage points LMH and STILL segments and the Voltas Material Handling Private compared with 2012 owing to the increase in the risk-free base rate Limited, Pune, India CGU (referred to below as VMH), which is from 2.50 per cent to 2.75 per cent and the lower inflation forecast of assigned to the Other segment. The Financial Services segment only 1.75 per cent (2012: 2.0 per cent) for Germany with a generally generates a finance margin to cover costs and consequently has declining implied return on equity of currently 8.75 per cent. The almost no impact on cash flow and does not earn any material assumed country risk was 0.28 per cent for the LMH CGU (2012: excess profit. As a result, no goodwill from the original purchase 0.20 per cent) and 0.45 per cent for the STILL CGU (2012: price allocation (PPA) was allocated to this CGU when the new seg- 0.50 per cent). A leverage ratio of 25.4 per cent (2012: 22.7 per cent) ment structure was defined in 2012 in accordance with IAS 36.87. was calculated based on the capital structure determined for the peer group. We keep the world moving.KION GROUP AG | Annual Report 2013143 A leveraged beta of 1.06 (2012: 1.07) was used to determine the impairment test for goodwill. Assessments of indefinite useful life are country-specific WACC for VMH. The risk-free interest rate for India carried out in every period. as at 1 November 2013 was 8.9 per cent (2012: 8.7 per cent); the The brand name of VMH, which is allocated to the Other seg- country-specific risk premium for India was set at 2.4 per cent (2012: ment, is subject to a usage right with a contractually limited term and 3.0 per cent). The WACC before tax, which is used to discount the it will therefore be amortised over its useful life. estimated cash flows, was calculated at 10.5 per cent for LMH (2012: Development costs are capitalised if the following can be 10.7 per cent), 10.8 per cent for STILL (2012: 11.0 per cent) and demonstrated: 16.4 per cent (2012: 21.5 per cent) for VMH. The WACC after tax was 7.7 per cent for LMH (2012: 7.8 per cent), 7.9 per cent for STILL (2012: 8.0 per cent) and 14.9 per cent for VMH (2012: 15.8 per cent). The impairment test carried out as at 31 December 2013 did not reveal any need to recognise impairment losses for the existing goodwill of the LMH, STILL and VMH CGUs. Based on the results of sensitivity analysis, we do not expect that significant impairment losses will need to be recognised for goodwill, even if key assump- tions vary within realistic limits. – the technical feasibility of the intangible asset; – the intention to complete the intangible asset and use or sell it; – the ability to use or sell the intangible asset; – the likelihood that the intangible asset will generate future eco- – the availability of adequate technical, financial and other nomic benefits; resources to complete the development and to use or sell the intangible asset; and – the ability to reliably measure the expenditure attributable to the intangible asset during its development. other intangible assets Capitalised development costs include all costs and overheads Other purchased intangible assets with a finite useful life are carried directly attributable to the development process. Once they have at cost less all accumulated amortisation and all accumulated impair- been initially capitalised, these costs and internally generated ment losses. If events or market developments suggest impairment intangible assets – particularly internally generated software – are has occurred, impairment tests are carried out on the carrying carried at cost less accumulated amortisation and accumulated amount of items classified as other intangible assets with a finite use- impairment losses. Internally generated intangible assets are not ful life. The carrying amount of an asset is compared with its recov- qualifying assets so finance costs are not capitalised. All non- erable amount, which is defined as the higher of its value in use and qualifying development costs are expensed as incurred and its fair value less costs to sell. If the reasons for recognising impair- reported on the income statement under research and develop- ment losses in the past no longer apply, impairment losses not ment costs together with research costs and the amortisation on exceeding the amortised cost of the assets are reversed. capitalised development costs. Other intangible assets with an indefinite useful life are carried at cost and are mainly capitalised brand names. Brand names are not amortised because they have been established in the market for a number of years and there is no foreseeable end to their useful life. In accordance with IAS 36, they are tested for impairment at least once a year or whenever there are indications that the asset might be impaired. The impairment test is performed in the same way as the We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsBasis of presentation144 The following useful lives are applied in determining the carrying amounts of other intangible assets: >> Table 043 Useful life of other intangible assets >> Table 043 Years 4 – 10 10 5 – 7 3 – 15 2 – 10 Customer relationships / client base Technology Development costs Patents and licences Software leases / short-term rentals KION Group companies lease equipment, mainly various industrial trucks, to their customers in order to promote sales. The leases may be of a short-term nature (short-term rental) or long-term nature (leasing). Companies in the KION Group enter into leases as lessors and as lessees. In line with IAS 17, these contracts are classified as finance leases if substantially all of the risks and rewards incidental to ownership of the leased / rental asset are transferred to the les- see. All other rentals and leases are classified as operating leases, again in accordance with IAS 17. If a KION Group company enters into a finance lease as the lessor, the future lease payments to be paid by the lessee are recognised as lease receivables at an amount equal to the net investment in the lease. Interest income is allocated to each reporting period in order to ensure a constant return on the outstanding net invest- ment in the lease. We keep the world moving.KION GROUP AG | Annual Report 2013 145 leased assets In an indirect leasing arrangement, industrial trucks are sold to finance partners who then enter into leases with end customers. If If the economic ownership of leased assets remains with a KION LMH and STILL brand companies provide material residual value Group company as the lessor under an operating lease, the assets guarantees or a customer default guarantee (‘sale with risk’), these are reported as leased assets in a separate item in the statement of transactions, which are classified as sale agreements under civil law, financial position. The leased assets are carried at cost and depreci- are recognised in accordance with the provisions on lessors with ated over the term of the underlying leases. operating leases in conjunction with the IFRS principles for revenue To fund leases, industrial trucks are generally sold to leasing recognition. In this case, the trucks are recognised as assets in the companies. The industrial trucks are then leased back to companies statement of financial position at their cost on the date of the sale in the KION Group (head lease), who sub-lease them to external end and written down to their guaranteed residual value, or zero, on a customers (described below as ‘sale and leaseback sub-leases’). straight-line basis over the period until the residual value guarantee These long-term leases generally have a term of four to five years. If, or the customer default guarantee expires. If the KION Group pro- in the case of sale and leaseback sub-leases, the risks and rewards vides a residual value guarantee, an amount equivalent to the resid- incidental to the head lease are substantially borne by KION Group ual value obligation is recognised under other financial liabilities. companies and are not transferred to the end customer, the corre- sponding assets are reported as non-current leased assets. How- ever, if substantially the risks and rewards incidental to the head other property, plant and equipment lease are transferred to the end customer, a corresponding lease receivable is recognised. In both cases, the funding items for these Property, plant and equipment are carried at cost less straight-line long-term customer leases, which are funded for terms that match depreciation and impairment losses. The cost of internally generated those of the leases, are recognised as lease liabilities. machinery and equipment includes all costs directly attributable to rental assets the production process and an appropriate portion of production overheads. This includes production-related depreciation and pro- portionate costs for administration and social insurance / employee benefits. Rental assets are assets resulting from short-term rentals as well as The cost of property, plant and equipment is reduced by the industrial trucks in relation to which significant risks and rewards amount of any government grants received. Expenses for mainte- remain with the KION Group despite the trucks having been sold nance and repairs are recognised in income to the extent that they (‘sale with risk’). are not required to be capitalised. Borrowing costs are capitalised In the case of short-term rentals, LMH and STILL brand compa- for certain items of property, plant and equipment whose acquisition nies rent industrial trucks to customers directly. Short-term rental or production exceeds one year as soon as the definition of a quali- agreements usually have a term of one day to one year. The signifi- fying asset is met. As was the case in the previous year, there were cant risks and rewards remain with the LMH and STILL brand com- no qualifying assets in 2013. panies. The industrial trucks are carried at cost and depreciated over Depreciation of property, plant and equipment is recognised on the normal useful life of between five and seven years, depending on a straight-line basis and reported in functional costs. The useful lives the product group. and depreciation methods are reviewed annually and adjusted to reflect changes in conditions. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsBasis of presentation146 Useful life of other property, plant and equipment Buildings Plant and machinery Office furniture and equipment >> Table 044 Years 10 – 50 3 – 15 2 – 15 The useful lives above are applied in determining the carrying If there are certain indications of impairment of the property, plant amounts of items of property, plant and equipment. >> Table 044 and equipment, the assets are tested for impairment by comparing the residual carrying amount of the assets with their recoverable KION Group companies also lease property, plant and equipment for amount, which is defined as the higher of value in use and fair value their own use using finance leases, which are recognised as other less costs to sell. If the residual carrying amount is greater than the property, plant and equipment. In this case, the lower of the fair value recoverable amount, an impairment loss is recognised for an asset. and present value of future lease payments is recognised at the incep- The KION Group calculates the recoverable amount primarily on tion of the lease. A corresponding liability to the lessor is recognised the basis of value in use. In determining value in use, the expected under other financial liabilities in the statement of financial position. future cash flows are discounted using a risk-adjusted discount rate, Property, plant and equipment covered by finance leases is taking into account the current and future level of earnings and seg- depreciated over the shorter of its useful life or the term of the lease, ment-specific, technological, economic and general trends. unless title to the leased assets passes to the lessee when the lease If an impairment test for an item of property, plant and equip- expires, in which case the property, plant and equipment is depreci- ment is performed at the level of a cash-generating unit to which ated and the other financial liabilities are reversed over the useful life goodwill is allocated and results in the recognition of an impairment of the leased assets. loss, first the goodwill and, subsequently, the assets must be written The difference between total finance lease liabilities and the fair down in proportion to their relative carrying amounts. If the reason value of the financed leased assets represents the finance charge for an impairment loss recognised in prior years no longer applies, which is recognised in the income statement over the term of the impairment losses not exceeding the amortised cost of the asset lease at a constant rate of interest on the outstanding balance in concerned are reversed. This does not apply to goodwill. each period. At the end of the lease term, the leased assets are either returned or purchased, or the contract is extended. We keep the world moving.KION GROUP AG | Annual Report 2013 147 equity-accounted investments Deferred tax assets also include tax refund claims that arise from the expected utilisation of existing tax loss carryforwards and In accordance with the equity method, associates and joint ventures interest carryforwards in subsequent years and whose utilisation is are measured as the proportion of the interest in the equity of the reasonably certain according to current forecasts. On the basis of investee. They are initially carried at cost. Subsequently, the carrying this estimate, deferred tax assets have been recognised on some amount of the equity investment is adjusted in line with any changes loss carryforwards and interest carryforwards. to the KION Group’s interest in the net assets of the investee. The Deferred taxes are determined on the basis of the tax rates that KION Group’s interest in the profit or loss generated after acquisition will apply or have been announced at the realisation date in accord- is recognised in income. Other changes in the equity of associates ance with the current legal situation in each country concerned. In and joint ventures are recognised in other comprehensive income accordance with the provisions in IAS 12, deferred tax assets and (loss) in the consolidated financial statements in proportion to the liabilities are not discounted. Group’s interest in the associate or joint venture. Deferred tax assets are offset against deferred tax liabilities to If the Group’s interest in the losses made by an associate or joint the extent that they have the same maturity and relate to the same venture exceeds the carrying amount of the proportionate equity taxation authority. attributable to the Group, no additional losses are recognised. Any goodwill arising from the acquisition of an associate or joint venture is included in the carrying amount of the investment in the associate inventories or joint venture. When an associate or joint venture is sold, the Group’s interest in its goodwill is taken into account in determining Inventories are carried at the lower of cost and net realisable value. the proceeds on disposal. The acquisition costs of raw materials and merchandise are cal- If there is evidence that an associate or joint venture may be culated on the basis of an average. impaired, the carrying amount of the investment in question is tested The cost of finished goods and work in progress includes direct for impairment. income taxes costs and an appropriate portion of the material and production overheads and production-related depreciation directly attributable to the production process. Administrative costs and social insur- ance / employee benefits are included to the extent that they are attributable to the production process. Borrowing costs as defined In the consolidated financial statements, current and deferred taxes by IAS 23 are not a component of cost as they are not qualifying are recognised on the basis of the tax laws of the jurisdictions assets as defined by IAS 23.4. The amount recognised is an average involved. Deferred taxes are recognised in other comprehensive value or a value determined in accordance with the FIFO method. income (loss) if they relate to transactions also recognised in other Net realisable value is the selling price that can be realised less comprehensive income (loss). the estimated costs of completion and the estimated costs neces- Deferred tax assets and liabilities are recognised in accordance sary to make the sale. with the liability method for all temporary differences between the Write-downs are recognised for inventory risks resulting from IFRS carrying amounts and the tax base, as well as for temporary duration of storage, impaired recoverability, etc. Write-downs are consolidation measures. reversed up to a maximum of cost if the reasons for their recognition no longer apply. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsBasis of presentation148 trade receivables Available-for-sale financial assets (AfS) are carried at fair value. If they are equity investments for which no market price is available, In the first period in which they are recognised, trade receivables cat- they are carried at cost. Unrealised gains and losses, including egorised as loans and receivables (LaR) are carried at fair value deferred taxes, are reported in other comprehensive income (loss) including directly attributable transaction costs. In subsequent peri- until they are realised. The equity investments in subsidiaries that are ods they are measured at amortised cost using the effective interest reported in other non-current financial assets are carried at amor- method. Appropriate valuation allowances are recognised for identi- tised cost less impairment losses, as observable fair values are not fiable individual risks. Low-interest or non-interest-bearing receiva- available and reliable results cannot be obtained using other permit- bles due in more than one year are carried at their present value. ted measurement techniques. At present there is no intention to sell Cash and cash equivalents these financial instruments. In the first period they are recognised, other financial assets which are categorised as loans and receivables (LaR) are carried at fair value including directly attributable transaction costs. In sub- Cash and cash equivalents comprise cash, credit balances with sequent periods they are measured at amortised cost using the banks and current financial assets that can be transformed into cash effective interest method. Appropriate valuation allowances are rec- at any time and are only subject to a minor level of volatility. ognised for identifiable individual risks. Low-interest or non-inter- other financial assets est-bearing receivables due in more than one year are carried at their present value. Carrying amounts of financial assets are tested for impairment on every reporting date and whenever indications of impairment Primary financial assets are initially recognised and derecognised in arise. If there is an objective indication of impairment (such as a bor- the financial statements on their settlement dates. rower being in significant financial difficulties), an impairment loss Under IAS 39 (‘Financial Instruments: Recognition and Measure- must be recognised directly in the income statement. ment’), financial assets are classified as financial assets held for trad- If objective facts in favour of reversing impairment losses are ing and carried at fair value through profit or loss (FAHfT), financial present on the reporting date, reversals are carried out to an appro- assets carried at fair value through profit or loss upon initial recogni- priate extent. Reversals do not exceed the amortised cost that would tion (FAFVtPL), available-for-sale financial assets (AfS), financial have arisen if the impairment loss had not been recognised. In the assets classified as loans and receivables (LaR) or held-to-maturity case of debt instruments classified as available-for-sale financial financial assets (HtM). assets (AfS), reversals of impairment losses are recognised in the The KION Group did not designate any financial asset as carried income statement. at fair value through profit or loss (FAFVtPL) in the reporting year. The Held-to-maturity financial assets (HtM) are carried at amortised FAHfT category contains derivative financial instruments that do not cost less impairment losses in accordance with the effective interest form part of a formally documented hedge. method. As in the previous year, the KION Group did not categorise any financial assets as HtM in the reporting year. We keep the world moving.KION GROUP AG | Annual Report 2013149 derivative financial instruments In the case of hedges of net investments in foreign subsidiaries, the translation risks resulting from investments with a different func- Derivative financial instruments are measured at their fair value and tional currency are hedged. Unrealised gains and losses on hedging are reported as financial assets or financial liabilities as at the report- instruments are reported in other comprehensive income (loss) until ing date. They are initially recognised and derecognised in the finan- the company is sold. In the past financial year, KION Group compa- cial statements on their settlement dates. nies have not entered into any hedges for net investments in foreign Derivative financial instruments in the KION Group comprise subsidiaries. currency forwards and interest-rate swaps and are used for hedging Further information on risk management and accounting for purposes to mitigate currency and interest-rate risks. In addition, the derivative financial instruments can be found in notes [35] and [36]. options on the remaining shares in Linde Hydraulics are reported as derivative financial instruments (see note [35]). In accordance with IAS 39 (Financial Instruments: Recognition retirement benefit obligation and Measurement), all derivative financial instruments must be measured at their fair value irrespective of an entity’s purpose or The retirement benefit obligation is calculated in accordance with the intention in entering into the derivative contract. Changes in the fair projected unit credit method. Future pension obligations are meas- value of derivative financial instruments in a formally documented ured on the basis of the pro rata vested benefit entitlements as at the hedge are reported in the income statement (for fair value hedges) or reporting date and discounted to their present value. The calcula- in other comprehensive income (loss) (for cash flow hedges). tions include assumptions about future changes in certain parame- The KION Group currently only uses cash flow hedges for cur- ters, such as expected salary and pension increases and biometric rency and interest-rate risks. factors affecting the amount of future benefits. Pension provisions In the case of cash flow hedges, derivatives are employed to are reduced by the fair value of the plan assets used to cover the hedge future cash flow risks from existing underlying transactions or Group’s benefit obligations. Plan assets are measured at fair value. planned transactions. The effective portion of changes in the fair Remeasurements, including deferred taxes, are recognised in value of derivatives is initially recognised in other comprehensive other comprehensive income (loss). It is not permitted to reclassify income (loss), and is subsequently reclassified to the income state- remeasurements recognised in other comprehensive income (loss) ment when the revenue from the corresponding underlying transac- to profit or loss in future periods. The cost of additions to pension tion is realised. The ineffective portion of the changes in fair value is provisions is allocated to functional costs. The interest cost on pen- recognised immediately in net financial income / expenses. sion obligations and the interest income from plan assets are netted If the criteria for hedge accounting are not satisfied, changes in and reported in net financial income / expenses. Further details can the fair value of derivative financial instruments are recognised in the be found in note [28]. income statement. