KION Group
Annual Report 2014

Plain-text annual report

We keep the world moving. ANNUAL REPORT 2014 20150302_Kion_GB2014_image.indd 3 03.03.15 23:48 KION Group Segments LINDE MATERIAL HANDLING STILL The Linde Material Handling (LMH) segment encompasses the Linde, Fenwick and Baoli brands. €3,077.2 million REVENUE €339.6 million ADJUSTED EBIT 13,945 EMPLOYEES The STILL and OM STILL brands are grouped in the STILL segment. €1,850.7 million REVENUE €133.6 million ADJUSTED EBIT 7,976 EMPLOYEES FINANCIAL SERVICES (FS) The purpose of the Financial Services (FS) segment is to act as an internal financing partner for LMH and STILL, providing finance solutions that promote sales. FS activities include the internal financing of the short-term rental fleet, the financing of long-term leasing business for the KION Group's external customers, and the risk management associated with these opera- tions. In the major sales markets with a high volume of financing and leasing, this business is handled by legally independent FS companies. €620.9 million REVENUE €2.1 million ADJUSTED EBIT 60 EMPLOYEES BREAKDOWN OF TOTAL REVENUE IN 2014 BREAKDOWN OF ADJUSTED EBIT IN 2014 59.2% LINDE MATERIAL HANDLING 32.3% STILL 7.5% FINANCIAL SERVICES 1.0% OTHER 76.7% 30.2% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% – 10% 0.5% – 7.3% LINDE MATERIAL HANDLING STILL FINANCIAL SERVICES OTHER ¹ 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 techno- logy. It has also been developing and manufacturing electric drive systems for decades and makes the resulting exper- tise available to external customers for use in a variety of applications. STILL is predominantly a global premium 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 warehouse trucks plus associated ser- vices. STILL has also positioned itself as a leading provider of intelligent intralogis- tics solutions. The Baoli brand covers the economy segment in China and other emerging markets in Asia, eastern Europe, the Middle East, Africa, and Central and South America. << S T C A F P U O R G N O I K << 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 indus- trial trucks in India. It manufactures diesel trucks, electric forklift trucks and warehouse trucks for the Indian market and can draw on a network of more than 50 dealers providing sales and service. 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 sophisticated requirements in terms of technology, effi- ciency, functionality and design. PRODUCTS AND SERVICES Service contracts Diesel and LPG forklift trucks Ad hoc service Electric forklift trucks Spare parts Fleet data management Automation Stock management and transport control systems Warehouse handling equipment Rental RFID systems Platform trucks and tractors Used trucks Racking systems Direct sale Leasing (3rd party providers) KION leasing via Financial Services PRODUCTS SERVICE SOLUTIONS FINANCING KION Group Key figures for 2014 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 2014 4,877.3 4,677.9 787.2 714.2 780.4 16.7% 347.0 442.9 9.5% 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% Change 2014/2013 8.6% 4.1% 13.5% 0.8% 8.2% – – 7.2% 6.3% – Net income 3 178.2 138.4 161.4 28.8% Financial position 1 Total assets Equity Net financial debt Cash flow Free cash flow 4 Capital expenditure 5 6,128.5 1,647.1 810.7 305.9 133.1 6,026.4 1,610.0 979.3 195.6 125.8 6,213.2 660.7 1,790.1 513.6 155.1 1.7% 2.3% – 17.2% 56.4% 5.9% Employees 6 22,669 22,273 21,215 1.8% * 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. Last year’s figures were adjusted due to a change in presentation, for details see ‘Other disclosures on Consolidated statement of cash flows’ 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 minor rounding differences. The percentages shown are calculated on the basis of the respective amounts, rounded to the nearest thousand euros. ANNUAL REPORT ANNUAL REPORT 2014 2014 We We keep keep the the world world moving. moving. The KION Group has a global presence with The KION Group has a global presence with products, services and solutions provided products, services and solutions provided by its six brand companies. The KION Group by its six brand companies. The KION Group is the European market leader and the world’s is the European market leader and the world’s second largest manufacturer of forklift trucks second largest manufacturer of forklift trucks and warehouse technology, and it is one of and warehouse technology, and it is one of the leading international suppliers in the sector the leading international suppliers in the sector in China. in China. Linde and STILL serve the premium segment Linde and STILL serve the premium segment worldwide, while Baoli focuses on the economy worldwide, while Baoli focuses on the economy segment. Fenwick is the material-handling segment. Fenwick is the material-handling market leader in France, OM STILL is a market market leader in France, OM STILL is a market leader in Italy and Voltas is one of the two leader in Italy and Voltas is one of the two market leaders in India. market leaders in India. Building on these strong foundations, the Building on these strong foundations, the KION Group and its more than 22,000 emplo- KION Group and its more than 22,000 emplo- yees generated revenue of €4.7 billion in 2014, yees generated revenue of €4.7 billion in 2014, never losing sight of what is most important: never losing sight of what is most important: our customers. our customers. What keeps us moving? Our customers. P.04 Comprehensive. Fuzhou, China P.06 Efficient. ONLINE VERSION ONLINE VERSION Budapest , Hungar y reports.kiongroup.com reports.kiongroup.com P.08 Intelligent. Miehlen, Germany REGISTER FOR OUR NEWSLETTER REGISTER FOR OUR NEWSLETTER P.10 kiongroup.com/newsletter kiongroup.com/newsletter Global. Bladensburg, USA P.12 P.14 INVESTOR RELATIONS INVESTOR RELATIONS Synergetic. kiongroup.com/ir kiongroup.com/ir Jundiaí, Bra zil Close. Aurangabad, India P.16 Profitable. Soave, Italy KION GROUP WEBSITE KION GROUP WEBSITE P.18 kiongroup.com kiongroup.com Motivated. Tangier, Morocco ANNUAL REPORT 2014 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 economy segment. 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. Building on these strong foundations, the KION Group and its more than 22,000 emplo- yees generated revenue of €4.7 billion in 2014, never losing sight of what is most important: our customers. ONLINE VERSION reports.kiongroup.com REGISTER FOR OUR NEWSLETTER kiongroup.com/newsletter INVESTOR RELATIONS kiongroup.com/ir KION GROUP WEBSITE kiongroup.com ANNUAL REPORT ANNUAL REPORT 2014 2014 We We keep keep the the world world moving. moving. The KION Group has a global presence with The KION Group has a global presence with products, services and solutions provided products, services and solutions provided by its six brand companies. The KION Group by its six brand companies. The KION Group is the European market leader and the world’s is the European market leader and the world’s second largest manufacturer of forklift trucks second largest manufacturer of forklift trucks and warehouse technology, and it is one of and warehouse technology, and it is one of the leading international suppliers in the sector the leading international suppliers in the sector in China. in China. Linde and STILL serve the premium segment Linde and STILL serve the premium segment worldwide, while Baoli focuses on the economy worldwide, while Baoli focuses on the economy segment. Fenwick is the material-handling segment. Fenwick is the material-handling market leader in France, OM STILL is a market market leader in France, OM STILL is a market leader in Italy and Voltas is one of the two leader in Italy and Voltas is one of the two market leaders in India. market leaders in India. Building on these strong foundations, the Building on these strong foundations, the KION Group and its more than 22,000 emplo- KION Group and its more than 22,000 emplo- yees generated revenue of €4.7 billion in 2014, yees generated revenue of €4.7 billion in 2014, never losing sight of what is most important: never losing sight of what is most important: our customers. our customers. ONLINE VERSION ONLINE VERSION reports.kiongroup.com reports.kiongroup.com REGISTER FOR OUR NEWSLETTER REGISTER FOR OUR NEWSLETTER kiongroup.com/newsletter kiongroup.com/newsletter INVESTOR RELATIONS INVESTOR RELATIONS kiongroup.com/ir kiongroup.com/ir KION GROUP WEBSITE KION GROUP WEBSITE kiongroup.com kiongroup.com Contents A 22 24 26 36 41 B 44 52 58 C 72 83 112 113 D 126 127 128 130 132 134 238 239 E 242 243 244 245 245 TO OUR SHAREHOLDERS Letter to shareholders Executive Board Report of the Supervisory Board KION shares Services for shareholders CORPORATE GOVERNANCE Corporate governance report Disclosures relevant to acquisitions Remuneration report GROUP MANAGEMENT REPORT Fundamentals of the KION Group Report on the economic position Events after the reporting date Outlook, risk report and opportunity report 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 Auditors’ opinion Responsibility statement ADDITIONAL INFORMATION Quarterly information Multi-year overview Disclaimer Financial calendar Contact 2 What keeps us moving? Our customers. With the KION Group keeping the world moving, everything revolves around just one thing – our customers. From automotive glass in China to building materials in the USA, or from packaging in Germany to refrigerators in India: our customers operate in industries that are as diverse as the opportunities for adding value that we offer our customers to help their businesses succeed. What motivates the brand companies of the KION Group is a desire to provide customers with efficient, intelligent and bespoke solutions for their logistics needs in conjunction with a full range of premium services. Across the world. VIDEOCON Household appliances P. 14 Close. Aurangabad, India FUYAO GROUP Automotive and safety glass 0 4 P . Comprehensive. Fuzhou, China HEUCHEMER VERPACKUNG Packaging Intelligent. Miehlen, Germany P. 08 P. 16 CANTINA DI SOAVE Winery Profitable. Soave, Italy 6 0 P . 3 SZABÓ ÖNTÉSZETI Foundry Efficient. Budapest , Hungar y 0 P . 1 ERNEST MAIER BLOCK Building materials Global. Bladensburg, USA 1 2 P . CASAS BAHIA Retail Synergetic. Jundiaí, Bra zil Profitable. Soave, Italy 1 8 P . RENAULT TANGER Automotive Motivated. Tangier, Morocco Comprehensive. FUYAO GROUP Automotive and safety glass Trucks and services from a single source – this is the idea at the core of the KION business model. It benefits customers such as Fuyao, a Chinese manufacturer of automotive and safety glass. And is helping it in its quest to become the worldwide number one in the industry. FUZHOU China FUYAO GROUP Automotive and safety glass 5 Creating values. The foundation for success: The KION Group operates in an attractive market that is growing faster than global economic output. Between 1980 and 2014, the worldwide market for indus- trial trucks grew at roughly 1.5 times the rate of the global economy. Three global megatrends are driving this growth: industrialisation in emerging markets, globalisation of world trade and increasing fragmentation of supply chains and value chains. The KION Group closely integrates its products and services. In Europe, more than 40 per cent of new truck sales are made using one of the Company’s financing packages. Most financing contracts are linked to service contracts through which the customer benefits from KION’s global service network. At the end of their ‘first lives’, the trucks return to the KION brand companies to be refurbished and sold as used trucks. Alternatively, they help meet precision logistics demands as part of the rental fleet. The cycle is completed when long-term cus- tomers place new orders. The KION Group business model is increasingly paying dividends outside Europe as well. In China, for example, revenue from services provided by the KION brand company Linde grew by an aver- age of approximately 15 per cent a year between 2008 and 2014. The KION Group’s integrated business model How KION closely integrates its products and services NE W TRUCK SALES R O DUCT S P FINANCIAL SERVICES RENTAL RENTAL & USED TRUCKS SERV I C E S SERVICE SOLUTIONS & AF TERSALES 03 01 01 Ships to car manufacturers around the world: the Fuyao Group 02 Teng Yu, purchasing director at Fuyao Group in Fuzhou 03 Linde’s quality and service have convinced Fuyao since 2003 04 The Fuyao Group sets up new factories – and relies on Linde 02 T wo workers carefully lift the huge plate of ferring to new factories. Fuyao is growing quickly, so glass onto the table. One of them shears right there’s always demand for labour. across it using a glass-cutter. Each takes one half and places it on a stand. The two men get through around The company, founded in 1987, is one of China’s great- seven plates a minute. They are protected by special est success stories. It focused on quality at an early gloves and by helmets that look a little like traditional stage and reaped the rewards of China’s legendary car straw hats. Waiting at all times next to the three cutting boom. Today the country is the biggest automotive tables is a Linde forklift truck that carries away the market in the world, and Fuyao is the world’s third larg- glass-holding stands as soon as they are full – on to the est manufacturer of vehicle glass. The company sup- next stage of the process in the hall, where each of the plies glass to vehicle manufacturers around the globe – panes is cut to a windscreen shape. including the German powerhouses VW, Audi, BMW An everyday occurrence at the automotive glass manu- says head of purchasing, Teng Yu. “The Chinese mar- facturer Fuyao, in a suburb of the city of Fuzhou on Chi- ket has largely stabilised. We have therefore shifted our na’s south-eastern coast. But change is afoot. “This focus to overseas markets. They are very important for and Daimler. Its aim is to be worldwide no. 1 by 2020, work is difficult and dangerous,” says a company the next stage in our growth.” spokesman looking at the glass-cutters. “Which is why it will soon be automated.” At the company, robots are New tasks for the trucks gradually taking over work processes such as the cut- Although Fuyao has a market share of around 70 per ting and washing of the windscreens. The workers cent in China, its global market share is only around 25 freed up by this are either operating the robots or trans- per cent. In the US, the company is building two facto- 04 ries; in Germany it has a branch in Heilbronn. A boom- Fuyao needs a whole range of different trucks. The ing international business, in addition to higher safety spectrum is so broad that the glass manufacturer is requirements and rising labour costs in China, is one of known jokingly at both companies as a ‘display cabinet the factors that is causing Fuyao to rapidly automate its for Linde products’. Fuyao is one of Linde’s ten biggest manufacturing. Experts believe that the resulting customers in China. The company ordered its first increases in quality, precision and efficiency are critical trucks in 1995. “We initially tried out several brands,” if Chinese companies are to enjoy sustained global says Teng. “It was Linde’s quality and service that success. China is undergoing a wave of automation, convinced the Fuyao buyers.” In 2003 Linde became mainly in the wider automotive sector and in high-tech the company’s exclusive truck supplier, and it carries industries. “We are in the process of increasing the level out servicing as part of the contract. More than 1,000 of automation from 50 to 80 per cent,” says Teng Yu. trucks made by Linde China are in operation across the “That’s the same level as in industrialised countries.” 15 Fuyao factories in China and at one factory in Rus- sia. If they break down, they are repaired on site by ser- Liu Xueshu is head of the Linde Sales Office in Fuzhou: vice engineers from KION’s premium brand company. “Linde is working with Fuyao to develop logistics con- cepts to adapt the company’s factories to this new, Two other plants are currently being built – one in automated style of production.” Teng Yu adds: “As Wuhan in central China and the other in Shenyang in automation increases, we need other types of truck – the north-east. For Shenyang – which will be 80 per less of the small ones but more of the heavy-duty cent automated from the outset – Fuyao has ordered trucks in excess of three tonnes. This is because when 21 new trucks. “Previously it might have been a couple the glass is packed manually, the package sizes are more,” says Liu Xueshu. “But that’s OK because auto- smaller than when robots do this work.” Fuyao manu- mation is helping Fuyao to grow quickly, which in turn factures the raw glass it needs for its products at a site will be to the benefit of Linde.” Fuyao is currently build- near its automotive glass factory – and that too is ing either one or two new factories every year. In each already a largely automated process. of the past three years, the company has ordered at At this site, the large forklift trucks bring heavy pack- is based in the port city of Xiamen in southern China. ages to the loading bay. Inside are panes of glass that These orders are far bigger than any previous ones measure several square metres. Before this stage, made by Fuyao and exemplify how the two companies robots cut the ribbon of glass that is extruded from the are set to continue growing together. least 100 trucks from the KION brand company, which furnace, and stack up the panes of glass into packs. The only work that is done manually is the securing of the panes with cardboard and foam. Trucks glide across the spacious hall, forwards, backwards. To interact with the fast, agile robots, they have to be highly manoeuvrable, says Teng Yu. Watch the video online: reports.kiongroup.com/comprehensive Efficient. SZABÓ ÖNTÉSZETI Foundry The KION Group offers the right product for every application and for every region, including growth markets such as eastern Europe. Highly robust, affordable and efficient trucks – like the ones offered by Baoli – are particularly popular here. And that is something that foundry owner József Szabó in Budapest appreciates. BUDAPEST Hungary 7 A successful multi-brand strategy for all segments and regions. The successful multi-brand strategy is part of the KION DNA: Linde and STILL serve the premium segment worldwide while Baoli focuses on the economy segment. 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. KION’s spectrum of products and services offers the optimum, most cost effective solution for every customer in every region. As part of the Strategy 2020, the KION Group is consolidating its strengths outside of Europe and using its multi-brand portfolio to gain new market share. At the end of 2014, KION North America followed the example of KION South America and KION South Asia by bringing together several brand companies in one regional structure. The Chinese manufacturer Baoli plays a special role in the global multi-brand strategy: it is a economy brand with good potential as volume- provider, and also supplies platforms for robust yet affordable trucks to other members of the KION Group. Where the growth comes from (Share of market order intake unit growth 2004 – 2014) 7 % WESTERN EUROPE 7 % E ASTERN EUROPE 7 % CENTR AL / SOUTH AMERICA 9 % NORTH AMERICA 1 6% REST OF WORLD Emerging markets Developed markets 54 % CHINA 01 01 Unique: “Every statue has its own story” 02 The foundry’s owner: József Szabó 03 Always on duty: The robust Baoli truck moves eight tonnes a day 04 Szabó: ”My customers know that their projects are in good hands” 03 02 T he bitter November cold permeates the plant shops before achieving his ultimate ambition of having in eastern Budapest; even the furnace in the his own foundry, more than over two decades ago. centre of the hall does little to counteract the freezing Later, Szabó purchased the Evig Foundry, which since conditions. Using a large pair of tongs, two employees 1997 has been called Szabó Öntészeti Foundry. Origi- remove a crucible of molten copper from the flames, nally it was set up for mass production. In 2007, Szabó before carefully pouring the metal into casting units on sold a large part of the company site to concentrate the dusty floor. It sizzles and sparks fly. fully on casting works of art. Statues of all shapes and sizes can be seen standing, With success: the Hungarian has made a name for him- sitting and lying on shelves and tables – people, oxen, self all over Europe. “I not only receive orders from art- giraffes and garden gnomes. Hungarian soccer star ists in Hungary, but also from Germany, France and Ferenc Szusza glistens in bronze in a corner. He will Austria. Over the years, I have built up a good network soon have pride of place outside Budapest football sta- of artists who trust my team to realise their visions.” dium. “But he is not quite finished,” says József Szabó with a laugh. Szabó’s small team of workers have developed a wonderful understanding. Producing statues requires It started as a childhood’s dream precision and craftsmanship. “Each and every one of Casting art – that was the childhood dream of Szabó, my 20 employees has artistic talent,” says Szabó. managing director of the Szabó Öntészeti Foundry. “My customers know that their project is in good After university, he gained experience at various work- hands. We don’t produce the works of art in series. 04 Sometimes, we produce medals in greater numbers, Without it, we wouldn’t be able to fulfil our customers’ but almost every sculpture, whether large or small, orders so quickly and continue to build on our good is unique.” reputation.” Baoli forklifts get the job done swiftly When artists commission Szabó Öntészeti to produce a In the workshop, an employee is removing a huge statue, they usually come to Budapest in person and bust from its mould with an ear-piercingly loud hammer bring a plaster model. It usually takes just one to two drill, creating a swirling cloud of dust. A door opens weeks until the work is finished, depending on the size and a forklift truck rolls in. The Baoli diesel truck drives and complexity of the order. “We have a reputation for up to the statue, picks it up on its forks, turns and working quickly and with care. Another reason why art- leaves the hall. “You could, of course, carry some stat- ists from all over Europe come to us in Budapest.” ues from A to B by hand,” says József Szabó, “but that would require several employees and I need their You don’t have to visit the small workshop in the east- manpower elsewhere. And that’s why our truck is in ern part of the Hungarian capital to admire the talents use every day.” of József Szabó. The restoration of the statues on Heroes’ Square in Budapest is his work. Is that some- Trucks bearing the Chinese brand Baoli, part of the thing he is proud of? “Not overly,” he says, shrugging KION Group since 2009, were mainly used in China to his shoulders. “The way I see it, there aren’t any impor- start with. Now, almost 40 per cent of the econo- tant and unimportant pieces – every statue has its own my-level trucks are exported, with eastern European unique story.” countries such as Hungary being one of the target mar- kets. As a result, Baoli has become the third global brand company in the KION Group. While Linde and STILL serve the premium markets, Baoli trucks are renowned for offering good quality at affordable prices. And that is something that József Szabó appreciates. “The Baoli truck is ideal for our needs. It transports eight tonnes of goods around our site every day. Watch the video online: reports.kiongroup.com/efficient Intelligent. HEUCHEMER VERPACKUNG Packaging Automation is a key trend in intralogistics. For customers like Heuchemer Verpackung, the KION Group always comes up with intelligent solutions: innovative, tailor-made, offering real customer benefits. MIEHLEN Germany 9 Offering customers unique opportunities to add value. Industry 4.0, automation, integrated logistics and IT, and lithium-ion batteries – these are key trends in the material handling industry, too. By 2018 the KION Group wants a significant number of its electric forklift trucks and ware- house trucks to be fitted as standard with lithi- um-ion batteries, which have a far higher energy density than conventional batteries. In just a few years’ time, the operating costs should fall well below those of existing drive systems. The KION Group also provides sophisticated solutions for automation. Trucks that move as if by magic are already meeting the highest standards in safety, reliability and round-the- clock operation. They can be used for all kinds of applications, including delivering parts to an assembly line, collecting finished products and transporting to high-bay racking. Automation, like lithium-ion batteries, is a growth market for the KION Group. How the KION Group plans to ramp-up its offering Share of li-ion truck models of electric and warehouse trucks 100 % 75 % 50 % 25 % 0 % 2013 2014 2015 2016 2017 2018 Lead acid Li-ion 01 01 A pallet’s journey: they are brought to the stretch machine by manual lift truck and automatically to the high rack 02 Christian Heuchemer (right), managing director, and Thomas Schmitt, the plastics plant’s manager 03 High-quality packaging: made of plastic, corrugated board and wood 04 “We plan to automate our intralogistics. That’s why we need our partner STILL” 03 02 Y ou can taste the plastic in the warm air of the Specialising in plastic, corrugated cardboard, factory. A huge machine is producing a never- and wooden packaging ending stream of gold-coloured plastic blocks before In the production hall, which is roughly half the size of a an employee casts a critical eye over them. Any defec- football pitch, Heuchemer Verpackung manufactures tive blocks go straight into a wire mesh crate, while the plastic packaging for customers in a variety of sectors, flawless articles are deposited in a cardboard box as including food and beverages, consumer products, auto- tall as a person. If you look carefully, you can see that motive, electronics, construction and chemicals. Plastic the blocks are actually stacks of inserts used in boxes and corrugated cardboard packaging from Miehlen, of sweets. The machine takes less than half an hour to close to the German city of Koblenz, are two of the three make 1,000 of them from a gold-coloured plastic film business lines of this family firm, which was established that is subjected to pressure of 20 tonnes and a tem- by the great-grandfather of Christian Heuchemer and perature of 200° centigrade. his two sisters as a manufacturer of wooden packaging in nearby Bad Ems almost 100 years ago. “Once one of the cardboard boxes is full, we use a hand pallet truck to transport it on a pallet to the stretch Today, business is flourishing more than ever before. machine,” explains Christian Heuchemer, managing This is due to the popularity of discount supermarkets, director of Heuchemer Verpackung GmbH & Co. KG. which do not unpack their products in their stores and The machine tightly wraps the box and its pallet in clear instead simply place them on the shelves still in their film. The route taken by the truck passes a number of packaging. Special requests are no problem for Heu- other machines pounding away. To maintain hygiene, chemer Verpackung, which has more than a dozen the people working at them wear white caps. developers at the ready. Heuchemer Verpackung itself 04 builds the unique and powerful tools with which it to the belt, brakes gently and raises its fork prongs as it shapes and die-cuts the packaging, thereby ensuring approaches the pallet. the high level of quality that its customers expect. Less than a minute later, the iGoEasy reaches the buffer In order to free up capacity and space for new ideas, rack with its load and places the pallet in the correct rack the company has automated most of the processes in channel of the twelve available. A light barrier identifies its factory buildings. “Now we want to automate our the pallet and activates the chain conveyor that pulls it intralogistics as well,” explains Christian Heuchemer. through the channel. It is then collected by a very narrow “What is important to us is the strategy for the overall aisle truck (VNA) at the back of the buffer rack. The VNA system, not just the quality of an individual truck. That’s picks up the pallet and whizzes backwards along the why we need our partner STILL.” Thomas Schmidt, narrow aisle of the high-bay storage facility while lifting its manager of the plastics plant, adds: “Heuchemer is a driver and the pallet to a height of up to 16 metres. The flexible and innovative company, and we demand the more than 1,000 rack channels contain more than same of our logistics partner.” 10,000 storage bays. Once it has reached the necessary Launch of fully automated intralogistics STILLPalletShuttle, which takes it to the storage bay in height, the VNA places the pallet on a semi-automated STILL iGoEasy provided Heuchemer Verpackung’s entry the channel. into fully automated transport technology – a “truck off-the-shelf that we can program for our processes “By working closely with STILL on our project, we have ourselves,” says Heuchemer. An iPad is used to indi- created a unique system for our company,” concludes vidually configure, control and monitor the truck, while Schmidt, the plant manager. He adds that Heuchemer reflectors have been attached to the racks in order to Verpackung is monitoring the system carefully in order guide the truck along its route. to make decisions about future developments. After all, The pallets containing the cardboard boxes that have within the foreseeable future,” says Schmidt. “we want to fully automate the movement of goods been wrapped up by the stretch machine are removed from the roller belt by the iGoEasy truck, which then takes them to the buffer rack. Usually, the iGoEasy receives its orders from the iPad, but in this case a scanner records all of the pallets at the end of the roller belt and sends the orders. Silently the truck then moves Watch the video online: reports.kiongroup.com/intelligent Global. ERNEST MAIER BLOCK Building materials People like building materials manufacturer Brendan Quinn from Maryland are very much aware that the USA is a growth market. After all, his industry is booming. With its global reach, the KION Group wants to harness the potential of North America’s upturn. Quinn is happy to confirm that KION products are a reliable choice. BLADENSBURG USA 11 Making further inroads in growth markets. The KION Group has its eye firmly on key growth markets for its products such as China and North America. It is taking an active approach – with the right brand strategies, the right, competitive products, the right sales models and the right local partners. The Strategy 2020 is focused on the North American market, consisting of the USA (the world’s second-largest single market), Canada and Mexico. In the coming years, the KION Group aims to considerably improve its share of this market, which stands at about one per cent. The Company has a solid basis on which to build. In the USA, the KION Group operates a production plant in Summerville, South Caro- lina, with an annual capacity of over 10,000 trucks. It also has a nationwide network of around 60 dealers with more than 100 sales outlets. Under the umbrella of KION North America, the brand companies Linde and STILL are to con- tinue serving the requirements of the US, Cana- dian and Mexican markets with a comprehen- sive, customised and complementary product portfolio. The medium-term plan is to establish a fleet management system and offer financing. North America’s and Mexico’s market for new industrial trucks (USA, Canada, Mexico, in thousands) 229 209 200 150 141 189 177 100 50 0 2010 2011 2012 2013 2014 01 01 Tough job: “We put our forklift trucks through so much” 02 Brendan Quinn: Ernest Maier’s CEO 03 The Bladensburg site produces ten to eleven million concrete blocks a year 04 ‘Lindy’: the “Mercedes of the forklift world” 03 02 T he red truck is covered in so much dust that “What makes us stand out from other companies is the you can hardly make out the Linde logo. With a service we offer. We take charge of the whole supply “Each block is good as cash” pallet of heavy cement blocks on its forklift, the truck chain personally – that includes loading up and unload- rolls across the yard at Ernest Maier Block, a manufac- ing – whereas our competitors have to rely on outside turer of concrete blocks in Bladensburg in the US state help. Things can sometimes get broken, which rarely of Maryland. Driver Jerome Chew skilfully places the pal- happens to us,” says Brendan Quinn, the 42-year-old let on the wide bed of a delivery truck, then steers the CEO of the family-owned company that dates back forklift towards his next load. ‘Lindy’, as Chew and his more than 80 years and has German roots. He carefully colleagues affectionately call the forklift truck, stirs up hand-picked his 125 or so employees. “We need forklift concrete dust with its tyres. Thudding noises come from truck drivers who are just that little bit better than the the machines in the open building across the yard, rest. For me, every concrete block represents hard where the compressor hisses and the cement conveyor cash. So, if one of them falls off the truck, it is as if you clatters away. This Ernest Maier factory alone produces are ripping up dollar bills,” continues Quinn. That’s why between ten and eleven million concrete blocks every he pays much higher wages than most mid-sized com- year. Following the economic difficulties of the financial panies, as well as making contributions to health insur- crisis, the construction boom now taking place in the ance and pension funds – which are by no means a USA needs materials to keep it going. given in the USA. 04 The only answer was to start piling them up. Of course, that’s only an option if you have sturdy equip- ment. “We put our forklift trucks through so much, It’s no wonder that Quinn feels a bit like the “mayor of they’re worked really hard. That’s why we chose Linde a small town,” as he puts it. His arrival represented trucks, which can lift higher and take more punish- a major career change, switching from banking to the ment,” explains Hank Keeney, Vice President and concrete block business aged just 23 years old. Chief Operating Officer at Ernest Maier. He added that “I wanted to do something more tangible. And this is Linde had proven highly reliable in terms of mainte- a business that deals with people,” he adds. Things nance too. There are two forklift trucks in use on the weren’t going so well for the company, based near the yard, which have a phenomenal 30,000 operating capital Washington, as the founding family had over- hours under their belts. Other trucks would have given stretched themselves in terms of their investment in the up the ghost after only half that, he says. “Linde is the business. Quinn helped get the company back on Mercedes of the forklift world.” track, a few years after his arrival he was running the company – and expanding it. Linde forklifts are in use everywhere at Ernest Maier, not only for loading and unloading delivery trucks. They President Obama came to visit are also invaluable when moving the still-damp blocks News of his success story reached the White House, from the production machine into the hot kilns. Whilst and in October 2010 President Barack Obama even other manufacturers have long since automated this came to visit Ernest Maier Block, where he gave a talk step of production, Brendan Quinn stands by tried-and- on the future of America’s economy. Obama described tested methods to produce the grey stone blocks. “We “bricks and blocks” as essential to America’s recovery are still a bit old-fashioned in that respect,” explains the from the recession, and said that he was very proud of CEO. “We find that humans on forklift trucks have fewer this company. breakdowns than machines on rails.” Since the US economy has moved back into growth, business has also begun to boom in the all-important construction industry. Ernest Maier is doing better than ever: twelve men work in two shifts per day, six days a week. At the main plant in Bladensburg they’re running out of space to dry and store the blocks. Watch the video online: reports.kiongroup.com/global Synergetic. CASAS BAHIA Retail Located near São Paulo, South America’s largest warehouse resembles a beehive. Productivity is a very valuable asset here. Smooth-running logistics calls for highly sophisticated integration – as provided by the KION Group’s modular and platform strategy, which leverages the global synergies of its brands. JUNDIAÍ Brazil 13 Harnessing potentials through cross-brand modules and platforms. The KION Group is more than the sum of its indi- vidual parts. Its strategy of using shared modules and platforms, part of the wider Strategy 2020, is key to making further long-term profitability gains. And it provides the basis for a global and successful portfolio of trucks that caters specifi- cally to all markets and segments. In Europe, the Linde and STILL premium brands share modules that can be used wherever com- mon standards reduce costs. The characteristics of a Linde or STILL truck will not change. But cus- tomers will benefit: from lower purchase prices and running costs. Outside KION’s core market, trucks in the volume and economy segments are based on cross- brand platforms that enable rapid market penetra- tion with proven technologies. The R&D team in Xiamen in southern China develops the platform that is then adapted to local requirements in the various growth markets. Successful localisation projects include the use of Baoli-brand trucks as a basis for products in India and Brazil. How the KION platform strategy works R&D center Europe R&D center Baoli R&D center Asia R&D center India R&D center North America R&D center South America 01 01 Centro de Distribuição: The distribution center in Jundiaí is the largest center of its kind in South America 02 Edgard Liberali Filho, head of the logistic unit at Via Varejo 03 Up to the ceiling: Several tens of thousands of articles are stored and moved in the warehouse 04 Casas Bahia is part of the Via Varejo Group, one of the world’s biggest retailers of elec- trical goods and household appliances 03 02 F rom above, it looks a bit like a scene from a the following morning approximately 6,700 consign- funfair. Dozens of men stand on warehouse ments will have been sent on their way from Jundiaí. In trucks. They rattle through the aisles and zoom around this huge country, it’s not uncommon for them to travel corners, their brakes squeaking. The workers, dressed the same distance as from Paris to Moscow. in blue and yellow overalls, steer their order pickers with the same intensity as small boys in bumper cars – and 960 people work here in three shifts; seven days a they appear to be having just as much fun. But here in week and around the clock. Using 163 order pickers, the Centro de Distribuição, instead of ramming into 87 forklift trucks and eight tow tractors, all made by the each other, they load up incoming goods such as KION brand company STILL, they move everything fridges, mattresses and gas ovens and transport them from bicycles and hi-fis to flat-pack furniture and pres- to their destination. sure cookers. In a precision-planned operation, the goods that arrive at the warehouse end up on the The Centro de Distribuição, or CD for short, is arranged opposite side of the building, where individual consign- in a giant L amid gently rolling hills in Jundiaí, just 50 ments that have been sorted by zip code are dis- kilometres from the Brazilian metropolis São Paulo. patched to dealers, shops and homes. With a footprint of 160,000 square metres – the size of more than 20 football pitches – it is the biggest goods By the time the trucks arrive, address labels have been distribution centre in South America. From half past five produced for each item, specifying precisely where in in the morning, suppliers’ trucks bring in goods from the warehouse each package, fridge or sofa is to be production sites across the region, and by three o’clock stored. At peak times, such as in the run-up to Christ- 04 mate as much as possible – in goods inward we are still using lots of manpower, and that’s hugely unproduc- mas or Mother’s Day, dozens of trucks wait outside for tive,” says Francisco Tarosso, head of the CD. The lat- their turn. The warehouse is packed right up to the ceil- est acquisitions are tow tractors with multiple trailers ing. “Sometimes, 35,000 TVs arrive here in three days which make it easier to unload and distribute goods. that will then be sold in the three days after that,” says They buzz up and down the 530-metre-long ware- Marcos Antônio Spoldari, who coordinates the incom- house, loading and unloading goods at pre-determined ing goods operation. points like a bus picking up and dropping off passen- gers. This ‘bus stop’ system reduces the volume of traf- From peddler to entrepreneur fic and saves space and manpower. Marcão, or “big Marcos” as his team respectfully call him, started work more than 30 years ago as a casual The electric motors hum, the rubber wheels squeak on worker at Casas Bahia, and he knew the company’s the concrete floor, the forks and lift masts clatter end- founder personally – the Polish immigrant Samuel Klein. lessly. Without order pickers, forklifts and tow tractors Klein started out as a peddler, before opening his own the CD in Jundiaí would come to a standstill. “So that shop. At first, he tapped into the potential of customers logistics can keep pace with productivity here, it’s par- from the lower rungs of society. He allowed them to pay ticularly important that the devices are low-mainte- in up to two dozen instalments, even if they didn’t have nance and don’t break down,” says Edgard Liberali a bank account. Samuel Klein gave them access to Filho, the centre’s logistics director. “Almost all the consumer goods that they could previously only dream products we use here are made by STILL. Some of of and he achieved commercial success on an unprec- them have been running reliably for 15 years.” With a edented scale. Before his company was merged with smile, he adds: “We just have to repaint them from time another in 2009, it was turning over around 14 billion to time, because some of the gaps between the metal reais a year. Today the Casas Bahia stores are part of shelving units are so narrow that it’s impossible to avoid the Via Varejo Group, one of the world’s biggest retail- scratches!” ers of electrical goods and household appliances. Huge savings thanks to automation In 1997 Klein had the Centro de Distribuição built in Jundiaí, which now dispatches goods valued at around six to seven million reais on a daily basis. Its processes are continuously being perfected. “We want to auto- Watch the video online: reports.kiongroup.com/synergetic Close. VIDEOCON Household appliances Always being close to the end customer is as essential to Videocon as it is to the KION Group. The washing machines, fridges and microwaves from this Indian household appliances manufacturer provide invaluable help to millions of people. And the trucks are just as invaluable to Videocon. AURANGABAD India 15 Efficient production via a global network. The KION Group continually invests in efficient, modern production facilities – around the world. By 2021, around €83 million will have been spent on making the core Linde and STILL plants in Aschaffenburg and Hamburg even more competitive. From 2016 onwards, KION’s new plant in Stříbro in the Czech Republic will initially be making existing warehouse technol- ogy products, with volume and economy trucks to follow later. In China, the KION Group is expanding its plant structure, including at the headquarters of Linde Material Handling in Xiamen and in Jingjiang, the home of Baoli. In Brazil, a state- of-the-art production facility came on stream in 2013. And from its base in Pune, the KION Group is tapping into the huge potential of the Indian market. As always, the objective is to manufacture the trucks as near as possible to the end customers. The KION Group’s global production sites Summerville Indaiatuba, São Paulo Pune Aschaffenburg Chatellerault Jingjiang Xiamen Hamburg Stříbro Reutlingen Luzzara 01 03 01 Enormous export trade: among others to China, Korea, Sri Lanka 02 D.K. Singh: divisional general manager at Videocon 03 “Our trucks are essential. Each is equivalent to eight employees” 04 Due to great demand: the Aurangabad site produces 100,000 refrigerators a month 02 T he vast factory building belonging to Video- Lanka. In India, Videocon is the market leader for con has a calming feel about it, and the drive washing machines and is among the top five for televi- through the chaotic streets of Aurangabad, around 250 sions and refrigerators. kilometres north-east of Pune, is soon forgotten. Here at the factory, hundreds of refrigerators are packed in Videocon manufactures 3,000 refrigerators a day brown cardboard boxes and stacked one above the Over 350 lorries loaded with Videocon appliances head other. The black and yellow forklift trucks from the out across this vast country every day. In the refrigera- KION brand company Voltas are efficiently carrying up tor assembly hall in Aurangabad, the production lines to six at a time, back and forth between the warehouse never stand still. Depending on the season, the daily and the lorry that is parked outside the factory gate. output is in excess of 3,000 units. And yet there is no Thirty-two trucks are in continuous operation. sense of chaos in this clean and well organised factory. Videocon is one of the largest companies in India and A forklift truck is positioned at the start of the refriger- specialises in the production of electrical home appli- ator production line. It is supplying the punching ances. Founded in 1979, the company today meets machine with shiny white plastic sheets from which high levels of quality that are certainly on a par with the inner liner is formed. Men and women wearing the technology standards of Japan or countries in the light grey t-shirts and gloves are fitting prefabricated west. Exports are running at unprecedented levels, components, many of which are imported from China mainly to markets such as China, Korea and Sri and Korea, on long production lines. They start by 04 threading cables through eyelets before fixing the cas- Vijay Potdar, manager of operations of Trinity, an author- ing on the metal housing. Further on, less than five ised Voltas dealer in Aurangabad, sees a great benefit metres away, the freezer compartment is fitted. Lastly, in manufacturing forklift trucks locally at affordable the motor and cooling fins are soldered on. prices. “But it’s not only that,” he says. “Voltas trucks are perfect for India. They are suitable for all kinds of Refrigerators may be a part of everyday life in the west terrain and they are robust, even in extreme climate but in India they are much more than that: they are lux- conditions from minus two to plus 50 degrees.” Videocon ury items. Rather than being tucked away in kitchens, is now planning the next stage of its modernisation: to they are positioned in the middle of living rooms. Video- replace its diesel trucks with quieter electric forklifts. con caters to the requirements of the market by pro- Spare parts are available from a Voltas service centre ducing appliances not only in white, but also with col- in Aurangabad. ourful doors decorated with flowers and stripes. Videocon is looking to expand further and plans to Middle class: new purchasing power open another factory in the far south of the country. The company owes its meteoric success to the growth Staying loyal to the Voltas brand, it has already of the middle class in India following the deregulation expressed an interest in purchasing additional forklift of industry in the early 1990s. Since then, many families trucks for the new factory. Looking ahead to the future, have managed to improve their social and financial the company intends to manufacture the majority of the standing, often coming from conditions of extreme components in-house so that it is not dependent on poverty. Purchasing power is growing and the market Chinese and Korean imports. It is not only India’s new for electronic household goods is booming. “Indians Prime Minister Narendra Modi who wants the ‘Made in are selective in their purchases,” says Videocon divi- India’ label to become a real mark of quality. sional general manager, D.K. Singh. “We have to offer value for money.” The consumption habits of the Indian people also place considerable demands on production. “We make eighty per cent of our revenue between October and Decem- ber during the Indian festival season. It would not be possible to achieve this without our forklift trucks. One truck is equivalent to eight employees.” Watch the video online: reports.kiongroup.com/close Profitable. CANTINA DI SOAVE Winery Quality is crucial at wine-maker Cantina di Soave, whether in its wines or in its trucks. That is why the cooperative not only obtains its trucks from the KION Group but also uses its services. In turn, these services ensure a stable level of revenue and profitability for the Group. SOAVE Italy 17 Strengthen resilience through improved capital efficiency and higher margins. When it comes to profitability and capital efficiency, the KION Group benefits from global synergies and economies of scale, shared modules and platforms, an in-market pro- duction network and a strategy of optimised manufacturing. A wide range of services – including customer services, truck hire and sales of used trucks and spare parts – ensures a stable flow of reve- nue and attractive margins. The service offering is currently being expanded with the addition of automation solutions and fleet management. The service business already contributes more than 40 per cent of the KION Group’s revenue. Around 1.2 million KION trucks are in operation around the world. The KION Group has po - tential here to grow its service business even further. It will do so through approximately 1,300 sales and service outlets that are situated near to customers so that support for products can be delivered quickly and efficiently when required. Resilient service revenues The KION Group’s global revenues (in €bn) 5 4 3 2 1 0 2.4 1.8 1.8 1.6 2.7 2.5 2.6 1.9 2.0 2.1 2010 2011 2012 2013 2014 New business Services 01 01 Cantina di Soave: wine cooperative with 2,200 members and 5,500 hectares under vine 02 The winery’s technical director: Filippo Pedron 03 Team effort: The cooperative delivers more than 100,000 tons of grapes each year 04 STILL trucks carry bottles to the bottling plants and warehouse 02 I t’s a picture-book slice of Italy. The old town of wine a year at its six sites. They are the fruits of a care- Soave is set amidst scenery dotted with cypress fully coordinated production process. trees and vine-clad hills and is towered over by a medi- eval castle. Even if you’ve never visited, you’ll have seen Since 2008 the company has been using forklift the name on the labels of wine bottles. This small town trucks made by OM STILL. “Our production processes lends its appellation to the most important export of the don’t make any excessive demands on the trucks,” Veneto region and one of the best-known wines of Italy: says Filippo Pedron, oenologist and technical director the Soave Classico. of the Cantina di Soave. “Extreme temperatures, high humidity, toxic substances: the forklift trucks here don’t The wine is made by growers such as the Cantina di have to cope with any of this. What’s all the more Soave. With around 2,200 members and more than important to us is that we are able to rely on the tech- 5,500 hectares under vine, this wine cooperative is one nology at all times.” This includes transporting the of the region’s largest producers – and also one of the grapes into the chilled warehouses, where they are oldest, having been founded back in 1898. Countless left to ripen on hundreds of pallets for up to three wooden casks, filled with the cooperative’s finest months, bringing consignments into the pressing and wines, are lined up one after another in long vaulted bottling plants and loading up the delivery lorries. The cellars. However, the winemaking itself is done mainly fleet is involved in almost every stage of the production in the neighbouring modern stainless steel vats. The process – breakdowns can have dramatic economic Cantina di Soave makes more than 30 million bottles of consequences. 04 03 Watch and learn at the “experimental vineyard” The Cantina di Soave offers its members support in the form of quality assurance seminars and its very own experimental vineyard, which offers stunning panoramic STILL trucks: economic and versatile views across Soave. At high season in October, when One of the main reasons Pedron puts his trust in the all the grapes have been harvested and the wine pro- Italian variant of the KION brand company STILL: duction can begin, the vines take on a deep orange “The battery is no different than those of other brands – hue. The vineyard is then mainly a tourist attraction. but it lasts longer,” he says. STILL forklift trucks, Spring, however, is when the wine experts of the Can- thanks to their state-of-the-art technology, use less tina di Soave show their members how to cut the vines power than other models. Another key feature is their in order to get the best results, and tell them which manoeuvrability. Some 13,000 bottles of wine are grape promises to be of particular quality this year. filled every hour when production is at full capacity at Filippo Pedron: “At the end of the day, if every one of the Cantina di Soave. With all the traffic this generates our members can get the best out of their vineyards, and with the fragile nature of the products being we all benefit.” transported, it is essential that the forklifts are precise and easy to operate. For Pedron and his team the focus is very much on quality rather than quantity. And that goes as much for The trucks help everything to run like clockwork and the forklift trucks as it does for the wine. There are no safeguard the company’s success. At the Cantina di plans to expand production volume in the years ahead. Soave it’s not just about the bottom line: “We don’t want And so the Cantina di Soave truck fleet is initially not to grow for growing’s sake. It’s more important that expected to grow. Nevertheless, the cooperative’s part- we deliver the best quality and that we continually work nership with OM STILL holds further potential. For qual- to improve this – that doesn’t necessarily translate into ity reasons, any decommissioned trucks made by other market share,” says Pedron. manufacturers will be replaced by OM STILL equiva- lents in the future. The idea of the cooperative is a simple one: wine- makers pool their expertise and resources in agricul- ture, business and science in order to produce wine in a more efficient way and to market their products. This gives them freedom to hone their vinicultural craft. “Whereas the winemakers once simply sold on their grapes after the harvest, they are now part of a proper value chain,” says Pedron. Watch the video online: reports.kiongroup.com/profitable Motivated. RENAULT TANGER Automotive Motivated employees are the bedrock of innovation, quality, competitiveness, growth and the opening up of new markets – such as Africa. One of the beneficiaries is Renault in Tangier, where it is making speedy progress thanks to its dependable trucks from the KION Group. TANGIER Morocco 19 Promoting employees with a passion for innovation, quality and customer focus. To serve successfully the markets of tomorrow – such as Africa – you need the best and most motivated employees. A committed developer of people, the KION Group has exported the German dual vocational training model to China. Offering training courses and giving people scope to develop are as important to business success as having lean and efficient processes. This is how the KION Group is fostering a passion for innovation, quality and, ultimately, customer satisfaction. An ongoing optimisation of processes, also in support functions, is another element of the Strategy 2020 that is designed to make the Company more competitive and lay the founda- tion for further growth. KION Group employees by country (full-time equivalents as at 31 December 2014) 6,025 OTHER 1,749 UNITED KINGDOM 3,162 FR ANCE 22,669 WORLDWIDE 8,264 GERMANY 3,469 CHINA 01 01 Lodgy, Dokker, Sandero: three Dacia models manufactured in Tangier 02 In charge for material handling at Renault in Tangier: Mohammed el-Bakrimi 03 110 Fenwick trucks help to produce 800 cars a day 04 Time to pray in separate areas 03 02 R ed, white and black cars yet to be fitted with El-Bakrimi spent two months learning how to instruct interiors hang one and a half meters up in workers in assembly. He has since gone on to become the air, suspended from yellow grippers. Lodgy, Dokker head of material handling at the factory, making sure and Sandero are the three models produced by the that engines, panels, seats and screws reach the Renault-owned Dacia brand in the factory in Tangier, assembly line at the right time. Computers monitor Morocco. As for which of these models the shiny new what needs to be where when. The materials are stored car bodies will emerge as, that’s something that only on huge racks ten metres high, right at the back of the someone like Mohammed el-Bakrimi can know. factory building. “This is where the forklift trucks per- form their ballet moves,” declares el-Bakrimi with pride. The 43-year-old has worked for Renault since the Tangier 110 trucks from Fenwick, KION’s French regional factory opened back in 2012. Like many others, he brand, are put to work in the Renault factory, delivering moved to this up-and-coming city on the Strait of Gibral- parts to the assembly lines at the precise minute they’re tar especially to take up one of the 5,000 or so jobs needed. That’s why they can be seen darting up and offered by Africa’s biggest car factory. The father of two down the long aisles, sometimes at breakneck speeds. children from the Casablanca region has always been fascinated by car engines and bodywork: “I used to run Each day, 800 cars roll off the assembly lines a car workshop.” Nevertheless, when he joined Renault “Sometimes there are accidents,” admits el-Bakrimi. All he had to start where nearly all new employees do: the more reason for the man who never takes off his grey inside the long and narrow training centre that stands cap, not even at mealtimes, to value anything that right by the entrance to the 300-hectare factory site. improves safety. For example, the BlueSpot warning sys- 04 carbon emissions. Over a dozen wind turbines can be seen turning in the hills around the factory, supplying electricity to the site. The hot water used in the paint- shop is heated using biomass obtained from the stones of Moroccan olives. tem – an intense blue spotlight that alerts passers-by to the moving truck. Because with all the sirens, the ham- The biggest sales market for the Moroccan-made mering and the hissing of compressed air on the shop- Dacias is Renault’s domestic French market, followed floor, it gets so loud that many drivers have deactivated by Spain. From the seaside promenade in Tangier, the reverse warning sound on their trucks. Spain’s coast looks close enough to touch, being only 14 kilometres away. Tangier’s geographical position And out the back in the ‘shop’, as the materials store is was another reason Renault chose the site. It only otherwise known, the nimble Fenwicks weave in and takes a day and a half to ship the vehicles to France out of the aisles. Abdelmounim el-Tounani is one of from Tangier’s state-of-the-art container port, Tan- the drivers. “I really appreciate the different ways you ger-Med. Renault, who invested one billion euro in the can handle materials, with the telescopic forklifts for facility, also benefits from the location in other ways, instance,” says the 27-year-old, who worked in a café in such as the lower labour costs in Morocco. Tangier before joining Renault. The ultra-modern fac- tory, which currently produces some 800 cars each The factory, which has created a further 30,000 or so day, is a world away from the hustle and bustle of the indirect jobs, is a crown jewel of sorts for the newly old town with its 700,000 residents, its little shops and industrialising country. It’s no wonder then that King its street hawkers haggling over every last dirham. Mohammed VI himself came along for the factory’s Nevertheless, many employees still make time for their remembers the monarch’s appearance as if it were prayers while at work in the factory, which has been yesterday. “I’d seen His Majesty open many factories built on a greenfield site roughly 30 kilometres outside before, but he looked especially happy to be opening Tangier. A space next to the staff room has been sepa- ours that day,” he recalls. opening in February 2012. Mohammed el-Bakrimi rated off and laid with carpet, where workers can go for worship. Prayer times are determined by the production process rather than the muezzin. “Allah will forgive me for missing the hours of prayer because I’m at work, I just pray later on instead,” says el-Bakrimi. He is proud of Renault Tanger’s pioneering green cre- dentials. The factory’s operations produce virtually no Watch the video online: reports.kiongroup.com/motivated TO OUR SHAREHOLDERS Contents 21 To our Shareholders 22 24 26 36 41 LETTER TO SHAREHOLDERS EXECUTIVE BOARD REPORT OF THE SUPERVISORY BOARD KION SHARES SERVICES FOR SHAREHOLDERS KION GROUP AG | Annual Report 2014 S R E D L O H E R A H S R U O O T A E C N A N R E V O G E T A R O P R O C B T R O P E R T N E M E G A N A M P U O R G C S T N E M E T A T S L A I C N A N I F D N O I T A M R O F N I L A N O I T I D D A E » Following the most successful year in its history, KION has set itself new and ambitious targets.« GORDON RISKE Chief Executive Officer We keep the world moving.KION GROUP AG | Annual Report 2014TO OUR SHAREHOLDERS Letter to shareholders 23 2 0 x o b n I s m e t I t n e S s r e d o l f l l A » Following the most successful year in its history, KION has set itself new and ambitious targets.« GORDON RISKE Chief Executive Officer FOTO 20150303_Kion_GB2014_EB.indd 18-19 03.03.15 17:52 KION GROUP AG | Annual Report 2014 KION GROUP AG | Annual Report 2014 KION GROUP AG | Annual Report 2014 We keep the world moving. Jan 01 2015casablancaItalydce2014201515Jan 2015Jan 01 2015Italydce2014201515Jan 2015casablanca2015 KION Group key figures for 2014 » Following the most successful year in its history, KION has set itself new and ambitious targets.« GORDON RISKE Chief Executive Officer 1. Order intake 2. Revenue 3. Adjusted EBIT * 4. Total R&D spending 5. Net income (loss) 6. Employees 7. Free cash flow** * Adjusted for KION acquisition items and one-off items ** Free cash flow is defined as Cash flow from operating activities plus Cash flow used in investing activities. Jan 01 2015casablancaItalydce2014201515Jan 2015We keep the world moving.KION GROUP AG | Annual Report 2014TO OUR SHAREHOLDERS Letter to shareholders 301 KION Group key figures for 2014 Letter to shareholders » Following the most successful year in its history, KION has set itself new and ambitious targets.« FOTO GORDON RISKE Chief Executive Officer 1. Order intake 2. Revenue 3. Adjusted EBIT * 4. Total R&D spending 5. Net income (loss) 6. Employees 7. Free cash flow** Dear shareholders, customers, partners, employees and friends of the KION Group, For us, 2014 was a year that flew by – and I mean that literally. We travelled all over the world in order to advance our KION Group Strategy 2020. But as different as the market require- ments in each region and country may be, our objective is always the same: to give our customers the best possible sup- port so that they can achieve their goals and do business suc- cessfully. We can only truly be satisfied once our products and services offer them the utmost added value. The objectives that we have set ourselves with the Strategy 2020 are ambitious. They focus on growth, profitability, capital efficiency and resilience. We want to remain highly profitable – even in the event of any future crises – and further conso- lidate our position as the most profitable supplier in our indus- try. In the medium term, we are aiming for EBIT margins of above 10 per cent. * Adjusted for KION acquisition items and one-off items ** Free cash flow is defined as Cash flow from operating activities plus Cash flow used in investing activities. 01 2 0 x o b n I s m e t I t n e S s r e d o l f l l A 20150303_Kion_GB2014_EB.indd 18-19 03.03.15 17:52 KION GROUP AG | Annual Report 2014 We keep the world moving. Jan 01 2015casablancaItalydce2014201515Jan 2015Jan 01 2015Italydce2014201515Jan 2015casablanca2015 Letter to shareholders 2014: a record year » Following the most successful year in its history, KION has set itself new and ambitious targets.« administrative expenses. We continued to make good progress along this route in 2014, set- ting records with all of our major key performance indicators. Our adjusted EBIT improved by 6.3 per cent year on year to reach €442.9 million. The EBIT margin stood at 9.5 per cent, compared with 9.3 per cent in 2013. And we have started the new year with a substantial order book worth €787.2 million. So that we can continue to increase our profitability, we want to generate further dynamic growth, contain our fixed costs and reduce Our orders for new trucks advanced at a faster pace than overall GORDON RISKE Chief Executive Officer market growth. In 2014, global demand for industrial trucks went up by 7.8 per cent to 1.1 million units. The KION Group’s new truck business expanded at an even healthier rate. We received orders for 155,000 new forklift trucks and warehouse trucks, which equates to a rise of 8.5 per cent compared with 2013. Our order intake increased in value by 8.6 per cent to €4.877 billion. O 02 k o e o b r d r € 7 8 7 . 2 m i l l i o n Jan 01 2015casablancaItalydce2014201515Jan 2015We keep the world moving.KION GROUP AG | Annual Report 2014 TO OUR SHAREHOLDERS Letter to shareholders 23 Letter to shareholders Letter to shareholders » Following the most successful 2014: a record year year in its history, KION has set itself new and ambitious administrative expenses. We also made further improvements to our funding structure. In We continued to make good progress along this route in 2014, set- spring 2014, we repaid corporate bonds with a total volume of ting records with all of our major key performance indicators. Our €525 million. This will lower our interest payments – by more than adjusted EBIT improved by 6.3 per cent year on year to reach €20 million per year – and give us greater flexibility as we forge €442.9 million. The EBIT margin stood at 9.5 per cent, compared ahead with our growth strategy. with 9.3 per cent in 2013. And we have started the new year with a substantial order book worth €787.2 million. So that we Following the KION Group’s record year, conditions are can continue to increase our profitability, we want to generate therefore ideal for achieving our objectives going forward. further dynamic growth, contain our fixed costs and reduce Streamlined management structures for faster decision-making Our orders for new trucks advanced at a faster pace than overall We streamlined the Group’s management structure at the start of market growth. In 2014, global demand for industrial trucks went this year. This means we can make decisions more quickly and up by 7.8 per cent to 1.1 million units. The KION Group’s new more effectively. We are creating additional synergies between truck business expanded at an even healthier rate. We received our brand companies and putting even greater effort into driving orders for 155,000 new forklift trucks and warehouse trucks, our innovations forward, yet still delivering our customary high which equates to a rise of 8.5 per cent compared with 2013. Our level of quality. We are working to make our activities even more order intake increased in value by 8.6 per cent to €4.877 billion. customer-centric than at present. Our aim is to transfer the mar- ket feedback from our sales teams and the ideas of our employ- ees into product innovations and improvements with greater efficiency and speed. FOTO targets.