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsBasis of presentation150 other provisions share-based payments Other provisions are recognised when the Group has a legal or con- IFRS 2 distinguishes between equity-settled and cash-settled share- structive obligation to a third party as the result of a past event that based payment transactions. is likely to lead to a future outflow of resources and that can be relia- The portion of the fair value of cash-settled share-based payments bly estimated. Where there is a range of possible outcomes and that is attributable to service provided up to the valuation date is recog- each individual point within the range has an equal probability of nised as an expense in functional costs and is also reported under other occurring, a provision is recognised in the amount of the mean of the provisions. The fair value is recalculated on each reporting date until the individual points. Measurement is at full cost. Provisions for identifia- end of the performance period. Any change in the fair value of the obli- ble risks and contingent liabilities are recognised in the amount that gation must be recognised (pro rata) as an expense. represents the best estimate of the cost required to settle the obliga- tions. Recourse claims are not taken into account. The settlement amount also includes cost increases identifiable as at the reporting date. Provisions with a maturity of more than twelve months are dis- counted using the standard market interest rate. The discount rate is financial liabilities, other financial liabilities, trade payables a before-tax rate that reflects current market expectations for the These liabilities are initially recognised at fair value at the time they time value of money and the specific risks inherent in the liability. are entered into. Directly attributable transaction costs are deducted Accrued interest is recognised in interest expenses. for all financial liabilities that are not subsequently designated as at Warranty provisions are recognised on the basis of past or esti- fair value through profit or loss. mated future claim statistics. The corresponding expense is recog- Non-current financial liabilities and other financial liabilities are nised in cost of sales at the date on which the revenue is recog- then carried at amortised cost. Any differences between historical nised. Individual provisions are recognised for claims that are cost and the settlement amount are recognised in accordance with known to the Group. the effective interest method. Provisions for expected losses from onerous contracts and other business obligations are measured on the basis of the work yet to be performed. A restructuring provision is recognised when a KION Group company has prepared a detailed, formal restructuring plan and this plan has raised a valid expectation in those affected that the com- pany will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it. The measurement of a restructuring provision only includes the direct expenditures arising from the restructuring and not associated with the ongoing activities of the company concerned. We keep the world moving.KION GROUP AG | Annual Report 2013151 assumptions and estimates Significant estimates are involved in calculating provisions for tax. These estimates may change on the basis of new information and The preparation of the IFRS consolidated financial statements experience (see also note [14]). Where necessary, the KION Group’s requires the use of assumptions and estimates for certain line items accounting departments receive assistance from external legal advi- that affect recognition and measurement in the statement of financial sors and tax consultants when making the estimates required. position and the income statement. The actual amounts realised The recognition and measurement of other provisions is based may differ from estimates. Assumptions and estimates are applied in on an estimate of the probability of the future outflow of resources, particular: – in assessing the need for and the amount of impairment losses on intangible assets, property, plant and equipment, and inventories; – in determining the useful life of non-current assets; – in classifying leases; – in measuring options; – in the recognition and measurement of defined benefit pension – in assessing the recoverability of deferred tax assets. obligations, provisions for tax, and other provisions; and supplemented by past experience and the circumstances known to the Group at the reporting date. Accordingly, the actual outflow of resources for a given event may be different from the amount recog- nised in other provisions. Further details can be found in note [31]. Deferred tax assets on tax loss carryforwards and interest carry- forwards are recognised on the basis of an estimate of the future recoverability of the tax benefit, i.e. an assumption as to whether sufficient taxable income or tax relief will be available against which the carryforwards can be utilised. The actual amount of taxable income in future periods, and hence the actual utilisation of tax loss carryforwards and interest carryforwards, may be different from the estimates made when the corresponding deferred tax assets were Goodwill is tested for impairment annually at the level of the recognised. cash-generating units to which goodwill is allocated, applying the The impact of a change to an estimate is recognised in profit or budget for 2014 and the medium-term planning for 2015 to 2016 loss prospectively when it becomes known and assumptions are combined with the growth predicted in the market forecasts for the adjusted accordingly. projections for 2017 to 2018 and assuming division-specific growth rates for the period thereafter. Any material changes to these and other factors might result in the recognition of impairment losses. Further information on goodwill can be found earlier in this note and in note [17]. Information on leases can be found in the sections on leases / short-term rentals, leased assets, rental assets and other property, plant and equipment in this note. Defined benefit pension obligations are calculated on the basis of actuarial parameters. As differences due to remeasurements are taken to other comprehensive income (loss), any change in these parameters would not affect the net profit for the current period. For further details about sensitivity analysis of the impact of significant material assumptions, please refer to the information about the retirement benefit obligation in note [28]. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsBasis of presentation152 Notes to the consolidated income statement [8] revenue The revenue generated by the KION Group in the year under review broken down by product category is as follows: >> Table 045 Revenue by product category >> Table 045 in € million New business Hydraulics Service offering - After sales - Rental business - Used trucks - Other Total revenue Further information on revenue can be found in the segment report in note [38]. 2013 2,519.6 – 1,975.0 1,174.2 443.1 226.4 131.3 2012 2,651.5 167.8 1,907.4 1,149.8 427.6 213.0 117.0 4,494.6 4,726.7 We keep the world moving.KION GROUP AG | Annual Report 2013 153 >> Table 046 2012 18.9 5.2 10.6 211.8 4.0 2.7 43.8 297.0 2013 24.2 10.6 8.4 8.1 7.3 2.0 61.0 121.7 [9] other inCome The breakdown of other income is as follows: >> Table 046 Other income in € million Foreign currency exchange rate gains Income from reversal of provisions Profit from release of deferred lease profits Net gains on the Weichai transactions Gains on disposal of non-current assets Rental income Sundry income Total other income The foreign currency exchange rate gains and losses result from the measurement of financial receivables and liabilities denominated in foreign currency and the measurement of corresponding derivatives. The foreign currency exchange rate gains include gains amounting to €7.6 million (2012: €9.7 million) on derivative financial instruments used to hedge operating currency risk. These gains were offset by foreign currency exchange rate losses (other expenses) of €7.3 mil- lion in 2013 (2012: €5.1 million). Overall, this resulted in a net gain of €0.3 million on derivative financial instruments used to hedge oper- ating currency risk (2012: €4.6 million). The sundry income of €61.0 million reported for 2013 also included earnings from commission collected, which are not reported under revenue. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated income statement 154 [10] other expenses The breakdown of other expenses is as follows: >> Table 047 Other expenses in € million Foreign currency exchange rate losses Losses on disposal of non-current assets Impairment of non-current assets Sundry expenses Total other expenses >> Table 047 2012 23.3 3.3 21.1 11.8 59.5 2013 22.3 1.8 1.2 21.4 46.7 The change in foreign currency exchange rate gains and losses is attributable to exchange rate movements (see also note [9]). The impairment recognised on non-current assets in the reporting year comprised impairment losses of €1.2 million on intangible assets (2012: €4.8 million). In the previous year, impair- [11] share of profit (loss) of equity-aCCounted investments ment losses of €16.3 million had been recognised on other prop- The share of profit of equity-accounted investments amounted to erty, plant and equipment. The impairment losses in 2012 were €1.7 million in the reporting year (2012: €15.9 million). This amount largely caused by the planned closure of production sites. includes income of €7.0 million arising from the remeasurement of an existing equity-accounted investment of 23.0 per cent held in Willen- brock Fördertechnik Holding GmbH, Bremen, Germany, over which a controlling influence can be exerted following the acquisition of fur- ther shares (see note [5]). The amount for the previous year included income of €8.0 million arising from the remeasurement of an existing equity-accounted investment of 49.0 per cent held in Linde Creighton Ltd., Basingstoke, United Kingdom. Further details on equity-ac- counted investments can be found in note [21]. We keep the world moving.KION GROUP AG | Annual Report 2013 155 >> Table 048 2012 12.1 22.5 1.2 4.8 40.5 2013 13.6 27.2 1.1 6.6 48.5 [12] finanCial inCome Financial income breaks down as follows: >> Table 048 Financial income* in € million Foreign currency exchange rate gains (financing) Interest income from leases Net interest income from defined benefit plans Other interests and similar income Total financial income * Financial income for 2012 was adjusted due to the retrospective application of IAS 19R (2011) The interest income from leases relates to the interest portion of lease payments in financial services transactions in which KION Group companies operate as lessors (finance leases). Gains on exchange differences – financing – include gains of €6.2 million from the repayment of a foreign-currency loan denomi- nated in US dollars (2012: €9.1 million, translation of a foreign- currency loan denominated in US dollars) and a gain of €6.8 million on hedging transactions (2012: €0.1 million). The line item ‘Net interest income from defined benefit plans’ relates to the net interest income on the net assets of four pension plans in the United Kingdom in which plan assets exceed pension obligations. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated income statement 156 [13] finanCial expenses Financial expenses break down as follows: >> Table 049 Financial expenses* >> Table 049 in € million Interest expense from loans Interest expense from corporate bond Interest cost of leases Amortisation of finance costs Net interest expense from defined benefit plans Foreign currency exchange rate losses (financing) Interest cost of shareholder loan Interest cost of non-current financial liabilities Other interest expenses and similar charges Total financial expenses * Financial expenses for 2012 was adjusted due to the retrospective application of IAS 19R (2011) 2013 59.1 65.2 43.0 30.2 18.7 9.6 – 1.2 41.5 268.4 2012 121.1 34.5 39.6 11.4 21.0 7.6 27.7 2.2 13.7 278.7 Interest expenses arising from loan liabilities essentially include inter- addition, interest-rate hedging instruments that had been used in est costs of €32.4 million arising from variable-rate loan liabilities the past for the acquisition finance arrangements were ended pre- under the senior facilities agreement (2012: €101.2 million) and losses maturely, which led to an amount of €18.3 million being recognised of €26.7 million on interest-rate swaps (2012: €19.9 million). under financial expenses as interest expenses arising from loan lia- Financial expenses were negatively affected by a number of bilities. Adjusted for these three non-recurring items, net financial non-recurring items totalling €57.5 million in 2013. The remeasure- expenses amounted to €162.4 million in 2013, compared with ment of the options in connection with the 30 per cent equity €238.2 million in 2012. This sustained reduction in net financial investment in Linde Hydraulics resulted in an expense of €14.7 mil- expenses was due, in particular, to conversion of the shareholder lion in 2013 that is reported under other interest expense and simi- loan of €670.8 million provided by Superlift Holding S.à r.l. into lar charges. Repayment in full of the long-term bank loans under equity at the end of 2012, conversion of the loan provided by the acquisition finance arrangements (Senior Facilities Agreement Superlift Holding to Superlift Funding (tranche G) into equity, full or SFA) and the early redemption of the 2011/2018 floating rate note repayment of the acquisition finance and cheaper funding under resulted in deferred borrowing costs of €24.5 million being recog- the new loan facility. nised as an expense as amortisation of borrowing costs in 2013. In We keep the world moving.KION GROUP AG | Annual Report 2013 157 Net interest expense from retirement benefit obligations relates Deferred taxes are recognised for temporary differences to the net interest cost of the net liability of pension plans applying between the tax base and IFRS carrying amounts. Deferred taxes the discount rate for plans in which pension obligations exceed are determined on the basis of the tax rates that will apply or have plan assets. been announced at the realisation date in accordance with the cur- The interest cost of leases relates to the interest portion of rent legal situation in each country concerned. The current corpo- lease payments in financial services transactions in which the rate income tax rate in Germany is 15.0 per cent plus the solidarity material risks and rewards are borne by KION Group companies as surcharge (5.5 per cent of corporate income tax). Taking into lessees (finance leases). Sale and finance leaseback-operating account the average trade tax rate of 14.14 per cent, the combined sub-leases (SALB-FL-OL) incurred interest expenses of €24.0 mil- nominal tax rate for companies in Germany was virtually unchanged lion (2012: €20.7 million). The income from corresponding customer on 2012 at 30.0 per cent. The income tax rates for foreign compa- agreements is, according to IAS 17, a component of the rental and nies used in the calculation of deferred taxes are between lease payments received and is therefore reported within revenue 10.0 per cent and 37.6 per cent (2012: between 10.0 per cent and rather than as interest income. 38.1 per cent). The foreign currency exchange rate losses – financing – include No deferred taxes have been recognised on temporary differ- losses on derivative financial instruments amounting to €6.6 million ences of €88.5 million (2012: €96.1 million) between the net assets (2012: €7.6 million). [14] inCome taxes reported in the consolidated financial statements for the Group companies and the tax base for the shares in these Group compa- nies (outside basis differences) because the KION Group is in a position to manage the timing of the reversal of temporary differ- ences and there are no plans to dispose of investments in the fore- seeable future. The income tax expense of €15.9 million (2012: expense of €149.5 mil- lion) consisted of €59.0 million in current tax expense (2012: €122.1 million) and €43.1 million in deferred tax income (2012: deferred tax expense of €27.4 million). The current tax expense includes expenses of €9.1 million (2012: expenses of €8.8 million) relating to previous financial years. At the reporting date there were income tax assets of €15.4 mil- lion receivable from tax authorities (2012: €5.5 million) and income tax liabilities of €27.7 million (2012: €85.0 million). We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated income statement158 Deferred tax assets are allocated to the following items in the state- ment of financial position: >> Table 050 Deferred tax assets* in € million Intangible assets and property, plant and equipment Financial assets Current assets Deferred charges and prepaid expenses Provisions Liabilities Deferred income Tax loss carryforwards and interest carryforwards Offsetting Total deferred tax assets * Deferred tax assets for 2012 was adjusted due to the retrospective application of IAS 19R (2011) Deferred tax liabilities are allocated to the following items in the state- ment of financial position: >> Table 051 Deferred tax liabilities in € million Intangible assets and property, plant and equipment Financial assets Current assets Deferred charges and prepaid expenses Provisions Liabilities Deferred income Offsetting Total deferred tax liabilities >> Table 050 2012 107.1 4.1 33.8 8.6 121.4 251.0 46.4 31.8 – 339.3 264.9 >> Table 051 2012 452.4 3.3 150.4 0.4 23.7 15.4 2.6 – 339.3 308.8 2013 115.1 2.6 45.1 0.8 112.0 317.4 41.0 62.2 – 400.7 295.5 2013 489.1 7.8 167.7 0.3 21.9 19.8 0.3 – 400.7 306.2 We keep the world moving.KION GROUP AG | Annual Report 2013 159 The deferred tax liabilities essentially relate to the purchase price The KION Group’s corporation-tax loss carryforwards in Ger- allocation in the acquisition of the KION Group, particularly for intan- many as at 31 December 2013 amounted to €169.8 million gible assets and property, plant and equipment. (31 December 2012: €289.8 million), while trade-tax loss carryfor- In April 2013, KION GROUP GmbH, Wiesbaden (controlling com- wards stood at €140.5 million (31 December 2012: €270.8 million). pany; since renamed KION Material Handling GmbH), and Linde There were also foreign tax loss carryforwards totalling €228.5 million Material Handling GmbH, Aschaffenburg (subordinated company), (31 December 2012: €190.5 million). concluded a control and profit-and-loss transfer agreement. The The interest that can essentially be carried forward indefinitely in agreement came into effect upon entry in the commercial register on Germany as at 31 December 2013 amounted to €359.0 million 17 May 2013 and established a tax group for these two companies (31 December 2012: €463.5 million). (single entity for tax purposes) for the 2013 tax assessment period The table below shows the reconciliation of expected income onwards. As a result of this arrangement, additional deferred tax tax expense to effective income tax expense. The Group reconcilia- assets totalling €41.8 million were recognised in 2013 in respect of tax tion is an aggregation of the individual company-specific reconcilia- loss carryforwards that it had previously not been possible to utilise. tions prepared in accordance with relevant local tax rates, taking into Of this amount, €12.7 million had been utilised by 31 December 2013. account consolidation effects recognised in income. The expected Deferred tax assets amounting to €139.0 million (2012: tax rate applied in the reconciliation is 30.0 per cent (2012: €233.2 million) have not been recognised because it is unlikely that 29.9 per cent). >> Table 052 the corresponding benefit can be utilised given the current tax laws. Unrecognised deferred tax assets relate to tax loss carryforwards of €49.7 million (2012: €108.6 million), interest carryforwards of €89.1 million (2012: €124.0 million) and other temporary differences of €0.2 million (2012: €0.6 million). Deferred taxes are recognised on tax loss carryforwards and interest carryforwards to the extent that sufficient future taxable income is expected to be generated against which the losses can be utilised. The total amount of unrecognised deferred tax assets relating to loss carryforwards was €49.7 million (2012: €108.6 million), of which €41.0 million concerns tax losses that can be carried forward indefinitely. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated income statement160 Income taxes* in € million Earnings before taxes Anticipated income taxes Deviations due to the trade tax base Deviations from the anticipated tax rate Change in valuation allowance on deferred taxes** Losses for which deferred taxes have not been recognised Change in tax rates and tax legislation Interest carryforwards for which deferred taxes have not been recognised Non-deductible expenses Permanent differences Tax-exempt income Taxes relating to other periods Deferred taxes prior periods Other Effective income taxes (current and deferred taxes) * Income taxes for 2012 were adjusted due to the retrospective application of IAS 19R (2011) **Mainly due to the actual usability of tax loss carryforwards of KION Material Handling GmbH [15] other inCome statement disClosures >> Table 052 2012 310.9 – 93.1 – 3.9 – 0.3 – 0.6 – 20.0 – 1.5 – 7.1 – 20.2 0.0 20.9 – 8.8 – 11.2 – 3.8 – 149.5 2013 154.3 – 46.2 – 4.0 13.3 41.7 – 7.1 0.1 – 7.0 – 8.1 5.7 2.2 – 9.1 – 1.1 3.7 – 15.9 instead reported under financial expenses as a component of inter- est cost of the defined benefit obligation. Pension expenses essen- tially comprised the pension entitlements of €23.0 million (2012: €16.2 million) and unrecognised past service income of €1.7 million (2012: unrecognised past service cost of €0.3 million) arising from The cost of materials declined by €58.3 million in the reporting year plan amendments and curtailments. to €2,121.7 million (2012: €2,180.0 million). Impairment losses and depreciation expenses on property, Personnel expenses went down by €59.0 million to €1,143.8 mil- plant and equipment together with impairment losses and amortisa- lion in 2013 (2012: €1,202.7 million). These personnel expenses tion expenses on intangible assets amounted to €335.0 million in the included wages and salaries of €900.5 million (2012: €946.6 million), reporting year (2012: €365.3 million). Inventories were written down social security contributions of €203.7 million (2012: €222.1 million) by €13.7 million (2012: €8.2 million). and expenses for pensions of €39.5 million (2012: €34.0 million). The The breakdown of rental and lease payments expensed in the interest cost from the unwinding of the discount on estimated pen- period and arising in connection with operating leases in which KION sion obligations is not recognised under personnel expenses and is Group companies are lessees is as follows: >> Table 053 We keep the world moving.KION GROUP AG | Annual Report 2013 161 Lessee: Expenses recognised for operating lease payments >> Table 053 in € million Procurement lease contracts Sublease contracts Total recognised expenses for lease payments 2013 75.1 20.3 95.4 2012 80.5 19.0 99.4 The expenses in connection with sub-leases relate to leases and well as the capital increases from company funds in the first half of rental agreements in which KION Group companies are both lessors 2013. As a result, the applicable number of shares was adjusted by and lessees. These expenses were offset by income of €40.9 million 63,700,000 no-par-value shares as at 1 January 2013. Due to the in 2013 (2012: €53.6 million). [16] earninGs per share additional capital increases carried out in June 2013 (see note [27]), the number of shares to be taken into account in accordance with IAS 33 rose from 63,950,000 no-par-value shares as at 1 January 2013 to 98,700,000 no-par-value shares as at 31 December 2013. This did not include the 200,000 no-par-value treasury shares which were repurchased by KION GROUP AG between 28 August and 26 September 2013 as part of a buy-back programme. Similarly, the Basic earnings per share are calculated by dividing the net income calculation for the prior-year period shown is based on an adjusted (loss) accruing to the KION GROUP AG shareholders by the weighted weighted average number of shares outstanding of 63,181,642 no- average number of shares outstanding during the reporting period par-value shares. (2013: 81,980,688 no-par-value shares). The net income accruing to As at 31 December 2013, there were no equity instruments that the shareholders of KION GROUP AG was €138.8 million (2012: diluted the earnings per share for the number of shares issued. €159.3 million). Information about determining the net income (loss) As described in note [7], the first-time adoption of the revised accruing to the KION GROUP AG shareholders can be found in the IAS 19 caused the net income for 2013 accruing to the KION consolidated income statement. The number of shares taken into GROUP AG shareholders to rise by €0.4 million (and by €0.3 million account was adjusted in accordance with the calculation method in for 2012). However, this did not lead to a material increase in earn- IAS 33 and reflected a stock split from €2.00 to €1.00 per share as ings per share. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated income statement 162 Notes to the consolidated statement of financial position [17] Goodwill and other intanGible assets Goodwill is allocated to the segments as follows: >> Table 054 Goodwill broken down by segment in € million LMH STILL Other Total goodwill The change in goodwill in 2013 mainly resulted from the acquisition of Willenbrock and STILL Arser, from which goodwill of €18.1 million and €5.0 million arose respectively, and from countervailing currency effects. The goodwill arising from the acquisition of Willenbrock is allocated to the LMH segment, while the goodwill from the acquisi- tion of STILL Arser is allocated to the STILL segment. >> Table 054 2012 907.8 552.2 13.2 2013 925.1 556.5 13.1 1,494.7 1,473.2 We keep the world moving.KION GROUP AG | Annual Report 2013 163 Intangible assets >> Table 055 in € million Balance as at 01/01/2012 Group changes Currency translation adjustments Additions Disposals Amortisation Impairment Reclassification Balance as at 31/12/2012 Gross carrying amount as at 31/12/2012 Accumulated amortisation Balance as at 01/01/2013 Group changes Currency translation adjustments Additions Disposals Amortisation Impairment Balance as at 31/12/2013 Gross carrying amount as at 31/12/2013 Accumulated amortisation Goodwill Brand names Technology & development Sundry intangible assets 1,538.0 16.3 – 0.5 0.2 – 80.7 – – – 1,473.2 1,473.2 – 1,473.2 23.1 – 1.6 – 0.0 – – – 1,494.7 1,494.7 – 0.0 594.4 – – 0.1 – – – 0.3 – – 593.9 594.5 – 0.5 593.9 1.5 – 0.5 – – – 0.3 – 594.7 595.4 – 0.7 251.7 – 0.4 51.2 – 25.1 – 55.5 – 4.8 – 0.1 217.9 426.7 – 208.8 217.9 – – 0.4 45.7 – 0.0 – 45.1 – 1.2 216.9 470.4 – 253.5 131.5 4.7 0.2 18.9 – 3.4 – 29.8 – 0.1 0.2 122.1 232.9 – 110.8 122.1 13.8 – 1.4 17.0 – 0.9 – 28.2 – 122.4 253.4 – 131.0 Total 2,515.6 21.0 – 0.0 70.4 – 109.2 – 85.7 – 4.8 0.1 2,407.2 2,727.4 – 320.2 2,407.2 38.4 – 3.8 62.6 – 0.9 – 73.6 – 1.2 2,428.7 2,813.9 – 385.2 The Group intends to retain and further strengthen the Linde, STILL, life. A value of €1.8 million was attributed to the Voltas brand name OM STILL and KION brand names on a long-term basis. Brand and allocated to the Other segment. This brand name is amortised names worth €473.6 million are assigned to the LMH segment over its useful life of five years. As at 31 December 2013, the brand (31 December 2012: €473.8 million) and brand names worth names allocated to the Other segment had a residual value of €115.3 million to the STILL segment (31 December 2012: €114.0 mil- €5.8 million (31 December 2012: €6.2 million). lion). These assets are not amortised as they have an indefinite useful We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 164 The total carrying amount for technology and development Other intangible assets relate in particular to the intangible assets as at 31 December 2013 was €216.9 million (31 Decem- assets identified in the course of purchase price allocation for the ber 2012: €217.9 million). Development costs of €45.7 million were acquisition of the KION Group, such as the customer base. capitalised in the reporting year (2012: €51.2 million). Total research The amortisation expense and impairment losses on intangible and development costs of €113.6 million (2012: €124.5 million) were assets are reported under functional costs. expensed. Of this amount, €45.1 million (2012: €55.5 million) related to depreciation and amortisation. Impairment losses of €1.2 million were recognised on capitalised development costs and reported within the other expenses in 2013 to reflect the lack of opportunities to use them in future as a result of the planned closure of a production site. This relates to further [18] leased assets impairment losses in connection with the closure of the heavy truck The changes in leased assets in 2013 and 2012 were as follows: plant in Merthyr Tydfil (LMH segment). >> Table 056 Leased assets in € million Balance as at 01/01/ Group changes Currency translation adjustments Additions Disposals Depreciation Reclassification Balance as at 31/12/ Gross carrying amount as at 31/12/ Accumulated depreciation >> Table 056 2012 167.4 – 0.7 135.1 – 60.6 – 51.2 – 0.1 191.3 453.9 – 262.6 2013 191.3 35.2 – 11.4 146.9 – 59.8 – 58.0 7.8 251.9 603.5 – 351.5 Leased assets are attributable solely to the Financial Services seg- Leased assets include assets leased over the long term with a ment and relate to industrial trucks in the amount of €251.6 million residual value of €201.2 million (31 December 2012: €142.7 million) (2012: €191.2 million) that are leased to external customers, and to that are funded by means of sale and leaseback transactions with office furniture and equipment in the amount of €0.3 million (2012: leasing companies and leased assets with a residual value of €0.1 million). €50.7 million (31 December 2012: €48.7 million) that are funded inter- nally or by means of bank loans. We keep the world moving.KION GROUP AG | Annual Report 2013 165 >> Table 057 2012 189.6 80.1 106.1 3.4 2013 225.8 89.6 134.7 1.5 >> Table 058 2012 356.7 1.5 1.5 193.8 – 28.2 – 130.1 – 0.2 395.1 913.0 – 517.9 2013 395.1 42.6 – 6.8 229.4 – 59.1 – 134.3 – 5.6 461.2 949.6 – 488.4 Leased assets resulted in non-cancellable minimum lease pay- ments from customers amounting to €225.8 million (31 Decem- ber 2012: €189.6 million). The following table shows the maturity structure of these payments: >> Table 057 Minimum lease payments in € million Cash receipts from minimum lease payments due within one year due in one to five years due in more than five years [19] rental assets The changes in rental assets in 2013 and 2012 were as follows: >> Table 058 Rental assets in € million Balance as at 01/01/ Group changes Currency translation adjustments Additions Disposals Depreciation Reclassification Balance as at 31/12/ Gross carrying amount as at 31/12/ Accumulated depreciation We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 166 Acquisitions amounting to €127.1 million (2012: €110.1 million) and disposals amounting to €37.8 million (2012: €19.8 million) were attributable to the LMH segment. Acquisitions amounting to €102.4 mil- lion (2012: €85.4 million) and disposals amounting to €21.4 million (2012: €10.2 million) were attributable to the STILL segment. The breakdown of rental assets by contract type is shown in the following table: >> Table 059 Rental assets broken down by contract types >> Table 059 Operating leases as lessor Sale with risk Total in € million Industrial trucks Truck equipment Total rental assets 2013 375.3 21.5 396.8 2012 323.6 4.6 328.2 2013 64.3 0.1 64.4 2012 66.8 0.1 66.9 2013 439.6 21.5 461.2 2012 390.4 4.7 395.1 Rental assets comprises assets resulting from short-term rentals (‘operating leases as lessor’) and assets in relation to which signifi- cant risks and rewards remain with the KION Group although they were sold (‘sale with risk’). We keep the world moving.KION GROUP AG | Annual Report 2013 167 [20] other property, plant and equipment The changes in the carrying amounts of other property, plant and equipment were as follows: >> Table 060 Other property, plant and equipment >> Table 060 in € million Balance as at 01/01/2012 Group changes Exchange rate adjustments Additions Disposals Depreciation Impairment Reclassification Balance as at 31/12/2012 Gross carrying amount as at 31/12/2012 Accumulated depreciation Balance as at 01/01/2013 Group changes Exchange rate adjustments Additions Disposals Depreciation Reversal of impairment Reclassification Balance as at 31/12/2013 Gross carrying amount as at 31/12/2013 Accumulated depreciation Plant, machinery, and office furniture and equipment Advances paid and assets under construction Land and buildings 345.2 3.0 – 0.3 9.9 – 19.0 – 14.1 – 12.3 9.9 322.3 637.6 – 315.4 322.3 11.8 – 5.2 6.2 – 3.2 – 14.7 – 2.8 320.0 647.2 – 327.2 188.5 – 0.2 – 0.1 65.7 – 30.4 – 63.1 – 4.0 6.0 162.4 888.0 – 725.6 162.4 6.1 – 2.7 46.5 – 2.9 – 53.1 0.5 1.5 158.3 939.6 – 781.3 20.1 – – 0.1 17.5 – 6.2 – – – 15.7 15.6 15.6 – 15.6 0.6 – 0.2 11.7 – 0.1 – – – 6.5 21.1 21.1 – Total 553.8 2.9 – 0.5 93.2 – 55.6 – 77.2 – 16.3 0.2 500.3 1,541.3 – 1,040.9 500.3 18.5 – 8.1 64.4 – 6.2 – 67.8 0.5 – 2.2 499.4 1,607.9 – 1,108.5 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 168 Land and buildings in the amount of €18.3 million (31 Decem- ber 2012: €4.2 million) were largely pledged as collateral for accrued retirement benefits under partial retirement agreements. The KION Group did not recognise any significant impairment [21] equity-accounted investments losses in accordance with IAS 36 on other property, plant and equip- The KION Group reported equity-accounted investments with a total ment in 2013. Of the impairment losses recognised in 2012, which carrying amount of €138.6 million as at 31 December 2013 predominantly related to the planned closure of production sites, (31 December 2012: €154.8 million). A significant portion of the car- €12.3 million was attributable to land and buildings and €4.0 million rying amount of the associates resulted from the shares (30 per cent) to plant & machinery and office furniture & equipment. in Linde Hydraulics. The associates and joint ventures can be seen in Plant & machinery and office furniture & equipment include the list of shareholdings in note [45]. Their key figures are as shown assets from procurement leases (finance leases) amounting to below. >> Table 061 €13.3 million (31 December 2012: €15.5 million). Depreciation on these assets came to €3.7 million in 2013. The corresponding liabili- The figures shown in the table are based on a notional 100 per cent ties are reported as other financial liabilities. investment. At-Equity investments in € million Associates (100 per cent) Revenue Net loss (income) Assets Liabilities Joint ventures (100 per cent) Revenue Net income Assets Non-current assets Current assets Liabilities Non-current assets Current assets >> Table 061 2013 2012 692.2 – 31.7 1,039.5 683.9 99.1 5.3 43.5 21.0 22.4 19.7 4.6 15.0 569.4 15.3 1,073.0 712.9 132.0 4.8 55.0 24.2 30.8 30.2 4.7 25.5 We keep the world moving.KION GROUP AG | Annual Report 2013 169 >> Table 062 2012 443.5 151.0 282.3 10.2 399.3 132.1 257.3 9.8 2013 537.5 194.8 326.9 15.8 479.6 170.8 293.6 15.2 57.9 44.2 [22] lease receivables In the case of leases under which KION Group companies lease assets directly to customers as part of the Group’s financial services activities, the Group’s net investment in the lease is reported as a lease receivable. The amounts recognised as lease receivables are based on the following data: >> Table 062 Lease receivables in € million Gross investments due within one year due in one to five years due in more than five years Present value of outstanding minimum lease payments due within one year due in one to five years due in more than five years Unrealised financial income Gross investments include minimum lease payments from non-can- cellable sub-leases amounting to €434.0 million (31 December 2012: €345.5 million). Lease receivables include unguaranteed residual values of €52.1 million (31 December 2012: €44.1 million). We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 170 [23] other financial assets Other financial assets of €166.3 million (31 December 2012: €156.9 million) comprise the following: >> Table 063 Other financial assets in € million Pension assets Investments in non-consolidated subsidiaries Other investments Loans receivable Non-current securities Derivative financial instruments Other non-current financial assets Derivative financial instruments Financial receivables from affiliated companies and related companies Financial receivables from third parties Deferred charges and prepaid expenses Sundry financial assets Other current financial assets >> Table 063 2012 22.8 3.9 2.7 0.7 0.8 19.7 50.2 4.2 8.5 1.1 20.4 72.6 106.8 2013 22.4 7.8 4.1 0.8 0.8 15.7 51.7 3.6 7.6 4.0 25.7 73.8 114.7 Total other financial assets 166.3 156.9 Pension assets relate to asset surpluses from four defined benefit The sundry financial assets essentially include receivables from plans in the United Kingdom in which plan assets exceed pension value added tax amounting to €37.5 million (31 December 2012: obligations. €37.2 million) and non-derivative financial receivables amounting to The non-current derivative financial instruments include the put €35.7 million (31 December 2012: €35.2 million) that fall within the option on the remaining shares in Linde Hydraulics amounting to scope of IFRS 7. €15.7 million (2012: €19.7 million). We keep the world moving.KION GROUP AG | Annual Report 2013 171 >> Table 064 2012 120.0 75.0 349.0 5.9 549.9 2013 108.3 66.7 331.2 5.5 511.8 [24] inventories The reported inventories break down as follows: >> Table 064 Inventories in € million Materials and supplies Work in progress Finished goods and merchandise Advances paid Total inventories The year-on-year reduction in inventories was largely attributable to the decrease in materials and supplies (down by 9.8 per cent), work in progress (down by 11.1 per cent) and finished goods (down by 5.1 per cent). In 2013, impairment losses of €13.7 million were recog- nised on inventories (2012: €8.2 million). Reversals of impairment losses had to be recognised in the amount of €7.0 million (2012: €0.8 million) because the reasons for the impairment losses no longer existed. [25] trade receivables The trade receivables break down as follows: >> Table 065 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 172 Trade receivables in € million Receivables from third parties thereof receivables from third parties before valuation allowances thereof valuation allowances for overdue receivables > 90 days ≤ 180 days thereof valuation allowances for overdue receivables > 180 days thereof other valuation allowances for receivables Trade receivables from affiliated companies Trade receivables from associated companies and joint ventures Total trade receivables Valuation allowances of €42.4 million (31 December 2012: €50.5 mil- lion) were recognised for trade receivables. [26] cash and cash equivalents The change in cash and cash equivalents is shown in the consoli- dated statement of cash flows. For more detailed information, please also refer to note [34]. Cash and cash equivalents in € million Cash held by banks, on hand and cheque Pledged cash Total cash and cash equivalents >> Table 065 2012 607.3 657.8 – 7.6 – 27.5 – 15.4 3.5 14.7 625.5 2013 540.1 582.6 – 6.2 – 25.8 – 10.4 5.8 12.8 558.7 >> Table 066 2012 561.9 0.5 562.4 2013 219.1 0.3 219.3 We keep the world moving.KION GROUP AG | Annual Report 2013 173 [27] equity subscribed capital and capital reserves In addition, the Annual General Meeting on 13 June 2013 approved a further resolution to increase the share capital by €13.7 million to €81.7 million by way of a share issue. Weichai Power (Luxembourg) Holding S.à r.l., Luxembourg, subscribed these shares. The capital increase was entered in the commercial register on 27 June 2013, as a result of which the share capital grew by As at 31 December 2013, the Company’s share capital amounted to €13.7 million and capital reserves went up by €314.7 million. €98.9 million and was fully paid up. As at 31 December 2012, the The share capital also increased due to the issue of shares to nominal capital of KION Holding 1 GmbH was divided into 250,000 investors as part of the IPO. To this end, the Annual General Meeting shares, each with a value of €2. Subscribed capital increased by a of KION GROUP AG on 13 June 2013 resolved to increase the share total of 98,650,000 no-par-value shares to 98,900,000 no-par-value capital of KION GROUP AG by a further €17.2 million to a total of shares due to entry of the capital increase in the commercial register €98.9 million by issuing new shares. An amount of €396.2 million in January 2013 and to three further capital increases and a stock was paid into the capital reserves. split in connection with the IPO in June 2013. The total number of Total transaction costs of €27.5 million were incurred in connec- shares outstanding as at 31 December 2013 was 98.7 million no-par- tion with the capital increases; €19.6 million of this total was directly value shares. At the reporting date, KION GROUP AG held 0.2 mil- attributable and was deducted directly from the capital reserves lion treasury shares. There were changes to the share capital in the after subtraction of a tax benefit of €5.7 million. year under review for the following reasons: Following the successful IPO, the KION Group began prepara- In December 2012, the Shareholders’ Meeting of KION Holding tions for an employee share programme to enable staff members, 1 GmbH had approved a resolution to increase the share capital by initially those in Germany, to derive greater benefit from the success €0.8 million to €1.3 million. The capital increase was not entered in of the Company. As authorised by the Annual General Meeting on the commercial register until 14 January 2013. In addition, capital 13 June 2013, treasury shares were repurchased via the stock reserves went up by €1,131.8 million. exchange for this purpose from 28 August 2013 onwards. By The Shareholders’ Meeting on 25 April 2013 approved not only 26 September 2013, a total of 0.2 million treasury shares had been the change in legal form but also a resolution to increase the share repurchased at an average price of €27.89. The total cost was capital by €62.7 million to €64.0 million from company funds. KION €5.6 million. GROUP AG’s transformation and capital increase were entered in the commercial register on 4 June 2013. On 11 June 2013, the Annual General Meeting of KION GROUP retained earnings AG resolved to increase the share capital by €4.0 million to €68.0 mil- lion by way of a share issue. The new shares were issued in return for The development of retained earnings is shown in the consolidated a non-cash capital contribution from Superlift Holding S.à r.l., Lux- statement of changes in equity. The retained earnings comprise the embourg (referred to below as Superlift Holding). The non-cash cap- net income (loss) for the financial year and past contributions to ital contribution from Superlift Holding took the form of all shares in earnings by the consolidated companies, provided they have not Superlift Funding S.à r.l., Luxembourg (referred to below as Superlift been distributed. Funding), and all rights and duties of Superlift Holding arising out of the agreement between Superlift Holding and Superlift Funding dated 30 September 2009 for a loan of €100.0 million (plus accrued interest of €17.0 million). The portion of the non-cash capital contri- bution that exceeded the capital increase (€114.0 million) was paid into the capital reserves. The aforementioned capital increase was entered in the commercial register on 19 June 2013. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position174 appropriation of profit The Group does not enter into any obligations above and beyond the payment of contributions to an external pension fund. The amount of The Executive Board and Supervisory Board of KION GROUP AG will future pension benefits is based solely on the amount of the contri- propose a dividend of €0.35 per share to the Annual General Meeting butions paid by the employer (and in some cases the beneficiaries on 19 May 2014. As there are 98,700,000 dividend-bearing shares, this themselves) to the external pension fund, including income from the equates to a total dividend payout of €34.5 million. A total of 25 per cent investment of these contributions. The total expense arising from of the net income accruing to the KION Group shareholders will there- defined contribution plans amounted to €57.6 million in 2013 (2012: fore be distributed in dividends. €63.9 million). Of this total, contributions paid by employers into gov- ernment-run schemes came to €52.8 million (2012: €59.7 million). The defined contribution plan expense is reported within the func- accumulated other comprehensive income (loss) tional costs. Accumulated other comprehensive income (loss) includes the cur- rency translation differences arising from the translation of the finan- defined benefit plans cial statements of foreign subsidiaries, the effects of the fair value measurement of derivative financial instruments, the share of profit The KION Group currently grants pensions to almost all employees (loss) of equity-accounted investments, and the gains and losses in in Germany and a number of foreign employees. These pensions connection with defined benefit pension obligations. consist of fixed benefit entitlements and are therefore reported as non-controlling interests defined benefit plans in accordance with IFRS. As at 31 Decem- ber 2013, the KION Group had set up defined benefit plans in 13 countries. For all of the significant defined benefit plans within the Group, the benefits granted to employees are determined on the Non-controlling interests in companies in the KION Group amounted basis of their individual income, i.e. either directly or by way of inter- to €5.0 million (31 December 2012: €6.2 million). mediate benefit arrangements. The largest of the KION Group’s [28] retirement benefit obliGation defined benefit plans – accounting for around 91 per cent of the global defined benefit obligation – are in Germany and the United Kingdom. In Germany, the pension benefits granted under the 2001 pen- sion benefit conditions and 2002 pension benefit conditions depend on employees’ length of service and gross annual remuneration The retirement benefit obligation is recognised for obligations to pro- (pension component entitlement). The pension component is calcu- vide current and future post-employment benefits. Post-employ- lated by multiplying a certain percentage by an age-dependent ment benefit plans are classified as either defined benefit plans or annuitisation factor. The contribution rate is 3.4 per cent (2001 pen- defined contribution plans, depending on the substance of the plan sion benefit conditions) or 2.0 per cent (2002 pension benefit condi- as derived from its principal terms and conditions. tions) of the gross remuneration that an employee earns in the com- defined contribution plans putation period. Employees receive the pension entitlement that they have earned in the form of a monthly retirement pension or invalidity benefit or, in the event of their death, the entitlement is paid to their surviving dependants in the form of a widow’s / widower’s pension or In the case of defined contribution pension plans, the Group pays orphans’ pension. Members of the Executive Board and other exec- contributions to government or private pension insurance providers utives are predominantly covered by individual pension plans. For based on statutory or contractual provisions, or on a voluntary basis. details of the pension entitlements of KION GROUP AG Executive We keep the world moving.KION GROUP AG | Annual Report 2013175 Board members, please refer to the information in note [43]. The truck plant in Merthyr Tydfil (Wales, United Kingdom) was shut down amount of the benefits paid to executives depends on the type of in 2013 as planned, resulting in gains on plan curtailments from two entitlement. Under the ‘old’ individual pension plans, executives of the plans in the reporting year. were entitled to a certain percentage of income as their pension ben- Each of the four plans is monitored by its own board of trustees, efit. By contrast, the employer-funded entitlement under the ‘new’ which oversees the running of the plan as well as its funded status individual pension plans consists of two components: a fixed basic and the investment strategy. The members of the boards of trustees pension and a variable top-up pension through which annual com- comprise people appointed by the companies involved and selected ponents are earned within a defined contribution system. Both com- plan beneficiaries. ponents depend on the seniority of the executive. Under UK law, the board of trustees is obliged to have a valua- In addition, employees in Germany are able to pay part of their tion of the plan carried out at least every three years. The last valua- salary into a company pension plan, for which KION provides a tion was carried out as at 1 January 2009. Because there are gaps defined minimum interest rate to enable employees to build up their in the coverage according to local valuation rules, the companies personal pension provision. The pension benefits consist of retire- involved made a one-off payment of €7.1 million in 2013 in line with ment, invalidity and surviving dependants’ benefits. Each contribu- the minimum funding agreements reached with the trustees. A one- tion made is converted into a capital component on the basis of a off payment of €6.9 million will have to be made in 2014. This amount guaranteed minimum interest rate of 3 per cent and depending on may decrease by €2.3 million depending on the achievement of the age of the employee. The capital components acquired each cal- defined KPIs. The trustees and the companies are currently finalising endar year are added up to give the pension capital. When an the valuation as at 1 January 2012. The board of trustees and the insured event occurs, the pension capital is converted into an on- companies involved have agreed that this valuation can be finalised going life-long pension or a one-off capital payment. after the statutory deadline so as to enable the board of trustees to In Germany, the KION Group also helps employees to build up take KION GROUP AG’s IPO into consideration in the valuation. The their own pension provision with an additional matching contribution new valuation may give rise to additional minimum funding require- for those employees who pay part of their salary into the KION pen- ments in future. sion plan. The additional matching contribution received by execu- The unsecured guarantees given to the trustees of the four plans tives is 50.0 per cent of the amount they defer in a calendar year, by KION GROUP GmbH (now KION Material Handling GmbH) were although the absolute amount of this contribution is limited to a certain replaced with letters of support after KION GROUP AG’s successful percentage of income (ranging from 2.5 per cent to a maximum of IPO, as set forth in the original guarantees. In these letters of sup- 5.0 per cent). All other employees who participate in the company pen- port, KION GROUP AG undertakes to ensure – provided that certain sion scheme receive up to 0.4 per cent of their gross remuneration. defined conditions are met – that each employer is always in a finan- Some of the KION Group’s pension obligations in Germany are cial position to meet its payment obligations under the plan. The like- financed by way of contractual trust arrangements (CTAs), which lihood of the guarantee being used is deemed low in view of the posi- qualify as plan assets within the meaning of IAS 19. There are no tion of the individual companies with regard to their current and statutory minimum funding requirements. In the event of the Compa- future financial and earnings situations. ny’s insolvency, the company pension scheme is to a large extent Furthermore, significant asset volumes are invested in external protected by law by the Pension Security Association. pension funds with restricted access in Switzerland and the Nether- In the United Kingdom, defined benefit pension obligations pre- lands. Decisions on additions to plan assets take into account the dominantly relate to four plans. The defined benefits include not only change in plan assets and pension obligations. They also take into a life-long retirement pension but also surviving dependants’ bene- account the statutory minimum coverage requirements and the fits. The amount of the pension depends on employees’ length of amounts deductible under local tax rules. service and final salary. All of the plans were closed to new employ- In accordance with IAS 19 (‘Employee Benefits’), pension provi- ees more than ten years ago. All beneficiaries in one of the plans are sions are recognised to cover obligations arising from the current no longer active employees. Production at the extra heavy-duty and future pension entitlements of active and (after the vesting period We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position176 has expired) former employees of the KION Group and their surviving Benefit obligations are calculated on the basis of current bio- dependants. metric probabilities as determined in accordance with actuarial prin- In the case of defined benefit plans, the beneficiaries are granted ciples. The calculations also include assumptions about future a specific benefit by the Group or an external pension fund. Due to employee turnover based on employee age and years of service and future salary increases, the benefit entitlement at the retirement age about the probability of retirement. The defined benefit obligation is of the beneficiary is likely to be higher than the amount granted as at calculated on the basis of the significant weighted-average assump- the reporting date. Pensions are often adjusted after an employee tions as at the reporting date shown in >> Table 067. reaches retirement age. The amount of the Group’s obligation, which The assumed discount rate is determined on the basis of the is defined as the actuarial present value of the obligation to provide yield as at the reporting date on AA-rated, investment-grade, the level of benefits currently earned by each beneficiary, is expressed fixed-interest corporate bonds with maturities that match the as the present value of the defined benefit obligation, which includes expected maturities of the pension obligations. Pension obligations adjustments for future salary and pension increases. in foreign companies are calculated on a comparable basis taking measurement assumptions into account any country-specific requirements. Future increases in salaries are estimated on an annual basis taking into account factors such as inflation and the overall eco- nomic situation. The discount rate used to calculate the defined benefit obligation at The biometric mortality rates used in the calculation are based each reporting date is determined on the basis of current capital on published country-specific statistics and empirical values. Since market data and long-term assumptions about future salary and 31 December 2009, the modified Heubeck 2005 G mortality tables pension increases in accordance with the best estimate principle. have been used in Germany as the biometric basis; the modified These assumptions vary depending on the economic conditions tables include a somewhat higher life expectancy for males than the affecting the currency in which benefit obligations are denominated unmodified tables. The S1NA CMI 2013 with a long-term trend of and in which fund assets are invested, as well as capital market 1.25 per cent p.a. is applied to the four defined benefit plans in the expectations. United Kingdom. Assumptions underlying provisions for pensions and other postemployment benefits >> Table 067 Discount rate Salary increase rate Rate of pension increase Germany UK Other 2013 3.60 % 2.75 % 1.75 % 2012 3.50 % 2.75 % 1.75 % 2013 4.40 % 4.16 % 3.53 % 2012 4.35 % 4.17 % 2.94 % 2013 2.95 % 2.44 % 0.48 % 2012 2.57 % 2.36 % 0.26 % We keep the world moving.KION GROUP AG | Annual Report 2013 177 The actuarial assumptions not listed in >> Table 067, such as with the projected unit credit method is reduced by the fair value of employee turnover, invalidity, etc., are determined in accordance the assets of the external pension plan. If the assets of the external with recognised forecasts in each country, taking into account the pension plan exceed the pension obligations (net assets), a corre- circumstances and forecasts in the companies concerned. sponding asset is recognised in accordance with IAS 19. IAS 19.64 The significant weighted-average assumptions shown in >> in conjunction with the supplementary explanatory information in Table 068 were applied to the calculation of the net interest cost and IFRIC 14 states that the recognition of an asset for an excess of pen- the cost of benefits earned in the current year (current service cost). sion plan assets over pension obligations is only permitted if the Differences between the forecast and actual change in the company concerned, in its function as the employer, gains economic defined benefit obligation and changes in related assets (known as benefits in the form of reductions in future contributions to the plan remeasurements) are recognised immediately in other comprehen- or in the form of refunds from the plan. If pension obligations are not sive income in accordance with IAS 19. This serves to ensure that covered by the assets of an external pension plan, the net obligation the pension liability in the statement of financial position is always the is reported under the retirement benefit obligation. present value of the defined benefit obligation not covered by assets. In four defined benefit plans in the United Kingdom, plan assets In the case of externally financed pension plans, the present exceed the pension obligations. Stipulations limiting the asset to be value of the defined benefit obligation as calculated in accordance recognised in the statement of financial position do not apply. Assumptions underlying for pensions expenses >> Table 068 Discount rate Salary increase rate Rate of pension increase Germany UK Other 2013 3.50 % 2.75 % 1.75 % 2012 5.65 % 2.75 % 1.75 % 2013 4.35 % 4.17 % 2.94 % 2012 4.85 % 4.18 % 3.18 % 2013 2.57 % 2.36 % 0.26 % 2012 4.01 % 2.31 % 0.38 % We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 178 statement of financial position The change in the present value of the defined benefit obligation (DBO) is shown in >> Table 069. Changes in defined benefit obligation >> Table 069 in € million 2013 2012 2013 2012 2013 2012 2013 2012 Germany UK Other Total Present value of defined benefit obligation as at 01/01/ Group changes Exchange differences Current service cost Past service cost (+) and income (–) from plan amendments Past service cost (+) and income (–) from curtailments Interest expense on defined benefit obligation Employee contributions 545.4 0.0 – 18.3 – – 18.9 – 389.3 – 67.4 – 11.9 – – 21.7 – Pension benefits directly paid by company – 12.1 – 11.3 419.5 390.4 – – 8.5 1.2 – 6.9 10.3 1.4 98.4 0.0 – 0.8 3.4 0.3 0.3 – 1.3 – 0.7 17.1 0.0 – – 19.1 0.1 – Pension benefits paid by funds Liability transfer out to third parties Remeasurements Present value of defined benefit obligation as at 31/12/ thereof unfunded thereof funded – – 0.4 – 5.1 565.1 237.9 327.2 – – 17.7 – 16.9 – 0.2 201.5 545.4 231.4 314.0 – 11.0 – 21.7 422.1 419.5 – – 422.1 419.5 The components of the remeasurements are listed in >> Table 073. 