« GORDON RISKE Chief Executive Officer 2 0 x o b n I s m e t I t n e S s r e d o l f l l A O r e o b r d o k € 7 8 7 . 2 m i l l i o n Order +8.6 per cent intake (in €) t s A D J U e b i t margin d e 9 . 5 % 03 20150303_Kion_GB2014_EB.indd 18-19 03.03.15 17:52 KION GROUP AG | Annual Report 2014 We keep the world moving. Jan 01 2015casablancaItalydce2014201515Jan 2015Jan 01 2015Italydce2014201515Jan 2015casablanca2015 Letter to shareholders » Following the most successful year in its history, KION has set itself new and ambitious targets.« The KION Group is more than the sum of its individual brands. This added value benefits not only our customers, but also our shareholders, partners and employees. This is precisely where this Company’s potential lies – in leveraging cross-brand syner- gies even more intensively than we do at present. We are con- tinuing with our successful multi-brand strategy. At the same time, shared modules and platforms are helping us to reduce costs and bring new products to market more quickly. The platforms are developed for fast-growing markets, primarily at the KION Group’s Chinese research and develop- ment centre. In Europe, the focus is on shared, cross-brand GORDON RISKE Chief Executive Officer modules. The R&D teams in Europe and the growth markets are sharing knowledge and information extensively. Last year, we launched more than 20 new trucks and truck families. 04 Jan 01 2015casablancaItalydce2014201515Jan 2015We keep the world moving.KION GROUP AG | Annual Report 2014TO OUR SHAREHOLDERS Letter to shareholders » Following the most successful year in its history, KION has set itself new and ambitious targets.« Letter to shareholders Letter to shareholders The KION Group is more than the sum of its individual brands. Successful initiatives in North America This added value benefits not only our customers, but also our The platform strategy is one of the reasons for the strong position shareholders, partners and employees. This is precisely where that the KION Group has held in the South American market for this Company’s potential lies – in leveraging cross-brand syner- many years. But another excellent example of where and how we gies even more intensively than we do at present. We are con- are deploying this strategy is North America, a vast market in tinuing with our successful multi-brand strategy. At the same which we want to establish a far stronger foothold as one of the time, shared modules and platforms are helping us to reduce world’s two largest suppliers of forklift trucks, warehouse technol- costs and bring new products to market more quickly. ogy and associated services. In order to increase market share in the USA, Canada and Mexico, we are adapting our product portfo- The platforms are developed for fast-growing markets, lio to local market requirements and offering new services. primarily at the KION Group’s Chinese research and develop- 2 0 x o b n I s m e t I t n e S s r e d o l f l l A FOTO GORDON RISKE Chief Executive Officer ment centre. In Europe, the focus is on shared, cross-brand The existing Linde plant in the US state of South Carolina was modules. The R&D teams in Europe and the growth markets renamed KION North America in 2014 and now manufactures are sharing knowledge and information extensively. Last year, products for various KION brands. Our initiatives are already we launched more than 20 new trucks and truck families. delivering results: whereas the North American market as a whole expanded by over 9 per cent to 219,500 units, KION North Amer- ica boosted its order intake in units by 23 per cent. t a k e 2014 order i n r e p kion nor t t n c e h americ a 05 20150303_Kion_GB2014_EB.indd 18-19 03.03.15 17:52 KION GROUP AG | Annual Report 2014 We keep the world moving. Jan 01 2015casablancaItalydce2014201515Jan 2015Jan 01 2015Italydce2014201515Jan 2015casablanca2015 Letter to shareholders » Following the most successful year in its history, KION has set itself new and ambitious targets.« Just like the Summerville plant, our new factory in the Czech Republic is to build trucks for multiple brands under one roof. Following the ground-breaking ceremony in November 2014, production at our Stříbro plant near Plzeň is scheduled to begin in 2016 and the KION Group is investing around €12 million in set- ting it up. The aim is to be able to supply the markets of eastern and southern Europe even more efficiently, in line with one of the KION Strategy 2020 objectives of manufacturing trucks as near At the same time we are consolidating our leading position in our home market of western Europe. To further increase their as possible to the customers who will buy them. GORDON RISKE Chief Executive Officer competitiveness, we will invest roughly €60 million by 2021 at Linde Material Handling’s core plant in Aschaffenburg and around €23 million at the core STILL plant in Hamburg over the same period. 06 Jan 01 2015casablancaItalydce2014201515Jan 201511/11/2014Ground-breaking ceremony KIONStříbro plant near Pilsen/Czech RepublicWe keep the world moving.KION GROUP AG | Annual Report 2014TO OUR SHAREHOLDERS Letter to shareholders » Following the most successful year in its history, KION has set itself new and ambitious targets.« Letter to shareholders Letter to shareholders Just like the Summerville plant, our new factory in the Czech This will create capacity for more growth in the medium term. Republic is to build trucks for multiple brands under one roof. The Linde MH and STILL plants in Aschaffenburg and Ham- Following the ground-breaking ceremony in November 2014, burg are the centres of excellence for their flagship IC trucks, production at our Stříbro plant near Plzeň is scheduled to begin in electric trucks and reach trucks in the premium segment. 2016 and the KION Group is investing around €12 million in set- ting it up. The aim is to be able to supply the markets of eastern and Consolidation of market position in China southern Europe even more efficiently, in line with one of the We of course have our sights firmly fixed on the incredibly impor- KION Strategy 2020 objectives of manufacturing trucks as near tant emerging markets of Asia. With our new truck orders up by as possible to the customers who will buy them. around 13 per cent in China last year, we out performed the world’s largest single market. This enabled us to cement our 2 0 x o b n I s m e t I t n e S s r e d o l f l l A FOTO At the same time we are consolidating our leading position in position as a major international supplier and the number three our home market of western Europe. To further increase their overall in the Chinese market. One of the driving forces is Baoli, competitiveness, we will invest roughly €60 million by 2021 at our third global brand company after Linde and STILL. Serving the Linde Material Handling’s core plant in Aschaffenburg and Chinese economy segment, the brand has a great deal of poten- around €23 million at the core STILL plant in Hamburg over tial. It also supplies platforms for robust yet affordable trucks GORDON RISKE Chief Executive Officer the same period. across the Group. s t n e m t s e v n i € 8 3 M i l l i o n r m a y n e G n i a e h i n c t n C s r e d r o r e p k c u r t 3 .1 w e N 1 + 07 20150303_Kion_GB2014_EB.indd 18-19 03.03.15 17:52 KION GROUP AG | Annual Report 2014 We keep the world moving. Jan 01 2015casablancaItalydce2014201515Jan 2015Jan 01 2015Italydce2014201515Jan 2015casablanca2015 Letter to shareholders India is another example. This emerging market offers huge long-term opportunities for our growth and thus for the imple- mentation of our KION Group Strategy 2020. Voltas Material Handling, one of the country’s two leading providers of forklift trucks and warehouse technology, now operates as KION India. This name change symbolises its membership of the KION » Following the most successful year in its history, KION has set itself new and ambitious targets.« Group family. Around the globe, there are now 1.2 million trucks from the KION brands in operation for our customers. That is why the KION Group’s service business has continued to grow, contribut- ing more than 45 per cent of the KION Group’s revenue in 2014. GORDON RISKE Chief Executive Officer Our customers rely on our trucks and on their availability. Our service portfolio is therefore far more than a core element of our integrated business model, and the excellent results for 2014 are further proof of its effectiveness. At the same time, our ser- vice offering represents a major selling point for our new trucks. 08 Jan 01 2015casablancaItalydce2014201515Jan 2015We keep the world moving.KION GROUP AG | Annual Report 2014TO OUR SHAREHOLDERS Letter to shareholders Letter to shareholders Letter to shareholders » Following the most successful year in its history, KION has set itself new and Group family. ambitious targets.« India is another example. This emerging market offers huge Strong demand for employee shares long-term opportunities for our growth and thus for the imple- The popularity of our employee equity programme shows that it mentation of our KION Group Strategy 2020. Voltas Material is not just my fellow Executive Board members and I who firmly Handling, one of the country’s two leading providers of forklift believe in the KION Group’s strategy for success and its potential: trucks and warehouse technology, now operates as KION India. our employees are convinced of it too. The programme was This name change symbolises its membership of the KION launched initially in Germany last year and is to be extended to other countries this year. We are making it possible for the KION Group’s employees to share in their Company’s success to a Around the globe, there are now 1.2 million trucks from the greater extent than they do at present. Almost a quarter of the KION brands in operation for our customers. That is why the employees who were eligible to take part took up this chance KION Group’s service business has continued to grow, contribut- to acquire shares – and more than half of those opted for the ing more than 45 per cent of the KION Group’s revenue in 2014. maximum of 60 shares. GORDON RISKE Chief Executive Officer Our customers rely on our trucks and on their availability. Our service portfolio is therefore far more than a core element of our integrated business model, and the excellent results for 2014 are further proof of its effectiveness. At the same time, our ser- vice offering represents a major selling point for our new trucks. FOTO 2 0 x o b n I s m e t I t n e S s r e d o l f l l A 4 1 0 2 / 8 0 / 8 2 k ion india become s +45 per cent service business 09 20150303_Kion_GB2014_EB.indd 18-19 03.03.15 17:52 KION GROUP AG | Annual Report 2014 We keep the world moving. Jan 01 2015casablancaItalydce2014201515Jan 2015Jan 01 2015Italydce2014201515Jan 2015casablanca2015 Letter to shareholders This high level of participation is an indication of the confidence that they have in our growth strategy. After all, our employees are the people who can best judge the potential that the KION Group holds. I would like to sincerely thank them for their hard work, their ideas and their loyalty. They are the face of the Group and enable it to be successful. And they are the central pillar of our » Following the most successful year in its history, KION has set itself new and ambitious targets.« Company. Besides those in our workforce, we also welcomed many new share- holders from outside the KION Group. Since being included in the MDAX in September 2014, our shares have become even more visi- ble and tradable. Following sales of shares by Goldman Sachs and GORDON RISKE Chief Executive Officer KKR, the proportion of shares that can be publicly traded on the stock exchange is now more than 50 per cent. Our shareholders form the second pillar, providing the strength for us to continue along our path of profitable growth and achieve the objectives in our KION Group Strategy 2020. 10 Jan 01 2015casablancaItalydce2014201515Jan 2015We keep the world moving.KION GROUP AG | Annual Report 2014TO OUR SHAREHOLDERS Letter to shareholders » Following the most successful year in its history, KION has set itself new and Company. ambitious targets.« Letter to shareholders Letter to shareholders This high level of participation is an indication of the confidence Our customers – whose importance we highlighted at the that they have in our growth strategy. After all, our employees are start – of course form the third pillar. In the front part of this the people who can best judge the potential that the KION Group annual report, we describe how our products offer customers holds. I would like to sincerely thank them for their hard work, genuine added value and explain what they can and should their ideas and their loyalty. They are the face of the Group and expect from our trucks and services. We are there to help enable it to be successful. And they are the central pillar of our our customers achieve their goals. In every industry, in every region and around the clock: FOTO GORDON RISKE Chief Executive Officer Besides those in our workforce, we also welcomed many new share- We keep the world moving. holders from outside the KION Group. Since being included in the MDAX in September 2014, our shares have become even more visi- With best wishes, ble and tradable. Following sales of shares by Goldman Sachs and KKR, the proportion of shares that can be publicly traded on the stock exchange is now more than 50 per cent. Our shareholders form the second pillar, providing the strength for us to continue Gordon Riske along our path of profitable growth and achieve the objectives in Chief Executive Officer our KION Group Strategy 2020. KION GROUP AG 1 9 M a r 2 0 1 5 2 0 x o b n I s m e t I t n e S s r e d o l f l l A 11 20150303_Kion_GB2014_EB.indd 18-19 03.03.15 17:52 KION GROUP AG | Annual Report 2014 We keep the world moving. Jan 01 2015casablancaItalydce2014201515Jan 2015Jan 01 2015Italydce2014201515Jan 2015casablanca2015 Letter to shareholders » Following the most successful year in its history, KION has set itself new and ambitious targets.« SUMMERVILLE GORDON RISKE Chief Executive Officer CHÂTELLER AULT around 1,300 sales and/or service outlets worldwide INDAIATUBA / SÃO PAULO New trucks material handling market worldwide 2014 New trucks KION Group brand companies worldwide 2014 12 Jan 01 2015casablancaItalydce2014201515Jan 2015We keep the world moving.KION GROUP AG | Annual Report 2014» Following the most successful year in its history, KION has set itself new and ambitious targets.« FOTO GORDON RISKE Chief Executive Officer Letter to shareholders Letter to shareholders K AHL ASCHAFFENBURG WEILBACH HAMBURG ČESK Ý KRUMLOV GEISA CHÂTELLER AULT REUTLINGEN around 1,300 sales and/or service outlets worldwide LUZZ AR A PUNE JINGJIANG XIAMEN > 13,000 service engineers worldwide New trucks KION Group brand companies worldwide 2014 KION Group trucks in use worldwide Share of service business in total revenue of the KION Group 13 2 0 x o b n I s m e t I t n e S s r e d o l f l l A 20150303_Kion_GB2014_EB.indd 18-19 03.03.15 17:52 KION GROUP AG | Annual Report 2014 We keep the world moving. Jan 01 2015casablancaItalydce2014201515Jan 2015Jan 01 2015Italydce2014201515Jan 2015casablanca2015 24 Executive Board GORDON RISKE Chief Executive Officer (CEO) of KION GROUP AG born in 1957 in Detroit (USA) DR THOMAS TOEPFER Chief Financial Officer (CFO) and Labour Relations Director of KION GROUP AG born in 1972 in Hamburg CHING PONG QUEK Member of the Executive Board of KION GROUP AG Chief Asia Pacific Officer born in 1967 in Batu Pahat/Johor (Malaysia) » We have a clear focus on growth, profitability, capital efficiency and resilience.« DR THOMAS TOEPFER Chief Financial Officer We keep the world moving. » The KION Group is more than the sum of its brand companies – this added value benefits our customers, partners, employees and shareholders.« GORDON RISKE Chief Executive Officer TO OUR SHAREHOLDERS Executive Board 25 » We are setting our sights on fast-growing markets such as Asia and North America in order to con- tinue increasing our market share.« CHING PONG QUEK Chief Asia Pacific Officer We keep the world moving.26 Report of the Supervisory Board of KION GROUP AG Dear shareholders, KION GROUP AG can look back on a successful 2014. It was the first full financial year following the Company’s initial public offering (IPO) in June 2013 and was dominated by the first concrete steps in implementing the Strategy 2020, which the Executive Board and Supervisory Board had adopted at the end of 2013. Business picked up strongly where the previous year left off, maintaining the same high level of momentum. Last year, the Supervisory Board continued to fulfil the tasks and responsibilities imposed on it by the law, the Company’s articles of incorporation and the German Corporate Governance Code with dedication and great diligence. There were again many important decisions, transactions requiring approval and other matters to be discussed and resolved upon. Monitoring and advisory role in dialogue with the Executive Board The Supervisory Board advised the Executive Board on all significant matters relat- ing 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. At meetings of the full Supervisory Board, the performance of the business and deci- sions 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 significant aspect of these transactions promptly and in detail, providing both written and oral reports. The Supervisory Board satisfied itself at all times that the Company was being managed lawfully and diligently. 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 examined closely the resolutions proposed by the Executive Board and deliberated on them before adopting them. In urgent cases, written resolutions were also adopted. We keep the world moving.KION GROUP AG | Annual Report 2014TO OUR SHAREHOLDERS Report of the Supervisory Board 27 DR JOHN FELDMANN Chairman The Executive Board informed the Supervisory Board about key financial data at reg- ular intervals. Where there was a discrepancy between the actual figures and the business planning, 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 committees, the chairman of the Supervisory Board, who is also chairman of the Executive Committee, remained in close contact at all times with the Chief Executive Officer. This ensured that the Super visory Board was always kept up to date on the Company’s performance and any significant transactions. Main focus areas discussed by the Supervisory Board Of particular importance in the Supervisory Board’s deliberations in the first half of 2014 were the first concrete steps in implementing the Strategy 2020, which had been developed and adopted in 2013 and aggregates the Executive Board’s plans for the Company’s further strategic development, as well as the preparations for the Company’s We keep the world moving. KION GROUP AG | Annual Report 201428 first Annual General Meeting since the IPO. In the second half of the year, the Super- visory Board closely followed the discussion about appropriate restructuring meas- ures at Linde Hydraulics GmbH & Co. KG, in which the Company still holds a minority interest, and the decision on necessary contributions from the Company. Delibera- tions also focused on the Company’s ongoing business performance and financial position, planning of capital expenditure, the employment situation, risk management, individual aspects of corporate strategy and planning, corporate governance matters and, in particular, the areas of responsibility assigned to the Supervisory Board – such as Executive Board remuneration. The main personnel matter, which the Supervisory Board had to deal with at the end of last year, were the changes made to the membership of the Executive Board at the start of this year. With effect from 15 January 2015, Executive Board members Theodor Maurer and Bert-Jan Knoef stepped down from the Executive Board and resigned from their roles as the CEOs of Linde Material Handling GmbH and STILL GmbH respectively at their own request. The departure of the two Executive Board members and the resulting organisational issues were discussed extensively by the Supervisory Board. As part of measures to improve the efficiency and effectiveness of KION GROUP AG, the Company’s Chief Executive Officer, Mr Gordon Riske, has taken over Mr Maurer’s and Mr Knoef’s functions in addition to his other management responsibilities. The Supervisory Board thanks Mr Maurer and Mr Knoef for their hard work and the outstanding contributions that they have made over the years to KION GROUP AG’s successful development and wishes them both all the best and every success in their new endeavours. In 2014, the Supervisory Board and its committees dealt with these issues and made the necessary decisions at a total of 18 meetings (seven full Supervisory Board meet- ings and eleven 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. KION Strategy 2020 A key area covered by the Supervisory Board’s deliberations in 2014 had been the plans to implement the Strategy 2020, particularly the expansion of production at Linde Material Handling GmbH in Aschaffenburg and the accompanying relocation of reach truck production from Aschaffenburg to a new production facility in Střibro in the Czech Republic. The Supervisory Board approved this measure at its meeting on 20 March 2014. The Strategy 2020 was also discussed at the Supervisory Board meeting on 2 June 2014, at which the Executive Board delivered a progress report on the implementation of the measure, and at the Supervisory Board’s strategy meeting We keep the world moving.KION GROUP AG | Annual Report 2014TO OUR SHAREHOLDERS Report of the Supervisory Board 29 on 23 September 2014, when the focus was on opportunities and the product strategy in emerging markets. Last year, the Supervisory Board again followed the Executive Board’s considerations relating to the Strategy 2020 with great interest and provided constructive support. 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 com- pliance 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. Owing to the changes to the membership of the Supervisory Board during the year, it was decided to postpone the review of the size and effectiveness of the Super- visory Board and its committees until 2015. The review, which had been planned for 2014, will now be combined with a formal efficiency review. 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 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 57 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 2014, please refer to the remuneration report, which can be found on pages 58 to 69 of the annual report. At its meeting on 17 December 2014, 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 an updated comply-or-explain statement pursuant to section 161 of the German Stock Corporation Act (AktG) on 19 December 2014. It has been made permanently available to the public on the KION GROUP AG website. KION GROUP AG complied with all but one of the re - We keep the world moving. KION GROUP AG | Annual Report 201430 commendations in the German Corporate Governance Code (version dated 24 June 2014) and intends to continue to do so in future. As was the case in the previous year, the only recommendation 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 par- ticular candidates from outside Germany. Work of the committees KION GROUP AG’s Supervisory Board had four committees last year: the Mediation Committee pursuant to section 27 (3) of the German Codetermination Act (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 Super visory 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 Execu- tive Committee also prepares the Supervisory Board’s decisions relating to corpo- rate governance, particularly amendments to the comply-or-explain statement pur- suant to section 161 AktG reflecting changed circumstances 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 prepared by the Executive Committee. The Executive Committee is also responsible for resolutions concerning 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 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 mem- We keep the world moving.KION GROUP AG | Annual Report 2014TO OUR SHAREHOLDERS Report of the Supervisory Board 31 bers 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 2014, 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 (until 31 August 2014), Mr Jiang Kui, Mr Olaf Kunz (from 24 Septem- ber 2014) and Mr Kay Pietsch. The Executive Committee met four times in 2014. The main topics discussed by the Executive Committee in 2014 were those concerning the Company’s first Annual General Meeting and the KION Strategy 2020. It also scruti- nised the personnel changes on the Executive Board. The Mediation Committee comprises the chairman of the Supervisory Board, his dep- uty, 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 propose 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 2014, the Mediation Committee consisted of Dr John Feldmann (chairman), Mr Joachim Hartig, Mr Johannes P. Huth and Mr Kay Pietsch. The Mediation Committee did not need to be convened in 2014. 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 auditors in connection with the audit and checks that the independent auditors are qualified and independent. It is also responsible for engaging the independent auditors, deter- mining 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 2014, the Audit Committee consisted of Mr Hans Peter Ring (chairman), Dr John Feldmann, Mr Kay Pietsch and Ms Alexandra Schädler. Mr Hans Peter Ring is an inde- pendent financial expert within the meaning of sections 100 (5) and 107 (4) AktG. The Audit Committee met five times in 2014. The main topics discussed by the Audit Com- mittee in 2014 were the 2014 annual financial statements, the interim reports, the budget and the regular subject of the key elements of corporate governance within the Company. We keep the world moving. KION GROUP AG | Annual Report 201432 The Nomination Committee comprises four members, all of whom are shareholder representatives. The Nomination Committee’s only task is to propose candidates for the Supervisory Board to the Supervisory Board for proposal to the Company’s Annual General Meeting when Supervisory Board elections are due. In 2014, the Nomination Committee consisted of Dr John Feldmann (chairman), Dr Martin Hintze, Mr Jiang Kui and Ms Silke Scheiber. The Nomination Committee met twice in 2014. At these meetings, it concentrated on selecting suitable candidates to replace the departing members of the Supervisory Board. This culminated in the proposal of Ms Xu Ping and Ms Behrendt as new Supervisory Board members with effect from 1 January 2015. All members of the Supervisory Board attended the Supervisory Board meetings in 2014 apart from the following exceptions: at one meeting, five members sent their apologies, at two meetings, three members sent their apologies, at two meetings, one member sent apologies and at one meeting, two members sent their apologies. With the exception of two committee meetings at each of which one member sent apologies, all committee meetings were attended by all members of the respective committee. Supervisory Board member Tan Xuguang participated in fewer than half of all Supervisory Board meetings. Engagement of the auditors; audit of the separate and consolidated financial statements The Company’s independent auditors, Deloitte & Touche GmbH Wirtschaftsprüfungs- gesellschaft, Frankfurt am Main, audited the Company’s separate financial state- ments and management report and the consolidated financial statements and group management report for the year ended 31 December 2014. 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 and the question of fees. The forthcoming engagement of an auditing firm was discussed at the Audit Committee meeting on 10 March 2014 and there was an opportunity to speak to the auditors in person. The key audit issues were dis- cussed and set out accordingly at the Audit Committee’s meeting on 10 March 2014. The auditors were appointed by the chairman of the Supervisory Board on 20 November 2014. The auditors issued an unqualified opinion for the separate financial statements, including the management report, for the year ended 31 December 2014 and the consolidated financial statements, including the group management report, for the year ended 31 December 2014 on 10 March 2015. We keep the world moving.KION GROUP AG | Annual Report 2014TO OUR SHAREHOLDERS Report of the Supervisory Board 33 In order to inform the Supervisory Board and its Audit Committee as soon as possi- ble about the progress of the audit and the individual audit findings that were emerg- ing, the members of both committees were offered two telephone briefings in which the Executive Board and the auditors took part. The auditors submitted their report and the documents relating to the financial statements to the members of the Audit Committee on 2 March 2015 and to the members of the Supervisory Board on 10 March 2015. The report was discussed in depth at the Audit Committee meeting on 10 March 2015 and at the full Supervisory Board meeting on 18 March 2015, both of which were attended by the auditors. At both of those meetings, the auditors 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 financial statements, management report and group management report for the year ended 31 December 2014, 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 18 March 2015. 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 finan- cial statements for the year ended 31 December 2014 prepared by the Executive Board. The annual financial statements were therefore adopted. At its meeting on 18 March 2015, 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 €0.55 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-expendi- ture planning and the interests of the shareholders. The Supervisory Board believes the proposed dividend is appropriate. 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 (dependency report). The Company’s auditors, Deloitte & Touche GmbH Wirtschafts- prüfungsgesellschaft, Frankfurt am Main, reviewed the dependency report, compiled an auditors’ report on it and issued the following unqualified opinion based on their completed audit on 10 March 2015: We keep the world moving. KION GROUP AG | Annual Report 201434 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 auditors at the Supervisory Board meeting on 18 March 2015. The auditors reported on the main findings of their 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 no changes on the Executive Board of KION GROUP AG during 2014. However, there were several changes on the Supervisory Board in 2014. Mr Thilo Kämmerer stepped down from the Supervisory Board on 31 August 2014. He was succeeded by Mr Olaf Kunz as an employee representative with effect from 1 Sep- tember 2014. Ms Silke Scheiber and Dr Martin Hintze stepped down from the Supervisory Board on 31 December 2014. Ms Xu Ping and Ms Birgit Behrendt were appointed by the courts as their successors with effect from 1 January 2015. The Supervisory Board would like to thank Ms Scheiber, Dr Hintze and Mr Kämmerer for the great dedication with which they have always carried out their work in the inter- ests of the Company. Both appointments will be submitted for confirmation by the shareholders at the Annual General Meeting. We keep the world moving.KION GROUP AG | Annual Report 2014TO OUR SHAREHOLDERS Report of the Supervisory Board 35 As preparation for their duties as members of the Company’s Supervisory Board, the new members were offered a comprehensive programme of information on the Com- pany’s business and on the main governance-related processes put in place by the Company in relation to risk management, the internal control system, internal auditing and compliance. The details of this report were discussed thoroughly at the Supervisory Board meet- ing on 18 March 2015 when it was adopted. My colleagues on the Supervisory Board and I would like to thank the members of the Executive Board and the employees of KION GROUP AG and its Group companies in Germany and abroad for their commitment and outstanding achievements in 2014. Dr John Feldmann Chairman We keep the world moving. KION GROUP AG | Annual Report 2014 36 KION shares Volatile stock market environment Inclusion in the MDAX The global equity markets experienced severe volatility in 2014. On 22 September 2014, KION GROUP AG was promoted from Although investors were increasingly on the buy side because the SDAX to the MDAX, which comprises the 50 largest listed persistently low interest rates provided a strong incentive for companies in Germany after those in the DAX, making KION investing in equities, sentiment was depressed, mainly by geo­ shares even more attractive and visible to investors. political tensions in the Middle East and Ukraine as well as fears > TABLE 001 of a renewed economic downturn in western Europe. As a result, there was a rapid series of sharp price fluctuations in both direc­ tions. Despite this high volatility, the DAX – which is regarded as Basic information on KION shares TABLE 001 the main barometer for prices in the German stock markets – closed at virtually the same level as at the end of 2013. Over the course of the year, the DAX had risen to 9,806 points, a gain of just 2.7 per cent, while the MDAX was up by 2.2 per cent. ISIN WKN Bloomberg Reuters DE000KGX8881 KGX888 KGX.GR KGX.DE Respectable performance by KION shares Share type No­par­value shares Index MDAX The price of KION shares also ended 2014 virtually unchanged. They closed at €31.74 on 31 December 2014, which was 3.3  per  cent higher than their 2013 year­end closing price of €30.73. The shares achieved their highest price of the year on 24 February when they reached €37.07. However, any gains were At the end of the reporting year, the KION Group’s market capital­ lost in the months that followed, in line with the performance of isation amounted to €3.1 billion, of which €1.5 billion was in free the market as a whole. The shares’ performance during the year float. The average daily Xetra trading volume during the year was was also influenced by three placements of blocks of shares by 106.3 thousand shares or €3.4 million. > TABLE 002 major shareholders KKR and Goldman Sachs (see next page). KION shares fell to their lowest price of the year, €25.83, on 15 October before recovering and catching up with the perfor­ mance of the MDAX once more. > DIAGRAM 001 We keep the world moving.KION GROUP AG | Annual Report 2014TO OUR SHAREHOLDERS KION shares 37 Share price performance between 28 June 2013 and 31 December 2014 DIAGRAM 001 €37 €35 €33 €31 €29 €27 €25 €23 KION GROUP + 33.9% + 23.6% + 23.2% MDAX DAX € 31.74 * * Closing price €23.70 * 07/2013 08/2013 09/2013 10/2013 11/2013 12/2013 01/2014 02/2014 03/2014 04/2014 05/2014 06/2014 07/2014 08/2014 09/2014 10/2014 11/2014 12/2014 Sharp rise in free float via Superlift Holding. On 7 January, they sold a total of 10.7 million shares – 10.8 per cent of KION shares – on the stock exchange, The shareholder structure changed significantly in the year under followed by the sale of around 7.5 million more shares – 7.6 per cent review, with a shift in favour of the free float. At the end of 2013, of KION shares – on 10 June. KKR and Goldman Sachs disposed Weichai Power exercised its option to acquire shares from KKR of a further block of 8.0  million shares – 8.1  per  cent of KION and Goldman Sachs and thereby increase its stake from shares – on 10 November. As a result of these placements and 30.0 per cent to 33.3 per cent. The transaction was completed on the increase in Weichai’s stake, the proportion of shares held by 15 January 2014. Weichai Power also undertook not to acquire KKR and Goldman Sachs indirectly via Superlift Holding at the more than 49.9  per  cent of KION shares before 28 June 2018 end of 2014 stood at 18.8 per cent, compared with 48.6 per cent (standstill agreement). at the beginning of the year. Weichai Power is therefore the Meanwhile, KKR and Goldman Sachs carried out several biggest single shareholder in KION GROUP AG. placements that substantially reduced their stakes held indirectly We keep the world moving.KION GROUP AG | Annual Report 2014 38 Share data TABLE 002 Closing price on 31/12/2013 High for 2014 Low for 2014 Closing price on 31/12/2014 Market capitalisation as at 31/12/2014 Performance in 2014 €30.73 €37.07 €25.83 €31.74 €3,138.6 million 3.3% Average daily trading volume in 2014 (no. of shares) 106.3 thousand Average daily trading volume in 2014 (€) Share capital Number of shares as at 31/12/2014 Pro forma earnings per share for 2014 Dividend per share for 2014 * Dividend payout rate * Total dividend payout * Equity ratio as at 31/12/2014 * Proposed dividend for the fiscal year 2014 €3.4 million €98,900,000 98,900,000 €1.79 €0.55 31% €54.3 million 26.9% We keep the world moving.KION GROUP AG | Annual Report 2014 TO OUR SHAREHOLDERS KION shares 39 Conversely, the free float increased from 20.3  per  cent at the 13 June 2013 allowing treasury shares to be acquired for an beginning of 2014 to a total of 47.7 per cent by the end of the year. employee share programme. A total of 251,000 shares have been Since October 2014, the shares in free float have also included repurchased since August 2013, 51,000 of them in September those held by around 1,800 employees of the KION Group’s 2014. Of these treasury shares, 163,562 were left after the first German companies who received blocks of shares at favourable stage of the KEEP programme – equivalent to 0.2  per  cent terms under the KION Employee Equity Programme (KEEP) of share capital – and they remain available for the employee approved by the Executive Board. As a result of the programme, share scheme. a total of 87.4 thousand shares – equivalent to 0.1  per  cent of On 28 June 2014, all participants in the KION management share capital – are now broadly distributed among the workforce. partnership plan (MPP) also became entitled to sell their shares or The KEEP programme is to be extended to other countries in 2015. transfer them into their private investment accounts. The shares In order to implement the KION Employee Equity Programme, previously reported as being attributable to KION management KION GROUP AG made use in September of an authorisation are therefore now counted as part of the free float. > DIAGRAM 002 granted by a resolution of the Extraordinary General Meeting on Shareholder structure as at 31 December 2014 DIAGRAM 002 0.2% KION GROUP AG 18.8% KKR AND GOLDMAN SACHS ² 33.3% WEICHAI POWER 47.7% FREE FLOAT ¹ 1 Includes shares that are still held by KION Management Beteiligungs GmbH & Co. KG for members of the Executive Board and Supervisory Board but which are no longer subject to a lock­up period and can therefore be sold or transferred to members’ private investment accounts. 2 Held via Superlift Holding S.à r.l. We keep the world moving.KION GROUP AG | Annual Report 201440 On 12 February 2015, KKR and Goldman Sachs placed a further 4.8 million shares (4.9 per cent of KION shares) in the market. As a result of this transaction, the free float increased again, from Overwhelming majority of financial analysts recommend KION shares 47.7 per cent to 52.6 per cent. The proportion of shares held indi­ In 2014, the following six brokerage houses began to cover KION rectly by KKR and Goldman Sachs via Superlift Holding therefore Group’s shares: HSBC, Baader Bank, MainFirst, Bankhaus reduced from 18.8 per cent to 13.9 per cent. Lampe, LBBW and NordLB. This brings the total number of Optimised funding structure, improved rating brokerage houses that now regularly publish research on KION shares to 16. At the year end, twelve of the analysts recom­ mended KION shares as a buy while four rated them as neutral. The median target price specified for the shares was €36.00. On 15 April 2014, the KION Group redeemed two of its outstand­ ing bond tranches before maturity in order to further optimise its Dividend of €0.55 per share planned corporate funding. The bonds had been issued prior to the IPO. The fixed­rate tranche of the corporate bond issued in 2011, The Executive Board and Supervisory Board of KION GROUP AG which had a volume of €325.0  million, and the floating­rate will propose a dividend of €0.55 per share to the Annual General tranche of the bond issued in 2013, which had a volume of Meeting on 12 May 2015. This equates to a dividend payout rate €200.0  million, were repaid early in full. This was financed by of about 31 per cent of net income. Pro­forma earnings per share drawdowns under the existing revolving credit facility and an for 2014 came to €1.79. increase of €198.0 million to the facility. By refinancing these bond tranches, the KION Group expects to save around €20 million in annual interest payments. The fixed­rate (6.75 per cent) tranche of the bond issued in 2013, which has a volume of €450.0 million and a maturity date of 2020, remains in place. On 7 April 2014, Moody’s raised the rating of the KION Group and the bonds from Ba3 to Ba2 with a stable outlook. Then, on 15 April 2014, S&P raised its rating for the KION Group from BB – with a positive outlook to BB, still with a positive outlook. We keep the world moving.KION GROUP AG | Annual Report 2014TO OUR SHAREHOLDERS Services for shareholders 41 Services for shareholders Active investor relations Each of the KION Group’s financial reports was explained in detail. The Executive Board of KION GROUP AG had presented The Executive Board and the KION Group’s investor relations the key aspects of the KION Group Strategy 2020 during a con­ team talked directly with investors and analysts on numerous ference call on 20 March 2014 when the 2013 annual report was occasions during the year. As well as attending a total of 15 inves­ published, and the strategy was also one of the key themes of the tor conferences in Germany and abroad, they ran a multitude of Annual General Meeting. The Executive Board held update calls roadshows and held a number of one­on­one meetings. to report on each set of quarterly results. The transcripts from the The KION Group’s first Capital Markets Day for analysts and quarterly update calls along with the presentations form part of investors, which was held in Mainz on 2 December, was also a the extensive information for investors available on the Compa­ focal point of investor activities. At the event, the Executive Board ny’s website at kiongroup.com/ir/presentations. addressed the key aspects of the KION Group Strategy 2020 that Data about KION shares and bonds, press releases and had been announced during the year, explained them in detail presentations as well as information about the Annual General and answered questions about the Group’s business model. To Meeting and corporate governance within the Group can be provide representatives from the capital markets with an insight found at kiongroup.com/ir. You can register for the IR newsletter into KION’s business, various forklift and warehouse trucks were under IR Contact & Services, which will enable you to receive our put on display and shown in operation. press releases and more. The contact details of the IR team and The first Annual General Meeting held by KION GROUP AG the financial calendar can also be found here. The KION Group’s as a listed company took place on 19 May 2014 and was attended financial reports are available both as PDF files and as interactive by around 150 shareholders. Those in attendance, representing online versions. They also contain a download section where, for 90.21 per cent of the voting share capital, approved all the draft example, you can download all of the tables as an Excel file. resolutions put forward by the Company’s management with a large majority, including the resolution to distribute a dividend of €0.35 per share. The total dividend payout of €34.5 million was equivalent to a dividend payout rate of roughly 25 per cent of net income. Other agenda items related to approval of the Executive Board remuneration system and the creation of authorised and KION GROUP INVESTOR RELATIONS conditional capital – equating in total to 10 per cent of the existing kiongroup.com/ir share capital – with the option of excluding pre­emptive rights. The speeches of the Chief Executive Officer and the chairman of the Supervisory Board were broadcast live at kiongroup.com/agm. A webcast of the Chief Executive Officer’s speech is also available on the Company’s website. We keep the world moving.KION GROUP AG | Annual Report 2014CORPORATE GOVERNANCE Contents 43 B Corporate Governance 44 44 51 52 58 58 68 CORPORATE GOVERNANCE REPORT Declaration Executive board and supervisory board shareholdings and directors’ dealings DISCLOSURES RELEVANT TO ACQUISITIONS REMUNERATION REPORT Executive Board remuneration Supervisory Board remuneration KION GROUP AG | Annual Report 2014 E C N A N R E V O G E T A R O P R O C B T R O P E R T N E M E G A N A M P U O R G C S T N E M E T A T S L A I C N A N I F D N O I T A M R O F N I L A N O I T I D D A E 44 Corporate governance report Corporate governance covers the whole system of managing and monitoring an enterprise, the principles and guidelines that shape its business policy and the system of internal and external control 1. Comply-or-explain statement pursuant to section 161 (1) AktG and monitoring mechanisms. The Executive Board and Supervi- Section 161 (1) AktG requires the management board and super- sory Board of KION GROUP AG believe that an uncompromising visory board of a publicly listed company to issue an annual dec- commitment to the most ambitious standards of corporate gov- laration stating that the company has complied with, or intends to ernance is essential to the Company’s long-term success. Com- comply with, the recommendations of the Code and also stating pliance with these principles also promotes the trust that our the recommendations with which it has not complied or does not investors, employees, business partners and the public have in intend to comply, and the reasons why. Detailed reasons must be the management and monitoring of the Company. given for any departure from the recommendations of the Code. There is a close correlation between the corporate govern- The comply-or-explain statement must be made permanently ance report required by section 3.10 of the German Corporate available to the public on the company’s website. Governance Code as amended on 24 June 2014 (the Code) and Following KION GROUP AG’s listing on the Regulated Market the content of the corporate governance declaration required at Frankfurt Stock Exchange on 28 June 2013, the Executive by section 289a German Commercial Code (HGB). For this rea- Board and Supervisory Board issued the Company’s first com- son, the Executive Board and the Supervisory Board of KION ply-or-explain statement on 19 December 2013. GROUP AG have combined the two statements. Both decision-making bodies considered the recommenda- DECLARATION PURSUANT TO SECTION 289A OF THE GERMAN COMMERCIAL CODE (HGB) tions of the amended Code in detail and on 17 December 2014 they issued the second comply-or-explain statement of KION GROUP AG as required by section 161 (1) AktG as follows: 1. Since the last comply-or-explain statement was issued in December 2013, KION GROUP AG has complied with all of the recommendations of the German Corporate Governance Code (the Code) as amended on 13 May 2013 with one The corporate governance declaration required by section 289a exception. HGB includes the comply-or-explain statement in accordance In departure from section 3.8 (3) of the Code, the articles with section 161 of the German Stock Corporation Act (AktG) (see of incorporation of KION GROUP AG do not provide for an 1. below), relevant disclosures on corporate management prac- excess in the D&O insurance policies for members of the tices extending beyond statutory requirements (see 2. below), a Supervisory Board. The Company believes that such an description of the working methods of the Executive Board and excess is not typical at international level and would therefore the Supervisory Board, and a description of the working methods make it considerably more difficult to find independent candi- and composition of the Supervisory Board committees (see 3. dates, in particular candidates from outside Germany. below). The declaration on corporate governance pursuant to section 289a HGB is part of the management report. According to section 317 (2) sentence 3 HGB, the information provided in accordance with section 289a HGB does not have to be included in the audit of financial statements. We keep the world moving.KION GROUP AG | Annual Report 2014 CORPORATE GOVERNANCE Corporate governance report 45 2. The Code as amended on 24 June 2014 was announced in the German Stock Corporation Act. For example, the Supervisory German Federal Gazette on 30 June 2014. Since then, KION Board’s Audit Committee, which was set up partly for this pur- GROUP AG has complied with all of the recommendations in pose, received regular reports on the accounting processes and the Code as amended on 24 June 2014 with the one exception the effectiveness of the internal monitoring and risk management described above, and intends to continue to do so in future. systems and of the audit of financial statements, and then reported back to the full Supervisory Board on these matters. Wiesbaden, 19 December 2014 2.1 Internal control system For the Executive Board: KION GROUP AG has an internal control system designed to meet the specific needs of the Company. Its processes are Gordon Riske Dr Thomas Toepfer intended to ensure the correctness of the internal and external For the Supervisory Board: Dr John Feldmann 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 ongoing basis and refined as necessary. The Supervisory Board and in particular the Supervisory Board’s Audit Committee regularly obtain information on the pro- The comply-or-explain statement is available on the website of cesses put in place as part of the internal control system and KION GROUP AG at kiongroup.com/comply_statement have satisfied themselves as to their efficiency. 2. Relevant disclosures on corporate governance 2.2 Accounting-related internal control system For its accounting process, the KION Group has defined suitable structures and processes as part of its internal control and risk The corporate governance of KION GROUP AG is essentially, but management system and implemented them throughout the not exclusively, determined by the provisions of the German Group. Besides defined control mechanisms, it includes, for Stock Corporation Act and those of the Codetermination Act (Mit- example, system-based and manual reconciliation processes, bestG) and also follows the recommendations of the German clear separation of functions, strict compliance with the dou- Corporate Governance Code. KION GROUP AG complies with all ble-checking principle and written policies and procedures. The the Code’s recommendations, with one exception. These funda- overarching aim is for the separate financial statements, consoli- mental principles are combined with a commitment to sustainable dated financial statements, management report and group man- business, taking account of society’s expectations in the markets agement report to be fully compliant with the relevant statutory in which the Company operates. and regulatory requirements and, in particular, the applicable In 2014, the Executive Board and the Supervisory Board (or financial reporting standards. Changes to these requirements its committees) regularly discussed corporate governance issues and standards are analysed on an ongoing basis and taken into in accordance with a rolling schedule of topics. This ensured that account as appropriate. Details can be found in the risk report, the key elements of corporate governance within the KION Group which is part of the group management report. were always on the agenda at meetings of the Company’s main decision-making bodies. The Supervisory Board in particular complied with the supervisory duties incumbent upon it under the We keep the world moving.KION GROUP AG | Annual Report 2014 46 2.3 Risk management system within the Group; the compliance department reports to the Chief Executive Officer of KION Group AG. Responsibility for imple- For the Company to be managed professionally and responsi- menting compliance management has been delegated to the bly, the Executive Board must regularly obtain information about Chief Compliance Officer, the CEOs of the STILL and LMH seg- existing risks and whether they have changed from the risk- ments, and the heads of the KION regions. Responsibility for management system established in the Company, and then monitoring of course remains with the CEO of the Group. The report on this to the Supervisory Board’s Audit Committee. The KION compliance department, the KION compliance team and KION Group’s risk-management system is documented in a the KION compliance committee provide operational support to Group risk policy that defines tasks, processes and responsibili- the aforementioned functions. The KION compliance department ties and sets out the rules for identifying, assessing, reporting and focuses mainly on preventing compliance violations by providing managing risk. Specific individual risks are then reported by each guidance, information, advice and training. It manages the KION Group entity using an online reporting tool. Reporting on compliance team, in which local and regional compliance officers cross-segment risks and groupwide risks is carried out by Con- of the Group are represented. trolling and the relevant departments. The risks that have been The members of the compliance team at KION GROUP AG reported are reviewed on a quarterly basis and re-assessed until are available to advise all Group employees and answer their there is no longer any reason to report a risk. questions at any time. They are also responsible for the imple- mentation of the compliance programme, particularly for provid- 2.4 Compliance management system ing advice, information and training. Actual or suspected incidents of non-compliance can be The Executive Board and Supervisory Board of KION GROUP AG reported by post, email or fax. All employees can also report any consider that adhering uncompromisingly to broad-ranging com- cases of non-compliance via a compliance hotline and can pliance standards is essential to sustained financial success. choose to remain anonymous. That is why a comprehensive compliance programme, centring As part of its work, the compliance department at KION around the KION Group Code of Compliance, has been set up for GROUP AG cooperates closely with the legal and internal audit KION GROUP AG and its Group companies worldwide. departments. The KION compliance committee is staffed by the The KION Group Code of Compliance, which is available in all heads of these departments and the head of human resources, of the main languages relevant to the Group companies of KION operating as a cross-functional committee that primarily advises on, GROUP AG, provides every employee with clear guidance on examines and, if relevant, punishes incidents of non-compliance how to conduct their business in accordance with sound values that are reported. While the KION compliance department is and ethics and in compliance with the law. The aim is that all responsible for preventing compliance violations, the internal audit employees should receive regular training on the most important unit is tasked with checking the facts of reported non-compliance compliance subjects (e.g. competition law, data protection, com- cases. On behalf of the Executive Board, the internal auditors also munication and anti-corruption). Desk-based employees can use monitor subsidiaries for compliance with regulations. If their e-learning tools to complete the mandatory training. audits confirm cases of non-compliance, it is the task of HR or Compliance activities focus on anti-corruption, foreign trade/ Legal to remedy the violations and sanction those responsible, if export controls, liability of senior management, directors’ and appropriate. officers’ liability, capital markets compliance, IT security and data The Management Boards of the KION brand parent compa- protection. nies and their subsidiaries are responsible for ensuring compliance. KION GROUP’s compliance organisation is made up of the The Local Compliance Representatives advise and support the following committees, functions and duties: directors and senior managers in ensuring compliance through- The Executive Board of KION GROUP AG bears collective out the Group. responsibility for the functioning of compliance management We keep the world moving.KION GROUP AG | Annual Report 2014CORPORATE GOVERNANCE Corporate governance report 47 2.5 Audit-relevant processes taken to ensure that this role at a major shareholder of the Com- pany does not create a conflict of interest relating personally to Mr The KION Group’s separate financial statements and management Riske. Formal processes have been put in place to ensure that Mr report, and the consolidated financial statements and group man- Riske, in his role as a non-executive director of Weichai Power, will agement report, which are prepared by the Executive Board of KION not be involved in transactions that could give rise to a conflict GROUP AG, are audited by an independent auditor, discussed by with the interests of the KION Group. Nor will Mr Riske will be the Audit Committee and approved by the Supervisory Board. involved in transactions relating to the exercise of voting rights by The independent auditor reviews the condensed consoli- Weichai Power or its subsidiaries at the Annual General Meeting dated interim financial statements and the condensed interim of KION GROUP AG. It has been ensured that Mr Riske maintains group management report for the first half of the year. The Exec- a strict separation between his duties as a non-executive director utive Board discusses all interim reports with the Audit Committee of Weichai Power and his duties as Chief Executive Officer of before they are published. KION GROUP AG and that he fulfils all of his legal obligations in the interests of the Company. 2.6 Avoiding conflicts of interest Conflicts of interest between the governing bodies and other 3. Working methods of the Executive Board decision-makers in the Company or significant shareholders go against the principles of good corporate governance and are likely to be harmful to the Company. KION GROUP AG and its and Supervisory Board and composition of the committees of the Supervisory Board governing bodies therefore adhere strictly to the Code’s recom- The Executive Board and Supervisory Board of KION GROUP AG mendations on this subject. The employees of KION GROUP AG have a close and trusting working relationship. It focuses on and its investees are made aware of the problem of conflicts of ensuring the sustained success of the Company. The members interest as part of compliance training and are bound by rules on of the Executive Board regularly attend Supervisory Board meet- how to behave in the event of actual or potential conflicts of interest. ings, unless the Supervisory Board decides to meet without the The Company attaches high priority to preventing possible Executive Board. conflicts of interest from occurring in the first place and to dis- The Board of Management promptly, comprehensively and pelling any impression that they might exist. This is especially regularly reports to the Supervisory Board on the performance of important given the involvement of Weichai Power, whose stake the KION Group. Besides the reporting obligations defined by has risen to 33.3 per cent, and of long-standing shareholders law, the rules of procedure for the Executive Board of KION Goldman Sachs and KKR, who exerted considerable influence GROUP AG set out further reporting requirements and reserva- over the Company’s Executive Board in the years before KION tions of approval in favour of the Supervisory Board. GROUP AG’s conversion to a public limited company and its IPO. As at 31 December 2014, they still held 18.8 per cent of the Com- 3.1 Working methods of the Executive Board pany’s shares via their joint equity investment company Superlift. The Company aims to avoid business scenarios or personnel Until the departure of Executive Board members Theodor Maurer scenarios that could give the impression of a conflict of interest and Bert-Jan Knoef on 15 January 2015, the Executive Board of and by taking transparent steps that effectively prevent concerns KION GROUP AG comprised five members. It is responsible for about conflicts of interest. managing the Company in the Company’s interest, i.e. taking The Company’s Chief Executive Officer, Mr Gordon Riske, account of shareholders, customers, employees and other stake- was appointed a non-executive director of Weichai Power with holders with the aim of creating sustainable added value. The effect from 24 June 2013, for which the Supervisory Board had Executive Board develops the Company’s strategy, discusses it previously given its consent. Appropriate precautions have been with the Supervisory Board and ensures that it is implemented. We keep the world moving.KION GROUP AG | Annual Report 201448 Every Executive Board member is responsible for his or her own Every Executive Board member must disclose potential conflicts area of responsibility, and keeps his or her fellow board members of interest to the Supervisory Board immediately and must also informed of developments on an ongoing basis. > TABLE 003 inform the other Executive Board members. All transactions between KION GROUP AG and Executive Board members or parties or companies closely associated with them must be con- Responsibilities within the Executive Board TABLE 003 cluded on an arm’s-length basis. Executive Board Responsibilities Gordon Riske CEO KION GROUP AG CEO STILL GmbH (from 15 January 2015) CEO Linde Material Handling GmbH (from 15 January 2015) Strategy/Business Development Corporate Communications Corporate Office Internal Audit Compliance KION Warehouse Systems KION Synergies/Platforms North America Region South America Region Quality (from 15 January 2015) Rules of procedure laid down by the Supervisory Board define the areas of responsibility of the Executive Board members and the way in which they work together. The full Executive Board normally meets every 14 days and meetings are chaired by the CEO. Individual Executive Board members sometimes take part via video conference. At the meetings, the board members dis- cuss measures and business that, under the Executive Board’s rules of procedure, require the approval of the full Executive Board. Resolutions of the full Executive Board are passed by simple majority unless a greater majority is required by law. The chair- man has a casting vote in the event of a tied vote. Resolutions of the Executive Board may also be adopted between meetings. Taking account of the requirements of section 90 AktG, the Exec- utive Board provides the Supervisory Board with regular, timely Dr Thomas Toepfer CFO KION GROUP AG and comprehensive information on all matters of relevance to the Accounting, Tax & Financial Services Corporate Finance/Investor Relations/M&A Controlling HR/Labour Relations Director Legal IT Purchasing Data Protection Logistics/Urban (from 15 January 2015) Facility Management/Health Safety Environ- ment (from 15 January 2015) 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 business as a whole relating to operating policy, strategic plan- ning, business performance, financial position, financial perfor- mance and business risks. The Chief Executive Officer meets regularly with the chairman of the Supervisory Board to discuss these matters. The Executive Board’s rules of procedure specify that impor- tant transactions are subject to approval by the Supervisory Board. Budget planning, major acquisitions or capital expenditure, for example, require the consent of the Supervisory Board. The Company is represented by two members of the Executive Board, by one member of the Executive Board acting conjointly with a Prokurist (person with full commercial power of representa- tion), or by two Prokurists. 