79.4 – 0.2 0.2 2.9 – – 3.1 0.8 – 2.3 – 3.0 – 17.5 98.4 28.2 70.2 1,063.3 0.1 – 9.2 23.0 859.0 – 74.5 10.5 16.2 – 1.0 0.3 – 0.7 38.4 0.9 – 13.1 – 19.1 – 0.4 0.9 – 43.8 0.9 – 13.6 – 19.9 – 0.2 240.7 1,082.9 1,063.3 265.9 817.1 259.6 803.7 – 2.5 0.9 – 1.0 – 1.4 – – 5.0 95.7 28.0 67.8 We keep the world moving.KION GROUP AG | Annual Report 2013 179 >> Table 070 shows the change in the fair value of plan assets. Changes in plan assets >> Table 070 in € million Fair value of plan assets as at 01/01/ Group changes Exchange differences Interest income on plan assets Employee contributions Employer contributions Pension benefits paid by funds Remeasurements Fair value of plan assets as at 31/12/ Germany UK Other Total 2013 40.0 – – 1.4 – 2.4 – – 1.9 41.9 2012 38.2 – 1.8 – 2.2 – – – 1.5 40.0 2013 439.5 – – 8.9 18.1 0.0 7.3 – 17.7 3.3 441.6 2012 406.4 – 4.1 10.7 20.0 0.1 7.3 – 16.9 16.0 439.5 2013 58.9 – – 0.6 1.4 0.9 1.9 – 1.4 0.6 61.7 2012 50.3 – 0.2 1.8 0.8 2.2 – 3.0 6.5 58.9 2013 538.4 – – 9.5 20.9 0.9 11.6 – 19.1 2.0 545.2 2012 494.9 – 5.9 10.9 24.0 0.9 9.5 – 19.9 24.0 538.4 In 2013, employer contributions in the United Kingdom, which The reconciliation of funded status and net defined benefit obli- amounted to €7.3 million, included one-off payments of €7.1 million gation to the amounts reported in the consolidated statement of into pension funds on the basis of contractual agreements. In Ger- financial position as at 31 December is shown in >> Table 071. many, the Executive Board members’ switch from KION Material As a result, the funding ratio (ratio of pension assets to pension Handling GmbH to KION GROUP AG meant that one-off payments obligations) in the KION Group was 50.3 per cent (2012: 50.6 per cent). of €2.4 million were made to a German CTA. The change in the retirement benefit obligation reported in the The payments expected for the following year amount to statement of financial position is shown in >> Table 072. €23.7 million (2013: €24.5 million), which includes expected employer contributions of €9.2 million to plan assets (2013: €11.2 million) and expected direct payments of pension benefits amounting to €14.6 million (2013: €13.3 million) that are not covered by corre- sponding reimbursements from plan assets. According to local valu- ation rules, there continue to be gaps in the coverage of four plans in the United Kingdom, as a result of which the expected employer contributions in 2014 include one-off payments of €6.9 million in line with the agreements reached with the trustees. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 180 Funded status and net defined benefit obligation >> Table 071 in € million 2013 2012 2013 2012 2013 2012 2013 2012 Germany UK Other Total Present value of the partially or fully funded defined benefit obligation Fair value of plan assets Surplus (+) / deficit (–) Present value of the unfunded defined benefit obligation Net liability (–) / net asset (+) as at 31/12/ – 327.2 – 314.0 – 422.1 – 419.5 – 67.8 – 70.2 – 817.1 – 803.7 41.9 40.0 – 285.3 – 274.0 441.6 19.5 439.5 20.0 61.7 – 6.1 58.9 545.2 538.4 – 11.3 – 271.8 – 265.2 – 237.9 – 231.4 – – – 28.0 – 28.2 – 265.9 – 259.6 – 523.1 – 505.4 19.5 – 2.9 20.0 – 2.7 – 34.1 – 34.1 – 39.5 – 39.5 – 537.7 – 524.8 – 560.1 – 547.6 Reported as ‘retirement benefit obligation’ – 523.1 – 505.4 Reported as ‘Other non-current financial assets’ – – 22.4 22.8 0.0 – 22.4 22.8 Changes in retirement benefit obligation >> Table 072 in € million Balance as at 01/01/ Group changes Exchange differences Total service cost Net interest expense Pension benefits directly paid by company Employer contributions to plan assets Liability transfer out to third parties Remeasurements Balance as at 31/12/ Germany UK Other Total 2013 505.4 0.0 – 18.3 17.5 2012 351.1 – 65.5 – 11.9 19.5 – 12.1 – 11.3 – 2.4 – 0.4 – 3.2 523.1 – – 0.2 200.0 505.4 2013 2012 2.7 – – 0.1 – 0.1 – – 0.2 – 0.4 2.9 2.1 – 0.1 – 0.1 – – 0.2 – 0.7 2.7 2013 39.5 0.0 – 0.2 2.1 1.1 – 1.0 – 1.9 – – 5.6 34.1 2012 29.1 – 0.2 0.0 2.9 1.3 – 2.3 – 2.2 – 10.9 39.5 2013 547.6 0.1 – 0.2 20.4 18.7 2012 382.2 – 65.8 0.1 14.8 20.9 – 13.1 – 13.6 – 4.5 – 0.4 – 8.4 560.1 – 2.4 – 0.2 211.6 547.6 We keep the world moving.KION GROUP AG | Annual Report 2013 181 In Germany, the KION pension plan for employees holds plan assets (2012: €19.9 million) was paid from plan assets. Cash contributions of €23.1 million from employee contributions (2012: €19.5 million) to plan assets in 2013 amounted to €11.6 million (2012: €9.5 mil- besides the Company-funded entitlements shown in >> Table 071 lion). Furthermore, pension benefit payments totalling €0.4 million The plan assets are wholly offset by corresponding liabilities relating (2012: €0.2 million) were transferred to external pension funds. to the direct pension entitlement scheme. Employees paid a total of €2.4 million (2012: €2.7 million) into the KION pension plan in 2013. income statement statement of cash flows In accordance with IAS 19, actuarial computations are performed for benefit obligations in order to determine the amount to be expensed In the case of obligations not covered by external assets, payments in each period in accordance with fixed rules. The expenses recog- to beneficiaries are made directly by the Company and therefore nised in the income statement for pensions and similar obligations have an impact on cash flow from operating activities. If the benefit consist of a number of components that must be calculated and dis- obligations are backed by external assets, the payments are made closed separately. from existing plan assets and have no effect on the Company’s The service cost is the new pension entitlement arising in the cash flow. Instead, any contributions made to the external pension financial year and is recognised in the income statement. It is calcu- fund by the Company result in a cash outflow for operating activi- lated as the present value of that proportion of the expected defined ties. benefit obligation when the pension is paid attributable to the year During the reporting year, pension benefits of €32.2 million under review on the basis of the maximum length of service achiev- (2012: €33.5 million) were paid in connection with the main pension able by each employee. entitlements in the KION Group, of which €13.1 million (2012: Past service cost arises if there is a change to the pension enti- €13.6 million) was paid directly by the Company and €19.1 million tlement and it is recognised immediately in full. Cost of defined benefit obligation >> Table 073 in € million Current service cost Past service cost (+) and income (–) from plan amendments Past service cost (+) and income (–) from curtailments Total service cost Interest expense on defined benefit obligation Interest income on plan assets Net interest expense (+) / income (–) Total cost of defined benefit obligation Germany UK Other Total 2013 18.3 – – 18.3 18.9 – 1.4 17.5 2012 11.9 – – 11.9 21.7 – 2.2 19.5 2013 1.2 0.3 – 0.7 0.8 17.1 2012 1.4 0.3 – 1.7 19.1 – 18.1 – 20.0 – 1.0 – 0.9 2013 3.4 – 1.3 – 2.1 2.5 – 1.4 1.1 2012 2.9 – – 2.9 3.1 – 1.8 1.3 2013 23.0 2012 16.2 – 1.0 0.3 – 0.7 21.2 38.4 – 20.9 17.6 – 16.5 43.8 – 24.0 19.8 35.8 31.4 – 0.2 0.8 3.2 4.2 38.8 36.4 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 182 The net interest cost / income, which is calculated by multiplying other comprehensive income (loss) the net liability (pension obligation minus plan assets) or the net assets (if the plan assets exceed the pension obligation) by the dis- The breakdown of the remeasurement of the defined benefit obliga- count rate at the start of the year, is also recognised in the income tion recognised in the statement of comprehensive income in 2013 is statement. as follows: >> Table 074 The breakdown of the net cost of the defined benefit obligation (expenses less income) recognised in the income statement for 2013 is shown in >> Table 073. The KION Group’s net financial income / expenses includes a net interest cost of €17.6 million (2012: €19.8 million). All other compo- nents of pension expenses are recognised under functional costs. The actual total return on plan assets in 2013 was €22.9 million (2012: €48.0 million). Accumulated other comprehensive income (loss) >> Table 074 Germany UK Other Total in € million 2013 2012 2013 2012 2013 2012 2013 2012 Accumulated other comprehensive income / loss as at 01/01/ Effects from the first time adoption of IAS 19 (rev. 2011) Group changes Exchange differences Gains (+) and losses (–) arising from remeasurements of defined benefit obligation thereof effect of changes in demographic assumptions thereof effect of changes in financial assumptions thereof experience adjustments Gains (+) and losses (–) arising from remeasurements of plan assets Accumulated other comprehensive income / loss as at 31/12/ – 118.0 81.5 – 37.0 – 37.0 – 20.2 – 10.2 – 175.1 34.3 – – – 0.6 – – – – 4.4 2.2 0.6 – 1.0 – – 0.1 1.0 – 0.0 – – 0.7 6.0 2.2 – 0.9 5.1 – 201.5 – 11.0 – 21.7 5.0 – 17.5 – 0.9 – 240.7 – – 2.7 0.1 10.1 – 5.0 – 199.2 – 2.3 – 13.2 – 0.5 – 16.5 – 5.3 – 1.9 1.5 3.3 16.0 0.1 4.1 0.9 0.6 – 1.0 2.8 – 0.9 – 17.5 1.0 6.5 1.0 – 4.7 – 233.2 – 6.6 2.0 24.0 – 114.8 – 118.0 – 44.1 – 37.0 – 14.4 – 20.2 – 173.3 – 175.1 We keep the world moving.KION GROUP AG | Annual Report 2013 183 The first-time adoption of IAS 19 (rev. 2011) resulted in a €4.3 million increase in equity as at 1 January 2012 (after deferred taxes) in rela- tion to defined benefit pension entitlements. Further information can be found in note [7]. The gains and losses on the remeasurement of plan assets are attributable entirely to experience adjustments. The changes in esti- mates relating to defined benefit pension entitlements resulted in a €0.7 million increase in equity as at 31 December 2013 (after deferred taxes). composition of plan assets The plan assets of the main pension plans consist of the following components: >> Table 075 Fair value of plan assets >> Table 075 in € million Securities Fixed-income securities Real estate Insurance policies Other Total plan assets thereof total assets that do not have a quoted price in active markets Insurance policies Other Germany UK Other Total 2013 10.2 15.7 2.1 – 13.9 41.9 9.0 – 9.0 2012 7.1 18.3 1.6 – 13.0 40.0 9.0 – 9.0 2013 96.0 2012 86.9 344.8 259.6 – – 0.8 441.6 – – – – – 93.0 439.5 – – – 2013 2012 8.4 12.1 4.0 33.9 3.2 61.7 34.7 33.9 0.8 8.5 11.7 3.9 32.6 2.2 58.9 32.6 32.6 – 2013 114.6 372.7 6.1 33.9 18.0 545.2 43.7 33.9 9.8 2012 102.5 289.6 5.4 32.6 108.3 538.4 41.6 32.6 9.0 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 184 The plan assets do not include any real estate or other assets used risks by the KION Group itself. The Other category largely comprises infla- tion-linked UK government bonds for four large plans in the United The funding ratio, the defined benefit obligation and the associated Kingdom. sensitivity analysis costs depend on the performance of financial markets. The return on plan assets is assumed to equal the discount rate, which is deter- mined on the basis of the yield earned on AA-rated, invest- ment-grade, fixed-interest corporate bonds. If the actual return on plan assets falls below the discount rates applied, the net obligation The present value of the defined benefit obligation is based on the arising out of the pension plans increases. The amount of the net assumptions detailed in >> Table 067 above. If one assumption were obligation is also particularly affected by the discount rates, and the to vary and the other assumptions remained unchanged, the current low level of interest rates – especially in the eurozone – is impact on the present value of the defined benefit obligation would resulting in a comparatively large net obligation. be as shown in >> Table 076. The plan assets are predominantly invested in corporate bonds and inflation-linked UK government bonds, particularly in the Sensitivity is determined using the same methods (projected unit United Kingdom. The market risk attaching to plan assets – above credit method) as for the measurement of the obligation recognised all in the case of equities – is mitigated by defining an investment in the consolidated statement of financial position as at 31 Decem- strategy and guidelines and constantly monitoring the assets’ per- ber 2013. formance. Moreover, a downward trend on financial markets could In line with IAS 19.173 (b), no comparative figures for 2012 are have a significant effect on minimum funding requirements, some disclosed for the sensitivity analysis. of which apply outside Germany. duration The KION Group also bears the full risk of possible future pen- sion adjustments resulting from changes in longevity and inflation. Payroll-based contributions by employees in Germany are invested in fund units. If the actual returns on these fund units fall As at the reporting date, the weighted average duration of the obliga- below the interest rate of 3.0 per cent that has been guaranteed to tion was 17.4 years (2012: 16.6 years). participating employees, the KION Group’s personnel expenses rise. Sensitivity defined benefit obligation >> Table 076 Discount rate Salary increase rate Pension increase rate Increase by 1.0 percentage point Reduction by 1.0 percentage point Increase by 0.5 percentage point Reduction by 0.5 percentage point Increase by 0.25 percentage point Reduction by 0.25 percentage point Life expectancy Increase by 1 year 2013 – 159.4 207.8 12.9 – 11.7 32.7 – 27.5 34.1 We keep the world moving.KION GROUP AG | Annual Report 2013 185 [29] financial liabilities The financial liabilities reported by the KION Group essentially com- prise interest-bearing liabilities to banks and capital market liabilities in connection with the corporate bonds that were issued. The liabili- ties to banks stem largely from the new revolving loan facility. The following table shows the maturity structure of the financial liabilities: >> Table 077 Maturity structure of financial liabilities >> Table 077 in € million Liabilities to banks due within one year due in one to five years due in more than five years Corporate bond due within one year due in one to five years due in more than five years Other liabilities due within one year due in one to five years due in more than five years Total current liabilities Total non-current liabilities 2013 233.7 224.6 9.1 – 958.3 – 319.5 638.8 6.6 2.9 – 3.7 227.5 971.1 2012 1,858.4 51.2 1,692.1 115.2 489.5 – – 489.5 4.5 0.6 – 3.9 51.8 2,300.7 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 186 loan agreement current financial assets and expensed over the term of the loan facil- ity. Combined with lower margins, this loan facility offers more In connection with its acquisition of Linde AG’s material handling favourable credit terms in line with those typically available to com- business, the KION Group signed a loan agreement (a senior facili- parable listed companies. ties agreement and a subordinated facility agreement, referred to below as ‘SFA’) for a total original amount of €3,300.0 million with the lead banks Barclays Bank Plc, Bayerische Hypo- und Vereinsbank corporate bond AG, Credit Suisse (London branch), Goldman Sachs International Bank, Lehman Commercial Paper Inc. (UK branch) and Mizuho Cor- The KION Group issued a corporate bond for €650.0 million through porate Bank Ltd. on 23 December 2006. the consolidated subsidiary KION Finance S.A., Luxembourg, in In 2013, the long-term bank loans under the acquisition finance February 2013. Of the bond’s total par value of €650.0 million, arrangements (tranches B and C) of €1,714.1 million were repaid in €450.0 million is repayable at a fixed interest rate of 6.75 per cent full along with the interest that was due as a bullet payment on matu- p.a., while €200.0 million carries a floating interest rate based on rity. The floating-rate tranche (tranche H1b) of the corporate bond of three-month Euribor plus a margin of 4.5 percentage points. The €175.0 million that was issued in 2011 and was due to mature in payout amount for the variable portion was €1.0 million below the par 2018 was repaid early in full. On repayment of the SFA liabilities and value (discount). The interest on the fixed-rate tranche is paid the floating rate note due in 2018, an amount of €24.5 million repre- semi-annually, while interest on the floating-rate tranche is paid once senting the proportion of the related deferred borrowing costs was a quarter. Excluding early repayment options, the contract stipulates recognised as a financial expense. Of this total, €21.2 million related repayment as a bullet payment on maturity in February 2020. Of the to the repaid bank liabilities and €3.3 million related to the repaid total proceeds of €649.0 million, €636.0 million was used to repay capital market liabilities. The funds for the repayment were gener- existing liabilities under the SFA. A further €12.7 million relates to set- ated by the corporate bond issued in February 2013 (tranches H2a tlement of the transaction costs incurred for the issuance of the cor- and H2b), the inflows from the IPO and the Weichai capital increase. porate bond, which is allocated pro rata to the two tranches and In 2013, financial expenses of €18.3 million arising from the unwind- expensed over their terms. In addition, the floating-rate tranche, ing of interest-rate hedges were also incurred in connection with which was due to mature in 2018 and amounted to €175.0 million, repayment of the SFA liabilities, of which €14.4 million impacted cash was repaid in full on 19 July 2013. Upon repayment, associated flow. transaction costs of €3.3 million were derecognised and taken to The loan (tranche G) of €100.0 million (plus accrued interest of income. The fixed-rate tranche of the bond issued in 2011, which has €17.0 million) was converted into equity in June 2013. In doing so, a volume of €325.0 million and a maturity date of 2018, remains Superlift Holding S.à r.l., Luxembourg, transferred all rights and unchanged. duties arising out of the loan with Superlift Funding S.à r.l., Luxem- bourg and all of the shares in the latter to KION GROUP AG as part of a capital increase. In connection with the IPO, the KION Group agreed a new revolving loan facility with a group of banks under the SFA for €995.0 million with a term to maturity of five years after the IPO. The loan facility was increased to €1,045.0 million in December 2013. As at 31 December 2013, €184.4 million had been drawn down under this newly agreed revolving loan facility of €1,045.0 million – including other loan liabilities of individual Group companies outside Germany and contingent liabilities. The directly attributable transaction costs of €9.3 million have been recognised as prepaid expenses under We keep the world moving.KION GROUP AG | Annual Report 2013187 changes in net financial debt In 2013, the KION Group made payments totalling €1,714.1 million to repay long-term SFA bank liabilities and €175.0 million to fully repay The KION Group uses its net financial debt as a key internal figure for the floating-rate tranche of the corporate bond issued in 2011 that analysing the changes in its financial liabilities. Net financial debt is was due to mature in 2018. The funds for the repayment were gen- defined as the difference between financial liabilities (excluding lease erated by issuance of a new corporate bond in February 2013 liabilities) and cash and cash equivalents. (€649.0 million after deduction of the discount of €1.0 million), the The inflows from the IPO and the capital increases were predom- inflows from the IPO and the Weichai capital increase, which together inantly used for the repayments. As a result, net financial debt fell sig- totalled €732.5 million (after deduction of banking fees), part of the nificantly in 2013. The table below gives a breakdown of the KION new revolving loan facility and existing cash reserves. Group’s net financial debt as at 31 December 2013: >> Table 078 Net financial debt in € million Corporate bond – fixed rate (2011/2018) – gross Corporate bond – floating rate (2011/2018) – gross Corporate bond – fixed rate (2013/2020) – gross Corporate bond – floating rate (2013/2020) – gross Liabilities to banks (gross) Liabilities to non-banks (gross) ./. Capitalised borrowing costs Financial debt ./. Cash and cash equivalents Net financial debt >> Table 078 2012 325.0 175.0 – – 1,882.1 4.5 – 34.1 2,352.4 562.4 1,790.1 2013 325.0 – 450.0 200.0 233.7 6.6 – 16.7 1,198.6 219.3 979.3 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 188 The table below gives details of the changes in financial debt and lists the applicable terms and conditions: >> Table 079 Credit terms >> Table 079 Interest rate Notional amount Maturity in € million Term Loan Facility B1 (EUR) Term Loan Facility B2 (EUR) Term Loan Facility B1 (USD) Term Loan Facility B2 (USD) Term Loan Facility C1 (EUR) Term Loan Facility C2 (EUR) Term Loan Facility C1 (USD) Term Loan Facility C2 (USD) Term Loan Facility G EURIBOR + Margin EURIBOR + Margin LIBOR + Margin LIBOR + Margin EURIBOR + Margin EURIBOR + Margin LIBOR + Margin LIBOR + Margin EURIBOR + Margin Term Loan Facility H1a (Corporate bond – fixed rate) Fixed rate Term Loan Facility H1b (Corporate bond – floating rate) 3-M-EURIBOR+Margin Term Loan Facility H2a (Corporate bond – fixed rate) Fixed rate Term Loan Facility H2b (Corporate bond – floating rate) 3-M-EURIBOR+Margin Multicurrency Revolving Credit Facility 3 EURIBOR + Margin Multicurrency Capex Restructuring and Acquisition Facility Other liabilities to banks Other financial liabilities to non-banks ./. Capitalised borrowing costs Total financial debt EURIBOR + Margin 2013 – – – – – – – – – 325.0 – 450.0 200.0 130,0 – 103,7 6,6 – 16,7 1,198.6 2012 138.5 411.1 108.0 79.1 286.6 382.8 227.1 81.3 116.0 325.0 175.0 – – – 18.2 33.3 4.5 – 34.1 2,352.4 2014 2017 2014 2017 2015 2017 2015 2017 2018 2018 2018 2020 2020 2018 2013 We keep the world moving.KION GROUP AG | Annual Report 2013 189 financial covenants The collateral includes guarantees, the assignment of shares in the guarantors (with the exception of shares in KION Material Han- The SFA and the contractual terms and conditions governing the dling GmbH (formerly KION GROUP GmbH)), the assignment of cer- issuance of the corporate bond require compliance with certain tain bank accounts and certain guarantor receivables, the assign- undertakings and covenants. The SFA also requires compliance with ment of claims arising from and in connection with the share specific financial covenants during the term of the agreement. The purchase agreement between Linde Material Handling GmbH and financial covenants specify required ratios for the financial position Linde AG dated November 5, 2006 relating to the shares in the for- and financial performance of the KION Group. The covenants are mer KION GROUP GmbH, the assignment of shares in KION Infor- expressed in the form of key figures relating to gearing, available mation Management Services GmbH and assignments and trans- liquidity, EBITDA, interest paid and capital expenditure. Since the fers of title to intellectual property rights by guarantors in Germany. IPO and the associated amendment of the credit terms under the The statutory provisions in the United Kingdom and the agreements SFA, only the financial covenant for gearing (the ratio of net financial entered into mean that all the assets of the UK guarantors are debt to EBITDA) now applies. If undertakings or financial covenants pledged as security. are breached, this may, for example, give lenders the right to termi- The carrying amounts of the financial assets pledged as collat- nate the SFA or permit bondholders to call the corporate bond prior eral amounted to €348.7 million as at the reporting date (31 Decem- to its maturity date. ber 2012: €566.3 million). All the financial covenants were complied with in the past As had been the case at the end of 2012, no material liabilities to financial year. banks were secured by mortgage charges at the end of 2013. loan collateral [30] lease liabilities Under the SFA, the KION Group is under an obligation to provide col- lateral for its obligations and liabilities. This obligation also extends to the corporate bonds (tranches H1a, H2a and H2b). By the reporting Lease liabilities relate solely to finance lease obligations arising from date, a total of 26 (31 December 2012: 26) KION Group companies sale and leaseback transactions for the funding of long-term leases (guarantors) in five countries – Germany, the UK, France, Spain and with customers. Italy – had provided the necessary collateral. The amounts recognised as lease liabilities are based on the fol- lowing data: >> Table 080 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position190 Minimum lease payments >> Table 080 in € million Total minimum lease payments (gross) due within one year due in one to five years due in more than five years Present value of minimum lease payments due within one year due in one to five years due in more than five years 2013 683.8 241.1 425.6 17.1 617.1 213.3 387.3 16.4 2012 524.4 166.8 344.6 13.0 475.0 145.8 316.8 12.4 Interest included in minimum lease payments 66.7 49.4 We keep the world moving.KION GROUP AG | Annual Report 2013 191 [31] other provisions Other provisions relate to the following items: >> Table 081 Other provisions >> Table 081 in € million Balance as at 01/01/2013 thereof non-current thereof current Changes in group of consolidated entities Additions Utilisations Reversals Additions to accrued interest Exchange differences Other adjustments Balance as at 31/12/2013 thereof non-current thereof current Provisions for product warranties Provisions for personnel Other obligations Total other provisions 64.4 61.4 3.0 0.2 16.8 – 16.5 – 10.4 0.1 – 0.7 – 0.1 53.8 53.5 0.4 88.5 18.4 70.1 0.1 8.4 – 31.2 – 1.1 1.1 – 0.3 – 0.4 65.1 16.8 48.3 72.6 9.4 63.2 4.5 10.6 – 8.3 – 10.9 0.0 – 1.2 0.6 68.0 6.3 61.6 225.5 89.1 136.4 4.8 35.9 – 56.0 – 22.4 1.2 – 2.3 0.1 186.9 76.5 110.3 The provisions for product warranties include contractual and statu- The KION Group had recognised restructuring provisions tory obligations arising from the sale of industrial trucks and spare (including obligations under social plans) totalling €28.9 million in parts. It is expected that the bulk of the costs will be incurred within 2012, predominantly in connection with the relocation of produc- the next two years after the reporting date. tion. In 2013, the KION Group recognised restructuring provisions The provisions for personnel comprise provisions for partial (including obligations under social plans) totalling €3.7 million, pre- retirement obligations, long-service awards, annual bonuses, sev- dominantly in connection with the planned closure of production erance pay and obligations under social plans. The provision for sites. Total restructuring provisions (including obligations under partial retirement obligations is recognised on the basis of individ- social plans) came to €43.7 million as at 31 December 2013 ual contractual arrangements. (31 December 2012: €65.0 million). Other obligations largely comprise provisions for restructuring, litigation and expected losses from onerous contracts. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 192 [32] other financial liabilities Other financial liabilities comprise the following items: >> Table 082 Other financial liabilities in € million Liabilities from finance leases Deferred income Sundry other liabilities Derivative financial instruments Other non-current liabilities Liabilities from finance leases Deferred income Personnel liabilities Derivative financial instruments Social security liabilities Tax liabilities Advances received from third parties Liabilities on bills of exchange Liabilities from accrued interest Sundry current financial liabilities Other current liabilities >> Table 082 2012 208.1 132.7 4.3 10.0 355.1 92.2 84.4 161.6 33.6 40.5 65.9 37.6 2.3 9.6 29.4 557.0 2013 220.0 139.4 5.6 27.2 392.1 143.0 81.3 162.0 1.9 36.4 66.3 32.4 1.8 18.9 33.4 577.3 Total other liabilities 969.4 912.1 We keep the world moving.KION GROUP AG | Annual Report 2013 193 The non-current derivative financial instruments include, among (2012: €21.4 million). The KION Group has also recognised other other things, two call options on the remaining shares in Linde financial liabilities amounting to €18.2 million (31 December 2012: Hydraulics amounting to €27.2 million (2012: €16.5 million). €15.2 million) arising from procurement leases, which are classified The finance lease obligations comprise liabilities arising from the as finance leases due to their terms and conditions. financing of industrial trucks for short-term rental of €327.5 million The finance lease obligations are based on the following future (2012: €263.7 million) and residual value obligations of €17.3 million minimum rental payments: >> Table 083 Minimum lease payments >> Table 083 in € million Total minimum lease payments (gross) due within one year due in one to five years due in more than five years Present value of minimum lease payments due within one year due in one to five years due in more than five years 2013 402.2 159.3 235.3 7.5 363.0 143.0 212.9 7.1 2012 331.6 105.5 217.9 8.2 300.3 92.2 200.3 7.9 Interest included in minimum lease payments 39.2 31.2 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 194 [33] continGent liabilities and other financial commitments contingent liabilities Contingent liabilities in € million Liabilities on bills of exchange Liabilities on guarantees Collateral security for third-party liabilities Total contingent liabilities Guarantees amounting to €2.1 million (2012: €0.8 million) relate to contingent liabilities assumed jointly with another shareholder of a joint venture. litigation The legal risks arising from the KION Group’s business are typical of those faced by any company operating in this sector. The Company is a party in a number of pending lawsuits in various countries. It can- not assume with any degree of certainty that it will win any of the lawsuits or that the existing risk provision in the form of insurance or provisions will be sufficient in each individual case. However, the Company believes it is unlikely that these ongoing lawsuits will require funds to be utilised that exceed the provisions recognised. >> Table 084 2013 2012 1.1 4.5 0.2 5.8 4.4 3.2 0.1 7.7 We keep the world moving.KION GROUP AG | Annual Report 2013 195 other financial commitments Other financial commitments >> Table 085 in € million Commitments under non-cancellable operating leases Capital expenditure commitments in property, plant and equipment Capital expenditure commitments in intangible assets Other financial commitments Total other financial commitments The maturity structure of the total future minimum lease payments under non-cancellable operating leases is as follows: >> Table 086 Minimum lease payments in € million Nominal minimum lease payments due within one year due in one to five years due in more than five years 2013 206.0 8.6 2.2 15.3 232.1 2013 206.0 71.2 99.3 35.4 2012 194.2 7.2 2.6 18.5 222.5 >> Table 086 2012 194.2 38.8 90.4 65.0 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsNotes to the consolidated statement of financial position 196 The minimum lease payments relate to payments for leased build- ings, machinery, office furniture and equipment (procurement leases) as well as payments for industrial trucks refinanced with a sale and leaseback and sub-leased to end customers (sale and leaseback sub-leases). >> Table 087 Minimum lease payments broken down into procurement leases & sale and leaseback sub-leases >> Table 087 in € million Minimum lease payments (cash out) due within one year due in one to five years due in more than five years Minimum lease payments (cash in) due within one year due in one to five years due in more than five years Procurement leases Sale and leaseback sub-leases 2013 145.3 38.5 71.4 35.4 – – – – 2012 142.1 21.3 55.7 65.0 – – – – 2013 60.7 32.7 27.9 0.0 3.9 1.7 2.2 0.0 2012 52.1 17.5 34.6 0.0 6.8 3.6 3.3 0.0 The future minimum lease payments for sale and leaseback transac- tions not recognised in the statement of financial position amounting to €60.7 million are partially offset by payments received under non-cancellable sub-leases amounting to €3.9 million. The future payments also include obligations arising from the refinancing of industrial trucks for which there are no offsetting receipts under short-term sub-leases. We keep the world moving.KION GROUP AG | Annual Report 2013 Notes to the coNsolidated fiNaNcial statemeNts 197 Other disclosures Other disclosures [34] Consolidated statement of Cash flows The proceeds from the disposal of non-current assets primarily related to disposals of assets no longer required for the Group’s operating activities. Cash flow from financing activities amounted to minus €538.6 mil- lion (2012: minus €330.1 million). Financial debt increased by The consolidated statement of cash flows shows the changes in €649.0 million due to the issuance of the senior secured bond in cash and cash equivalents in the KION Group resulting from cash February 2013. In addition, €184.4 million had been drawn down inflows and outflows in the year under review, broken down into cash from the new revolving loan facility totalling €1,045.0 million as at flow from operating, investing and financing activities. The effects on 31 December 2013. As a result of the capital increases from Weichai cash from changes in exchange rates are shown separately. Cash and the IPO at the end of June 2013, the capital contributions made flow from operating activities is presented using the indirect method up to 31 December 2013 totalled €741.8 million. In total, these trans- in which the profit or loss for the year is adjusted for non-cash actions plus existing cash enabled the repayment of financial liabili- operating items. ties of €1,714.1 million relating to the Senior Facilities Agreement Cash flow from operating activities decreased by 18.9 per cent (SFA) as well as the early redemption of the 2011/2018 floating rate to €336.1 million in 2013 (2012: €414.0 million). EBIT fell sharply note amounting to €175.0 million. Gross repayments of all the KION from €549.1 million in 2012 to €374.2 million in the reporting period, Group’s financial liabilities (including PIK interest) amounted to a total although EBIT in the previous year had included, among things, outflow over the period as a whole of €2,201.6 million. This amount income of €211.8 million from the sale of the hydraulics business was partly offset by taking up financial debt of €1,095.9 million – that did not impact on cash flow from operating activities. The sig- including the corporate bond issued in 2013. The cash payments for nificant year-on-year decrease was largely due to one-off tax pay- costs incurred in connection with the debt and equity transactions ments of €57.7 million in connection with the sale of the hydraulics mentioned above amounted to €56.3 million (2012: €15.6 million). In business in 2012. the third quarter, 200,000 treasury shares worth €5.6 million were pur- Net cash used for investing activities amounted to €133.5 million. chased on the stock exchange for the new employee share pro- The net cash provided by investing activities in 2012 of €104.1 million gramme. Regular interest payments were €10.1 million lower than in included proceeds of €259.7 million from the sale of the hydraulics 2012 and amounted to €119.6 million in the reporting period. These business. Cash payments for capital expenditure on non-current interest payments included a non-recurring outflow of funds of assets and property, plant and equipment came to a total of €14.4 million resulting from the termination of interest-rate hedging €125.8 million (2012: €155.1 million). In the Linde Material Handling instruments in connection with the previous acquisition finance and STILL operating segments, the volume of capital expenditure arrangements. The net cash outflow from financing activities in 2012 was below that of the comparable prior-year period because the (€330.1 million) was also largely attributable to the repayment of loans. hydraulics business (which had high levels of capital expenditure) in The inflows from the IPO and the capital increases as well as the the LMH segment and the new plant in Brazil in the STILL segment existing cash from 2012 were predominantly used for the repayments. had led to higher cash payments in 2012. The net cash used for the Overall, this resulted in a sharp contraction in cash and cash acquisition of the Arser Group in Turkey amounted to €3.9 million equivalents, which fell from €562.4 million as at the end of 2012 to (after deduction of the cash received). The acquisition of 51 per cent €219.3 million as at 31 December 2013. There was also a decrease of Willenbrock Fördertechnik Holding GmbH led to a further outflow in cash and cash equivalents of €7.0 million owing to currency effects of funds of €21.2 million in December 2013. In the previous year, (2012: increase of €1.0 million). €9.7 million of the outflow of funds was attributable to the acquisition of a majority stake in Linde Creighton. We keep the world moving.KION GROUP AG | Annual Report 2013198 [35] information on finanCial instruments The following table shows the measurement categories defined by IAS 39. In line with IFRS 7, the table shows the carrying amounts and fair values of financial assets and liabilities: >> Tables 088 – 089 The KION Group uses both primary and derivative financial instru- ments. The following section summarises the relevance of these financial instruments for the KION Group. carrying amounts broken down by class and category 2013 >> Table 088 classes in € million financial assets Investments in non-consolidated subsidiaries / Other investments Loans receivable Financial receivables Available-for-sale investments Lease receivables* Trade receivables Other receivables thereof non-derivative receivables thereof derivative receivables Cash and cash equivalents financial liabilities Liabilities to banks Corporate bond Other financial liabilities to non-banks Lease liabilities* Trade payables Other liabilities thereof non-derivative liabilities thereof liabilities from finance leases* thereof derivative liabilities * as defined by IAS 17 carrying amount fahft afs laR htm flac flhft fair value categories 11.9 0.8 0.8 11.6 558.7 35.7 219.3 18.0 11.9 0.8 11.6 0.8 479.6 558.7 55.0 35.7 19.4 219.3 233.7 958.3 6.6 617.1 550.5 554.4 162.4 363.0 29.1 11.9 0.8 11.6 0.8 478.4 558.7 55.0 35.7 19.4 219.3 234.1 1,040.8 6.6 619.2 550.5 555.5 162.4 364.1 29.1 233.7 958.3 6.6 550.5 162.4 28.0 We keep the world moving.KION GROUP AG | Annual Report 2013199 carrying amounts broken down by class and category 2012 >> Table 089 classes in € million financial assets Investments in non-consolidated subsidiaries / Other investments Loans receivable Financial receivables Available-for-sale investments Lease receivables* Trade receivables Other receivables thereof non-derivative receivables thereof derivative receivables Cash and cash equivalents financial liabilities Liabilities to banks Corporate bond Other financial liabilities to non-banks Lease liabilities* Trade payables Other liabilities thereof non-derivative liabilities thereof liabilities from finance leases* thereof derivative liabilities * as defined by IAS 17 carrying amount fahft afs laR htm flac flhft fair value categories 6.2 0.8 0.7 9.6 625.5 35.2 562.4 21.1 6.2 0.7 9.6 0.8 399.3 625.5 59.2 35.2 23.9 562.4 1,858.4 489.5 4.5 475.0 646.0 503.1 159.2 300.3 43.6 6.2 0.7 9.6 0.8 398.2 625.5 59.2 35.2 23.9 562.4 1,858.4 530.9 4.5 475.8 646.0 503.6 159.2 300.8 43.6 1,858.4 489.5 4.5 646.0 159.2 24.0 As at 31 December 2013, trade payables of €550.5 million included liabilities to affiliated companies of €4.5 million (31 December 2012: €5.9 million) and liabilities to other long-term investees and investors of €6.0 million (31 December 2012: €5.6 million). We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures200 The change in valuation allowances for trade receivables was as follows: >> Table 090 change in valuation allowances >> Table 090 in € million Valuation allowances as at 01/01/ Group changes Additions (cost of valuation allowances) Reversals Utilisations Currency translation adjustments Valuation allowances as at 31/12/ 2013 50.5 – 0.2 9.4 – 7.5 – 9.2 – 0.7 42.4 2012 49.6 – 0.5 12.0 – 2.8 – 7.6 – 0.2 50.5 The net gains and losses on financial instruments are broken down by IAS 39 category as follows: >> Table 091 Net gains and losses on financial instruments broken down by category >> Table 091 in € million Loans and receivables (LaR) Financial assets held for trading (FAHfT) Financial liabilities held for trading (FLHfT) Financial liabilities carried at amortised cost (FLaC) 2013 11.0 3.6 – 17.8 – 152.9 2012 – 1.6 9.0 – 11.9 – 179.2 The above gains and losses do not include losses arising on hedging transactions amounting to €26.7 million (2012: €19.9 million) because these losses form part of a documented hedge. We keep the world moving.KION GROUP AG | Annual Report 2013 201 offsetting of financial instruments The potential offsetting volume essentially arises from netting arrangements in framework agreements governing derivatives trading that the KION Group concludes with commercial banks. The potential offsetting volume reported in connection with finan- cial collateral issued relates to collateral provided in the context of the SFA serving as collateral in case of default for the creditors of all SFA tranches (including H1 and H2), subject to the usual limita- tions and agreed recovery principles. The following tables show actual offsetting and potential offsetting volumes for financial assets and financial liabilities. >> Tables 092-095 financial assets subject to offsetting, enforceable master netting arrangements and similar agreements >> Table 092 Potential net amount Gross amounts of recognised financial liabilities set off in the balance sheet Net amounts of financial assets presented in the balance sheet Gross amounts of recognised financial assets owing to netting agreements in connection with financial collaterals received Potential net amount in € million Trade receivables Derivative financial assets total 560.8 19.4 580.1 – 2.1 – – 2.1 31/12/2013 558.7 19.4 578.1 – – 0.9 – 0.9 – – – 558.7 18.5 577.2 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures 202 financial assets subject to offsetting, enforceable master netting arrangements and similar agreements >> Table 093 Potential net amount Gross amounts of recognised financial liabilities set off in the balance sheet Net amounts of financial assets presented in the balance sheet Gross amounts of recognised financial assets owing to netting agreements in connection with financial collaterals received Potential net amount in € million Trade receivables Derivative financial assets total 627.9 23.9 651.9 – 2.5 – – 2.5 31/12/2012 625.5 23.9 649.4 – – 3.3 – 3.3 – – – 625.5 20.6 646.1 financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements >> Table 094 Potential net amount Gross amounts of recognised financial liabilities set off in the balance sheet Net amounts of financial assets presented in the balance sheet Gross amounts of recognised financial assets owing to netting agreements in connection with financial collaterals received Potential net amount in € million Financial liabilities Trade payables Derivative financial liabilities total 1,198.6 552.6 29.1 1,780.3 – – 2.1 – – 2.1 31/12/2013 1,198.6 550.5 29.1 1,778.2 – – – 0.9 – 0.9 – 348.7 – – 849.9 550.5 28.2 – 348.7 1,428.7 We keep the world moving.KION GROUP AG | Annual Report 2013 203 financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements >> Table 095 Potential net amount Gross amounts of recognised financial liabilities set off in the balance sheet Net amounts of financial assets presented in the balance sheet Gross amounts of recognised financial assets owing to netting agreements in connection with financial collaterals received Potential net amount in € million Financial liabilities Trade payables Derivative financial liabilities total 2,352.4 648.5 43.6 3,044.5 – – 2.5 – – 2.5 31/12/2012 2,352.4 646.0 43.6 3,042.0 – – – 3.3 – 3.3 – 566.3 1,786.1 – – 646.0 40.3 – 566.3 2,472.5 fair value measurement publicly quoted prices in an active market and is therefore classified as level 1 of the fair value hierarchy. The calculation is based on the The majority of the cash and cash equivalents, loans, other non- middle rate applicable on the reporting date. derivative receivables and liabilities, trade receivables and trade pay- The fair value of receivables and liabilities from finance leases ables held by the Group have short remaining terms to maturity. The corresponds to the present value of the net lease payments, taking carrying amounts of these financial instruments are roughly equal to account of the current market interest rate for similar leases. their fair values. The fair value of liabilities to banks corresponds to With the exception of derivative financial instruments and availa- the present value of the outstanding payments, taking account of the ble-for-sale assets, all financial assets and liabilities are measured at current interest-rate curve and the Group’s own default risk. This fair amortised cost. value, calculated for the purposes of disclosure in the notes to the The following tables show the assignment of fair values to the financial statements, is classified as level 2 of the fair value hierarchy. individual classification levels as defined by IFRS 7 for financial The fair value of the corporate bonds issued, calculated for dis- instruments measured at fair value. >> Tables 096 – 097 closure in the notes to the financial statements, is determined using We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures 204 financial instruments measured at fair value >> Table 096 in € million financial assets thereof available-for-sale thereof derivative instruments financial liabilities thereof derivative instruments fair Value hierarchy level 1 level 2 level 3 0.8 3.6 1.9 15.7 27.2 2013 20.2 0.8 19.4 29.1 29.1 financial instruments measured at fair value >> Table 097 in € million financial assets thereof available-for-sale thereof derivative instruments financial liabilities thereof derivative instruments fair Value hierarchy level 1 level 2 level 3 0.8 4.2 19.7 27.1 16.5 2012 24.7 0.8 23.9 43.6 43.6 We keep the world moving.KION GROUP AG | Annual Report 2013 205 Level 1 comprises available-for-sale assets for which the fair value is market. There were no longer any material interest-rate hedging calculated using prices quoted in an active market. instruments as at 31 December 2013. The fair value of currency for- All interest-rate swaps and currency forwards are classified as wards is calculated by the system using the discounting method Level 2. The fair value of derivative financial instruments is based on forward rates on the reporting date. determined using appropriate valuation methods on the basis of The financial assets and liabilities allocated to Level 3 relate to a the observable market information at the reporting date. The put option held by Linde Material Handling GmbH, Aschaffenburg, default risk for the Group and for the counterparty is taken into and two call options held by Weichai Power on the remaining shares account on the basis of gross figures. The fair value of interest rate in Linde Hydraulics. The Black-Scholes model is used to calculate swaps is calculated as the present value of the estimated future the fair value of the put option and the two call options. At 31 Decem- cash flows. Both contractually agreed payments and forward inter- ber 2013, the material changes in fair value and the impact on the est rates are used to estimate the future cash flows, which are then income statement were as follows. >> Tables 098 – 099 discounted on the basis of a yield curve that is observable in the development of financial assets / liabilities classified as level 3 >> Table 098 in € million Value as at 1/1/2013 Losses recognised in net financial expenses Value as at 31/12/2013 Losses of the period relating to financial assets / liabilities held as at 31/12/2013 Change in unrealised losses for the period relating to financial assets / liabilities held as at 31/12/2013 2013 3.2 – 14.7 – 11.5 – 14.7 – 14.7 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures 206 significant unobservable inputs of level 3 financial assets / liabilities input Initial exercise price (in € million) Put-Option Fair value of the remaining shares in Linde Hydraulics (in € million) Residual time (in years) Initial exercise price (in € million) Call-Option 1 Fair value of the remaining shares in Linde Hydraulics (in € million) Residual time (in years) Initial exercise price (in € million) Call-Option 2 Fair value of the remaining shares in Linde Hydraulics (in € million) Residual time (in years) >> Table 099 2013 77.4 116.1 1.49 – 3.49 77.4 116.1 3.99 38.7 116.1 1.49 – 3.99 The fair values are measured using probability-weighted scenario analysis, on which the key, unobservable input parameters in the [36] finanCial risk reporting table above are based. As at 31 December 2013, the net value calculated for the options on the remaining shares in Linde Hydraulics came to minus Capital management €11.5 million (31 December 2012: €3.2 million). If the fair value of the shares had been 10 per cent lower on the reporting date, the net One of the prime objectives of capital management is to ensure value arising from the options would have increased by €9.4 million liquidity at all times. Measures aimed at achieving these objectives (31 December 2012: €8.3 million) to minus €2.1 million (31 December include the optimisation of the capital structure, the reduction of 2012: €11.5 million) and the expense would have decreased by liabilities and ongoing Group cash flow planning and management. €9.4 million (31 December 2012: additional gain of €8.3 million). A The inflows from the IPO and the capital increases as well as the 10.0 per cent rise in the fair value of the shares in Linde Hydraulics existing cash from 2012 were predominantly used for repayment of would have reduced the net value arising from the options by the SFA liabilities and the floating rate note, which had been due in €9.4 million (31 December 2012: €9.0 million) to minus €20.9 million 2018. Following on from the amendment and extension of the SFA (31 December 2012: minus €5.8 million) and led to an additional loan in July 2012, a further corporate bond was issued in expense of €9.4 million (31 December 2012: €9.0 million). February 2013 (see ‘Credit terms’ table in note [29]) as another way In order to eliminate default risk to the greatest possible extent, of meeting long-term financing requirements. the KION Group only enters into derivatives with investment-grade Close cooperation between local units and the Group head counterparties. office ensures that the local legal and regulatory requirements faced If events or changes in circumstances make it necessary to by foreign group companies are taken into account in capital reclassify financial instruments as a different level, they are reclassi- management. fied at the end of a reporting period. No financial instruments were transferred between Levels 1, 2 or 3 in 2013. We keep the world moving.KION GROUP AG | Annual Report 2013 207 Net financial debt – defined as the difference between financial based on certain credit ratings. The Group only enters into transac- liabilities (excluding lease liabilities) and cash and cash equivalents – tions with business partners and banks holding a good credit rating is the key performance measure used in liquidity planning at Group and subject