3.2 Working methods of the Supervisory Board The Supervisory Board of KION GROUP AG advises and monitors the Executive Board in its management of the Company and reviews its work. The Supervisory Board is fully involved from an early stage in all decisions that are fundamental to KION GROUP AG. Bert-Jan Knoef (until 15 January 2015) Theodor Maurer (until 15 January 2015) Ching Pong Quek We keep the world moving.KION GROUP AG | Annual Report 2014 CORPORATE GOVERNANCE Corporate governance report 49 The Supervisory Board of KION GROUP AG consists of 16 mem- requirements for the proportion of female members of supervisory bers, eight of whom are employee representatives and eight boards. Since the appointment of Ms Birgit Behrendt and Ms Xu are shareholder representatives. The shareholder representa- Ping as members of the KION GROUP AG Supervisory Board with tives are elected individually by the Annual General Meeting by effect from 1 January 2015, there have been three female members. simple majority. The Supervisory Board will also support the inclusion of other The Supervisory Board has drawn up rules of procedure for female Board members who meet the above criteria. its work. These apply in addition to the requirements of the arti- cles of incorporation and also define the Supervisory Board com- 3.4 Working methods and composition of the committees of mittees. According to these rules, the chairman of the Supervi- the Executive Board and Supervisory Board sory Board coordinates its work and the cooperation with the Executive Board, chairs its meetings and represents it externally. In the year under review, there were four committees at KION The Supervisory Board meets in person at least twice in each half GROUP AG whose tasks, responsibilities and work processes of a calendar year, and adopts its resolutions at these meetings. comply with the provisions of the German Stock Corporation Act Between these meetings, resolutions may also be adopted in (AktG) and the German Corporate Governance Code. The chairman writing, by telephone or by other similar forms of voting, provided of each committee reports regularly to the full Supervisory Board on that the chairman of the Supervisory Board or, in his absence, his the committee’s work. The committees have each drawn up rules of deputy, decides on this procedure for the individual case con- procedure that define their tasks and working methods. cerned. The Supervisory Board adopts resolutions by a simple majority of the votes cast unless a different procedure is pre- Executive Committee scribed by law. If a vote is tied, the matter will only be renegotiated The Executive Committee consists of four shareholder represent- if the majority of the Supervisory Board vote in favour of this atives and four employee representatives. Its chairman is always option. Otherwise the Board must vote again without delay. If this the chairman of the Supervisory Board. It prepares the meetings new vote on the same matter also results in an equal number of of the Supervisory Board and is responsible for ongoing matters votes for and against, the chairman of the Supervisory Board has between Supervisory Board meetings. The Executive Committee a casting vote. also prepares the Supervisory Board’s decisions relating to cor- porate governance, particularly amendments to the comply-or-ex- 3.3 Objectives for the composition of the Supervisory Board plain statement pursuant to section 161 AktG reflecting changed circumstances and the checking of adherence to the comply-or-ex- The Supervisory Board strives to ensure that its composition is plain statement. It also prepares documents for the Supervisory appropriate to its responsibilities and obligations. In particular, this Board when Executive Board members are to be appointed or means considering members’ individual qualities and skills as well removed and, if applicable, when a new Chief Executive Officer is as the specific requirements resulting from the global business to be appointed. Documents relating to any matters in connection activities of KION GROUP AG and its Group companies. The Super- with Executive Board remuneration are also prepared by the visory Board is therefore of the opinion that the priority in aiming for Executive Committee. The Executive Committee is also responsi- a board composition based on diversity must be on the expertise of ble for resolutions concerning the conclusion, amendment and ter- the individual members and on a balanced mix of personal qualities, mination of Executive Board employment contracts and agree- experience, skills, qualifications and knowledge of all members in ments with Executive Board members governing pensions, line with the requirements of the business. Consequently, it has severance packages, consultancy and other matters and for reso- agreed upon guidelines for the selection of Supervisory Board mem- lutions about any matters arising as a result of such contracts and bers in the form of a diversity statement. This also means that the agreements, unless they relate to remuneration. The responsibili- Supervisory Board’s aim is to have an appropriate number of women ties of the Executive Committee also include resolutions about on the Supervisory Board and to comply with the new statutory the extension of loans to Executive Board members, Supervisory We keep the world moving.KION GROUP AG | Annual Report 201450 Board members and parties related to them within the meaning Audit Committee of sections 89 and 115 AktG, as well as resolutions to approve The Audit Committee has four members, who are elected by the contracts with Supervisory Board members outside their Super- Supervisory Board. Its purpose is to assist the Supervisory Board visory Board remit. The Executive Committee should – in consul- in performing its task of monitoring accounting processes, com- tation with the Executive Board – regularly deliberate on long-term pliance matters and reporting. These responsibilities encompass succession planning for the Executive Board. monitoring the quality and integrity of the consolidated and sepa- rate financial statements (as well as related disclosures), the internal In 2014, the members of the Executive Committee were: control mechanisms, risk management and the internal audit sys- Dr John Feldmann (chairman) Joachim Hartig (deputy chairman) Dr Alexander Dibelius Denis Heljic Johannes P. Huth Jiang Kui Thilo Kämmerer (until 31 August 2014) Olaf Kunz (from 24 September 2014) Kay Pietsch Mediation Committee tem. The Audit Committee also reviews the work carried out by the independent auditor 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 2014, the members of the Audit Committee were: Hans Peter Ring (chairman) Kay Pietsch (deputy chairman) Dr John Feldmann The Mediation Committee comprises the chairman of the Super- Alexandra Schädler visory Board, his deputy, an employee representative and a shareholder representative. If the two-thirds-of-votes majority As an independent member of the Audit Committee, the chairman, required by section 27 (3) and section 31 (3) of the German Code- Hans Peter Ring, has the required expertise in the areas of account- termination Act (MitbestG) is not reached in a vote by the Super- ancy and auditing specified in sections 100 (5) and 107 (4) AktG. visory Board on the appointment of an Executive Board member, the Mediation Committee must propose candidates for the post Nomination Committee to the Supervisory Board within one month. The chairman of the The Nomination Committee has four members, all of whom are Supervisory Board does not have a casting vote on the candi- shareholder representatives and are elected by the shareholder dates proposed. representatives on the Supervisory Board. The Nomination Com- mittee’s only task is to propose new candidates for the Supervi- In 2014, the members of the Mediation Committee were: sory Board to the Company’s Annual General Meeting. Dr John Feldmann (chairman) Joachim Hartig (deputy chairman) Johannes P. Huth Kay Pietsch In 2014, the members of the Nomination Committee were: Dr John Feldmann (chairman) Dr Martin Hintze (deputy chairman, until 31 December 2014) Dr Alexander Dibelius (from 1 January 2015) Dr Johannes Huth (from 1 January 2015) Jiang Kui Silke Scheiber (until 31 December 2014) We keep the world moving.KION GROUP AG | Annual Report 2014CORPORATE GOVERNANCE Corporate governance report 51 EXECUTIVE BOARD AND SUPER- VISORY BOARD SHAREHOLDINGS AND DIRECTORS’ DEALINGS 1. Shareholdings 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 (such as derivatives) if the value of these transactions reaches As at 31 December 2014, the shares in KION GROUP AG or €5,000 or more within one calendar year. > TABLE 004 related financial instruments held directly or indirectly by all mem- bers of the Executive Board and Supervisory Board equated to less than 1 per cent of all the shares issued by the Company. Transactions pursuant to section 15a (WpHG) in 2014 TABLE 004 Buyer/Seller Holger Brandt Theodor Maurer Bert-Jan Knoef Type of transaction Date of transaction Share price (€) Number of shares Total value (€) Sale Sale Sale 24 February 2014/ 24 March 2014 * 13 August 2014 10 November 2014 35.1681 5,175 181,994.92 29.20 30.702 25,000 24,350 730,000.00 747,593.70 * The report dated 24 March 2014 refers to the report dated 26 February 2014, in which it was only possible to state a provisional sale price of €36.7250 for the 5,175 shares. The report dated 26 February 2014 also stated that a second report concerning these 5,175 shares would be made once the final sale price had been determined. Mr Brandt has known the final sale price since 19 March 2014. It was determined by adjusting the provisional price of €36.725 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 €1.5569, which was equivalent 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 €35.1681. We keep the world moving.KION GROUP AG | Annual Report 201452 Disclosures relevant to acquisitions, section 315 (4) HGB The disclosures relevant to acquisitions pursuant to section 315 (4) converted into shares in the Company or options that can be HGB together with the explanatory report form an integral part of exercised or exchanged to obtain shares in the Company. Under the group management report. this agreement, KMB was not permitted to offer, pledge, allocate, 1. Composition of subscribed capital 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. It complied in full with this obligation until it lapsed on 29 June 2014. The subscribed capital (share capital) of KION GROUP AG The Executive Board understands that KION GROUP AG’s amounted to €98.9 million as at 31 December 2014. It is divided two major shareholders, Superlift Holding S.à r.l. (‘Superlift’) and into 98.9 million no-par-value bearer shares. The share capital is Weichai Power (Luxembourg) Holding S.à r.l. (‘Weichai Power’) fully paid-up. All of the shares in the Company give rise to the have entered into a shareholder agreement in which they have same rights and obligations. Each share confers one vote and both undertaken to coordinate their voting at the Annual General entitlement to an equal share of the profits. The rights and obliga- Meeting of the Company in respect of certain resolutions. Fur- tions arising out of the shares are defined by legal provisions. As thermore, the Executive Board understands that Superlift and at 31 December 2014, the Company held 163,562 shares in Weichai Power have come to an arrangement in the shareholder treasury. The primary intention is to offer these treasury shares to agreement to grant each other a mutual right of first offer in staff as part of the KION Employee Equity Programme (KEEP). respect of the shares held by the other shareholder, but this arrangement expired in the course of 2014. KION GROUP AG has no rights arising from the treasury 2. Restrictions on voting rights or the transfer shares that it holds (section 71b AktG). 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 3. Direct or indirect shareholdings in the Company that represent more than 10 per cent of the voting rights the Company can be traded freely. As at 31 December 2014, KION Management Beteiligungs As far as the Company is aware, the following companies directly GmbH & Co. KG (KMB) held shares in the Company on behalf of or indirectly held more than 10  per  cent of the voting rights in managers employed by the Company and its subsidiaries. KMB KION GROUP AG as at 31 December 2014: made an undertaking to the syndicate banks underwriting the IPO regarding the shares held by KMB for members of the Executive Board of the Company, the Executive Board of KION Material Handling GmbH and the Management Boards of Linde Material – Superlift with a direct shareholding of 18.8 per cent of the voting rights Handling GmbH and STILL GmbH at the time the underwriting Pursuant to the German Securities Trading Act (WpHG), the agreement was signed as part of the IPO. It undertook not to dis- shareholding held by Superlift is deemed to belong to the fol- pose of these shares within a period of twelve months from the lowing other companies: day after the Company’s first day of trading on the stock > TABLE 005 exchange, i.e. until 29 June 2014. This obligation also included other securities of the Company, including securities that can be We keep the world moving.KION GROUP AG | Annual Report 2014 CORPORATE GOVERNANCE Disclosures relevant to acquisitions 53 Companies to which Superlift is deemed to belong TABLE 005 Companies to which Superlift is deemed to belong TABLE 005 Company KKR & Co. L.P. KKR 1996 Overseas, Limited KKR 2006 Fund (Overseas), Limited Partnership KKR 2006 Limited Registered office Company Wilmington, USA GSCP V AIV, L.P. George Town, Cayman Islands George Town, Cayman Islands George Town, Cayman Islands GS Capital Partners V Employee Funds GP, L.L.L. GS Advisors V AIV, Ltd. Goldman, Sachs & Co. Registered office George Town, Cayman Islands Wilmington, USA George Town, Cayman Islands New York, USA KKR Associates 2006 (Overseas), Limited Partnership George Town, Cayman Islands The Goldman Sachs Group, Inc. Wilmington, USA KKR Associates Europe II, Limited Partnership KKR Europe II Limited KKR European Fund II, Limited Partnership KKR Fund Holdings GP Limited KKR Fund Holdings L.P. KKR Group Holdings L.P. KKR Group Limited KKR Management LLC KKR Partners (International), Limited Partnership Calgary, Canada George Town, Cayman Islands Calgary, Canada George Town, Cayman Islands George Town, Cayman Islands George Town, Cayman Islands George Town, Cayman Islands Wilmington, USA Calgary, Canada KKR PEI GP LIMITED George Town, Cayman Islands KKR PEI Investments, L.P. St. Peter Port, Guernsey GS Capital Partners V Employee Fund, L.P. GSCP V Institutional AIV, L.P. GS Capital Partners V Offshore, L.P. GS Capital Partners V GmbH & Co. KG Wilmington, USA George Town, Cayman Islands George Town, Cayman Islands Frankfurt am Main, Germany GS Advisors V, L.L.C. Wilmington, USA – Weichai Power with a direct shareholding of 33.3 per cent of the voting rights Pursuant to WpHG, the shareholding held by Weichai Power is deemed to belong to the following other companies: > TABLE 006 Companies to which Weichai Power is deemed to belong TABLE 006 Company Registered office Shandong Heavy Industry Group Co., Ltd. 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 Interna- tional Development Co., Ltd. Hong Kong, People's Republic of China Other People’s Republic of China Registered office Beijing, People's Republic of China KKR PEI Associates, L.P. St. Peter Port, Guernsey Weichai Group Holdings Limited We keep the world moving.KION GROUP AG | Annual Report 2014 54 On 12 February 2015, KKR and Goldman Sachs placed a further important resolutions of the Annual General Meeting, these part- 4.8 million shares (4.9 per cent of KION shares) in the market. As ners must convene a partners’ meeting of KMB and obtain the a result of this transaction, the free float increased again, from approval of the limited partners with regard to how to vote. The 47.7 per cent to 52.6 per cent. The proportion of shares held indi- limited partners pass resolutions by simple majority when taking rectly by KKR and Goldman Sachs via Superlift Holding therefore a decision on how they should vote at the Shareholders’ Meeting reduced from 18.8 per cent to 13.9 per cent. of KION GROUP AG. Since the reporting date, there may have been further changes to the aforementioned shareholdings of which the Com- pany 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 6. Appointment and removal of members of the Executive Board; amendments to the articles of incorporation regulations. Members of the Company’s Executive Board are appointed and removed in accordance with the provisions of sections 84 and 85 4. Shares with special rights that confer AktG and section 31 MitbestG. Pursuant to article 6 (1) of the articles authority to exert control over the Company of incorporation of the Company, the Executive Board must have a minimum of two members. The Supervisory Board determines There are no shares with special rights that confer the authority to the number of Executive Board members. Pursuant to section 84 exert control over the Company. AktG and section 6 (3) of the Company’s articles of incorporation, 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 the Supervisory 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 In connection with the acquisition of the business of the current to the articles of incorporation are passed by simple majority of KION GROUP AG from Linde AG in 2006, a relatively large group the votes cast and by simple majority of the share capital repre- of managers and executives in the KION Group were given the sented in the voting unless a greater majority is specified as a opportunity to indirectly acquire shares in KION GROUP AG’s mandatory requirement under statutory provisions. The option to legal predecessor, the former KION Holding 1 GmbH, through a stipulate a larger majority than a simple majority in any other limited partnership in KMB (see under 2 above). When KION cases has not been exercised in the articles of incorporation. Holding 1 GmbH was transformed into KION GROUP AG, these The Supervisory Board is authorised in article 10 (3) of the holdings were exchanged for shares in the new Company. The articles of incorporation to amend the articles of incorporation shares are not subject to internal restrictions, unless lock-up pro- provided that such amendments relate solely to the wording. visions apply because the executives concerned are members of the Executive Board of KION GROUP AG or members of the management board of a consolidated German subsidiary (see 7. Authority of the Executive Board to issue or under 2 above). buy back shares At the Annual General Meetings of KION GROUP AG, KMB is represented either by its general partner, KION Management The Extraordinary General Meeting on 13 June 2013 authorised Beteiligungs GmbH, or by its managing limited partners. Before the Company, in the period up to 12 June 2016, to acquire for We keep the world moving.KION GROUP AG | Annual Report 2014CORPORATE GOVERNANCE Disclosures relevant to acquisitions 55 treasury up to 10 per cent of all the shares in issue at the time of conversion rights, warrants, mandatory conversion requirements the resolution or in issue on the date the authorisation is exer- or option obligations, or any combinations of these instruments, cised, whichever is the lower. Together with other treasury shares which can be perpetual and/or fixed-term (also referred to jointly in possession of the Company or deemed to be in its possession as ‘debt instruments’) for a total par value of up to €800 million. To pursuant to section 71a et seq. AktG, the treasury shares bought enable shares to be allocated to the holders/beneficial owners of as a result of this authorisation must not exceed 10 per cent of the the convertible bonds, warrant-linked bonds, profit-sharing rights Company’s share capital at any time. The Company may sell the and/or income bonds with conversion rights, warrants, manda- purchased treasury shares through a stock exchange or by tory conversion requirements or option obligations issued on the means of an offer to all shareholders. It may also sell the shares in basis of this authorisation granted by the Executive Board of return for a non-cash consideration, in particular in connection KION GROUP AG or of a German or non-German company in with the acquisition of a business, parts of a business or equity which KION GROUP AG directly or indirectly holds the majority of investments. In addition, the treasury shares may be offered to voting rights and capital, the share capital was increased by con- employees of the Company or of an affiliated company as part of ditional capital of up to €9.89 million by issuing up to 9.89 million an employee share ownership programme. The treasury shares new, no-par-value bearer shares in KION GROUP AG (2014 can also be retired. Share buyback for trading purposes is pro- Conditional Capital). hibited. The authorisation may be exercised on one or more Restrictions were placed on the issuance of new shares and occasions, for the entire amount or for partial amounts, in pursuit debt instruments in accordance with the resolutions adopted by of one or more aims, by the Company, by a subsidiary or by third the Company’s Annual General Meeting on 19 May 2014. parties for the account of the Company or the account of a sub- Together, the proportion of the Company’s share capital attribut- sidiary. At the choice of the Executive Board, the shares may be able to the shares issued on the basis of the 2014 Authorised purchased through the stock exchange, by way of a public pur- Capital and the total number of shares issued to service the debt chase offer made to all shareholders or by way of a public invitation instruments issued on the basis of the aforementioned authorisa- to shareholders to tender their shares. tion must not exceed 10 per cent of the Company’s share capital, After acquiring 200,000 shares in 2013, the Company again either on the effective date of the authorisation or the date on made use of the authorisation in 2014 and purchased a further which it is exercised. This 10 per cent limit includes shares that 51,000 shares in the period from 10 September to 15 October are issued during the term of the authorisation based on the 2014 2014. During the reporting year, 87,438 of the shares acquired Authorised Capital, those that are issued, are required to be were used as part of the KEEP employee share programme for issued or may be issued from the 2014 Conditional Capital to ser- the employees of the Company and certain Group companies vice debt instruments, or shares that have been or will be issued in Germany. on the basis of a different authorisation, or are still required to be Subject to the consent of the Supervisory Board, the Com- issued to service a debt instrument or may be issued to do so. pany’s Annual General Meeting resolved on 19 May 2014 to In accordance with the resolutions adopted by the Company’s authorise the Executive Board to increase the Company’s share Annual General Meeting on 19  May 2014, new shares and debt capital by up to €9.89 million by issuing up to 9.89 million new instruments can be issued for cash or non-cash contributions. no-par-value ordinary bearer shares for cash and/or non-cash They must be offered for subscription to existing shareholders. contributions on one or more occasions up to and including Pursuant to section 186 (5) AktG, the new shares can also be 18  May 2019 (2014 Authorised Capital). acquired by one or more banks provided they undertake to offer On 19 May 2014, for the period up to and including 18 May them to existing shareholders for subscription (indirect rights 2019, the Company’s Annual General Meeting also resolved to issue). However, subject to the consent of the Supervisory Board, authorise the Executive Board to issue, on one or more occa- the Executive Board is authorised to disapply some or all of the sions, bearer and/or registered convertible bonds, warrant-linked pre-emptive rights of existing shareholders in the following cases: bonds, profit-sharing rights and/or income bonds with or without We keep the world moving.KION GROUP AG | Annual Report 201456 – in order to remove fractional amounts from shareholders’ – where new shares are issued for cash during a capital subscription rights; increase and the price at which the new shares are issued is When profit-sharing rights and/or income bonds with no conversion rights, warrants, mandatory conversion obligations or option obligations are issued in return for cash or non-cash capi- tal contributions, the Executive Board is authorised, subject to the not significantly lower (as defined by section 186 (3) sentence consent of the Supervisory Board, to exclude all pre-emption 4 AktG) than the market price for shares in the Company with rights of shareholders, provided these profit-sharing rights and/or the same rights, or if debt instruments are issued for cash income bonds have a debt-like structure and do not give rise to and the Executive Board reaches a view after due examina- rights to membership of the Company or entitle the holder to a tion that the issue price is not significantly lower then their share of the proceeds of any liquidation and the coupon rate is theoretical market value determined according to recognised not based on levels of net income, distributable profit or divi- principles of financial mathematics (section 186 (3) sentence dends. In this case, the coupon rate and issue price of the prof- 4 AktG states that subscription rights can be excluded pro- it-sharing rights and/or income bonds must also correspond to vided the capital increase is less than 10 per cent of share the market terms and conditions for comparable forms of finance capital); – where necessary in order to grant the same pre-emption rights to holders/beneficial owners of conversion rights or prevailing at the time they are issued. Subject to the consent of the Supervisory Board, the Execu- tive Board is authorised to determine the further details of the warrants and/or holders/beneficial owners of mandatory capital increase relating to the 2014 Authorised Capital and its convertible bonds issued or to be issued by KION GROUP implementation, particularly the rights conferred by the shares AG or a company in which it has a majority shareholding as and their terms and conditions of issue. In relation to debt instru- those to which they would be entitled after exercising conver- ments, it is authorised to determine further details about their sion rights or warrants or meeting conversion obligations; – where new shares are issued during capital increases in return for non-cash contributions, particularly for the acquisi- issuance, terms of issue and the supply of shares or to determine them by mutual consent with the governing bodies of any major- ity-held company that is issuing the debt instruments. tion of a business, parts of a business or equity investments or if debt instruments are issued in return for non-cash capi- tal contributions and the exclusion of pre-emption rights is in the interest of the Company. If new shares are issued from the 2014 Authorised Capital, the Executive Board is also authorised, subject to the consent of the Supervisory Board, to exclude shareholders’ pre-emption rights in order to allot shares to people who are employees or directors of the Company or its subsidiaries. This exclusion of pre-emption rights is limited to a maximum of 5 per cent of share capital, both on the effective date of this authorisation and at the time it is exercised. We keep the world moving.KION GROUP AG | Annual Report 2014CORPORATE GOVERNANCE Disclosures relevant to acquisitions 57 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 lim- ited partnerships/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 In the event of a change of control resulting from a takeover bid, drawn down would be immediately repayable and any that had certain consequences are set out in the following contracts con- not been drawn down would be automatically cancelled. cluded between Group companies of KION GROUP AG and third parties: – Covenant agreement dated 14 February 2013 in connection with the €450,000,000, 6.75 per cent, senior secured notes – KION Material Handling GmbH has entered into an agreement with Volkswagen AG for the supply of internal combustion engines. This agreement includes a provision under which either party may terminate the agreement without notice if maturing in 2020 issued by KION Finance S.A., concluded there is a change in ownership involving more than 50 per between Deutsche Trustee Company Limited as trustee, cent of the shares in either case. KION Finance S.A. and KION Group GmbH (now KION Mate- rial Handling GmbH). In the event that a third party (with the exception of KKR and Goldman Sachs, companies affiliated with them or funds or lim- ited partnerships/partnerships owned by them or that are advised or managed by them) acquires beneficial ownership of more than 9. Compensation agreements that the Company has signed with the Executive Board members or employees and that will be triggered in the event of a takeover bid 50 per cent of all shares in KION GROUP AG, KION GROUP AG No such agreements have been concluded between the Com- will be obliged to submit an offer to acquire the aforementioned pany and its current Executive Board members or employees. debt instruments at a price of 101 per cent of their nominal value. This offer must remain valid for a minimum of 30 days from the date of the change of control. – Senior facility agreement dated 23 December 2006 (and amended on several occasions thereafter), concluded between KION Group GmbH (now named KION Material Handling GmbH) and, among others, the London branch of UniCredit Bank AG. We keep the world moving.KION GROUP AG | Annual Report 201458 Remuneration report This remuneration report forms an integral part of the group man- a measurement basis covering a number of years, thus providing agement report for KION GROUP AG. In accordance with statu- the members of the Executive Board with an incentive to con- tory requirements and the recommendations of the German Cor- tribute to the sustained and long-term growth of the Company. porate Governance Code as amended 24 June 2014 (DCGK), it The structure also takes into account both positive and negative explains the main features of the remuneration system used for performance. the Executive Board and the Supervisory Board of the Company In addition, the remuneration for all members of the Executive and also discloses the remuneration paid to the individual mem- Board is subject to upper limits on the amounts payable, both bers of the Executive Board and the Supervisory Board in return overall and also in terms of the variable components. for the work that they carried out on behalf of the Company and The pension entitlements consist of entitlements in respect of its subsidiaries in 2014. EXECUTIVE BOARD REMUNERATION Remuneration system Essential features of the retirement, invalidity and surviving dependants’ benefits. The Supervisory Board regularly reviews the structure and appropri- ateness of Executive Board remuneration. Non-performance-related remuneration The Executive Board members of KION GROUP AG receive non-performance-related remuneration in the form of a fixed annual salary (basic remuneration) and additional benefits. The fixed annual salary is paid at the end of each month in twelve equal instalments, the last payment being made for the full month Executive Board remuneration system in which the Executive Board service agreements ends. The addi- tional non-cash benefits essentially comprises use of a company The remuneration of the Executive Board of KION GROUP AG is car and the payment of premiums for accident insurance with determined in accordance with the requirements of the German benefits at a typical market level. Stock Corporation Act (AktG) and the DCGK. It reflects the size Additional special benefits have been agreed for Mr Quek and complexity of the KION Group, its business and financial because he has been sent from Singapore to China on foreign situation, its performance and future prospects, the normal assignment. amount and structure of executive board remuneration in compa- Mr Quek’s remuneration is therefore structured as if he were rable companies and the internal salary structure. The Supervi- liable for taxes and social security contributions in Singapore. sory Board also took into account the relationship between the KION GROUP AG pays the additional taxes and social security Executive Board remuneration and the remuneration paid to contributions that Mr Quek incurs in China and Germany. In 2014, senior managers and the workforce of the Company as a whole, the additional amount involved totalled €284,897 (2013: including increases over the course of time. Other criteria used to €316,045). The additional benefits agreed with Mr Quek include determine remuneration included the remit and work to be car- moreover the cost of trips home to Singapore for Mr Quek and his ried out by the individual members of the Executive Board. The family, a company car, rental payments in Xiamen and private remuneration system was designed with support from external health insurance. In 2014, the special additional benefits for consultants working independently of the Executive Board and Mr Quek amounted to a total of €107,997 (2013: €117,161). These the Company. special benefits will be granted for as long as Mr Quek’s desig- The total remuneration paid to the Executive Board com- nated place of work is Xiamen or until his service agreement with prises a non-performance-related salary and non-perfor- KION GROUP AG ends. mance-related non-cash benefits, performance-related (variable) remuneration and pension entitlements. When the variable remu- neration structure was defined, the emphasis was on creating We keep the world moving.KION GROUP AG | Annual Report 2014CORPORATE GOVERNANCE Remuneration report 59 Performance-related remuneration Multiple-year variable remuneration The performance-related remuneration components consist of a variable remuneration component measured over one year and a The multiple-year variable remuneration component is structured variable remuneration component measured over several years in in the form of a performance share plan. At the start of the three- the form of a rolling performance share plan with a three-year year performance period, a conditional entitlement to a certain term. target number of performance shares is granted. This number is calculated by dividing the allocation value (in euros) for the par- One-year variable remuneration ticular Executive Board member by the fair value of one perfor- mance share at the time of grant. The number of preliminary per- The one-year variable remuneration is a remuneration compo- formance shares defined in this way is adjusted depending on nent linked to the business profitability and productivity of the achievement of the two target values – total shareholder return KION Group in the relevant financial year. Its amount is deter- (TSR) for KION shares compared with the STOXX® Europe Total mined by the achievement of targets based on the following KPIs: Market Index (TMI) Industrial Engineering index and return on earnings before interest, taxes and amortisation (EBITA), return capital employed (ROCE) – over the performance period. Each on capital employed (ROCE), revenue and net debt. They are target has a 50 per cent weighting. weighted as follows: 30 per cent for EBITA, 30 per cent for ROCE, The possible range for target achievement for both elements 20 per cent for revenue and 20 per cent for net debt. The target is 0  per  cent to 150  per  cent. If KION shares outperform the values for the financial components are derived from the annual STOXX® Europe TMI Industrial Engineering index by 10 per cent budget and specified by the Supervisory Board. and the ROCE targets defined each year on the basis of the The possible range for target achievement is 0  per  cent to budget are achieved, total target achievement will be 100 per cent. 200 per cent. If the targets derived from the annual budget are The amount paid for each tranche is determined by the final achieved in full, target achievement is 100  per  cent. The target number of performance shares multiplied by the price of the achievement levels for the weighted Company targets (EBITA, Company’s shares (average price over the preceding 60 trading ROCE, revenue and net debt) are added together to give the total days) at the end of the performance period. Depending on target achievement. achievement of the individual targets defined by the Supervisory The individual performance of the Executive Board members Board at the start of the performance period (three-year target is rated using a discretionary performance multiple with a factor agreement form), the Supervisory Board can use a discretionary of between 0.8 and 1.2. The factor is determined by the Supervi- factor to make a final adjustment to the calculation of the amount sory Board with reference to achievement of the individual targets to be paid out at the end of the performance period by plus or defined by the Supervisory Board in a target agreement form at minus 20  