to fixed limits. Counterparty risks involving our custom- level (see note [29]) and amounted to €979.3 million in 2013 (2012: ers are managed by the individual Group companies. €1,790.1 million). The following table shows the age structure of receivables as at the reporting date: >> Table 100 Credit risk In certain finance and operating activities, the KION Group is subject to credit risk, i.e. the risk that partners will fail to meet their contrac- tual obligations. This risk is limited by diversifying business partners age structure analysis of receivables >> Table 100 thereof: Not impaired at the reporting date, but thereof: Nei- ther overdue nor impaired at the reporting date carrying amount thereof: overdue and impaired at the reporting date up to and including 90 days overdue more than 90 days overdue 11.6 479.6 558.7 35.7 9.6 399.3 625.5 35.2 11.6 479.6 452.7 34.6 9.6 399.3 485.6 34.5 – – 2.8 0.5 – – 16.8 0.7 – – 97.2 0.4 – – 110.2 – – – 4.5 0.2 – – 5.5 0,0 2013 2012 in € million Financial receivables Lease receivables Trade receivables Other non-derivative receivables in € million Financial receivables Lease receivables Trade receivables Other non-derivative receivables We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures208 Impairment losses are based on the credit risk associated with the bility and solvency. The age structure of financial liabilities is reviewed receivables, the risk being assessed mainly using factors such as continually. The inflows from the IPO and the capital increases were customer credit rating and failure to adhere to payment terms. predominantly used for the repayments. This led to an improvement Some of the receivables that were overdue as at the reporting in the age structure in the reporting year. As a result of the IPO, there date, but for which no impairment losses had been reported, were was also a significant improvement in the KION Group’s credit profile, offset by corresponding trade payables. Apart from this item, the and consequently in its credit rating. In July 2013, Moody’s upgraded Group did not hold any significant collateral. its corporate family rating by three notches, from B3 / positive to liquidity risk Ba3 / stable, while Standard & Poor’s also significantly improved its rating for the KION Group, from B / stable to BB- / positive. All of the contractually agreed payments under recognised financial liabilities as at 31 December 2013 and 2012, including deriv- Based on IFRS 7, a liquidity risk arises if a company is unable to meet ative financial instruments with negative fair values, are shown in its financial liabilities. The KION Group maintains a liquidity reserve in >> Tables 101 – 102 the form of lines of credit and cash in order to ensure financial flexi- liquidity analysis of financial liabilities and derivatives 2013 >> Table 101 in € million Primary financial liabilities Liabilities to banks Corporate bond Borrowing costs Other financial liabilities Trade payables Lease liabilities Other liabilities derivative financial liabilities Derivatives with negative fair value + Cash in – Cash out carrying amount 2013 cash flow 2014 cash flow 2015 – 2018 cash flow from 2019 233.7 975.0 – 16.7 1,192.0 6.6 550.5 617.1 525.3 1.9 – 229.7 – 66.0 – 11.1 – 583.7 – 0.1 – 713.6 – 2.9 – 550.5 – 241.1 – 321.7 – – – 425.6 – 235.3 147.0 – 148.7 1.5 – 1.7 – 4.1 – – 17.1 – 7.5 – – We keep the world moving.KION GROUP AG | Annual Report 2013 209 liquidity analysis of financial liabilities and derivatives 2012 >> Table 102 in € million Primary financial liabilities Liabilities to banks Corporate bond Borrowing costs Other financial liabilities Trade payables Lease liabilities Other liabilities derivative financial liabilities Derivatives with negative fair value + Cash in – Cash out carrying amount 2012 cash flow 2013 cash flow 2014 – 2017 cash flow from 2018 1,882.1 500.0 – 34.1 2,347.9 4.5 646.0 475.0 443.0 27.1 – 124.4 – 33.7 – 1,994.4 – 138.4 – 149.8 – 517.9 – 0.6 – 646.0 – 166.8 – 248.1 – – – 344.6 – 217.9 438.2 – 452.6 5.0 – 13.8 – 5.3 – – 13.0 – 8.2 – – The calculation of future cash flows for derivative financial liabilities In some cases, the KION Group retains insignificant rights and includes all currency forwards and interest-rate swaps that have duties in connection with fully derecognised financial assets, primar- negative fair values as at the reporting date. ily the provision of limited reserves for defaults. The recognised Bank guarantee lines (e.g. sureties, performance bonds) had assets that serve as reserves for defaults and are reported under been issued under the ancillary facility agreements for a total amount other current financial assets, stood at €1.0 million as at 31 Decem- in the low double-digit millions as at 31 December 2013. They ber 2013 (31 December 2012: €0.0 million). However, the short included guarantees payable ‘on first demand’. No guarantees were residual maturity of these financial assets meant their carrying utilised in 2013. amount was almost the same as their fair value. The maximum downside risk arising on the transferred and fully derecognised financial assets amounted to €5.0 million as at 31 December 2013 (31 December 2012: €0.0 million). We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures 210 default risk Because of low default rates, counterparty risk has not been significant to date in the KION Group. The Group did not identify any For financial assets, default risk is defined as the risk that a counter- material year-on-year changes in 2013. The KION Group’s losses party will default, and hence is limited to a maximum of the carrying from defaults are also mitigated by its receipt of the proceeds from amount of the assets relating to the counterparty involved. The the sale of repossessed trucks. In addition, it primarily offers financial potential default risk attaching to financial assets is mitigated by services indirectly via selected funding partners, and the KION secured forms of lending such as reservation of title, credit insurance Group bears the counterparty risk in less than 5 per cent of cases. and guarantees, and potential netting agreements. The credit risk management system was refined as part of the work Specific valuation allowances for defaults are recognised to to transfer financial services activities to a separate segment. In reflect the risk arising from primary financial instruments. Financial particular, this involved revising procedures on operational and transactions are only entered into with selected partners holding organisational structure as well as processes for risk management good credit ratings. Investments in interest-bearing securities are and control. limited to investment-grade securities. risks arising from financial services Currency risk In accordance with its treasury risk policy, the KION Group hedges The KION Group’s leasing activities mean that it may be exposed to currency risks both locally at the level of the individual companies residual value risks from the marketing of trucks that are returned by and centrally via KION Material Handling GmbH in order to meet the the lessee at the end of a long-term lease and subsequently sold or prescribed minimum hedging ratios. re-leased. Residual values in the markets for used trucks are there- The main hedging instruments employed are foreign-currency fore constantly monitored and forecast. forwards, provided that there are no country-specific restrictions on The KION Group regularly assesses its overall risk position aris- their use. ing from financial services, recognising write-downs, valuation allow- At company level, hedges are entered into for highly probable ances or provisions to cover the risks it identifies. It immediately future transactions on the basis of rolling 15-month forecasts, as well takes account of any changes in residual values when calculating as for firm obligations not reported in the statement of financial new leases. position. In accordance with IAS 39, these hedges are generally clas- In addition, residual values are mainly based on remarketing sified as cash flow hedges for accounting purposes (see note [37]). agreements that continued to achieve positive outcomes in 2013; Foreign-currency forwards are also employed to hedge the any residual-value risk under these agreements is transferred to the currency risks arising in the course of internal financing. external leasing company. Groupwide standards to ensure that residual values are calculated conservatively reduce risk and provide the basis on which to create the transparency required. KION also has an IT system for residual-value risk management. The KION Group mitigates its liquidity risk and interest-rate risk by ensuring that most of its transactions and funding loans have matching maturities. Long-term leases are primarily based on fixed-interest agreements. The credit facilities provided by various banks ensure that the Group has sufficient liquidity. In order to exclude currency risk, KION generally funds its leasing business in the local currency used in each market. We keep the world moving.KION GROUP AG | Annual Report 2013211 The following table shows an overview of the foreign-currency forwards entered into by the KION Group. >> Table 103 foreign-currency forwards >> Table 103 fair value National amount in € million Foreign-currency forwards (assets) Foreign-currency forwards (liabilities) 2013 2012 Hedge Trading Hedge Trading 1.3 2.3 0.7 0.8 2.9 1.3 1.0 7.4 2013 65.0 164.7 33.4 115.7 2012 89.2 103.7 29.8 414.2 Significant currency risks from financial instruments are measured financial instruments are denominated in a currency other than the on the basis of value at risk (VaR) as part of internal Group manage- functional currency of the reporting entity concerned. This means ment. VaR figures are calculated using a historical variance- that currency risks resulting from the translation of the separate covariance matrix. Currency risks from financial instruments as financial statements of subsidiaries into the Group reporting defined by IFRS 7 are only included in calculating value at risk if the currency, i.e. currency translation risks, are not included. Value-at-Risk in € million Currency risk >> Table 104 2013 18.6 2012 30.3 The value at risk in respect of currency risk as at 31 December 2013 was €18.6 million (31 December 2012: €30.3 million). Value at risk is the loss that is not expected to be exceeded over a holding period of one year with a confidence level of 97.7 per cent (2012: 97.7 per cent). We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures 212 interest-rate risk The Group funds itself by, among other things, drawing down loans under its agreed loan facilities. Until the third quarter, interest-rate Interest-rate risk within the KION Group is managed centrally. The derivatives – mainly interest-rate swaps – were used to hedge the basis for decision-making includes sensitivity analyses of interest - resultant interest-rate risk. The corresponding interest-rate hedging rate risk positions in key currencies. instruments were terminated upon repayment of the floating-rate The table below shows the cumulative effect of a rise or fall of liabilities under the SFA, which means that there were no material 100 basis points (bps) in the relevant interest-rate curves, with a rate interest-rate hedging instruments as at 31 December 2013. of 0 per cent constituting the lower limit of the calculation. >> Table 106 >> Table 105 interest-rate sensitivity in € million Other comprehensive income (loss) Net income (loss) interest-rate swaps in € million Interest-rate swaps (assets) Interest-rate swaps (liabilities) +100 bps –100 bps +100 bps –100 bps >> Table 105 2013 – – 9.7 fair value 2013 – – 0.4 – 2013 – 9.7 2012 – – 18.6 – 2012 16.0 – 8.5 2012 – 1.6 8.5 >> Table 106 Notional amount 2013 – – 13.0 – 2012 – – 1,670.0 – Hedge Trading Hedge Trading We keep the world moving.KION GROUP AG | Annual Report 2013 213 [37] hedge aCCounting hedging of interest-rate risk hedging currency risk The KION Group used hedge accounting in connection with the hedging of interest-rate risk in 2013. The KION Group funded itself by, among other things, drawing down loans with variable interest rates in various currencies. Inter- In accordance with its treasury risk policy, the KION Group applies est-rate derivatives denominated in various currencies were used to hedge accounting in hedging the currency risks arising from highly hedge the resultant interest-rate risk in 2013. These interest-rate probable future transactions in various currencies. Foreign-currency derivatives were terminated in July 2013 when most of the float- forwards with settlement dates in the same month as the expected ing-rate loans were repaid. Upon early termination of the interest-rate cash flows from the Group’s operating activities are used as hedges. derivatives, the amounts totalling €14.4 million that were recognised The effectiveness of the Group’s hedging transactions is in OCI as part of hedge accounting were derecognised and taken to assessed on the basis of forward rates using the hypothetical income. Because the KION Group had used interest-rate swaps to derivative approach under the cumulative dollar-offset method. The transform 48 per cent of its variable-rate exposure into fixed-rate effective portion of the changes in the fair value of foreign-currency obligations in the previous year, it did not fully benefit from the low forwards is recognised in accumulated other comprehensive income level of market interest rates. The individual hedges were designated (loss) and only reversed when the corresponding hedged item is at the time the swaps were transacted. The KION Group no longer recognised in income. had any material interest-rate derivatives as at 31 December 2013. On account of the short-term nature of the Group’s payment The effective portion of the hedges was recognised in other terms, reclassifications to the income statement and the recognition comprehensive income (loss). As in the previous year, the cumulative of the corresponding cash flows generally take place in the same effectiveness of the hedging transactions was almost 100 per cent. reporting period. A foreign-currency receivable or liability is Again, as in 2012, there were no material ineffective portions. recognised when goods are despatched or received. Hedge In total, variable portions of future interest payments amounting accounting continues until the corresponding payment is received, to €6.3 million had been designated as hedged items in 2012. No with the changes in the fair value of the derivative being recognised material hedged items had been designated to hedge interest-rate in the income statement, thereby largely offsetting the effect of the risk as at 31 December 2013. measurement of the receivable at the reporting date. The changes in fair value recognised and reclassified in other comprehensive income in 2013 are shown in the consolidated state- ment of comprehensive income. The ineffective portion of the changes in the fair value of the hedging transactions is recognised directly in the income statement. There were no significant ineffective [38] segment report portions in 2013. The Executive Board divides the KION Group into financial services In total, foreign-currency cash flows of €162.1 million (2012: (FS) activities and the Linde Material Handling (LMH) and STILL €114.3 million) were hedged and designated as hedged items, of brands for management purposes. Segment reporting follows the which €147.6 million is expected by 30 September 2014 (2012: same breakdown, taking into account the relevant organisational €99.7 million by 30 September 2013). The remaining cash flows structures and corporate strategy of the KION Group. designated as hedged items fall due in the period up to 24 Febru- ary 2015. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures214 description of the segments income (loss) for the current period. As at 31 December 2013, ROE – earnings before tax as a percentage of average equity – remained The Linde Material Handling (LMH) segment encompasses the unchanged on the prior year at 13.0 per cent. Linde, Fenwick and Baoli brands. The 30 per cent stake held in Linde Intra-group transactions are generally conducted on an arm’s- Hydraulics is allocated to the LMH segment and accounted for using length basis. The regular (interest) margin income that FS generates the equity method. from its business activities reflects prevailing market conditions. The STILL segment comprises the STILL and OM STILL brands. Surpluses from leasing that exceed this interest margin are reflected FS activities include the financing of long-term leasing business in the producer margin within the operating profit generated by the with external customers of the KION Group and short-term rental LMH and STILL brand segments. business of the LMH and STILL operating segments as well as risk Segment reports are prepared in accordance with the same management. When long-term leasing business is being conducted, accounting policies as the consolidated financial statements, as FS operates as a contractual partner to external customers and described in note [7]. Contrary to these policies, however, the LMH provides the necessary funding in conjunction with external financial and STILL brands’ intersegment sales to FS are always treated as partners. Besides management of residual-value risk, risk manage- revenue for the brand segments, irrespective of which entity might ment also includes the management of credit risk. In addition, FS retain any opportunities and risks. provides the financing for short-term rental fleets on behalf of the Assets and liabilities associated with the long-term leasing LMH and STILL brand segments, which operate and maintain such business, including related income and expenses, are assigned to fleets as part of their operational business. the FS segment. The Other segment comprises the company operating under the Whereas the main feature of long-term leasing business is the Voltas brand as well as holding and service companies in the KION provision of a financial service for the external lessee, the focus in Group. Voltas is a KION Group brand company whose manufacturing short-term rental business is on the service function. External is based in India and whose business activities focus primarily on the customers are offered rental trucks from a rental pool – including Indian volume market. The service companies provide services for all associated services – for short-term use. Unlike the situation in long- segments in the KION Group. The bulk of the revenue in this segment term leasing, financial performance in the short-term business is is generated by internal IT and logistics services. largely dependent on the achieved level of utilisation of the rental segment management fleet, management of which lies entirely within the responsibility of the brand segments. Given this structure, the assets associated with the short-term business remain on the brand segments’ statements of financial position and the related income and expenses remain on The KPIs used to manage the brand segments are order intake, the brand segments’ income statements. revenue and adjusted EBIT. Segment reporting therefore includes a In an indirect leasing arrangement, the otherwise typical reconciliation of externally reported consolidated earnings before financing function of the FS segment as a lender for the leasing interest and tax (EBIT) – including KION acquisition items and transaction no longer applies. As a result of the sale of the leased non-recurring items – to the adjusted EBIT for the segments asset to the external finance provider in such transactions, the brand (‘adjusted EBIT’). To improve comparability and control, the non- segments view the transactions in the same way as a sale to an end- recurring items for the Linde Material Handling segment in 2012 also user. Consequently, these transactions and all the revenue that they include the elimination of the EBIT items for the hydraulics business, generate are recognised in the LMH and STILL brand segments. which was sold at the end of 2012. Earnings before tax (EBT) and return on equity (ROE) are the KPIs used to manage the Financial Services segment. ROE is calculated on the basis of average equity employed excluding net We keep the world moving.KION GROUP AG | Annual Report 2013215 The following tables show information on the KION Group’s operating segments for 2013 and 2012: >> Tables 107 – 108 segment report 2013 >> Table 107 in € million Revenue from external customers Intersegment revenue Total revenue earnings before taxes Financial income Financial expenses = Net financial expenses eBit + Non-recurring items + KION acquisition items = adjusted eBit Segment assets Segment liabilities Carrying amount of at-equity investments Equity result Capital expenditure 1 Depreciation 2 Order intake Number of employees 3 lmh 2,629.8 251.2 2,881.1 270.3 9.2 – 21.3 – 12.0 282.4 2.9 23.8 309.1 4,669.4 1,553.3 118.3 – 2.5 67.6 86.0 2,901.8 13,776 still 1,501.8 215.7 1,717.5 75.0 1.7 – 36.6 – 34.9 109.9 8.3 5.7 123.9 2,086.9 1,198.5 4.6 0.7 42.2 38.8 1,692.0 7,704 financial services 314.7 224.7 539.4 4.7 52.4 – 48.4 4.0 0.7 0.0 0.0 0.7 1,249.4 1,207.7 15.8 3.5 0.0 0.0 539.4 118 other 48.2 186.9 235.1 – 102.6 27.7 – 202.1 – 174.4 71.8 1.7 0.0 73.5 902.9 3,332.0 0.0 0.0 16.0 16.8 235.1 675 consolidation / Reconciliation – – 878.5 – 878.5 – 93.1 – 42.6 40.1 – 2.5 – 90.6 – – – 90.6 – 2,882.1 – 2,875.0 – – – – – 879.1 – total 4,494.6 0.0 4,494.6 154.3 48.5 – 268.4 – 219.8 374.2 12.8 29.5 416.5 6,026.4 4,416.5 138.6 – 1.7 125.8 141.4 4,489.1 22,273 1 Capital expenditure including capitalised R&D costs, excluding leased and rental assets 2 On intangible assets and property, plant and equipment excl. leased and rental assets 3 Number of employees in full-time equivalents as at 31 December We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures 216 segment report 2012 >> Table 108 in € million Revenue from external customers Intersegment revenue Total revenue earnings before taxes Financial income Financial expenses = Net financial expenses eBit + Non-recurring items + KION acquisition items = adjusted eBit Segment assets Segment liabilities Carrying amount of at-equity investments Equity result Capital expenditure 1 Depreciation 2 Order intake Number of employees 3 lmh 2,903.2 229.1 3,132.2 506.2 9.7 – 26.4 – 16.7 522.9 – 254.9 33.0 301.0 4,514.0 1,461.7 135.5 13.5 89.1 102.5 3,135.8 13,148 still 1,483.8 192.8 1,676.6 69.6 3.0 – 31.1 – 28.1 97.7 17.1 7.4 122.2 2,068.0 1,190.8 6.1 1.2 51.1 42.7 1,648.6 7,253 financial services 296.8 212.6 509.3 4.8 44.7 – 41.3 3.4 1.4 0.0 0.0 1.4 1,039.0 997.3 13.2 1.2 0.1 0.0 509.3 112 other 42.9 208.0 250.9 – 205.7 21.7 – 215.2 – 193.5 – 12.2 55.5 1.1 44.4 902.3 4,206.0 0.0 0.0 14.8 17.7 250.9 702 consolidation / Reconciliation – – 842.4 – 842.4 – 63.9 – 38.6 35.3 – 3.3 – 60.6 – – – 60.6 – 2,310.2 – 2,303.3 – – – – – 844.7 – total 4,726.7 0.0 4,726.7 310.9 40.5 – 278.7 – 238.2 549.1 – 182.2 41.5 408.3 6,213.2 5,552.5 154.8 15.9 155.1 162.9 4,700.1 21,215 1 Capital expenditure including capitalised R&D costs, excluding leased and rental assets 2 On intangible assets and property, plant and equipment excl. leased and rental assets 3 Number of employees in full-time equivalents as at 31 December We keep the world moving.KION GROUP AG | Annual Report 2013217 The table below gives a breakdown of the revenue from external cus- tomers by location. >> Table 109 segment revenue broken down by customer location >> Table 109 in € million Western Europe Eastern Europe Americas Asia Rest of world 2013 3,223.9 369.7 279.4 453.5 168.1 2012 3,363.3 362.8 324.2 485.6 190.7 total segment revenue 4,494.6 4,726.7 Revenue in Germany came to €1,115 million in 2013 (2012: The assets attributable to the Financial Services segment €1,225 million). There are no relationships with individual customers include long-term leases, which were reported as either leased that generate revenue deemed to be significant as a proportion of assets or lease receivables, depending on the type of lease. As at total consolidated revenue. the reporting date, lease receivables due from unrelated third parties Financial income and expenses including all interest income and amounted to €458.1 million (31 December 2012: €379.9 million). expenses are described in notes [12] and [13]. There were also intra-group lease receivables of €449.1 million The non-recurring items mainly comprised consultancy costs, (31 December 2012: €373.4 million), which primarily resulted from as well as costs incurred in connection with severance payments, the funding of the short-term rental business of LMH and STILL. social plan costs and costs relating to the relocation of production The liabilities attributable to the Financial Services segment and closure of production sites. They totalled €12.8 million in 2013 largely comprised liabilities to leasing companies of €935.2 million (2012: €70.9 million). (31 December 2012: €730.3 million) relating to sale and leaseback In 2013, these items also included further income and expenses transactions that resulted from the funding of long-term leases with connected with the sale of our controlling interest (70 per cent) in external third parties and intra-group customers. In the reporting Linde Hydraulics GmbH & Co. KG, Aschaffenburg in December year, €615.5 million (2012: €470.2 million) of this amount was 2012, and components of the share of profit (loss) of the remaining attributable to the funding of leases with external customers and 30 per cent of the equity-accounted shares, which amounted to net €319.7 million (2012: €260.2 million) related to the funding of intra- income of €0.1 million. For reasons of comparability and control, the group leases with the LMH and STILL brand companies as lessees, hydraulic business’s current income of €28.8 million for 2012 was who had in turn entered into leases with external third parties. More- also eliminated as a non-recurring item from EBIT in last year’s over, they include net financial debt of €163.6 million (2012: segment reporting. €174.9 million) arising from general corporate finance for the FS The KION acquisition items relate to the acquisition of the KION segment. Group, which was formed at the end of 2006 when it was spun off from Linde AG, Munich. These items comprise net write-downs on the hidden reserves identified as part of the purchase price allocation. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures 218 Capital expenditure by the Financial Services segment includes Capital expenditure in Germany came to €82.2 million in 2013 additions to intangible assets and property, plant and equipment. (2012: €105.0 million). Leased assets are described in note [18]. >> Table 110 capital expenditure broken down by company location (excl. leased and rental assets) >> Table 110 in € million Western Europe Eastern Europe Americas Asia Rest of world total capital expenditure 2013 105.0 3.7 2.2 13.9 0.9 125.8 2012 132.9 3.3 8.4 9.9 0.6 155.1 Depreciation / amortisation relates to intangible assets with finite Non-current assets attributable to Germany amounted to useful lives and property, plant and equipment. €2,676.6 million in 2013 (2012: €2,552.6 million). The regional breakdown of non-current assets excluding finan- cial assets, financial instruments, deferred tax assets and post-em- ployment benefits is as follows: >> Table 111 Non-current assets broken down by company location >> Table 111 in € million Western Europe Eastern Europe Americas Asia Rest of world 2013 3,316.2 109.6 42.6 130.4 42.4 2012 3,174.8 101.2 46.2 122.2 49.5 total non-current assets (ifRs 8) 3,641.2 3,494.0 We keep the world moving.KION GROUP AG | Annual Report 2013 219 [39] employees The KION Group employed an average of 21,632 people in the reporting year (2012: 22,232). The number of employees (including part-time employees expressed in terms of full-time equivalents) is broken down by region as follows: >> Table 112 employees (average) >> Table 112 Germany France UK Italy Rest of Europe Asia Rest of world total employees The acquisition of Willenbrock and STILL Arser led to an increase of 542 and 122 employees respectively. 2013 7,625 3,160 1,881 786 3,565 3,438 1,177 2012 8,497 3,245 1,807 884 3,443 3,243 1,113 21,632 22,232 We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures 220 [40] related party disClosures In addition to the subsidiaries included in the consolidated financial statements, the KION Group has direct or indirect business relation- ships with a number of unconsolidated subsidiaries, joint ventures and associates in the course of its ordinary business activities. Related parties that are controlled by the KION Group, through which a significant influence can be exerted over the KION Group, or which are members of the Superlift group are either included in the list of shareholdings as at 31 December 2013 (see note [45]) or in the table below: >> Table 113 Related parties >> Table 113 Superlift Holding S.à r.l., Luxembourg Kohlberg Kravis Roberts & Co. L.P., New York, USA Goldman, Sachs & Co., New York, USA Weichai Power Co. Ltd., Weifang, China Parent company Entity with significant influence Entity with significant influence Entity with significant influence The members of the Executive Board and Supervisory Board of KION GROUP AG are also related parties. superlift funding s.à r.l., luxembourg Under a supplementary loan agreement dated 23 September 2009, investment funds advised by Kohlberg Kravis Roberts & Co. L.P. (‘KKR’) and The Goldman Sachs Group, Inc. extended the SFA to include an additional loan of €100.0 million to be paid via Superlift Funding S.à r.l., Luxembourg. The loan provided by Superlift Holding to Superlift Funding (including accrued interest) and the investment in Superlift Funding, together amounting to €118.1 million, were converted into equity with effect from 11 June 2013. We keep the world moving.KION GROUP AG | Annual Report 2013 221 advisory agreement weichai power On 8 May 2007, KION GROUP GmbH, Kohlberg, Kravis Roberts & Since exercising its option, which did not come into effect until Co. L.P. (‘KKR’) and Goldman, Sachs & Co. entered into an advisory 15 January 2014, Weichai Power Co. Ltd., Weifang, China (referred agreement, under the terms of which KKR and Goldman, Sachs & to below as Weichai Power) has held a 33.3 per cent stake in KION Co. were to provide advisory services for the KION Group. These GROUP AG. Weichai Power also holds a controlling interest (70.0 advisory services related, in particular, to financial and strategic per cent) in Linde Hydraulics GmbH & Co. KG, Aschaffenburg issues. The advisory agreement expired when KION GROUP AG was (referred to below as Linde Hydraulics). The remaining shares (30.0 floated on the stock market. A total of €2.4 million in advisory fees per cent) in Linde Hydraulics are held by the KION Group. During was recognised as an expense in respect of this agreement in 2013 2013, the KION Group earned revenue of €17.0 million from selling (2012: €4.8 million). KION GROUP AG, KKR and Goldman, Sachs & goods and services to Linde Hydraulics and its subsidiaries. Over Co. concluded a new global advisory agreement on 7 June 2013, the same period, companies in the KION Group obtained goods and which stipulates a fixed annual fee of €125,000. Under the agree- services from Linde Hydraulics and its subsidiaries amounting to ment, KKR and Goldman, Sachs & Co. will continue to provide €114.1 million. The receivables arising from the sale of goods and limited advisory services for the KION Group after its IPO in the event services stood at €6.0 million as at 31 December 2013 (31 Decem- that the KION Group decides it wishes to draw on this expertise. A ber 2012: €1.0 million). No valuation allowances for trade receivables total of €0.1 million in advisory fees was recognised as an expense in had been recognised as at the reporting date, a situation that was respect of the new agreement in 2013. unchanged on 31 December 2012. As at 31 December 2013, liabilities In connection with the issuance of a corporate bond, a banking to Linde Hydraulics and its subsidiaries resulting from the purchase fee totalling €1.9 million was paid to KKR and Goldman, Sachs & Co. of goods and services came to €2.7 million (31 December 2012: as syndicate members. This fee has been allocated pro rata as €0.0 million). transaction costs to each of the tranches and expensed over their In parallel with its global advisory agreement with KKR and respective terms. Goldman, Sachs & Co., KION GROUP AG also concluded a global As part of the stock market flotation, KKR and Goldman, advisory agreement with Weichai Power on 7 June 2013. Under the Sachs & Co. were promised a contractual banking fee totalling agreement, Weichai Power will provide advisory services related to €5.1 million, which was reported in other comprehensive income the Asia-Pacific region for the KION Group after its IPO in the event (loss) as transaction costs relating to the capital increase. that the KION Group decides it wishes to draw on this expertise. A In August 2013, the KION Group began preparations for an fixed annual fee of €125,000 was agreed for these services. A total of employee share programme to enable staff members, initially those €0.1 million in advisory fees was recognised as an expense in respect in Germany, to derive greater benefit from the success of the of the new agreement in 2013. Company. An agreement for handling the share repurchase between Weichai Power (Luxembourg) Holding S.à r.l. acquired shares by 28 August and 26 September 2013 was signed with Goldman Sachs way of a capital increase. This capital increase caused the share International, in which Goldman Sachs International was authorised capital to rise by €13.7 million and the capital reserves by to run the buy-back programme on behalf of KION GROUP AG. In €314.7 million. 2013, a total of €0.1 million was recognised as an expense. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures222 The table below shows the receivables due from related parties as at the reporting date. >> Table 114 Receivables from related parties >> Table 114 in € million Non-consolidated subsidiaries Associates Joint ventures Other related parties total receivables from related parties The table below shows the liabilities owed to related parties as at the reporting date. >> Table 115 liabilities to related parties in € million Non-consolidated subsidiaries Associates Joint ventures Other related parties total liabilities to related parties 2013 10.0 10.9 0.2 5.5 26.6 2013 6.1 67.2 2.1 1.1 76.4 2012 7.4 13.3 2.6 3.4 26.8 >> Table 115 2012 6.0 35.9 4.9 132.5 179.3 We keep the world moving.KION GROUP AG | Annual Report 2013 223 Since the conversion of an existing loan and the investment in Super- while KION Management Beteiligungs GmbH deferred payment of lift Funding by Superlift Holding, the loan (plus accrued interest) the purchase price of the ‘B’ and ‘C’ shares, subject to an interest provided by Linde Material Handling GmbH to Superlift Funding has charge. In 2010, the performance-related vesting conditions for the no longer been reported under liabilities owed to related parties. ‘C’ shares relating to the 2009-2012 plan years were adjusted to take [41] kion management partnership plan (mpp) account of the revised long-term KION business plan. The change in vesting conditions affected a total of 1,034 ‘C’ shares with an expected exercise price of €16 thousand each. The total fair value of the adjustment of the performance-related vesting conditions for the ‘C’ shares was €1,044 thousand. The 1,034 purchase options out- standing as at 1 January 2013 were all exercised in 2013. The fair value attributable to the adjustment at the exercise date in 2013 In 2007, the former sole shareholder, Superlift Holding S.à r.l., gave differed only insignificantly from the corresponding pro-rata exercise managers in the KION Group the opportunity to invest in what is now price. No expenses were recognised in respect of the MPP in 2013 KION GROUP AG through KION Management Beteiligungs GmbH & (2012: €0.16 million). Co. KG by way of a co-invest agreement. This scheme is known as the KION management partnership plan (MPP). More managers joined the MPP in 2007, 2008, 2010 and 2011. At the time of the IPO, the KION Group’s Executive Board plus around 300 executives around the world had invested in KION GROUP AG through KION Management Beteiligungs GmbH & Co. KG. KION Management Beteiligungs GmbH & Co. KG held an equity [42] kion performanCe share plan (psp) interest of 3.7 per cent in KION GROUP AG at the time of the IPO. In May 2013, the Company entered into new service contracts with After the IPO, individual managers used the option open to them as Executive Board members which were contingent on the Company’s a result of the IPO to withdraw the shares attributable to them from IPO going ahead. Consequently, they did not come into force until KION Management Beteiligungs GmbH & Co. KG or to sell the the day after the initial listing on the Frankfurt Stock Exchange on shares through KION Management Beteiligungs GmbH & Co. KG. As 28 June 2013. The provisions of these new service contracts specify a result, the equity interest of KION Management Beteiligungs GmbH that long-term variable remuneration (the KION GROUP AG & Co. KG fell to below 3 per cent. Only the shares held by members performance share plan) is to be introduced so that the remuneration of the KION Executive Board and some members of the Manage- structure is based on the sustainable performance of the Company. ment Boards of Linde Material Handling GmbH and STILL GmbH As part of the KION GROUP AG performance share plan, the remain subject to a lock-up period of one year following the IPO. Of Executive Board members are allocated virtual shares over a fixed those shares, 881,471 are held by Executive Board members, period (two-and-a-half years for the 2013 tranche and three years for equating to an equity interest in KION GROUP AG of 0.89 per cent. all subsequent tranches). The remuneration component measured The Executive Board’s equity interest has remained unchanged over the long term is based in equal parts on the total shareholder since the IPO. return (TSR) of KION GROUP AG shares compared with the STOXX® The shares in what is now KION GROUP AG were purchased by Europe TMI Industrial Engineering index as a measure of market per- managers in the KION Group through KION Management formance, and with return on capital employed (ROCE) as an internal Beteiligungs GmbH & Co. KG at fair value, and shareholdings are measure. It also depends on the performance of KION GROUP AG divided into virtual ‘A’, ‘B’, and ‘C’ shares. Different terms and shares during the relevant period. conditions concerning payment of the purchase price and rights to The first performance period for the 2013 tranche ends on purchase attach to these virtual shares. The purchase price for ‘A’ 31 December 2015. At the beginning of the performance period, the shares became payable when participants joined the programme, Executive Board members were granted a total of 0.3 million virtual We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures224 shares for this tranche with a specific fair value based on an allocation the performance period by + / – 20 per cent. The maximum amount value in euros specified in each Executive Board member’s service payable is limited to 200 per cent of the value of the shares allotted contract. At the end of the performance period, the number of the to an individual at the grant date. virtual shares is amended depending on the degree to which the The pro-rata expense calculation based on the fair value of the relevant targets are achieved. The resulting final number of virtual virtual shares on each valuation date is carried out using Monte-Carlo shares multiplied by the smoothed price of KION GROUP AG shares simulation. The following valuation parameters were used to value at the end of the performance period determines the amount of cash the virtual shares on the reporting date: >> Table 116 actually paid. The Supervisory Board can also use a discretionary personal performance factor to adjust the final payment at the end of significant measurement parameters for the KioN GRoUP aG Performance share Plan >> Table 116 measurement parameters Expected volatility of the KION share Expected volatility of the STOXX® Europe TMI Industrial Engineering Index Risk-free interest rate Expected dividend yield Price of the KION share Initial value of the KION share (60 days average) Initial value of the STOXX® Europe TMI Industrial Engineering Index (60 days average) Expected pay-out for internal target ROCE Valuation date 31/12/2013 30.0 % 20.0 % 0.2 % €0.88 €30.73 €26.64 €204.26 100.0 % The historic volatility of shares in similar companies (peer group) was virtual shares was €6.2 million on that date. Because the perfor- used to determine the volatility of KION shares on which the mance period for the 2013 tranche has been set at 30 months, a valuation is based. As at 31 December 2013, the fair value of one liability of €1.2 million was recognised as a pro-rata expense for six virtual share was €23.74 and the total fair value based on 0.3 million months in 2013. We keep the world moving.KION GROUP AG | Annual Report 2013 225 [43] remuneration of the exeCutive Board and supervisory Board executive Board The total remuneration paid to the members of the Executive Board in 2013 amounted to €7.4 million (2012: €12.0 million). This con- sisted of short-term remuneration amounting to €4.9 million (2012: €5.6 million), post-employment benefits totalling €0.6 million (2012: €0.4 million), termination benefits of €0.0 million (2012: €6.0 million) and share-based payments of €1.9 million (2012: €0.0 million). The short-term remuneration comprised non-performance-related com- Gordon Riske, Chief Executive Officer (CEO), is responsible, among ponents amounting to €2.8 million (2012: €1.9 million) and perfor- other things, for the strategic management of the Group, communi- mance-related components amounting to €2.2 million (2012: €3.6 mil- cations, governance and compliance. On 11 January 2013, he also lion). The current service cost resulting from pension provisions for the took over responsibility for internal audit, KION Warehouse Systems Executive Board is reported under post-employment benefits. The and the North and South America regions. long-term incentive components take the form of a performance share Klaus Hofer stepped down from the Executive Board of the plan (see note [42]). In addition, one Executive Board member was KION Group on 10 January 2013. As Chief Human Resources Officer promised a special bonus, to be paid in two tranches, that would be (CHRO), he had been responsible for human resources, legal affairs, granted in the event of a successful IPO; this bonus also counts as a health & safety and internal audit. He was also the KION Labour long-term incentive. The pro-rata expense for share-based payments Relations Director. totalled €1.9 million (2012: €0.0 million). Bert-Jan Knoef is CEO and Labour Relations Director of the Under section 314 HGB, disclosure of the expense for share- brand company STILL GmbH and, since 11 January 2013, has also based payments is not required. Rather, they must be included in the overseen all cross-brand logistics activities and managed the intra- Executive Board members’ remuneration for the year in which they group logistics service provider, Urban. are granted on the basis of the fair value at the individual grant dates. Theodor Maurer is CEO and Labour Relations Director of the The fair value of the share-based payments at their individual grant brand company Linde Material Handling GmbH and, since 11 Janu- dates amounted to €6.2 million (2012: €0.0 million). Furthermore, ary 2013, has also held cross-brand responsibility for quality, facility post-employment benefits must not be disclosed. On this basis, the management, health, safety and the environment. total remuneration paid to the members of the Executive Board pur- Ching Pong Quek was appointed Chief Asia Pacific Officer with suant to section 314 HGB came to €11.1 million (2012: €5.6 million). effect from 11 January 2013 and heads up the KION Group’s entire No loans or advances were made to members of the Executive Asia business. Board in 2013 (2012: loans and advances totalling €0 million). The Dr Thomas Toepfer, Chief Financial Officer (CFO), is responsible, present value of the defined benefit obligation in respect of Executive among other things, for finance (including financial services) and IT Board members as at 31 December 2013 was €5.9 million (31 Decem- activities. On 11 January 2013, he also took over responsibility for ber 2012: €2.3 million). purchasing, human resources, legal affairs and data protection. He The total remuneration paid to former members of the Executive is also the KION Labour Relations Director. Board in 2013 amounted to €0.2 million (2012: €0.2 million). Defined The remuneration paid to the Executive Board comprises a fixed benefit obligations to former members of the Executive Board or salary and non-cash benefits, pension entitlements and their surviving dependants amounting to €5.2 million (2012: €3.6 mil- performance-related components. The variable performance- lion) were recognised in accordance with IAS 19. related components are paid each year on the basis of the Group’s Further details of Executive Board remuneration, including the performance. In addition, there are performance-based compo- individual amounts for each member, can be found in the nents in the form of the KION performance share plan for all Execu- remuneration report on pages 57 to 65 of this annual report. tive Board members and a bonus for Dr Thomas Toepfer. The pension entitlements consist of retirement, invalidity and surviving dependants’ benefits. We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures226 supervisory Board Bert-Jan Knoef Member of the Executive Board / CEO of STILL The total remuneration paid to the members of the Supervisory (since 11 January 2013) Board for the performance of their tasks at the parent company and subsidiaries in 2013 amounted to €1.2 million including VAT (2012: Member of the Executive Board of KION Material €1.0 million). There were no loans or advances to members of the Handling GmbH, Wiesbaden Supervisory Board in 2013. Furthermore, the members of the Super- Chief Executive Officer (CEO) and Labour Relations Director visory Board did not receive any remuneration or benefits for of STILL GmbH, Hamburg services provided as individuals, such as consulting or brokerage Presidente of the Consiglio di Amministrazione of OM Carrelli activities. Elevatori S.p.A., Lainate, Italy Members of the Supervisory Board also received short-term Presidente of the Consiglio di Amministrazione of employee benefits of €0.6 million for employee services (2012: STILL ITALIA S.p.A., Lainate, Italy €0.5 million). Member of the Advisory Board of STILL GmbH i. L., Ljubljana, [44] memBers of the exeCutive Board and supervisory Board executive Board Gordon Riske Chief Executive Officer (CEO) Slovenia Member of the Advisory Board of STILL Gesellschaft m.b.H., Wr. Neudorf, Austria (until 17 January 2013) Member of the Advisory Board of STILL KFT, Környe, Hungary (until 30 January 2013) Member of the Supervisory Board of STILL INTERN TRANSPORT B.V., Hendrik-Ido-Ambacht, Netherlands (until 30 January 2013) Member of the Advisory Board of STILL POLSKA, Gądki, Poland (until 30 January 2013) Member of the Advisory Board of Supralift Beteiligungs- und Kommunikationsgesellschaft mbH, Hofheim am Taunus (until 31 December 2013) Chief Executive Officer of KION Material Member of the Advisory Board of Supralift GmbH & Co. KG, Handling GmbH, Wiesbaden Hofheim am Taunus (until 31 December 2013) Member of the Executive Board of KION Holding 2 GmbH, Member of the Advisory Board of STILL Belgien N.V., Wijnegem Wiesbaden (Antwerp), Belgium (until 17 January 2013) Member of the Asia Pacific Committee of KION Material Member of the Supervisory Board of STILL Danmark A / S, Kolding, Handling GmbH, Wiesbaden Denmark (until 17 January 2013) Chairman of the Supervisory Board of Linde Material Member of the Board of Directors of STILL Materials Handling Ltd., Handling GmbH, Aschaffenburg Preston, United Kingdom (until 30 January 2013) Chairman of the Board of Directors of Linde (China) Member of the Advisory Board of OOO ‘STILL Forklifttrucks’, Forklift Truck Co., Ltd., Xiamen, People’s Republic of China Moscow, Russia (until 1 February 2013) Chairman of the Supervisory Board of STILL GmbH, Hamburg Member of the Executive Board of the non-profit Hertie Foundation, Frankfurt am Main Non-Executive Director of Weichai Power Co., Ltd., Weifang, People’s Republic of China We keep the world moving.KION GROUP AG | Annual Report 2013227 theodor maurer Handling Asia Pacific Pte., Ltd., Singapore, Singapore Member of the Executive Board / CEO of LMH Chairman of the Board of Directors of Linde Material (since 11 January 2013) Handling Hong Kong Ltd., Hong Kong, People’s Republic of China Member of the Executive Board of KION Material dr thomas toepfer Handling GmbH, Wiesbaden Member of the Executive Board / CFO Chief Executive Officer (CEO) and Labour Relations Director of Linde Material Handling GmbH, Aschaffenburg Member of the Executive Board of KION Material Chairman of the Board of Directors of Linde Material Handling GmbH, Wiesbaden Handling (UK) Ltd., Basingstoke, United Kingdom Member of the Executive Board of KION Holding 2 GmbH, Chairman of the Board of Directors of Linde Heavy Truck Wiesbaden Division Ltd., Merthyr Tydfil, United Kingdom Member of the Asia Pacific Committee of KION Material Member of the Board of Directors of LMH North America Corp., Handling GmbH, Wiesbaden Summerville, USA Member of the Supervisory Board of STILL GmbH, Hamburg Member of the Board of Directors of Linde (China) Forklift Member of the Supervisory Board of Linde Material Handling Truck Co. Ltd., Xiamen, People’s Republic of China GmbH, Aschaffenburg Member of the Supervisory Board of Linde Hydraulics Member of the Executive Board of MPP Verwaltungs GmbH, Verwaltungs GmbH, Aschaffenburg Wiesbaden Member of the Comité Consultatif of Fenwick- Member of the Executive Board of MPP Beteiligungs GmbH, Linde S.à.r.l., Élancourt, France Wiesbaden Member of the Supervisory Board of Schöler Fördertechnik AG, Administrador Solidario of Islavista Spain S.A., Barcelona, Spain Rheinfelden ching Pong Quek Chairman of the Board of Directors of LMH North America Corp., Summerville, USA Member of the Board of Directors of Superlift UK Ltd., Member of the Executive Board / Chief Asia Pacific Officer Basingstoke, United Kingdom (since 11 January 2013) Klaus hofer Member of the Executive Board / Chief Asia Pacific Officer (until 10 January 2013) of KION Material Handling GmbH, Wiesbaden Member of the Asia Pacific Committee of KION Material Member of the Executive Board / CHRO Handling GmbH, Wiesbaden Member of the Supervisory Board of Linde Material Handling GmbH, Chief Executive Officer of Linde (China) Forklift Truck Corp., Ltd., Aschaffenburg (until 10 January 2013) Xiamen, People’s Republic of China Member of the Board of KION South Asia Pte Ltd., Singapore, Singapore President and CEO of KION Asia Ltd., Hong Kong, People’s Republic of China Chairman of KION Baoli Forklift Co., Ltd., Jiangsu, People’s Republic of China Member of the Board of Directors of Voltas Material Handling Pvte. Ltd., Pune, India Member of the Board of Directors of Linde Material We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures228 supervisory Board Member of the Shareholder Committee of Xella International S.à r.l., Luxembourg dr John feldmann Chairman of the Supervisory Board of Wincor Nixdorf AG, Chairman of the Supervisory Board Paderborn Member of the Supervisory Board of Wincor Nixdorf International Chief Executive Officer of the non-profit GmbH, Paderborn Hertie Foundation, Frankfurt am Main (until 31 March 2014) Chairman of the Supervisory Board of KION Material denis heljic 1 Handling GmbH, Wiesbaden (since 12 June 2013) Member of the Supervisory Board of Bilfinger SE, Mannheim Field technician at STILL GmbH, Member of the Supervisory Board of Hornbach Baumarkt AG, Dortmund, and Deputy Chairman of the Works Council Bornheim of STILL GmbH, Dortmund plant Member of the Supervisory Board of Hornbach Holding AG, Member of the Supervisory Board of KION Material Handling GmbH, Bornheim Joachim hartig 1 Wiesbaden dr martin hintze Deputy Chairman of the Supervisory Board Managing Director of Merchant Banking at Goldman Sachs International, London, United Kingdom Chairman of the European Works Council of Member of the Supervisory Board of KION Material KION GROUP AG, Wiesbaden Handling GmbH, Wiesbaden Deputy Chairman of the Supervisory Board of Member of the Executive Board of Xella International KION Material Handling GmbH, Wiesbaden Holdings S.à r.l., Luxembourg Deputy Chairman of the Supervisory Board of Member of the Executive Board of Xella HoldCo Linde Material Handling GmbH, Aschaffenburg Finance S.A., Luxembourg holger Brandt 2 Luxembourg Head of Sales Germany at STILL GmbH, Hamburg Member of the Executive Board of Xenia S.à r.l., Member of the Supervisory Board of KION Material Luxembourg Handling GmbH, Wiesbaden Member of the Supervisory Board of LEG Immobilien AG, Member of the Supervisory Board of STILL GmbH, Hamburg Düsseldorf Member of the Executive Board of Xella Topco S.à r.l., dr alexander dibelius Johannes P. huth Chairman of the Executive Board of Goldman Sachs AG, Partner at and member of the Executive Committee of Kohlberg Frankfurt am Main Kravis Roberts & Co. Partners LLP, London, United Kingdom Member of the Supervisory Board of KION Material Member of the Supervisory Board of KION Material Handling GmbH, Wiesbaden Handling GmbH, Wiesbaden Member of the European Management Committee of Deputy Chairman of the Supervisory Board of NXP BV, Goldman Sachs International, London, United Kingdom Eindhoven, Netherlands Member of the Board of Directors of OOO Goldman Sachs, Chairman of the Supervisory Board of ProSiebenSat. 