per  cent, although the maximum payment may not the start of the year. The factor is applied to total target achieve- exceed 200 per cent of the allocation value. ment for the budget targets and results in payment of the individ- The plan is a cash-settled long-term incentive plan that does ual target bonus. The amount paid as one-year variable remuner- not include the right to receive any actual shares. The first pay- ation is capped at 200 per cent of the target bonus. ment under the plan will be made in 2016. In the event that an Executive Board member is not entitled Under the requirements of German accounting standard to remuneration for the entire year on which the calculation is (GAS) 17 and IFRS 2, the total expense arising from share-based based, the remuneration is reduced pro rata temporis. payments and the fair value of the performance share plan on the date of granting must be disclosed. > TABLE 007 We keep the world moving.KION GROUP AG | Annual Report 201460 Performance Share Plan 2014 Fair value of the perfor- mance 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 54,427 36,284 36,284 30,116 36,284 193,395 €27.56 €27.56 €27.56 €27.56 €27.56 Gordon Riske Bert-Jan Knoef Theodor Maurer Ching Pong Quek Dr Thomas Toepfer Total TABLE 007 Expense for share-based remuneration in 2014 €486,033 €324,016 €324,016 €268,936 €324,016 €1,727,017 1 The target number of performance shares 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. Performance Share Plan 2013 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 Expense for share-based remuneration in 2013 Expense for share-based remuneration in 2014 €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 €349,975 €233,317 €233,317 €193,652 €233,317 €859,620 €573,080 €573,080 €475,654 €573,080 €1,243,578 €3,054,514 Gordon Riske Bert-Jan Knoef Theodor Maurer Ching Pong Quek Dr Thomas Toepfer Total 1 The target number of performance shares 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. The total expense in 2014 amounted to €4,781,531 (2013: tranche 2). The amount of the bonus depends on the weighted €1,243,578). average price of KION shares in the four weeks immediately Prior to the IPO in 2013, Executive Board member Dr Thomas preceding the payment of each tranche. The pro-rata expense for Toepfer was granted a special bonus (to be payable in two tranches) 2014 was €0.8 million (2013: €0.6 million). In connection with the dependent on a successful IPO and subject to the condition that provision of this special bonus entitlement, Dr Toepfer paid a one- Dr Toepfer remained employed by KION GROUP AG after the IPO off capital contribution of €200,000 into the Company, which the for a period of twelve months (for tranche 1) and 18 months (for Company deducted from the net amount of a bonus for 2012 that We keep the world moving.KION GROUP AG | Annual Report 2014CORPORATE GOVERNANCE Remuneration report 61 was due to be paid to Dr Toepfer in 2013. The IPO bonus became Termination benefits payable in 2014. Besides the capital contribution repayment, Dr Toepfer was paid €755,285 for tranche 1 and €679,058 for In line with the DCGK, all Executive Board service agreements tranche 2. Pension entitlements provide for a severance payment equivalent to no more than two years’ annual remuneration payable in the event of the contract being terminated prematurely without good cause. The amount of annual remuneration is defined as fixed salary plus the variable KION GROUP AG grants its Executive Board members direct remuneration elements, assuming 100  per  cent target achieve- entitlement to a company pension plan consisting of retirement, ment and excluding non-cash benefits and other additional ben- invalidity and surviving dependants’ benefits. efits, for the last full financial year before the end of the Executive When the Company was floated, the defined benefit entitle- Board service agreement. If the Executive Board service agree- ment for the Company’s Chief Executive Officer that had been ment was due to end within two years, the severance payment is granted to Mr Riske in his original service agreement was trans- calculated pro rata temporis. If a service agreement is terminated ferred to his Executive Board service agreement. The benefit for good cause for which the Executive Board member con- amounted to a maximum of 50 per cent of the most recent fixed cerned is responsible, no payments are made to the Executive annual salary after the end of the tenth year of service based on Board member in question. The Company does not have any his original service agreement. commitments for the payment of benefits in the event of a prema- For the ordinary members of the Executive Board, the pres- ture termination of Executive Board agreements following a ent value of the previous defined benefit plan at the time of the change of control. IPO was transferred as a starting contribution for new pension Executive Board members are subject to a post-contractual arrangements in the form of a defined-contribution plan. The new non-compete agreement of one year. In return, the Company defined-contribution plan is structured as a cash balance plan. pays the Executive Board member compensation for the duration For each of the ordinary members of the Executive Board, a fixed of the non-compete agreement amounting to 100 per cent of his annual contribution of €150,000 (€124,500 for Mr Quek) is paid or her final fixed salary. Other income of the Executive Board into their pension accounts for the duration of the member’s member is offset against the compensation. period of service on the Executive Board. In the event that Mr Riske’s appointment is not extended for Interest is paid on the pension account at the prevailing stat- reasons for which he is not responsible and he has not reached utory guaranteed return rate for the life insurance industry (appli- the standard retirement age for the statutory pension or in the cable maximum interest rate for the calculation of the actuarial event that Mr Riske resigns for good cause before the end of his reserves of life insurers pursuant to section 2 (1) German Regula- appointment or suffers permanent incapacity after his period of tion on the Principles Underlying the Calculation of the Premium service as a result of sickness, he will receive transitional benefits Reserve (DeckRV)) until an insured event occurs. If higher interest of €264,000 per annum on the basis of previous contracts. Dur- is generated by investing the pension account, it will be credited ing his current term of office, the amount of the transitional bene- to the pension account when an insured event occurs (surplus). fits will rise by €12,000 each year up to a maximum amount of The standard retirement age for the statutory pension applies. €300,000 per annum. Severance payments in the event of early Once Executive Board members have reached their 62nd birth- termination of his appointment without good cause, compensa- day, they are entitled to early payment of the pension. In the event tion for the post-contractual non-compete agreement, pension of invalidity or death, the contributions that would have been benefits that Mr Riske receives due to his previous work for other made until the age of 60 are added to the pension account, employers and income from other use of his working capacity although only a maximum of ten contributions will be added. (with the exception of remuneration for work as a member of a When an insured event occurs, the pension is paid as a lump sum supervisory or advisory board or a board of directors) will be off- or, following a written request, in ten annual instalments. set against these transitional benefits. We keep the world moving.KION GROUP AG | Annual Report 201462 If an Executive Board member suffers temporary incapacity, he or for the three subsequent months, but only up to the point at which she will receive their full fixed salary for a period of six months plus the service agreement would otherwise have come to an end. the one-year variable remuneration. In the event of temporary incapacity for a further six months, the Executive Board member will receive 80 per cent of his or her fixed salary, but only up to a point at which the service agreement is terminated. If an Executive Board member ceases to be employed by the Remuneration paid to members of the Executive Board in 2014 Company as a result of death, the Executive Board member or The total remuneration granted to Executive Board members his/her family members will be entitled to the fixed monthly remu- for 2014 was €11,839,561 (minimum: €3,928,961, maximum: neration for the month in which the service agreement ends and €19,750,161) (2013: €12,528,938). Of this amount, €2,839,850 Benefits granted in 2014 Benefits granted Non-perfor- mance-related components Gordon Riske CEO KION GROUP AG Bert-Jan Knoef Theodor Maurer Executive Board member KION GROUP AG Executive Board member KION GROUP AG Since 11 Jan 2013 Since 11 Jan 2013 Fixed remuneration €700,000 €800,000 €800,000 €800,000 €440,761 €500,000 €500,000 €500,000 €440,761 €500,000 €500,000 €500,000 2013 2014 2014 (min) 2014 (max) 2013 2014 2014 (min) 2014 (max) 2013 2014 2014 (min) 2014 (max) Non-cash remuneration and other benefits 1 €25,606 €18,560 €18,560 €18,560 €21,310 €18,898 €18,898 €18,898 €23,495 €17,547 €17,547 €17,547 Total €725,606 €818,560 €818,560 €818,560 €462,071 €518,898 €518,898 €518,898 €464,256 €517,547 €517,547 €517,547 TABLE 008 Short-term incentive One-year variable remuneration 2,3 Performance- related components Share-based long-term incentive 4 Multiple-year variable remuneration Performance share plan 2 (29 Jun 2013 – 31 Dec 2015) Performance share plan 2 (1 Jan 2014 – 31 Dec 2016) IPO bonus tranche 1 (29 Jun 2013 – 29 Jun 2014) IPO bonus tranche 2 (29 Jun 2013 – 31 Dec 2014) €877,303 €700,000 €1,500,000 €1,500,000 €0 €0 €1,400,000 €3,000,000 €391,356 €400,000 €800,000 €391,356 €400,000 €800,000 €0 €0 €0 €0 €1,000,000 €1,000,000 €2,000,000 €1,000,000 €1,000,000 €2,000,000 €1,500,000 €1,000,000 €1,000,000 €1,500,000 €0 €3,000,000 €1,000,000 €0 €2,000,000 €1,000,000 €0 €2,000,000 Total €3,102,909 €3,018,560 €818,560 €5,218,560 €1,853,427 €1,918,898 €518,898 €3,318,898 €1,855,612 €1,917,547 €517,547 €3,317,547 Pension expense 6 €422,727 €510,056 €510,056 €510,056 €89,965 €101,631 €101,631 €101,631 €56,967 €104,401 €104,401 €104,401 Total remuneration €3,525,636 €3,528,616 €1,328,616 €5,728,616 €1,943,392 €2,020,529 €620,529 €3,420,529 €1,912,579 €2,021,948 €621,948 €3,421,948 1 Other, non-performance related, non-cash remuneration and other benefits include expenses and/or benefits in kind, such as the use of a company car and housing costs. 2 The amount shown for Mr Quek includes a flat-rate allowance of 30 per cent as part of a tax equalisation agreement. 3 The figure shown for one-year variable remuneration is based on a target achievement rate of 100 per cent (minimum: 0 per cent target achievement, maximum: 200 per cent target achievement). 4 Fair value on the date of grant. 5 Former members of the Executive Board of KION Holding 1 GmbH. 6 Service cost (IAS). We keep the world moving.KION GROUP AG | Annual Report 2014CORPORATE GOVERNANCE Remuneration report 63 (2013: €2,534,753) was attributable to fixed non-performance-re- figure shown for multiple-year variable remuneration is the fair lated remuneration components, €7,910,600 (minimum: €0, max- value of the performance share plans at the date of grant, which imum: €15,821,200) (2013: €9,141,827) to variable one-year and is equivalent to a target achievement rate of 100 per cent (mini- multiple-year performance-related remuneration components, mum: 0 per cent target achievement, maximum: 200 per cent tar- €175,254 (2013: €221,744) to non-performance-related non-cash get achievement). The first payment will be made in 2016, pro- remuneration and other non-performance-related benefits, and vided the Company’s long-term targets are achieved. €913,857 (2013: €630,614) to the pension expense. The figure The additional benefits were measured at the value calcu- shown for one-year variable remuneration is based on a target lated for tax purposes. > TABLE 008 achievement rate of 100  per  cent (minimum: 0  per  cent target achievement, maximum: 200 per cent target achievement). The TABLE 008 Gordon Riske CEO KION GROUP AG Bert-Jan Knoef Theodor Maurer Executive Board member KION GROUP AG Executive Board member KION GROUP AG Since 11 Jan 2013 Since 11 Jan 2013 Fixed remuneration €700,000 €800,000 €800,000 €800,000 €440,761 €500,000 €500,000 €500,000 €440,761 €500,000 €500,000 €500,000 2013 2014 2014 (min) 2014 (max) 2013 2014 2014 (min) 2014 (max) 2013 2014 2014 (min) 2014 (max) €25,606 €18,560 €18,560 €18,560 €21,310 €18,898 €18,898 €18,898 €23,495 €17,547 €17,547 €17,547 €725,606 €818,560 €818,560 €818,560 €462,071 €518,898 €518,898 €518,898 €464,256 €517,547 €517,547 €517,547 Short-term incentive One-year variable remuneration 2,3 €877,303 €700,000 €1,400,000 €391,356 €400,000 €1,500,000 €1,500,000 €3,000,000 €1,000,000 €1,000,000 €0 €0 €0 €0 €800,000 €391,356 €400,000 €2,000,000 €1,000,000 €1,000,000 €0 €0 €800,000 €2,000,000 (29 Jun 2013 – 31 Dec 2015) €1,500,000 €1,000,000 €1,000,000 €1,500,000 €0 €3,000,000 €1,000,000 €0 €2,000,000 €1,000,000 €0 €2,000,000 Total €3,102,909 €3,018,560 €818,560 €5,218,560 €1,853,427 €1,918,898 €518,898 €3,318,898 €1,855,612 €1,917,547 €517,547 €3,317,547 Pension expense 6 €422,727 €510,056 €510,056 €510,056 €89,965 €101,631 €101,631 €101,631 €56,967 €104,401 €104,401 €104,401 Total remuneration €3,525,636 €3,528,616 €1,328,616 €5,728,616 €1,943,392 €2,020,529 €620,529 €3,420,529 €1,912,579 €2,021,948 €621,948 €3,421,948 1 Other, non-performance related, non-cash remuneration and other benefits include expenses and/or benefits in kind, such as the use of a company car and housing costs. 2 The amount shown for Mr Quek includes a flat-rate allowance of 30 per cent as part of a tax equalisation agreement. 3 The figure shown for one-year variable remuneration is based on a target achievement rate of 100 per cent (minimum: 0 per cent target achievement, maximum: 200 per cent target achievement). 4 Fair value on the date of grant. 5 Former members of the Executive Board of KION Holding 1 GmbH. 6 Service cost (IAS). Benefits granted in 2014 Benefits granted Non-perfor- mance-related components Performance- related components Share-based long-term incentive 4 Non-cash remuneration and other benefits 1 Total Multiple-year variable remuneration Performance share plan 2 Performance share plan 2 (1 Jan 2014 – 31 Dec 2016) IPO bonus tranche 1 (29 Jun 2013 – 29 Jun 2014) IPO bonus tranche 2 (29 Jun 2013 – 31 Dec 2014) We keep the world moving.KION GROUP AG | Annual Report 201464 Benefits granted in 2014 (continued) Ching Pong Quek Executive Board member KION GROUP AG/ Chief Asia Pacific Officer Since 11 Jan 2013 Dr Thomas Toepfer CFO KION GROUP AG Former Executive Board members 5 TABLE 008 Benefits granted Non-perfor- mance-related components 2013 2014 2014 (min) 2014 (max) 2013 2014 2014 (min) 2014 (max) 2013 2014 2014 (min) 2014 (max) Fixed remuneration €480,566 €539,850 €539,850 €539,850 €462,520 €500,000 €500,000 €500,000 €10,145 Non-cash remuneration and other benefits 1 €123,502 €107,997 €107,997 €107,997 €26,605 €12,252 €12,252 €12,252 Total €604,068 €647,847 €647,847 €647,847 €489,125 €512,252 €512,252 €512,252 Short-term incentive One-year variable remuneration 2 , 3 Performance- related components Share-based long-term incentive 4 Multiple-year variable remuneration Performance share plan 2 (29 Jun 2013 – 31 Dec 2015) Performance share plan 2 (1 Jan 2014 – 31 Dec 2016) IPO bonus tranche 1 (29 Jun 2013 – 29 Jun 2014) IPO bonus tranche 2 (29 Jun 2013 – 31 Dec 2014) Total Pension expense 6 €438,989 €431,600 €1,079,000 €1,079,000 €0 €0 €863,200 €2,158,000 €577,362 €400,000 €800,000 €15,748 €1,870,713 €1,000,000 €2,000,000 €0 €0 €0 €1,079,000 €1,079,000 €0 €2,158,000 €1,000,000 €0 €2,000,000 €1,000,000 €433,141 €437,572 €2,122,057 €2,158,447 €647,847 €3,669,047 €2,937,200 €1,912,252 €512,252 €3,312,252 €96,836 €96,836 €96,836 €58,758 €100,933 €100,933 €100,933 Total remuneration €2,122,057 €2,255,283 €744,683 €3,765,883 €2,995,958 €2,013,185 €613,185 €3,413,185 €1,226 €11,371 €27,119 €2,197 €29,316 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 1 Other, non-performance related, non-cash remuneration and other benefits include expenses and/or benefits in kind, such as the use of a company car and housing costs. 2 The amount shown for Mr Quek includes a flat-rate allowance of 30 per cent as part of a tax equalisation agreement. 3 The figure shown for one-year variable remuneration is based on a target achievement rate of 100 per cent (minimum: 0 per cent target achievement, maximum: 200 per cent target achievement). 4 Fair value on the date of grant. 5 Former members of the Executive Board of KION Holding 1 GmbH. 6 Service cost (IAS). The total remuneration allotted to/earned by Executive Board and other non-performance-related benefits, and €913,857 members for 2014 was €7,694,904 (2013: €5,851,985). Of this (2013: €630,614) to the pension expense. The figure shown for amount, €2,839,850 (2013: €2,534,753) was attributable to fixed one-year variable remuneration is based on a preliminary total tar- non-performance-related remuneration components, €3,765,943 get achievement rate of 100 per cent calculated using preliminary (2013: €2,464,874) to variable one-year and multiple-year perfor- earnings figures at the end of 2014. This preliminary variable mance-related remuneration components, €175,254 (2013: remuneration for each Executive Board member is also subject to €221,744) to non-performance-related non-cash remuneration adjustment by the Supervisory Board in line with the individual We keep the world moving.KION GROUP AG | Annual Report 2014 CORPORATE GOVERNANCE Remuneration report 65 Benefits granted in 2014 (continued) Benefits granted Non-perfor- mance-related components Performance- related components Share-based long-term incentive 4 Non-cash remuneration and other benefits 1 Total Multiple-year variable remuneration Performance share plan 2 Performance share plan 2 (1 Jan 2014 – 31 Dec 2016) IPO bonus tranche 1 (29 Jun 2013 – 29 Jun 2014) IPO bonus tranche 2 (29 Jun 2013 – 31 Dec 2014) Total Pension expense 6 Executive Board member KION GROUP AG/ Ching Pong Quek Chief Asia Pacific Officer Since 11 Jan 2013 Dr Thomas Toepfer CFO KION GROUP AG Former Executive Board members 5 TABLE 008 2013 2014 2014 (min) 2014 (max) 2013 2014 2014 (min) 2014 (max) 2013 2014 2014 (min) 2014 (max) Fixed remuneration €480,566 €539,850 €539,850 €539,850 €462,520 €500,000 €500,000 €500,000 €10,145 €123,502 €107,997 €107,997 €107,997 €26,605 €12,252 €12,252 €12,252 €604,068 €647,847 €647,847 €647,847 €489,125 €512,252 €512,252 €512,252 €1,226 €11,371 Short-term incentive One-year variable remuneration 2 , 3 €438,989 €431,600 €863,200 €577,362 €400,000 €1,079,000 €1,079,000 €2,158,000 €1,870,713 €1,000,000 (29 Jun 2013 – 31 Dec 2015) €1,079,000 €1,000,000 €0 €0 €0 €0 €800,000 €15,748 €2,000,000 €0 €1,079,000 €0 €2,158,000 €1,000,000 €0 €2,000,000 €2,122,057 €2,158,447 €647,847 €3,669,047 €2,937,200 €1,912,252 €512,252 €3,312,252 €96,836 €96,836 €96,836 €58,758 €100,933 €100,933 €100,933 Total remuneration €2,122,057 €2,255,283 €744,683 €3,765,883 €2,995,958 €2,013,185 €613,185 €3,413,185 €27,119 €2,197 €29,316 €433,141 €437,572 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 €0 1 Other, non-performance related, non-cash remuneration and other benefits include expenses and/or benefits in kind, such as the use of a company car and housing costs. 2 The amount shown for Mr Quek includes a flat-rate allowance of 30 per cent as part of a tax equalisation agreement. 3 The figure shown for one-year variable remuneration is based on a target achievement rate of 100 per cent (minimum: 0 per cent target achievement, maximum: 200 per cent target achievement). 4 Fair value on the date of grant. 5 Former members of the Executive Board of KION Holding 1 GmbH. 6 Service cost (IAS). performance of the Executive Board member. This adjustment may vary by +/- 20 per cent of the variable remuneration. The additional benefits were measured at the value calcu- lated for tax purposes. > TABLE 009 We keep the world moving.KION GROUP AG | Annual Report 2014 66 Allocation in 2014 Allocation Non-perfor- mance-related components Gordon Riske Bert-Jan Knoef Theodor Maurer Ching Pong Quek Dr Thomas Toepfer CEO KION GROUP AG Executive Board member KION GROUP AG Since 11 Jan 2013 Executive Board member KION GROUP AG Executive Board member Chief Asia Pacific Officer KION GROUP AG/ CFO KION GROUP AG Since 11 Jan 2013 Since 11 Jan 2013 Fixed remuneration €700,000 €800,000 €440,761 €500,000 €440,761 €500,000 €480,566 €539,850 €462,520 €500,000 €10,145 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 Non-cash remuneration and other benefits 1 €25,606 €18,560 €21,310 €18,898 €23,495 €17,547 €123,502 €107,997 €26,605 €12,252 Total €725,606 €818,560 €462,071 €518,898 €464,256 €517,547 €604,068 €647,847 €489,125 €512,252 Short-term incentive One-year variable remuneration 2 €763,744 €700,000 €354,701 €400,000 €372,773 €400,000 €459,925 €431,600 €500,355 €400,000 €13,376 Performance- related components Share-based long-term incentive Multiple-year variable remuneration Performance share plan (29 Jun 2013 – 31 Dec 2015) Performance share plan (1 Jan 2014 – 31 Dec 2016) IPO bonus tranche 1 (29 Jun 2013 – 29 Jun 2014) IPO bonus tranche 2 (29 Jun 2013 – 31 Dec 2014) €0 €0 €0 €0 €0 €0 €0 €0 €0 €1,434,343 €0 Total €1,489,350 €1,518,560 €816,772 €918,898 €837,029 €917,547 €1,063,993 €1,079,447 €989,480 €2,346,595 Pension expense 4 €422,727 €510,056 €89,965 €101,631 €56,967 €104,401 €96,836 €58,758 €100,933 Total remuneration €1,912,077 €2,028,616 €906,737 €1,020,529 €893,996 €1,021,948 €1,063,993 €1,176,283 €1,048,238 €2,447,528 1 Other, non-performance related, non-cash remuneration and other benefits include expenses and/or benefits in kind, such as the use of a company car and housing costs. 2 The figure shown for one-year variable remuneration for 2013 is the actual amount paid out, which differs from the estimated value listed in the 2013 consolidated financial statements. 3 Former members of the Executive Board of KION Holding 1 GmbH. 4 Service cost (IAS). At its meeting on 17 December 2014, the Supervisory Board ments. Subsequently, agreement was reached with Mr Knoef authorised the chairman of the Supervisory Board to hold talks and Mr Maurer that they would resign from office with effect with Mr Bert-Jan Knoef and Mr Theodor Maurer about the early from 14 January 2015 and that their Executive Board service termination of their appointment as members of the KION agreements would end on 31 March 2015. GROUP AG’s Executive Board, about the termination of their As is the case with the remuneration paid to the Executive Executive Board service agreements and about the conclusion Board, the benefits granted to the two men comprise a of appropriate termination agreements. The Supervisory Board non-performance-related salary and non-performance-related also authorised its chairman to conclude the necessary agree- non-cash benefits, performance-related remuneration and ments in accordance with contractual and statutory require- pension entitlements. TABLE 009 Former Executive Board members 3 €1,226 €11,371 €24,747 €2,197 €26,944 €0 €0 €0 €0 €755,285 €679,058 We keep the world moving.KION GROUP AG | Annual Report 2014CORPORATE GOVERNANCE Remuneration report 67 Allocation in 2014 Allocation Non-perfor- mance-related components Performance- related components Share-based long-term incentive Non-cash remuneration and other benefits 1 Total Multiple-year variable remuneration Performance share plan (29 Jun 2013 – 31 Dec 2015) Performance share plan (1 Jan 2014 – 31 Dec 2016) IPO bonus tranche 1 (29 Jun 2013 – 29 Jun 2014) IPO bonus tranche 2 (29 Jun 2013 – 31 Dec 2014) Gordon Riske Bert-Jan Knoef Theodor Maurer Ching Pong Quek Dr Thomas Toepfer CEO KION GROUP AG Executive Board member KION GROUP AG Since 11 Jan 2013 Executive Board member KION GROUP AG Executive Board member KION GROUP AG/ Chief Asia Pacific Officer Since 11 Jan 2013 Since 11 Jan 2013 CFO KION GROUP AG TABLE 009 Former Executive Board members 3 Fixed remuneration €700,000 €800,000 €440,761 €500,000 €440,761 €500,000 €480,566 €539,850 €462,520 €500,000 €10,145 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 Short-term incentive One-year variable remuneration 2 €763,744 €700,000 €354,701 €400,000 €372,773 €400,000 €459,925 €431,600 €500,355 €400,000 €13,376 €25,606 €18,560 €21,310 €18,898 €23,495 €17,547 €123,502 €107,997 €26,605 €12,252 €725,606 €818,560 €462,071 €518,898 €464,256 €517,547 €604,068 €647,847 €489,125 €512,252 €1,226 €11,371 €0 €0 €0 €0 €0 €0 €0 €0 €0 €1,434,343 €0 Total €1,489,350 €1,518,560 €816,772 €918,898 €837,029 €917,547 €1,063,993 €1,079,447 €989,480 €2,346,595 Pension expense 4 €422,727 €510,056 €89,965 €101,631 €56,967 €104,401 €96,836 €58,758 €100,933 Total remuneration €1,912,077 €2,028,616 €906,737 €1,020,529 €893,996 €1,021,948 €1,063,993 €1,176,283 €1,048,238 €2,447,528 €24,747 €2,197 €26,944 €755,285 €679,058 1 Other, non-performance related, non-cash remuneration and other benefits include expenses and/or benefits in kind, such as the use of a company car and housing costs. 2 The figure shown for one-year variable remuneration for 2013 is the actual amount paid out, which differs from the estimated value listed in the 2013 consolidated financial statements. 3 Former members of the Executive Board of KION Holding 1 GmbH. 4 Service cost (IAS). €0 €0 €0 €0 Mr Knoef’s total amount of €4,546,755 breaks down into a Mr Maurer’s total amount of €4,248,034 breaks down into a non-performance-related component of €4,070,712, a perfor- non-performance-related component of €3,771,991, a perfor- mance-related component without a long-term incentive of mance-related component without a long-term incentive of €84,444, a performance-related component with a long-term €84,444, a performance-related component with a long-term incentive – at the fair value for the 2013 and 2014 tranches pursu- incentive – at the fair value for the 2013 and 2014 tranches pursu- ant to the terms of the performance share plan as at 31 Decem- ant to the terms of the performance share plan as at 31 Decem- ber 2014 – of €194,562, plus the pro-rata value for 2015 of the ber 2014 – of €194,562, plus the pro-rata value for 2015 of the shares allotted of €70,370 and pension expenses of €126,667. shares allotted of €70,370 and pension expenses of €126,667. We keep the world moving.KION GROUP AG | Annual Report 201468 The table below shows the pension contributions (additions to the defined benefit obligations to former members of the Executive plan) attributable to each individual Executive Board member and Board or their surviving dependants amounting to €6,082,485 their separate present values. > TABLE 010 (2013: €5,171,114) were recognised in accordance with IAS 19. In the year under review, no advances were made to mem- The total remuneration paid to former members of the Executive bers of the Executive Board, and there were no loans. Board amounted to €209,616 (2013: €207,561). Provisions for Pensions Gordon Riske Bert-Jan Knoef Theodor Maurer Ching Pong Quek Dr Thomas Toepfer TABLE 010 2014 service cost 2013 service cost Present value (DBO) 31 Dec 2014 Present value (DBO) 31 Dec 2013 €510,056 €101,631 €104,401 €96,836 €100,933 €422,727 €89,965 €56,967 €0 €58,758 €4,562,340 €1,905,632 €637,569 €426,727 €523,314 €3,180,565 €1,642,647 €492,380 €265,443 €341,416 SUPERVISORY BOARD REMUNERATION Remuneration system annual remuneration for members of a committee is €8,000, while the chairman of a committee receives double this amount. If a member of the Supervisory Board or one of its commit- tees does not hold their position for a full financial year, remuner- ation is reduced pro rata temporis. The members of the Supervisory Board receive an attend- ance fee of €1,250 per day for meetings of the Supervisory Board The Supervisory Board’s remuneration is defined in article 18 and its committees, although they only receive this amount once of KION GROUP AG’s articles of incorporation. Members of the if they attend more than one meeting on the same day. Supervisory Board receive fixed remuneration plus reimburse- The Company reimburses each member for any VAT incurred ment of out-of-pocket expenses. The annual remuneration in connection with his or her remuneration. amounts to €45,000 for ordinary members of the Supervisory A D&O insurance policy without an excess has been taken Board, €75,000 for the deputy chairman of the Supervisory out for the members of the Supervisory Board. Board and €105,000 for the chairman of the Supervisory Board. Additional remuneration is paid for being a member or chair- man of a committee, although this does not apply in the case of the Nomination Committee or the Mediation Committee pursuant to section 27 (3) German Codetermination Act (MitbestG). The We keep the world moving.KION GROUP AG | Annual Report 2014CORPORATE GOVERNANCE Remuneration report 69 Remuneration paid to members of the Supervisory Board in 2014 In 2014, no company in the KION Group paid or granted any remuneration or other benefits to members of the Supervisory Board for services provided as individuals, such as consulting or The total remuneration paid to the Supervisory Board in 2014 was brokerage activities. Nor were any advances or loans granted to €1,183,555. Of this amount, €1,019,927 was attributable to remu- members of the Supervisory Board. neration for activities carried out by the Supervisory Board. The remuneration paid for committee work totalled €163,628. The fol- lowing table shows the breakdown of remuneration paid to each Supervisory Board member for 2014. > TABLE 011 Supervisory Board remuneration TABLE 011 Dr John Feldmann (chairman) Joachim Hartig (deputy chairman) Holger Brandt Dr Alexander Dibelius Denis Heljic Dr Martin Hintze Johannes P. Huth Thilo Kämmerer Olaf Kunz Jiang Kui Özcan Pancarci Kay Pietsch Hans Peter Ring Alexandra Schädler Silke Scheiber Tan Xuguang Hans-Peter Weiß Total Fixed remuneration Committee remuneration Attendance fees Total remuneration €105,000 €75,000 €45,000 €45,000 €45,000 – €65,838 €29,959 €15,041 €65,838 €45,000 €45,000 €45,000 €45,000 €65,838 €65,838 €45,000 €24,000 €8,000 – €8,000 €8,000 – €11,704 €5,326 €2,170 €11,704 – €16,000 €16,000 €8,000 – – – €18,750 €15,000 €13,750 €10,000 €15,000 – €10,973 €7,500 €6,250 €18,288 €13,750 €21,250 €15,000 €18,750 €16,459 €1,829 €13,750 €147,750 €98,000 €58,750 €63,000 €68,000 – €88,515 €42,785 €23,461 €95,830 €58,750 €82,250 €76,000 €71,750 €82,297 €67,667 €58,750 €848,352 €118,904 €216,299 €1,183,555 We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Contents 71 Group Management Report 72 72 78 81 83 83 86 FUNDAMENTALS OF THE KION GROUP Profile of the KION Group Strategy of the KION Group Management system REPORT ON THE ECONOMIC POSITION Macroeconomic and sector-specific conditions Financial position and financial performance 104 Non-financial performance indicators 112 EVENTS AFTER THE REPORTING DATE 113 OUTLOOK, RISK REPORT AND OPPORTUNITY REPORT 113 115 122 Outlook Risk report Opportunity report KION GROUP AG | Annual Report 2014 T R O P E R T N E M E G A N A M P U O R G C S T N E M E T A T S L A I C N A N I F D N O I T A M R O F N I L A N O I T I D D A E 72 Fundamentals of the KION Group PROFILE OF THE KION GROUP Organisational structure applies are set out in the declaration on corporate governance. This declaration also contains the comply-or-explain statement pursuant to section 161 German Stock Corporation Act (AktG), which was issued by the Executive Board and Supervisory Board of KION GROUP AG on 19 December 2014, and the corporate governance report pursuant to section 3.10 German Corporate The KION Group is the world’s second-largest supplier of forklift Governance Code, which also provides information about the trucks, warehouse trucks and associated services and solutions. compliance standards in the Group. The declaration on corporate With three global brands – Linde, STILL and Baoli – and three governance can be viewed and downloaded on the Company’s regional brands, it is represented in all of the major sales markets website (kiongroup.com/governancereport). It also forms part of and price segments. this annual report. The KION Group’s strategic management holding company, The essential features of the remuneration system are KION GROUP  AG, is listed on the Frankfurt Stock Exchange, described in the remuneration report, which is part of the 2014 where it is part of the MDAX. KION GROUP AG indirectly owns all group management report and can be found in the ‘remuneration the shares in KION Material Handling GmbH. Its head office report’ section of this annual report. The total amounts for functions, consisting of administrative, financial and technical Executive Board remuneration and Supervisory Board remuner- services, and human resources, were transferred to the KION ation are reported in the notes to the consolidated financial state- GOUP AG on 1 September 2014 by means of a purchase and ments (note [43]). transfer agreement. Therefore KION GROUP AG replaced KION Material Handling GmbH as the operational parent company of Disclosures relevant to acquisitions the KION GROUP. The strategic anchor shareholder of KION GROUP AG is The disclosures relevant to acquisitions (pursuant to section 315 Weichai Power (Luxembourg) Holding S.à r.l., Luxembourg, a (4) HGB) together with the explanatory report form an integral part subsidiary of Weichai Power Co. Ltd., which held 33.3 per cent of of the group management report and can be found in the ‘disclo- the shares at the end of 2014 as far as the Company is aware. sures relevant to acquisitions’ section of this annual report. Another 18.8 per cent of the shares were held, through Superlift Holding S.à r.l., Luxembourg, by investment funds that are Executive Board advised by group companies of The Goldman Sachs Group, Inc. (Goldman Sachs) and companies that are advised by or affiliated The Executive Board of KION GROUP AG is responsible for the with Kohlberg Kravis Roberts & Co. L.P. (KKR). The free float operational management of the KION Group. The responsibilities accounted for 47.7 per cent of the shares. of the Executive Board members are allocated as follows: Management and control Corporate governance – Gordon Riske, Chief Executive Officer (CEO), is responsible, among other things, for the strategy/business development, corporate communications, the corporate office, internal audit, compliance, KION Warehouse Systems, KION syner- gies/platforms, the North America region and the South The KION Group follows generally accepted standards of sound, America region. Since 15 Jan uary 2015, he has also been responsible corporate governance. The German Corporate Gov- CEO of both the Linde Material Handling GmbH and the ernance Code (DCGK) provides the framework for management STILL GmbH brand companies and has assumed responsi- and control. As required by section 289a German Commercial bility for quality. Code (HGB), the corporate governance standards that the Group We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Fundamentals of the KION Group 73 – Dr Thomas Toepfer, Chief Financial Officer (CFO), is in charge, among other things, of accounting, tax & financial services, Business model corporate finance/investor relations/M&A, controlling, HR In order to fully cater to the needs of its material handling custom- (Labour Relations Director), legal affairs, IT, purchasing and ers worldwide, the KION Group’s business model covers every data protection. On 15 January 2015, he also assumed step of the value chain: product development, manufacturing, responsibility for facility management/health, safety & envi- sales and logistics, spare parts business, truck rental and used ronment (HSE) and logistics/Urban. – Ching Pong Quek is Chief Asia Pacific Officer and heads up the KION Group’s entire Asia business. trucks, system and software solutions, plus financial services that support the Group’s core industrial business. The KION Group operates a multi-brand strategy involving the three global brands Linde, STILL and Baoli plus the three regional brands Fenwick, Bert-Jan Knoef and Theodor Maurer stepped down as members OM STILL and Voltas MH. of the Company’s Executive Board with effect from 15 January The KION Group earns most of its consolidated revenue – 2015. Until then, Mr Knoef had been CEO and Labour Relations 54.1 per cent in the year under review – from the sale of industrial Director of the brand company STILL GmbH. He oversaw all trucks. The product portfolio includes counterbalance trucks cross-brand logistics activities and managed the intra-group powered by an internal combustion engine or electric drive, ware- logistics service provider, Urban. Before his departure from the house technology (ride-on and hand-operated industrial trucks) KION Group Executive Board, Mr Maurer was CEO and Labour and towing vehicles for industrial applications. It covers all load Relations Director of the brand company Linde Material Handling capacities, from 1 tonne to 16 tonnes. GmbH until his departure from the KION GROUP AG Executive Worldwide research and development activities (R&D) enable Board on 15 January 2015. He was also responsible for quality, the KION Group to consolidate and extend its technology leader- facility management and health, safety & environment (HSE). ship. The Company plays a pioneering role in hydrostatic and The Executive Board maintains a relationship of trust with, diesel-electric drive systems and in innovative energy-efficient and is monitored by, the Company’s Supervisory Board. and low-emission drive technologies. As at the end of 2014, the Supervisory Board KION Group employed a total of 1,023 developers, of whom 282  worked in Asia. Total research and development spending amounted to €119.7 million in the year under review. This corre- The Supervisory Board, which was formed in accordance with sponded to 2.6  per  cent of consolidated revenue, putting the the German Codetermination Act (MitbestG), comprises 16 people. KION Group above the industry average. The focus of the Group’s It advises the Executive Board in its handling of significant mat- R&D activities is described in the ‘research and development’ ters and business transactions. To increase the efficiency of its section. work, the Supervisory Board is supported by four committees: The KION Group operates a total of 14 production facilities the Nomination Committee, the Executive Committee, the Audit for industrial trucks and components in eight countries. Another Committee and the Mediation Committee. plant is currently being built in the Czech Republic, with produc- Thilo Kämmerer stepped down as an employee representa- tion due to start there in 2016. Owing to the particular require- tive on the Supervisory Board with effect from 31 August 2014. ments of its business, the KION Group manufactures major com- He was replaced by Olaf Kunz on 1 September 2014. Ms Silke ponents itself – notably lift masts, axles, counterweights and Scheiber and Dr Martin Hintze stepped down from the Super- safety equipment – in order to ensure security of supply and the visory Board with effect from 1 January 2015. Ms Birgit Behrendt availability of spare parts for important components. Other com- and Ms Xu Ping were appointed to the Supervisory Board in ponents – such as hydraulic components, electronic compo- their place. nents, rechargeable batteries, engine components and industrial tyres – are purchased through the KION Group’s global procure- ment organisation. > DIAGRAM 003 We keep the world moving.KION GROUP AG | Annual Report 201474 Production sites of the KION Group DIAGRAM 003 K AHL ASCHAFFENBURG WEILBACH HAMBURG ČESK Ý KRUMLOV GEISA SUMMERVILLE REUTLINGEN CHÂTELLER AULT LUZZ AR A PUNE JINGJIANG XIAMEN INDAIATUBA / SÃO PAULO Linde Material Handling Germany STILL Germany Aschaffenburg: Counterbalance trucks with IC engine or electric drive, warehouse technology Hamburg: Counterbalance trucks with IC engine or electric drive, warehouse technology, components Weilbach: Component production Reutlingen: Very narrow aisle trucks Kahl: Spare parts warehouse, component production Geisa: Component production France Italy Châtellerault: Warehouse technology Luzzara: Warehouse technology Czech Republic Brazil Český Krumlov: Component production United States Summerville: Counterbalance trucks with IC engine or electric drive, warehouse technology Indaiatuba / São Paulo: Counterbalance trucks with IC engine, warehouse technology China Xiamen: Counterbalance trucks with IC engine or electric drive, heavy trucks, warehouse technology Other (KION India) India Jingjiang: Counterbalance trucks with IC engine or electric drive, warehouse technology Pune: Counterbalance trucks with IC engine or electric drive, ware- house technology We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Fundamentals of the KION Group 75 The KION Group offers customers tailor-made solutions and only There are also individual orders for repairs and maintenance makes trucks specifically to order. More than a third of new trucks work as well as for spare parts. In addition, the KION Group looks are fitted with technical components developed especially for a after entire customer fleets, using special fleet management soft- particular order. Advantages for customers in terms of total cost ware to monitor the trucks in the fleets. of ownership (TCO) underpin the Linde and STILL brands’ pre- The brand companies also have extensive used truck and mium positioning. The trucks’ hallmarks are cost-efficiency, high rental truck businesses, allowing peaks in capacity requirements productivity, comparatively low maintenance and high residual to be met and customers to be supported after their leases have values. expired. Once a lease has expired, the used truck is serviced at a The KION brand companies have an extensive sales and ser- reconditioning centre and can then be rented on a flexible, short- vice network comprising around 1,300 outlets staffed by more term basis, for example. The used and rental truck business is than 13,000 service employees in over 100 countries. Approxi- integrated into the LMH and STILL segments in terms of its oper- mately half of them are employed by the KION Group. In other ations, and its fleet of well in excess of 50,000 trucks is financed cases, the Company relies on external dealers. The sales net- internally by Financial Services. work in western Europe consists of exclusive dealers and Com- pany-owned dealer ships. In China, Linde has built up a broad network of more than 100 proprietary sales and service outlets. Market and influencing factors By contrast, distribution partners in Asia and South America usu- ally offer more than one brand of truck. Industrial trucks are deployed for a wide variety of applications. The installed base, which comprised 1.2  million trucks Material handling products are used for tasks such as loading worldwide at the end of 2014, is a source of spare parts, main- and unloading, linking production steps and moving pallets in tenance and repair business within the KION Group’s integrated logistics centres or in retail/wholesale operations. They therefore business model. form part of the production processes and supply chains of many The service business – spare parts, rental and used trucks, different industries around the world. system and software solutions, and financial services – helps to Measured in terms of unit sales of new trucks, the growth of smooth out fluctuations in consolidated revenue and reduces the market for industrial trucks has exceeded global economic dependency on market cycles. In the reporting year, it con tributed growth over the past ten years (2004 – 2014), rising at an average 45.9  per  cent of consolidated revenue. This business also of 4.5 per cent per year. However, it should be noted that these strengthens customer relationships, thereby helping to generate statistics do not include price effects or the contribution from the sales of new trucks. service business. Financial services support new truck business in many mar- The main growth driver across all regions is the advancing kets, forming another pillar of the service business within the inte- interconnectivity of the global economy, which requires additional grated business model. Approximately 50 per cent of new truck transport services between what are becoming increasingly frag- business involves some form of financing via KION companies, mented value chains and supply chains. The specialisation of external banks or dealers. Offering finance is therefore part of the companies and the growth of internet-based commerce are also truck sales process, and end customer finance is generally linked making logistics processes more segmented and more complex. to a service contract throughout the term of the finance agree- In regional terms, emerging markets – particularly China, ment. In the main sales markets with a high volume of financing eastern Europe, Central America and South America – are the and leasing, financial services are handled by legally independent major source of market growth. Demand for logistics services on financial services companies. These include long-term leasing to the back of increasing consumer spending is being fuelled by customers and internal financing of the brand companies’ short- expansion of industrial and public infrastructure as well as rising term rental fleets. living standards. We keep the world moving.KION GROUP AG | Annual Report 201476 The lower (economy) and middle (volume) price segments are Legal requirements also apply to the construction and oper- growing at an above-average rate thanks to demand from emerg- ation of production facilities, including in relation to air pollution ing markets, where inexpensive industrial trucks are particularly avoidance, noise reduction, waste production & disposal and popular. Simple counterbalance trucks with an internal combus- health & safety. Furthermore, the KION Group fulfils all of the legal tion engine (diesel trucks) make up a comparatively high propor- requirements pertaining to exports and financing business. tion of the total volume in these markets. Above-average growth opportunities are presented by eco-friendly, reliable diesel trucks on the one hand and, on the other, counterbalance trucks with an Market position electric motor (electric forklift trucks) and warehouse technology. In mature markets, where supply chains are highly sophisti- The KION Group is one of the world’s leading manufacturers of cated, the large number of trucks in use provides a strong base industrial trucks. Measured in terms of units sold, it maintained its for replacement business. A survey conducted by Peerless leading position in western Europe in the year under review. It is Research Group found that the majority of trucks are replaced also one of the top players in eastern Europe, Brazil and India, within ten years. The KION Group estimates that around where one in four trucks sold now bears the name of a KION 90 per cent of sales in western Europe are currently accounted brand. In China, the KION Group is among the leading non- for by replacement investments. In highly developed economies, domestic manufacturers, whereas it is still considered a niche electric forklift trucks and warehouse technology, as well as provider in the USA. The KION Group achieved a global market diesel trucks in the premium price segment, make up the bulk of share of 14.2  per  cent in 2014 and therefore remained the market volume. second-largest supplier worldwide. Measured in terms of units ordered, around 44  per  cent of the global market was attributable to diesel trucks in 2014, while electric forklift trucks accounted for around 17 per cent and ware- The segments and their products and services house technology for 39 per cent. According to the KION Group’s estimates, the premium price segment and the economy price The KION Group is represented in the market by three global segment each accounted for between 25 and 30 per cent of units brands – Linde, STILL and Baoli – and three regional brands: ordered. The remainder is accounted for by the volume price seg- Fenwick (France), OM STILL (Italy) and Voltas MH (India). While ment, making it the largest in terms of units sold. the brand companies have full operational and commercial Economic conditions in the different regions and the rates of responsibility within their markets, KION GROUP AG is the stra- growth in global trade are key influencing factors for the KION tegic management holding company and is responsible for the Group. Its financial situation is also affected by competition levels, groupwide strategy and groupwide business standards. exchange rates and changes in commodity prices. > TABLE 012 The products and services of companies in the KION Group also have to comply with specific legal requirements in their respective markets. Compliance with the different requirements has to be verified or certified. Many of the legal requirements are enshrined in product-specific and other standards (e.g. EN, ISO and DIN). The tightening of emissions standards is not only taking place in developed markets, it is also increasingly observable in emerging markets such as China. This trend benefits the KION Group with its high-tech products. We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Fundamentals of the KION Group 77 Segments 2014 in € million LMH STILL Financial Services Other Consolidation / reconciliation Total Revenue Adjusted EBIT ¹ Employees ² 2014 3,077.2 1,850.7 620.9 235.7 – 1,106.6 4,677.9 2013 2,881.1 1,717.5 539.4 235.1 – 878.5 4,494.6 2014 339.6 133.6 2.1 135.5 – 167.9 442.9 2013 309.1 123.9 0.7 73.5 – 90.6 416.5 2014 13,945 7,976 60 688 – 22,669 22,273 TABLE 012 2013 13,824 7,715 59 675 – 1 Adjusted for KION acquisition items and one-off items 2 Number of employees in full-time equivalents as at 31 December For internal management purposes, the KION Group has divided STILL segment its business into operating segments that correspond to the reportable segments, as required by international financial report- The STILL and OM STILL brands are grouped in the STILL seg- ing standards (IFRS 8). ment. STILL is predominantly a global premium provider of trucks with electric and diesel-electric drives. It mainly focuses on the Linde Material Handling (LMH) segment European and Latin American markets, with the regional brand OM STILL serving the Italian market. The Linde Material Handling (LMH) segment encompasses the The segment’s portfolio consists of forklift trucks and ware- Linde, Fenwick and Baoli brands. house trucks plus associated services. STILL has also positioned Linde is a global premium brand and a technology leader. itself as a leading provider of intelligent intralogistics solutions, Among its other selling points, it has decades of experience with offering trucks and fully integrated warehouse systems, including hydrostatic drive technology and meets customers’ highest automation and fleet management solutions. requirements regarding technology, efficiency, functionality and design. The product portfolio ranges from warehouse trucks to Financial Services (FS) segment heavy trucks and caters to all of the major application areas. Linde has been developing and manufacturing electric drive The Financial Services (FS) segment is an internal financing part- systems for decades and uses the resulting expertise in a variety ner for LMH and STILL, providing finance solutions that promote of applications. In France, Linde products are sold under the sales. Its activities comprise the financing of long-term leasing Fenwick brand. business for external customers of the KION Group, the internal Baoli is the global brand for the economy segment. Building financing of the short-term rental business of the LMH and STILL on its base in China and other growth markets in Asia, it has operating segments, and the related risk management. In the established sales structures in Europe, Central America and large sales markets with a high volume of financing and leasing, South America. legally independent FS companies handle this business. We keep the world moving.KION GROUP AG | Annual Report 201478 When long-term leasing business is being conducted, FS itself acts as the contractual partner to external customers and offers STRATEGY OF THE KION GROUP various financing models. Operational responsibility for the short-term rental business (short-term rental fleet) lies with the LMH and STILL brand seg- Objectives of the Strategy 2020 ments. FS acts as the contractual partner to the brand segments, providing the internal financing for this short-term rental fleet. The KION Group presented its Strategy 2020 in March 2014, FS refinances both long-term leasing with end customers clearly setting out its goals for the next few years: and the short-term rental fleet, mostly on the basis of sale and leaseback agreements. In addition, a substantial portion of sales financing for exter- – Growth: The KION Group wants to accelerate its growth and close the gap to the global market leader by 2020. To nal customers is offered indirectly, with an external leasing com- this end, it is strengthening its leading positions in the Euro- pany to which the business is referred by the KION Group acting pean and Brazilian markets so that it can go on to capture as lessor rather than the KION Group. The financial services pro- additional market share in growth markets, particularly vider purchases the truck from the KION Group and provides the those in Asia and North America. This growth is to be financing to the end customer. The KION Group carries out the accompanied by a far greater presence in the largest price majority of the servicing for the truck and, once the financing has segment (volume). expired, may also take on its reconditioning and remarketing. Other segment – Profitability: The KION Group aims to further improve its EBIT margin in order to expand its position as the most profitable supplier in the market. It has therefore set a target of a sus- The Other segment mainly comprises holding companies and tained EBIT margin of above 10 per cent. This requires not service companies, the latter providing cross-segment services only an increase in the gross margin but also strict control of such as IT and logistics. In the reporting year, the subsidiary KION fixed costs. India (formerly Voltas Material Handling Pvt. Ltd.) also belonged to this segment. KION India manufactures diesel trucks, electric forklift trucks and warehouse trucks for the Indian market under – Efficient use of capital: The KION Group is working stead- fastly to optimise the return on capital employed (ROCE). the Voltas brand. It has a network of more than 60 branches and Besides increasing earnings, the focus here is on managing dealers providing sales and service. assets and finance. – Resilience: The KION Group aims to improve its ability to cope with economic downturns. It is therefore stepping up efforts to diversify its business in terms of regions and cus- tomer sectors alongside its initiatives to optimise the produc- tion network and expand the service business. We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Fundamentals of the KION Group 79 Strategic focus areas of the Strategy 2020 industrial trucks as part of Industry 4.0 scenarios (see ‘research The Strategy 2020 essentially encompasses six closely related areas of focus. Multi-brand strategy and development’). Global production network The KION Group wants to build its industrial trucks close to the markets in which they will be sold. To this end, production facil- The starting point is the further development of the successful ities worldwide are being efficiently integrated – utilising econo- multi-brand strategy, coupled with greater differentiation within it. mies of scale and ensuring a high level of capacity utilisation. A The premium brands, Linde and STILL, are to consolidate their programme of capital expenditure is aimed not only at updating presence at the upper end of the volume segment on the basis of and expanding existing plants but also at establishing factories the platform strategy (see below), particularly in North America in new locations. and the emerging markets. As the global brand for the economy The core element in western Europe is the modernisation of segment, Baoli is to gain a foothold at the lower end of the volume the plants in Aschaffenburg (Linde) and Hamburg (STILL), with a segment with a tailored product and sales strategy. In future, all clear focus on increasing capacity, improving processes and three global brands – Linde, STILL and Baoli – will be represented containing costs. Approximately €83 million will be made availa- in these regions and cater to all price segments. ble for these projects between now and 2021. Both sites will col- laborate closely with the new plant in Stříbro, near Plzeň in the Global modular and platform strategy Czech Republic. The ground-breaking ceremony for the new fac- Further development of the multi-brand strategy requires the tory was held in November 2014. Due to open in 2016, it will ini- product portfolio to be managed end to end on the basis of a tially produce warehouse trucks currently manufactured in global modular and platform strategy. For this reason, a Prod- Aschaffenburg. Capital expenditure on this undertaking amounts uct & Module Committee was formed in the reporting year. The to approximately €12 million. At the same time, capacity is to be KION Group will establish shared, cross-brand and cost-effi- significantly increased and processes optimised at sites in cient platforms for product development and production that are China (Xiamen and Jingjiang), the USA (Summerville) and Brazil geared to the volume and economy segments outside western (São Paulo). Europe. However, market success depends on these platforms In October 2013, small-scale production of heavy trucks was allowing a strong degree of regional differentiation in the industrial ended at a dedicated production site in Wales and transferred to trucks. One example is Baoli’s diesel truck platform, which is a contract manufacturing facility in the Czech Republic. The used for region-specific trucks in India (Voltas) and Brazil (STILL). winding-up of the former production site was completed in the The global deployment of platforms is managed by the research reporting year. and development centre in Xiamen, China, wich was significantly expanded in 2014. Regional growth strategies In western Europe, the premium brands, Linde and STILL, Having enhanced its multi-brand strategy and its modular and plat- will continue to use different platforms in order to maintain the form strategy, as well as increasing integration between the sites in defining characteristics of their brands, but will increasingly its production network, the KION Group has put everything in deploy shared modules. Innovation underpins the premium posi- place to increase its market share in strategically important regions. tioning of the two brands. Currently, the focus is on optimising In North America, one of the largest markets for industrial lithium-ion batteries for electric and hybrid trucks, which are trucks, the KION Group aims to move from being a niche provider superior to lead-acid batteries in many regards. The first models to a major market player offering a full portfolio of products by were launched on the market in October 2014. Sales in the pre- 2020. This will enable it to capture an increasing share of this mium segment are also boosted by innovative intralogistics growing market. As part of the new multi-brand approach, Linde solutions, such as fleet data management and automated North America was renamed KION North America in November We keep the world moving.KION GROUP AG | Annual Report 201480 2014. The plant in Summerville is to be expanded so that it can Strategy for back-office functions start manufacturing IC trucks, electric forklift trucks and ware- In addition, the KION Group is aligning its groupwide back-office house technology. The region-specific con figuration of the plat- services to the growing requirements of the global organisation in form products is especially important here. Particular emphasis will order to leverage economies of scale and synergies. For example, be placed on the volume market, which is very well developed in KION Group IT – a global shared services organisation with four North America. As well as expanding the range of products, KION functions: IT governance, key account management, application North America is also strengthening its sales and service network. services and infrastructure services – will focus even more on New products for the volume segment are aimed at increas- increasing its contribution to the success of the Company and on ing market share in the fast-growing markets of Asia. They are providing cost-efficient and reliable IT services. based on the economy product platform developed by Baoli. Strategy for aftersales and service business The strategy for the aftersales business is designed to unlock more of the potential offered by the installed base, which is expanding worldwide. This will help to boost revenue. The KION Group is continually extending its portfolio of services and improving their quality at every stage of the product lifecycle. Because the premium segment is already well covered, the focus is on expanding sales and service structures in the economy and volume markets. Financial services are also a key component of the service portfolio as they support the KION Group’s core industrial business. The Company also intends to increase its market share by, for example, opening additional service outlets in attractive growth markets and stepping up the short-term rental business. We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Fundamentals of the KION Group 81 MANAGEMENT SYSTEM Core key performance indicators The KION Group’s strategy, which centres on value and growth, is reflected in how the Company is managed. It uses four core key performance indicators (KPIs) to continuously monitor market success, profitability, financial strength and liquidity. The perfor- mance targets of the Group and the segments are based on selected financial KPIs, as is the performance-based remunera- tion 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 variances compared with target figures. > TABLE 013 Key performance indicators TABLE 013 in € million 2014 2013 2012 * Order intake Revenue Adjusted EBIT ¹ Free cash flow ² 4,877.3 4,489.1 4,590.3 4,677.9 4,494.6 4,559.8 442.9 416.5 408.3 305.9 195.6 513.6 * 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 2 Last year's figures were adjusted due to a change in presentation, for details see ‘Other disclosures on Consolidated statement of cash flows’ We keep the world moving.KION GROUP AG | Annual Report 201482 KPIs related to business volume Other key performance indicators Order intake and revenue Besides the aforementioned core KPIs, the KION Group uses a Order intake and revenue are broken down by region, segment wealth of additional financial KPIs. The main ones are net debt, and product category in the KION Group’s management report- which is used to manage the capital structure, as well as the EBIT ing so that growth drivers and pertinent trends can be identified margin and return on capital employed (ROCE), which form the and analysed at an early stage. Order intake is a leading indicator basis for a component of remuneration and are defined as targets for revenue. The length of time between receipt and invoicing of in the Strategy 2020. There are also non-financial KPIs, which an order varies between business units and product groups. primarily relate to customers, employees, sustainability and tech- nology. Some of them are used operationally as leading indica- Earnings-related KPI tors for the financial KPIs. Adjusted EBIT The KPIs used to manage the brand segments are order intake, revenue and adjusted EBIT. Earnings before tax (EBT) and The key figure used for operational management and analysis of return on equity (ROE) are the KPIs used to manage the Financial the KION Group’s financial performance is adjusted earnings Services segment. 