1 Moscow, Russia Media AG, Unterföhring Member of the Board of Directors of OOO Goldman Sachs Bank, Chairman of the Supervisory Board of WMF AG, Moscow, Russia Geislingen an der Steige We keep the world moving.KION GROUP AG | Annual Report 2013229 Jiang Kui Kay Pietsch 1 President and Director of Shandong Heavy Industry Chairman of the Group Works Council of the KION Group and Group Co., Ltd., Jinan, People’s Republic of China Chairman of the Works Council of STILL GmbH, Hamburg Member of the Supervisory Board of KION Material Member of the Supervisory Board of KION Material Handling Handling GmbH, Wiesbaden GmbH, Wiesbaden Director of Shantui Construction Machinery Co., Ltd., Deputy Chairman of the Supervisory Board of STILL GmbH, Jining, People’s Republic of China Hamburg Chairman of the Board of Strong Construction Machinery Co., Ltd., Linyi, People’s Republic of China Deputy Chairman of the Board of Weichai hans Peter Ring (since 9 June 2013) Holding Group Co., Ltd., Weifang, People’s Republic of China Management consultant, Munich Director of Weichai Power Co., Ltd., Weifang, Member of the Supervisory Board of KION Material Handling People’s Republic of China GmbH, Wiesbaden Director of Shandong Heavy Industry India Member of the Supervisory Board of Elbe Flugzeugwerke GmbH, Private Ltd., Pune, India Dresden Director of Weichai Power Hong Kong International Member of the Supervisory Board of MAG Europe GmbH, Development Co., Ltd., Hong Kong, People’s Republic of China Göppingen Member of the Executive Board of Hydraulics Drive Member of the Supervisory Board of Fokker Technologies Technology Beteiligungs GmbH, Aschaffenburg Holding B.V., Papendrecht, Netherlands Chairman of the Supervisory Board of Linde Hydraulics Verwaltungs GmbH, Aschaffenburg alexandra schädler 1 (since 2 October 2013) thilo Kämmerer 1 Trade Union Secretary on the National Executive of the Trade Union Secretary, IG Metall, Bamberg Administrative Office IG Metall union, Frankfurt am Main Member of the Supervisory Board of KION Material Member of the Supervisory Board of KION Material Handling Handling GmbH, Wiesbaden GmbH, Wiesbaden dr Roland Köstler 1 (until 30 September 2013) Member of the Supervisory Board of Fujitsu Technology Solutions GmbH, Munich Head of Business Law at Hans-Böckler-Stiftung, silke scheiber Düsseldorf (until 31 July 2013) Partner at Kohlberg Kravis Roberts & Co. Partners LLP, Member of the Supervisory Board of KION Material Handling London, United Kingdom GmbH, Wiesbaden (until 30 September 2013) Member of the Supervisory Board of KION Material Handling Özcan Pancarci 1 (since 12 June 2013) GmbH, Wiesbaden Member of the Board of Directors of Jungbunzlauer Holding AG, Basel, Switzerland Chairman of the Plants I & II Works Council of Linde Material Member of the Supervisory Board of WMF AG, Geislingen an der Handling GmbH, Aschaffenburg Steige Member of the Supervisory Board of KION Material Handling Member of the Supervisory Board of Van Gansewinkel Groep B.V., GmbH, Wiesbaden Rotterdam, Netherlands Member of the Supervisory Board of Linde Material Handling GmbH, Aschaffenburg We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures230 tan Xuguang (since 9 June 2013) Chief Executive Officer and Chairman of the Board of Directors of Weichai Power Co. Ltd., Weifang, People’s Republic of China [45] list of the shareholdings of kion group ag, wiesBaden Member of the Supervisory Board of KION Material Handling The shareholdings of the KION Group as at 31 December 2013 are GmbH, Wiesbaden listed below. >> Table 117 Chairman of the Board of Directors of Shandong Heavy Industry Group Co., Ltd., Jinan, People’s Republic of China Chairman of the Board of Directors of Weichai Group Holding Co., Ltd., Weifang, People’s Republic of China Chairman of the Board of Directors of Weichai Heavy Machinery Co., Ltd., Weifang, People’s Republic of China Chairman of the Board of Directors of Shaanxi Heavy-duty Motor Co., Ltd., Xi’an, People’s Republic of China Chairman of the Board of Directors of Shaanxi Fast Gear Co., Ltd., Xi’an, People’s Republic of China hans-Peter Weiß 1 Chairman of the Plant III Works Council of Linde Material Handling GmbH, Kahl Member of the Supervisory Board of KION Material Handling GmbH, Wiesbaden 1 Employee representatives 2 Executive representatives We keep the world moving.KION GROUP AG | Annual Report 2013231 list of shareholdings as of december 31, 2013 according to section 313 para. 2 No. 1 – 4 commercial code (hGB) >> Table 117 No. Name Registered office country Parent company shareholding Note 1 KION GROUP AG Wiesbaden Germany consolidated subsidiaries domestic 2 BlackForxx GmbH 3 Eisenwerk Weilbach GmbH 4 Fahrzeugbau GmbH Geisa 5 KION Financial Services GmbH 6 KION Holding 2 GmbH 7 KION Information Management Services GmbH 8 KION Material Handling GmbH 9 KION Warehouse Systems GmbH Stuhr Wiesbaden Geisa Wiesbaden Wiesbaden Wiesbaden Wiesbaden Reutlingen 10 Klaus Pahlke GmbH & Co. Fördertechnik KG Haan Germany Germany Germany Germany Germany Germany Germany Germany Germany 11 Linde Material Handling GmbH Aschaffenburg Germany 18 11 18 11 1 8 6 18 11 8 12 LMH Immobilien GmbH & Co. KG Aschaffenburg Germany 11 & 13 13 LMH Immobilien Holding GmbH & Co. KG Aschaffenburg Germany 14 LMH Immobilien Holding Verwaltungs-GmbH Aschaffenburg Germany 15 LMH Immobilien Verwaltungs-GmbH Aschaffenburg Germany 16 Schrader Industriefahrzeuge GmbH & Co. KG 17 STILL Financial Services GmbH 18 STILL Gesellschaft mit beschränkter Haftung Essen Hamburg Hamburg Germany Germany Germany 19 Urban-Transporte Gesellschaft mit beschränkter Haftung Unterschleißheim Germany 20 Willenbrock Arbeitsbühnen GmbH & Co. KG 21 Willenbrock Fördertechnik GmbH & Co. KG 22 Willenbrock Fördertechnik GmbH & Co. KG 23 Willenbrock Fördertechnik Holding GmbH foreign 24 Linde Material Handling Pty. Ltd. 25 STILL N.V. Bremen Bremen Hannover Bremen Huntingwood Wijnegem 26 KION South America Fabricação de Equipamentos para São Paulo Armazenagem Ltda. 27 KION Baoli (Jiangsu) Forklift Co., Ltd. 28 Linde (China) Forklift Truck Corporation Ltd. 29 STILL DANMARK A / S 30 BARTHELEMY MANUTENTION SAS 31 Bastide Manutention SAS 32 Bretagne Manutention S.A. 33 FENWICK FINANCIAL SERVICES SAS 34 FENWICK-LINDE S.A.R.L. 35 KION France SERVICES SAS Jiangjiang Xiamen Kolding Vitrolles Toulouse Pacé Elancourt Elancourt Elancourt Germany Germany Germany Germany Australia Belgium Brazil China China Denmark France France France France France France 11 11 11 11 5 11 11 23 23 23 11 11 18 & 69 18 58 11 18 34 34 34 35 35 & 11 11 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 99.64 % 94.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 74.00 % 74.00 % 74.00 % 74.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 87.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % [1] [1] [1] [1] We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures232 list of shareholdings as of december 31, 2013 according to section 313 para. 2 No. 1 – 4 commercial code (hGB) >> Table 117 No. Name 36 LOIRE OCEAN MANUTENTION SAS 37 Manuchar S.A. 38 MANUSOM SAS Registered office country Saint-Herblain France Gond Pontouvre France Rivery 39 SAS Société Angoumoisine de Manutention - SAMA Champniers 40 SM Rental SAS 41 STILL Location Services SAS 42 STILL SAS 43 KION FINANCIAL SERVICES Ltd. 44 Linde Castle Ltd. 45 Linde Creighton Ltd. 46 Linde Heavy Truck Division Ltd. 47 Linde Holdings Ltd. 48 Linde Jewsbury’s Ltd. 49 Linde Material Handling (UK) Ltd. 50 Linde Material Handling East Ltd. 51 Linde Material Handling Scotland Ltd. 52 Linde Material Handling South East Ltd. 53 Linde Severnside Ltd. 54 Linde Sterling Ltd. 55 McLEMAN FORK LIFT SERVICES LTD. 56 STILL Materials Handling Ltd. 57 Superlift UK Ltd. Roissy Charles de Gaulle Marne la Vallée Marne la Vallée Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Exeter Basingstoke France France France France France U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. 58 KION ASIA (HONG KONG) Ltd. Kwai Chung Hong Kong 59 Linde Material Handling Hong Kong Ltd. Kwai Chung Hong Kong 60 Voltas Material Handling Pvt. Ltd. 61 Linde Material Handling (Ireland) Ltd. 62 KION Rental Services S.p.A. 63 Linde Material Handling Italia S.p.A. 64 OM Carrelli Elevatori S.p.A. 65 QUALIFT S.p.A. 66 STILL ITALIA S.p.A. 67 KION Finance S.A. 68 Superlift Funding S.à r.l. 69 STILL Intern Transport B.V. 70 AUSTRO OM PIMESPO Fördertechnik GmbH 71 Linde Fördertechnik GmbH 72 STILL Gesellschaft m.b.H. Pune Walkinstown Milan Buguggiate Lainate Verona Lainate India Ireland Italy Italy Italy Italy Italy Luxembourg Luxembourg Luxembourg Luxembourg Hendrik Ido Ambacht Linz Linz Netherlands Austria Austria Wiener Neudorf Austria 73 Linde Material Handling Polska Sp. z o.o. Warsaw Poland Parent company shareholding Note 34 34 42 42 34 35 35 57 49 49 49 57 49 47 49 49 49 49 49 45 57 11 11 11 83 47 63 & 64 & 66 11 11 & 66 63 18 – 1 18 64 11 & 70 18 11 86.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % – 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % [2] [1] We keep the world moving.KION GROUP AG | Annual Report 2013233 list of shareholdings as of december 31, 2013 according to section 313 para. 2 No. 1 – 4 commercial code (hGB) >> Table 117 No. Name 74 STILL POLSKA Spólka z o.o. 75 OOO ‘Linde Material Handling Rus’ 76 OOO ‘STILL Forklifttrucks’ 77 STILL MOTOSTIVUITOARE S.R.L. 78 Linde Material Handling AB 79 STILL Sverige AB 80 Linde Material Handling Schweiz AG (for- merly: Linde Lansing Fördertechnik AG) 81 STILL AG 82 KION South Asia Pte. Ltd. 83 Linde Material Handling Asia Pacific Pte. Ltd. Registered office Gadki Moscow Moscow Giurgiu Örebro Malmö country Poland Russia Russia Romania Sweden Sweden Dietlikon Switzerland Otelfingen Singapore Singapore Switzerland Singapore Singapore Slovakia Slovakia Slovenia Spain Spain Spain Spain Spain Spain 84 Linde Material Handling Slovenska republika s.r.o. Trencin 85 STILL SR, spol. s r.o. 86 Linde Vilicar d.o.o. 87 IBER-MICAR S.L. 88 Islavista Spain S.A.U. 89 KION Rental Services S.A.U. 90 Linde Holding de Inversiones S.R.L. 91 Linde Material Handling Ibérica, S.A.U. 92 STILL, S.A.U. Nitra Celje Gava L’Hospitalet de Llobregat L’Hospitalet de Llobregat Pallejá Pallejá L’Hospitalet de Llobregat 93 Linde Material Handling (Pty) Ltd. Linbro Park South Africa 94 Linde Material Handling Česká republika s r.o. Prague 95 Linde Pohony s r.o. Český Krumlov 96 STILL ČR spol. s r.o Prague 97 STILL ARSER Iş Makineleri Servis ve Ticaret A.Ş. Izmir 98 Linde Magyarország Anyagmozgatási Kft. 99 STILL Kft. Dunaharaszti Környe Czech Republic Czech Republic Czech Republic Turkey Hungary Hungary 100 Linde Material Handling North America Corp. Summerville United States Parent company 18 11 & 3 11 & 18 11 & 18 11 18 11 18 11 11 11 & 94 18 & 96 11 11 11 88 88 90 88 11 11 & 18 shareholding Note 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 11 100.00 % 11 & 18 100.00 % 18 11 18 11 51.00 % [1] 100.00 % 100.00 % 100.00 % We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures234 list of shareholdings as of december 31, 2013 according to section 313 para. 2 No. 1 – 4 commercial code (hGB) >> Table 117 No. Name Registered office country Parent company shareholding Note Non-consolidated subsidiaries (at amortised cost) domestic 101 Klaus Pahlke Betriebsführungs-GmbH 102 OM Deutschland GmbH Haan Neuhausen a. d. Fildern Germany Germany 103 proplan Transport- und Lagersysteme GmbH Aschaffenburg Germany 104 Schrader Industriefahrzeuge Verwaltung GmbH 105 Trainingscenter für Sicherheit und Transport GmbH 106 Willenbrock Arbeitsbühnen Beteiligungs-GmbH 107 Willenbrock Fördertechnik Beteiligungs-GmbH Essen Bremen Bremen Bremen 108 Willenbrock Fördertechnik Beteiligungs-GmbH Hannover Germany Germany Germany Germany Germany 11 64 1 11 23 23 23 23 100.00 % 100.00 % [R] 100.00 % 100.00 % 74.00 % 74.00 % 74.00 % 74.00 % [1] [1] [1] [1] foreign 109 Lansing Bagnall (Aust.) Pty. Ltd. Huntingwood Australia 49 & 11 100.00 % 110 WHO Real Estate OÜ 111 Baoli France SAS 112 OM PIMESPO FRANCE S.A.S. 113 SCI Champ Lagarde 114 URBAN LOGISTIQUE SAS 115 Castle Lift Trucks Ltd. 116 Creighton Materials Handling Ltd. 117 D.B.S. Brand Factors Ltd. 118 Fork Truck Rentals Ltd. 119 Fork Truck Training Ltd. 120 Lancashire (Fork Truck) Services Ltd. 121 OM PIMESPO (UK) Ltd. 122 Stephensons Enterprise Fork Trucks Ltd. 123 Sterling Mechanical Handling Ltd. 124 Trifik Services Ltd. 125 Urban Logistics (UK) Ltd. Tallinn Elancourt Marne la Vallée Elancourt Elancourt Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Estonie France France France France U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. 126 Handling & Storage Equipment (Ireland) Ltd. Walkinstown Ireland 127 Carest SRL 128 COMMERCIALE CARRELLI S.r.l. 129 Milano Carrelli Elevatori S.r.l. 130 URBAN LOGISTIKA S.R.L. 131 WHO Real Estate UAB 132 TOO ‘Linde Material Handling Kazakhstan’ 133 Linde Material Handling (Malaysia) Sdn. Bhd. 134 Linde Viljuskari d.o.o. Lainate Lainate Monza Lainate Vilnius Almaty Shah Alam Belgrade Italy Italy Italy Italy Lithuania Kazakhstan Malaysia Serbia 23 35 64 34 19 49 49 54 49 49 54 64 54 49 49 19 61 64 66 & 62 64 19 23 11 & 3 83 71 74.00 % [1] 100.00 % 100.00 % [R] 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % [R] [R] [R] [R] [R] [R] [R] [R] [R] [R] [R] 100.00 % [R] 100.00 % 74.00 % 100.00 % 100.00 % 100.00 % [1] [1] We keep the world moving.KION GROUP AG | Annual Report 2013235 list of shareholdings as of december 31, 2013 according to section 313 para. 2 No. 1 – 4 commercial code (hGB) >> Table 117 No. Name 135 STILL VILICAR d.o.o. 136 Linde Material Handling (Thailand) Co., Ltd. 137 Baoli Material Handling Česká republika s r.o. Registered office Ljubljana Bangkok Teplice 138 Urban Transporte spol. s.r.o. Moravany u Brna 139 TOV ‘Linde Material Handling Ukraine’ Kiev country Slovenia Thailand Czech Republic Czech Republic Ukraine Parent company 18 83 94 19 shareholding Note 100.00 % 100.00 % [1] 100.00 % 100.00 % 11 & 3 100.00 % associates (at-equity investments) domestic 140 Beutlhauser-Bassewitz GmbH & Co. KG 141 Hans Joachim Jetschke Industriefahrzeuge Hagelstadt Hamburg Germany Germany (GmbH & Co.) KG 142 Linde Leasing GmbH 143 Linde Hydraulics GmbH & Co. KG 144 MV Fördertechnik GmbH 145 Pelzer Fördertechnik GmbH foreign Wiesbaden Germany Aschaffenburg Germany Blankenhain Kerpen Germany Germany 146 Linde High Lift Chile S.A. Santiago de Chile Chile Joint Ventures (at-equity investments) foreign 11 11 11 11 11 11 11 25.00 % 21.00 % 45.00 % 30.00 % 25.00 % 24.96 % 45.00 % 147 JULI Motorenwerk s.r.o. Moravany Czech Republic 11 & 18 50.00 % Joint Ventures (at amortised cost) domestic 148 Eisengießerei Dinklage GmbH Dinklage Germany 18 50.00 % associates (at amortised cost) domestic 149 JETSCHKE GmbH Hamburg Germany 150 Linde Hydraulics Verwaltungs GmbH Aschaffenburg Germany 151 Supralift Beteiligungs- und Kommunikations- gesellschaft mbH 152 Supralift GmbH & Co. KG Hofheim am Taunus Hofheim am Taunus Germany Germany 11 11 11 11 22.00 % 30.00 % 50.00 % 50.00 % We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures236 list of shareholdings as of december 31, 2013 according to section 313 para. 2 No. 1 – 4 commercial code (hGB) >> Table 117 No. Name foreign 153 Labrosse Equipement S.A. 154 Normandie Manutention S.A. 155 Chadwick Materials Handling Ltd. 156 EUROPA CARRELLI S.R.L. 157 Nordtruck AB 158 Carretillas Elevadoras Sudeste S.A. 159 CAYSA MANUTENCION S.L. 160 Motorové závody JULI CZ s r.o. other investments (at amortised cost) foreign Registered office country Parent company shareholding Note Saint-Peray France Le Grand Quevilly France Corsham Bastia Umbra U.K. Italy Örnsköldsvik Sweden Murcia Valladolid Moravany Spain Spain Czech Republic 34 34 49 66 78 91 91 & 158 11 34.00 % 34.00 % 48.00 % 40.00 % 25.00 % 38.53 % 46.71 % 50.00 % 161 TPZ Linde Vilicari Hrvatska d.o.o. Zagreb Croatia 11 20.00 % [3] [1] New during 2013 [2] Consolidated as required by IAS 27 in conjunction with SIC-12 Consolidation – Special Purpose Entities [3] No material influence [R] Dormant company We keep the world moving.KION GROUP AG | Annual Report 2013237 [46] auditors’ fees [49] information on preparation and approval The fees recognised as an expense and paid to the auditors of the consolidated financial statements in 2013 amounted to €0.9 million The Executive Board of KION GROUP AG prepared the consolidated (2012: €1.0 million) for the audit of the financial statements, €1.4 mil- financial statements on 10 March 2014 and approved them for for- lion (2012: €0.7 million) for other attestation services, €0.4 million warding to the Supervisory Board. The Supervisory Board has the (2012: €0.4 million) for tax consultancy services and €0.0 million task of examining and deciding whether to approve the consolidated (2012: €0.0 million) for other services. financial statements. [47] Comply-or-explain statement regarding the german Corpo- rate governanCe Code (dCgk) Wiesbaden, 10 March 2014 The Executive Board In December 2013, the Executive Board and Supervisory Board of KION GROUP AG submitted their comply-or-explain statement for Gordon Riske Bert-Jan Knoef 2013 relating to the recommendations of the German Corporate Governance Code government commission pursuant to section 161 AktG. The comply-or-explain statement has been made perma- nently available to shareholders on the website of KION GROUP AG at kiongroup.com/comply_statement. [48] events after the reporting date Theodor Maurer Ching Pong Quek In the period between the reporting date and 10 March 2014 there were no events or developments that would have led to a material change in the recognition or measurement of the individual assets and liabilities as at 31 December 2013 or that it would be necessary to disclose. Dr Thomas Toepfer We keep the world moving.KION GROUP AG | Annual Report 2013Notes to the coNsolidated fiNaNcial statemeNtsOther disclosures238238 Auditors’ opinion We have audited the consolidated financial statements prepared by In our opinion, based on the findings of our audit, the consolidated KION GROUP AG, Wiesbaden / Germany, – comprising the consoli- financial statements of KION GROUP AG, Wiesbaden / Germany, dated income statement, consolidated statement of comprehensive comply with IFRS, as adopted by the EU, as well as the regulations income, consolidated statement of financial position, consolidated under German commercial law complementarily applicable under statement of cash flows, consolidated statement of changes in § 315a (1) German Commercial Code (HGB) and give a true and fair equity and the notes to the consolidated financial statements – and view of the net assets, financial position and results of operations the group management report for the business year from 1 January of the Group in accordance with these requirements. The group to 31 December 2013. The preparation of the consolidated financial management report is consistent with the consolidated financial statements and the group management report in accordance with statements and as a whole provides a suitable view of the Group’s IFRS, as adopted by the EU, as well as the regulations under German position and suitably presents the opportunities and risks of future commercial law complementarily applicable under § 315a (1) Ger- development. man Commercial Code (HGB) are the responsibility of the parent company’s Executive Board. Our responsibility is to express an opin- Frankfurt am Main / Germany, 10 March 2014 ion on the consolidated financial statements and on the group man- agement report based on our audit. We conducted our audit of the consolidated financial statements in accordance with § 317 HGB ("German Commercial Code") and Ger- man generally accepted standards for the audit of financial state- Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft ments promulgated by the Institut der Wirtschaftsprüfer. Those Signed: Crampton standards require that we plan and perform the audit such that mis- Wirtschaftsprüfer Signed: J. Löffler Wirtschaftsprüfer statements materially affecting the presentation of the net assets, (German Public Auditor) (German Public Auditor) financial position and results of operations in the consolidated finan- cial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determina- tion of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of enti- ties to be included in consolidation, the accounting and consolida- tion principles used and significant estimates made by the Executive Board, as well as evaluating the overall presentation of the consoli- dated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. We keep the world moving.KION GROUP AG | Annual Report 2013 Notes to the coNsolidated fiNaNcial statemeNts 239 Auditors’ opinion Responsibility statement Responsibility statement To the best of our knowledge, and in accordance with the applicable reporting principles for consolidated financial reporting, the consoli- dated financial statements give a true and fair view of the financial performance and financial position of the Group, and the manage- ment report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Wiesbaden, 10 March 2014 The Executive Board Gordon Riske Bert-Jan Knoef Theodor Maurer Ching Pong Quek Dr Thomas Toepfer We keep the world moving.KION GROUP AG | Annual Report 2013AdditionAl informAtion Contents 241 Additional information QuArterly informAtion multi-yeAr overview disclAimer finAnciAl cAlendAr contAct 242 243 244 245 245 KION GROUP AG | Annual Report 2013 We keep the world moving. 242 Quarterly information Kion Group overview in € million Order intake Revenue EBIT Adjusted EBIT Adjusted EBIT margin Adjusted EBITDA Adjusted EBITDA margin Free cash flow Net financial debt Q4 2013 1,192.5 1,177.8 107.4 115.6 9.8 % 194.2 16.5 % 134.9 979.3 Q3 2013 1,046.4 1,082.3 88.8 100.5 9.3 % 175.9 16.3 % 52.2 1,056.6 Q2 2013 1,104.8 1,149.3 91.5 107.6 9.4 % 183.5 16.0 % 20.2 1,701.6 >> Table 118 Q1 2013 1,145.3 1,085.2 86.4 92.8 8.5 % 167.9 15.5 % – 4.7 1,824.4 We keep the world moving.KION GROUP AG | Annual Report 2013 243 Multi-year overview Kion Group multi-year overview >> Table 119 in € million Order intake Revenue Order book 1 results of operation EBITDA Adjusted EBITDA 2 Adjusted EBITDA margin 2 EBIT Adjusted EBIT 2 Adjusted EBIT margin 2 2013 4,489.1 4,494.6 693.3 708.8 721.5 16.1 % 374.2 416.5 9.3 % 2012 * 4,590.3 4,559.8 807.8 914.4 700.5 15.4 % 549.1 408.3 9.0 % 2012 4,700.1 4,726.7 807.8 915.4 747.3 15.8 % 550.1 438.2 9.3 % 2011 4,681.9 4,368.4 953.0 569.2 665.3 15.2 % 213.2 364.6 8.3 % 2010 3,859.7 3,534.5 801.3 380.2 462.2 13.1 % 34.6 139.4 3.9 % 2009 3,028.2 3,084.3 533.0 183.0 310.8 10.1 % – 181.9 – 29.1 – 0.9 % Net income (loss) 3 138.4 161.4 161.1 – 92.9 – 196.7 – 366.2 financial position 1 Total assets Equity Net financial debt cash flow Free cash flow 4 Capital expenditure 5 6,026.4 1,610.0 979.3 6,213.2 660.7 1,790.1 6,213.2 660.3 1,790.1 6,066.3 – 487.6 2,631.3 5,758.9 – 399.9 2,626.0 5,814.9 – 213.0 2,464.2 202.6 125.8 518.1 155.1 518.1 155.1 234.2 133.0 76.0 123.5 34.0 108.2 employees 6 22,273 21,215 21,215 21,862 19,968 19,953 * Key figures for 2012 were adjusted due to the retrospective application of IAS 19R (2011); Order intake, Revenue, adjusted EBIT and adjusted EBITDA were aligned due to the Hydraulics Business 1 Values as at balance sheet date 31/12/ 2 Adjusted for KION acquisition items and one-off items 3 Net income 2012 included a net gain from the Weichai transaction in the amount of €154.8 million 4 Free cash flow is defined as Cash flow from operating activities plus Cash flow used in investing activities 5 Capital expenditure including capitalised R&D costs, excluding leased and rental assets 6 Number of employees in full-time equivalents as at balance sheet date 31/12/ AdditionAl informAtionQuarterly informationMulti-year overviewWe keep the world moving.KION GROUP AG | Annual Report 2013 244244 DIsClAImeR forward-looking statements This annual report contains forward-looking statements that relate to the current plans, objectives, forecasts and estimates of the management of KION GROUP AG. These state- ments only take into account information that was available up and including the date that this annual report was prepared. The management of KION GROUP AG makes no guarantee that these forward-looking statements will prove to be right. The future development of the KION GROUP AG and its subsidiaries and the results that are actually achieved are subject to a variety of risks and uncertainties which could cause actual events or results to differ signifi- cantly from those reflected in the forward-looking statements. Many of these factors are beyond the control of KION GROUP AG and its subsidiaries and therefore cannot be pre- cisely predicted. Such factors include, but are not limited to, changes in economic conditions and the competitive situation, changes in the law, interest rate or exchange rate fluctuations, legal disputes and investigations, and the availability of funds. These and other risks and uncertainties are set forth in the 2013 group management report. However, other factors could also have an adverse effect on our business performance and results. The KION GROUP AG neither intends to nor assumes any separate obligation to update forward-look- ing statements or to change these to reflect events or developments that occur after the pub- lication of this annual report. rounding Certain numbers in this annual report have been rounded up or down. There may therefore be discrepancies between the actual totals of the individual amounts in the tables and the totals shown as well as between the numbers in the tables and the numbers given in the corre- sponding analyses in the text of the annual report. All percentage changes and key figures were calculated using the underlying data in thousands of euros (€ thousand). We keep the world moving.KION GROUP AG | Annual Report 2013245245 FINANCIAl CAleNDAR CONtACt 20 march 2014 contacts for the media contacts for investors Financial statements press conference Publication of 2013 Annual Report michael Hauger frank w. Herzog 8 may 2014 Phone: +49 (0) 611.770-655 Phone: +49 (0) 611.770-303 Interim report for the period michael.hauger@kiongroup.com frank.herzog@kiongroup.com Head of Corporate Communications Head of Corporate Finance ended 31 March 2014 19 may 2014 Head of Corporate Media Relations Head of Investor Relations and M&A Annual General Meeting Phone: +49 (0) 611.770-752 Phone: +49 (0) 611.770-450 frank.brandmaier@kiongroup.com silke.glitza@kiongroup.com frank Brandmaier silke Glitza 6 August 2014 Interim report for the period ended 30 June 2014 5 november 2014 Interim report for the nine months ended 30 September 2014 Subject to change without notice Securities identification numbers KION GROUP AG ISIN: DE000KGX8881 WKN: KGX888 Abraham-Lincoln-Strasse 21 65189 Wiesbaden Phone: +49 (0) 611.770-0 Fax: +49 (0) 611.770-269 info@kiongroup.com www.kiongroup.com This annual report is available in German and English at kiongroup.com under Investor Relations / Financial Reports. Only the content of the German version is authoritative. We keep the world moving.KION GROUP AG | Annual Report 2013AdditionAl informAtionDisclaimerFinancial calendar/ContactPublisher KION GROUP AG Corporate Communications Abraham-Lincoln-Strasse 21 65189 Wiesbaden | Germany Phone: +49 (0) 611.770-0 Fax: +49 (0) 611.770-269 info@kiongroup.com www.kiongroup.com

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