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 leverage 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. Carefully targeted management of working capital and detailed planning of capital expenditure are used to help in controlling the level of free cash flow. We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Report on the economic position 83 Report on the economic position MACROECONOMIC AND SECTOR-SPECIFIC CONDITIONS Macroeconomic conditions In South America, the main factor acting as a brake on growth other than the fall in commodity prices was the political uncertainty in individual countries. Brazil, the largest economy in Latin America, entered recession in the first half of the year and ended 2014 with close to zero growth for the year as a whole. Growth across eastern Europe was uneven and overall not as strong as in 2013. The economies of Poland and the Czech In 2014, growth in the global economy was less dynamic than Republic enjoyed growth, whereas the Russian economy con- anticipated, remaining almost unchanged from 2013. Adverse tracted significantly as a consequence of the sanctions imposed factors included the greater geopolitical risks caused by the con- in connection with the crisis in Ukraine and as a result of the steep flicts in Ukraine and the Middle East, plus resurgent uncertainty in drop in the value of the rouble and the persistently low price of oil. the financial markets. On balance, the industrialised nations achieved a somewhat Another noticeable feature was the muted growth in emerg- higher level of growth than in 2013, but likewise still fell short of ing markets, which were unable to build overall on the growth expectations. Economic recovery in the eurozone was particularly rates achieved in 2013. The weaker pace of growth in China led disappointing with unexpectedly weak growth in Germany com- to a drop in demand from key trading partners, even though the pounding the impact from the recession in Italy and stagnation in shift towards a sustainable growth trajectory can be seen as a France. In contrast, the picture in the United Kingdom was positive, positive development over the longer term. Growth rates in the boosted by higher consumer spending and stronger growth in ser- other newly industrialising countries in Asia were sound but nev- vices, a key sector of the economy. In the US, the growth rate ertheless still down year on year on average, although India man- almost exceeded that achieved in 2013, with both consumer aged to increase its growth rate again. spending and corporate capital investment rising substantially dur- ing the course of the year. DIAGRAM 004 7.4% 5.3% Gross domestic product in 2014 – real year-on-year change CHINA INDIA WORLD UNITED STATES GERMANY EU RUSSIA BRAZIL 0.1% JAPAN 0.1% 2.6% 2.4% 1.5% 1.4% 0.6% Source: Oxford Economics (as at 16 January 2015) 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 201484 Demand for industrial trucks is primarily driven by investment house technology products also increased significantly by confidence and world trade volumes as well as GDP growth. The 10.8 per cent but unit sales of IC trucks failed to match the 2013 increase in spending on capital equipment was spread unevenly growth rate, achieving a rise of just 3.5 per cent. around the globe, reflecting the varying rates of market growth. Most of the growth in unit sales was accounted for by west- Whereas the US saw a considerable rise in this spending, busi- ern Europe (up by 11.5 per cent), China (up by 10.2 per cent) and nesses in the eurozone, including Germany in particular, remained North America (up by 9.2 per cent). The western European mar- noticeably reticent. Over the whole of 2014, the expansion in ket therefore rallied significantly following the stagnation in 2013 global trade was weaker than anticipated and once again fell (0.3  per cent growth), the principal growth drivers in this case short of the long-term trend. The growth in imports and exports being pent-up demand (primarily in southern European markets) in the emerging markets was more subdued than in 2013. and, at a more structural level, the replacement of old trucks. Ger- Sectoral conditions Sales markets many, the largest single market in western Europe, gained 10.3 per cent and was therefore almost at the western European average. Growth in Spain (up by 42.6 per cent), the United King- dom (up by 12.6 per cent) and Italy (up by 15.7 per cent) was more rapid than in other neighbouring European countries, but there was hardly any gain in the French market at all. In 2014, the global market for industrial trucks hit a new record In overall terms, the eastern European market flatlined (down level of almost 1.1  million vehicles ordered, with even stronger by 0.7 per cent). The significant drop in unit sales in Russia (down market growth than in 2013. Across all regions and product by 19.2 per cent) was almost offset by gains elsewhere, particu- types, the number of new trucks ordered was up by 7.8 per cent larly higher sales figures in Poland, the Czech Republic and in (2013: 6.9 per cent). The sharpest upturn was in the sales figures Hungary. for electric forklift trucks (up by 13.3 per cent), an area of business As in 2013, China notched up double-digit growth (10.2 per that had lagged behind the overall market in 2013. Sales of ware- cent), the main impetus coming from electric forklift trucks and Global industrial truck market (order intake) in thousand units Western Europe Eastern Europe North America Central & South America Asia (excl. Japan) Rest of world World Source: WITS/FEM 2014 289.2 57.6 219.5 48.5 357.5 119.0 2013 259.4 58.0 201.0 52.3 327.0 114.5 1,091.3 1,012.2 TABLE 014 Change 11.5% – 0.7% 9.2% – 7.3% 9.3% 4.0% 7.8% We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Report on the economic position 85 warehouse technology equipment. In contrast, the total number Financial markets of units sold in Brazil, the largest single market in South America, fell by 13.0 per cent. > TABLE 014 The KION Group bills the bulk of its revenue in euros; the propor- Procurement markets tion was 62.8 per cent in 2014 and was therefore unchanged com- pared with 2013. The remainder is billed in foreign currencies, notably the Chinese renminbi, pound sterling and the Brazilian real. Commodity prices continue to have a direct impact on approxi- In the first half of 2014, the strong euro combined with the mately one quarter of the cost of the materials needed to manu- devaluation of currencies in relevant emerging markets had a neg- facture an industrial truck in the KION Group. ative impact on the KION Group's order intake. In the second half The average price over the year for steel, the most important of the year, however, the euro weakened as the monetary policy commodity, fell compared with 2013 owing to the persistently of the European Central Bank (ECB) became increasingly expan- modest level of economic growth. Manufacturing costs are also sionary and the currency fell against other key reserve currencies. influenced to a lesser extent by the prices for copper and rubber, Over the year, the euro fell by approximately 10  per cent which were also down year on year. The price of oil, a useful price against the Chinese renminbi but the average exchange rate for indicator for plastic products, fell markedly during the second half the year remained largely around the level of 2013. The pound of the year and overall was below the average for 2013. sterling strengthened by approximately 5 per cent on average in On the other hand, however, higher payroll and ancillary 2014 whereas the Brazilian real lost further ground (down by wage costs had an adverse impact on unit costs. In overall terms, around 9 per cent) despite the weakness of the euro. All things producer prices for input goods in the eurozone only fell by a neg- considered, changes in exchange rates only had a slight negative ligible amount. effect on the KION Group's order intake, revenue and profits. > TABLE 015 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 2013 1.38 2.87 1.23 8.17 0.85 42.33 1.33 2014 1.47 3.12 1.21 8.19 0.81 50.92 1.33 We keep the world moving.KION GROUP AG | Annual Report 201486 Business performance On 15 April 2014, the KION Group repaid early and in full the fixed-rate tranche of the corporate bond issued in 2011, which was due to mature in 2018 and had a volume of €325.0 million, FINANCIAL POSITION AND FINANCIAL PERFORMANCE and the floating-rate tranche of the corporate bond issued in Overall assessment of the economic situation 2013, which was due to mature in 2020 and had a volume of €200.0  million. An amount of €8.4  million representing the pro- The year under review was the KION Group's most successful rata deferred borrowing costs and a payment of €14.8 million rep- year to date. Following flat revenue growth in the first half of the resenting early repayment charges were recognised as financial year, the Group was able to generate significant gains over the expenses. The funds used for the repayment mainly originated rest of the year, increasing revenue by 4.1 per cent to €4,677.9  mil- from a revolving credit facility, which has a term to maturity of five lion over the year as a whole. Thanks to a strong final quarter, rev- years after the IPO in June 2013. This credit facility currently has enue from new trucks business reached the 2013 level, but ser- lower interest rates than the two corporate bonds. vice business was up by 8.6 per cent, a considerable year-on-year Against this background, the revolving credit facility was gain which made a substantial contribution to the strong revenue increased by €198.0 million to a total of €1,243.0 million in April growth at Group level. 2014 on the basis of bilateral lending agreements with a group of The encouraging rise in order intake of 8.6 per cent or €388.1 banks. These additional loans mature in April 2019 and have a million was attributable to the successful sales activities in the variable interest rate. two operating brand segments. At the same time, the 13.5  per On 7 April 2014, Moody's raised the rating of the KION Group cent rise in the order book (€787.2  million) represents a good and the bonds from Ba3 to Ba2 with a stable outlook. Then, on starting position for 2015. Based on an 8.5 per cent increase in 15 April 2014, Standard & Poor’s raised its rating for the KION units ordered, the KION Group outperformed the global market in Group from BB– to BB, retaining the positive outlook. terms of growth and consolidated its position as the second-larg- On 1 October 2014, the Executive Board of KION GROUP AG est provider worldwide. One of the contributing factors in this approved the introduction of a share option programme for regard was the targeted expansion of the international business employees in Germany and the issue of an offer as part of this beneath the premium segment. share option programme. The offer deadline for eligible employ- EBIT, adjusted for non-recurring items, came to €442.9 mil- ees was 31 October 2014. lion, a year-on-year increase of 6.3 per cent. The adjusted EBIT The KION Group sold its indirect controlling interest in Willen- margin improved from 9.3 per cent in 2013 to 9.5 per cent in the brock Arbeitsbühnen GmbH & Co. KG (referred to below as Willen- reporting period. brock Arbeitsbühnen) in full with effect from 16 December 2014. The further optimisation of the funding structure in the year under review was reflected in the significant decline in financial expenses. Despite non-recurring expenses in connection with the early redemption of two corporate bond tranches, the Group more than halved the interest expenses on loan obligations and capital market liabilities. In total, the KION Group generated net income for the year of €178.2 million. The earnings per share attributable to the shareholders in the KION Group amounted to €1.79. KION GROUP  AG will propose a dividend of €0.55 per share to the Annual General Meeting, €0.20 per share more than in 2013. We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Report on the economic position 87 The KION Group is well positioned to use its own resources over In the reporting year, high-growth markets accounted for some the next years to fund and implement the action necessary as 35 per cent of new truck orders, driven in the main by growth in part of its Strategy 2020. The aim of this strategy is to enable the eastern Europe and China. Group to catch up with the global market leader within five years. Factors contributing to the rise in order intake in terms of value Comparison between actual and forecast growth included the higher unit sales of vehicles, the further slight increase in the proportion of customised equipment and the expansion of the service business. Over the course of 2014, the order book increased by 13.5 per cent to €787.2 million (2013: €693.3 million). In the past year, the KION Group was consistently able to fulfil, Revenue and in some cases even exceed, the forecasts for 2014 specified in the outlook section of the 2013 group management report. For Revenue in the KION Group amounted to €4,677.9  million, an example, in the case of order intake, the Group was able to increase of 4.1 per cent on the 2013 figure of €4,494.6 million. After exceed the slight increase forecast for the year. As for consoli- a subdued start to the year, revenue growth gathered pace mark- dated revenue, the actual year-on-year increase was in line with edly with the Group generating an 8.2 per cent increase in revenue the anticipated slight increase in this figure and the Group cer- in the second half of the year. The LMH and STILL brand segments tainly achieved the significant rise in adjusted EBIT expected for both shared in the growth. The acquisition of the majority stakes in the year. In the case of free cash flow, the KION Group managed the dealers Arser (August 2013) and Willenbrock (end of 2013) also to exceed the substantial forecast increase. The funds generated contributed to the improved consolidated revenue, although the as a result were used to bring down borrowing, enabling the restructuring of the heavy truck business did lead to a modest loss Group to markedly reduce its net debt in the year under review. of revenue. Business situation and financial performance of the KION Group Level of orders Revenue by product category The trend in new trucks business in the second half of the year was encouraging. The Group was able to make up for the deficit in the first six months of the year in full, so that ultimately the rev- enue for the year amounted to €2,533.0 million, which was actu- Order intake totalled €4,877.3 million, exceeding the 2013 level of ally slightly higher than the prior-year figure of €2,519.6  million. €4,489.1 million by 8.6 per cent. The LMH and STILL operating Higher unit sales of warehouse technology products and electric segments contributed to this rise, both accelerating their rate of forklift trucks more than offset the slight drop in revenue from die- growth over the course of year. sel trucks and the negative impact from the heavy truck business. The KION Group brand companies increased orders for new In the service business, the KION Group generated a signifi- trucks by 8.5 per cent to 155.0 thousand units. In the case of die- cant increase in revenue of 8.6 per cent to €2,144.9 million (2013: sel trucks, the KION Group generated slight growth and main- €1,975.0  million). This substantial rise was partly attributable to tained its share of the global market. A noticeable feature was the the dealer Willenbrock, in which the KION Group had acquired a demand for Baoli's D series trucks in emerging markets. The majority stake. There were increases in revenue from the spare- KION Group benefited from growth in the market for electric fork- parts business and from servicing and maintenance work. The lift trucks and warehouse technology products, responding in rental business and the used truck business also registered sig- particular to the rising demand in western Europe and China. nificant year-on-year gains. The proportion of the KION Group’s total revenue generated by the service business grew to 45.9 per cent (2013: 43.9 per cent). > TABLE 016 We keep the world moving.KION GROUP AG | Annual Report 201488 Revenue by product category in € million New business Service offering – Aftersales – Rental business – Used trucks – Other Total 2014 2,533.0 2,144.9 1,250.4 486.9 264.9 142.7 2013 2,519.6 1,975.0 1,174.2 443.1 226.4 131.3 4,677.9 4,494.6 TABLE 016 Change 0.5% 8.6% 6.5% 9.9% 17.0% 8.7% 4.1% Revenue by customer location Republic and the Group therefore did not feel an impact from the loss of revenue in Russia and Ukraine as a consequence of In western Europe, the KION Group increased revenue appreci- the geopolitical situation there. In Brazil, the KION Group was ably and made up in full for the loss of revenue incurred in 2013. unable to escape the effects from the negative trends in the Significant gains in Germany, Italy and the United Kingdom market, but revenue in Asia was slightly up year on year. Of the more than compensated for a drop in revenue in other areas, total consolidated revenue, 73.9  per cent was generated out- notably France. Strong growth in eastern Europe was based pri- side Germany, with growth markets accounting for 24.8  per marily on the expansion of business in Poland and the Czech cent (2013: 25.3 per cent). > TABLE 017 Revenue by customer location in € million Western Europe Eastern Europe Americas Asia Rest of world Total revenue 2014 3,411.0 403.3 245.3 470.7 147.5 2013 3,223.9 369.7 279.4 453.5 168.1 4,677.9 4,494.6 TABLE 017 Change 5.8% 9.1% – 12.2% 3.8% – 12.2% 4.1% We keep the world moving.KION GROUP AG | Annual Report 2014 GROUP MANAGEMENT REPORT Report on the economic position 89 Earnings EBIT and EBITDA Hydraulics GmbH & Co. KG (referred to below as Linde Hydrau- lics), which had become necessary because of the downturn in the business performance of Linde Hydraulics. EBIT for the KION The Group improved earnings before interest and tax (EBIT), Group was also adversely impacted by the earnings and the pro adjusted for KION acquisition items and non-recurring items, to rata purchase-price-related non-operating effects on earnings €442.9 million, an increase of 6.3 per cent compared with 2013 from Linde Hydraulics. Overall, the non-cash effects from Linde (€416.5 million). The higher administrative expenses since the IPO Hydraulics came to a total loss of €33.9 million, which was recog- and the higher IT costs in connection with the infrastructure nised under share of profit (loss) of equity-accounted investments. changes throughout the Group were more than offset by the Other material non-recurring items included non-recurring admin- higher gross profit. The adjusted EBIT margin improved from istrative expenses in connection with the growth strategy and 9.3 per cent in 2013 to 9.5 per cent in the reporting period. expenses arising from the early termination of service contracts for EBIT including KION acquisition items and non-recurring members of the Executive Board. In addition to depreciation/amor- items amounted to €347.0  million (2013: €374.2  million). This tisation, earnings-related items from the KION acquisition also decline was largely attributable to the recognition of an impair- included significant expenses arising from the disposal of assets ment loss related to the 30 per cent equity investment in Linde amounting to €10.7 million (2013: €0.4 million). > TABLE 018 EBIT in € million Net income Income taxes Net financial expenses EBIT + Non-recurring items + KION acquisition items Adjusted EBIT 2014 178.2 – 80.0 – 88.8 347.0 57.0 38.9 442.9 2013 138.4 – 15.9 – 219.8 374.2 12.8 29.5 416.5 TABLE 018 Change 28.8% <– 100.0% 59.6% – 7.2% > 100.0% 31.6% 6.3% We keep the world moving.KION GROUP AG | Annual Report 2014 90 EBITDA in € million EBIT Amortisation and depreciation EBITDA + Non-recurring items + KION acquisition items Adjusted EBITDA 2014 347.0 367.2 714.2 55.6 10.7 780.4 2013 374.2 334.6 708.8 12.3 0.4 721.5 TABLE 019 Change – 7.2% 9.7% 0.8% > 100.0% > 100.0% 8.2% EBITDA amounted to €714.2  million and was therefore close to The 'other' item amounting to €26.4 million accounted for a the equivalent figure in 2013 (€708.8 million). In contrast, adjusted much smaller proportion of net income than in 2013 (€76.6 mil- EBITDA rose significantly to €780.4 million (2013: €721.5 million). lion). In particular, the share of profit (loss) of equity-accounted As a consequence, the adjusted EBITDA margin improved from investments reported under 'other' went from a share of profit of 16.1 per cent to 16.7 per cent. > TABLE 019 €1.7 million in 2013 to an overall share of loss of €24.8 million in the year under review. The negative amount arose primarily from Key influencing factors for earnings Linde Hydraulics (loss of €33.9 million); some of this loss was off- Compared with the rise in revenue, there was a disproportionately set by a total share of profit of €9.1 million from the other equi- low year-on-year increase of 2.5 per cent in the cost of sales to ty-accounted investments. > TABLE 020 €3,337.4  million (2013: €3,255.2  million). Gross profit therefore improved by 8.2 per cent to €1,340.5 million (2013: €1,239.4 mil- Net financial income/expenses lion) and the gross margin improved from 27.6 per cent to 28.7 per cent. One of the main factors behind this improvement in margin The change in the balance of financial income and financial was the greater proportion of revenue accounted for by the expenses reflected the much improved funding structure resulting high-margin service business. In addition, the new trucks busi- from the IPO and the subsequent redemption of financial liabilities. ness benefited from a better margin based on the high proportion Net financial expenses amounted to just €88.8  million, less than of customised equipment. half of the net financial expenses in 2013 (€219.8 million). The net Selling expenses went up by €32.3 million year on year, for financial expenses for the year under review included significant the most part because the dealers Willenbrock and Arser were effects from two non-recurring items. Firstly, the early redemption consolidated for the first time for the whole of the year. Trade fair of two corporate bond tranches in the second quarter of 2014 gave participation expenses incurred by LMH and STILL also had an rise to non-recurring financial expenses of €23.2  million. This impact. One of the causes of the rise in R&D costs was the devel- amount comprised pro-rata borrowing costs of €8.4  million and opment of platform concepts. The rise of 11.6 per cent in admin- early-redemption charges of €14.8 million. The second non-recur- istrative expenses to €323.6  million (2013: €290.0  million) was ring item was financial income amounting to €43.2 million from the attributable to the enhanced requirements associated with the measurement of the put option held by Linde Material Handling IPO, salary increases and the early termination of service con- GmbH and the two call options held by Weichai Power relating to tracts for members of the Executive Board. shares in Linde Hydraulics. The net financial expenses in 2013 also included non-recurring expense items arising from capitalised We keep the world moving.KION GROUP AG | Annual Report 2014 GROUP MANAGEMENT REPORT Report on the economic position 91 (Condensed) income statement 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 2014 4,677.9 2013 4,494.6 – 3,337.4 – 3,255.2 1,340.5 – 570.5 – 125.7 – 323.6 26.4 347.0 – 88.8 258.3 – 80.0 178.2 1,239.4 – 538.2 – 113.6 – 290.0 76.6 374.2 – 219.8 154.3 – 15.9 138.4 TABLE 020 Change 4.1% – 2.5% 8.2% – 6.0% – 10.6% – 11.6% – 65.6% – 7.2% 59.6% 67.4% <– 100.0% 28.8% borrowing costs (€24.5  million), the termination of interest-rate Net income and appropriation of profit hedges (€18.3  million) and from the remeasurement of the Linde The KION Group generated net income of €178.2 million in 2014, Hydraulics options (€14.7 million). Adjusted for these non-recurring a year-on-year increase of €39.8  million (2013: €138.4  million). items, net financial expenses in 2014 amounted to €108.8 million, a The decline in EBIT and the higher tax expense were offset by the significant improvement on the adjusted net financial expenses in significant improvement in net financial expenses. Net income of 2013 totalling €162.4 million. €176.7 million (2013: €138.8 million) was attributable to the share- Income taxes holders of KION GROUP  AG. Basic and diluted earnings per share came to €1.79 (2013: €1.69) based on an average number Income tax expenses amounted to €80.0  million. The tax rate of no-par-value shares in the year of 98.7 million (2013: 82.0 mil- therefore increased to 31.0 per cent compared with the unusually lion). This did not include 163,562 no-par-value treasury shares low rate of 10.3 per cent in 2013. The low tax expense in 2013 was that were repurchased by KION GROUP  AG as part of a buy- primarily attributable to the recognition of deferred tax assets back to support the KION Employee Equity Programme. related to loss carryforwards and interest carryforwards that were The Executive Board and Supervisory Board of KION only able to be utilised after KION Material Handling GmbH and GROUP  AG will propose a dividend of €0.55 per share to the Linde Material Handling GmbH had entered into a profit-and-loss Annual General Meeting on 12 May 2015. This equates to a total transfer agreement. In contrast, a deferred tax expense of €16.5 dividend payout of €54.3  million based on 98,736,438 divi- million arose in 2014 (2013: deferred tax income of €43.1 million), dend-bearing shares on the reporting date of 31 December 2014. attributable mainly to the utilisation of loss carryforwards and inter- Approximately 31 per cent of the net income attributable to the est carryforwards in Germany. The current income tax expense shareholders in KION GROUP AG will therefore be distributed in compared with 2013 was accounted for, in particular, by the dividends. improved net income before tax in individual foreign companies. We keep the world moving.KION GROUP AG | Annual Report 2014 92 Business situation and financial performance of the segments LMH segment In 2014, LMH put in place the basis for Strategy 2020, pre- paring for the comprehensive modernisation of its Aschaffenburg facility and the construction of a new plant in the Czech Republic. Further activities included the design of the product and sales offensive in North America and the expansion of the sales and Business performance and order intake service network for all three brand companies in the segment: The Linde Material Handling segment reported a significant Linde, Baoli and Fenwick. The realignment of the heavy trucks increase in orders and revenue, consolidating its position as one business was also completed in the year under review. of the leading global manufacturers and the market leader in Europe. Order intake rose to €3,234.4  million, an increase of Revenue 11.5 per cent on the 2013 figure of €2,901.8 million, and thereby The LMH segment improved revenue by 6.8  per cent to exceeded the €3 billion mark for the first time. Measured on the €3,077.2  million (2013: €2,881.1 million). There were particularly basis of the number of vehicles ordered, LMH and its brand com- strong gains in the service and spare-parts business, the rental panies were able to defend their market position in western business and the used trucks business. A significant contribution Europe and in Asia, and expand in eastern Europe. In the case of to revenue came from the full-year consolidation of the dealer counterbalance trucks and warehouse trucks, LMH visibly out- Willenbrock. LMH generated a noticeable upturn in revenue from performed the global market in terms of growth. Contributing fac- new trucks, driven primarily by greater unit sales of electric fork- tors included the electric forklift trucks in the six to eight tonne lift trucks and warehouse trucks. This more than offset the mod- load capacity category launched in the year under review and the est contraction in revenue from diesel trucks, which was also broadening of the range of reach trucks and double stackers. In partially caused by the realignment of the heavy trucks business. addition, order intake in terms of value included an increasing From a regional perspective, Germany, the United Kingdom and contribution from the service business, which was also boosted China were the main contributors to the revenue growth. by the acquisition of the dealer Willenbrock at the end of 2013. Key figures – LMH – in € million Order intake Revenue EBITDA Adjusted EBITDA EBIT Adjusted EBIT Adjusted EBITDA margin Adjusted EBIT margin 2014 3,234.4 3,077.2 441.2 486.6 270.3 339.6 15.8% 11.0% 2013 2,901.8 2,881.1 442.1 444.5 282.4 309.1 15.4% 10.7% TABLE 021 Change 11.5% 6.8% – 0.2% 9.5% – 4.3% 9.9% – – We keep the world moving.KION GROUP AG | Annual Report 2014 GROUP MANAGEMENT REPORT Report on the economic position 93 Earnings The acquisition of a majority stake in the dealer Arser in Adjusted EBIT rose by 9.9 per cent year on year to €339.6 million August 2013 had a positive impact on the order volume in Tur- (2013: €309.1 million). The inclusion of the dealer Willenbrock and key. In June 2014, STILL signed up the French company A.PSV the realignment of the heavy trucks business also had a positive Diffusion as a new sales partner for the North African market. In impact on this figure. The adjusted EBIT margin was 11.0  per April 2014, STILL opened a new European reconditioning centre cent, a further improvement on the already high figure of 10.7 per for used trucks at Rokietnica in Poland. This centre has the cent in 2013. capacity to recondition approximately 2,000 trucks each year With the inclusion of non-recurring items, EBIT fell year on and further reinforces the strong market position of this seg- year to €270.3  million (2013: €282.4  million). The main reason ment in eastern Europe. At the same time, product innovations behind this decrease was the negative impact on EBIT from the such as a new series of tow tractor models helped to secure the equity-accounted investment in Linde Hydraulics, as already positioning of STILL in the premium segment. described at Group level. Adjusted EBITDA for the LMH segment amounted to Revenue €486.6  million (2013: €444.5 million). This equated to an adjusted Revenue in the STILL segment amounted to €1,850.7  million, EBITDA margin of 15.8 per cent (2013: 15.4 per cent). > TABLE 021 exceeding the 2013 figure of €1,717.5 million by 7.8 per cent. Rev- STILL segment enue from the new trucks business was up by 1.9 per cent year on year. In the service business, STILL generated significantly higher revenue than in 2013 in all categories (servicing, spare Business performance and order intake parts, rentals and used trucks), the overall year-on-year revenue The STILL segment enjoyed profitable growth in 2014. Order growth amounting to 14.3 per cent. intake increased by 12.0  per cent to €1,895.1  million (2013: €1,692.0  million). The comparative order intake figures for 2013 Earnings were exceeded in all sales regions, except in South America. New Adjusted EBIT for the segment grew in proportion to revenue and truck orders grew by 7.9  per cent, roughly in line with market amounted to €133.6  million (2013: €123.9  million). The adjusted growth. Electric forklift trucks and warehouse technology EBIT margin at 7.2 per cent remained at the same level as in 2013 accounted for a higher share of orders than before, whereas unit (7.2 per cent). EBIT including non-recurring items improved year sales of diesel trucks declined. STILL notched up significant on year to €118.4 million (2013: €109.9 million). gains, especially in western Europe, with the segment outper- Adjusted EBITDA rose to €240.4  million (2013: €223.0  mil- forming the market in terms of order growth in a number of areas, lion). The adjusted EBITDA margin remained unchanged at notably in Scandinavia and Italy. 13.0 per cent. > TABLE 022 We keep the world moving.KION GROUP AG | Annual Report 201494 Key figures – STILL – in € million Order intake Revenue EBITDA Adjusted EBITDA EBIT Adjusted EBIT Adjusted EBITDA margin Adjusted EBIT margin 2014 1,895.1 1,850.7 231.1 240.4 118.4 133.6 13.0% 7.2% 2013 1,692.0 1,717.5 214.4 223.0 109.9 123.9 13.0% 7.2% TABLE 022 Change 12.0% 7.8% 7.8% 7.8% 7.7% 7.8% – – Financial Services (FS) segment already high level achieved in 2013 to €350.1  million (2013: Business performance €314.7  million). As a consequence of the expansion in the short- term rental fleet, intra-group revenue rose by 20.5  per cent to The Financial Services (FS) segment is the central financing part- €270.7  million (2013: €224.7  million). Total segment revenue ner in the KION Group. The FS segment benefited from the therefore amounted to €620.9 million (2013: €539.4 million). Earn- increase in business in the LMH and STILL brand segments, ings before tax came to €5.2  million, exceeding the figure of enjoying growth in the financing of short-term rental business €4.7  million in 2013. The return on equity (ROE) was 13.0 per cent (which is the operational responsibility of the brand segments) (2013: 13.0 per cent). and in the long-term leasing business with external end custom- As at 31 December 2014, total segment assets amounted to ers. As in 2013, a large proportion of the financing portfolio was €1,361.3 million and had therefore increased by €111.9 million in focused on business in western Europe, with some countries, the year under review. Of this total, €521.9 million was accounted notably in southern Europe, accounting for a disproportionately for by lease receivables due from external customers (31 Decem- high amount of volume growth. FS was also able to expand its ber 2013: €458.1  million), while €473.0  million (31 December business outside western Europe, generating significant growth 2013: €449.1  million) related to the financing of the short-term particularly in eastern Europe. rental fleet in the LMH and STILL segments. Leased assets under FS has attracted further funding partners in connection with operating leases relating to external customer contracts the growing business. It has focused on banks operating at a amounted to €267.4 million (31 December 2013: €240.7 million). regional level, providing useful additions to the already well-devel- The funding of leases with external end customers gave rise oped network of global partners. FS has also initiated discussions to leasing liabilities with external funding partners amounting to with potential banking partners in North America with a view to €702.9  million (31 December 2013: €615.5  million). The leasing supporting the planned expansion of business in the region. liabilities arising from the funding of intra-group leases with LMH and STILL relating to the short-term rental fleet business Financial position and financial performance amounted to €334.5 million (31 December 2013: €319.7 million). Revenue from long-term leasing business with external end cus- The net financial debt attributable to the FS segment was tomers once again increased markedly compared with the €155.1  million (31 December 2013: €163.6 million). > TABLE 023 We keep the world moving.KION GROUP AG | Annual Report 2014 GROUP MANAGEMENT REPORT Report on the economic position 95 Key figures – Financial Services – in € million Revenue Adjusted EBITDA Adjusted EBIT Earnings before taxes (EBT) Total segment assets Lease assets Lease receivables thereof lease receivables from long-term leases to third parties thereof lease receivables from LMH and STILL from funding of the short-term rental business Lease liabilities ¹ thereof liabilities from funding of the long-term leases with third parties thereof liabilities from funding of the short-term rental business of LMH and STILL Net financial debt Equity Return on equity ² 1 Includes liabilities from financing of the short-term rental fleet reported as other financial liabilities 2 Earnings before taxes / Average equity tied up during the reporting period excluding the net income of the period 2014 620.9 82.6 2.1 5.2 2013 539.4 66.2 0.7 4.7 TABLE 023 Change 15.1% 24.8% > 100.0% 12.3 % 1,361.3 1,249.4 9.0 % 267.4 994.9 521.9 473.0 1,037.5 702.9 334.5 155.1 46.5 240.7 907.2 458.1 449.1 935.2 615.5 319.7 163.6 41.7 11.1% 9.7% 13.9% 5.3% 10.9% 14.2% 4.6% – 5.2% 11.4% 13.0% 13.0% – Other segment Earnings Business performance The total revenue generated by the segment amounted to €235.7  million, roughly the same level as in 2013 (€235.1 million). Group head office functions that do not come under any other As in the previous year, the main revenue drivers were internal IT segment are reported in the Other segment. These functions and logistics services as well as KION India. Revenue generated include the holding and service companies in the KION Group. outside the KION Group totalled €47.6  million (2013: €48.2  mil- KION India (formerly Voltas Material Handling) is also reported in lion). Business volume at KION India increased slightly compared the Other segment. In 2014, KION India expanded its sales and with 2013. service network and now has access to more than 60 sales out- Adjusted EBIT for the segment reached €135.5 million, which lets. Since the start of 2015, KION India has been included in the was substantially up on the figure for 2013 (€73.5 million). For the LMH brand segment. most part, this increase was attributable to improved earnings in We keep the world moving.KION GROUP AG | Annual Report 201496 Key figures – Other – in € million Order intake Revenue EBITDA Adjusted EBITDA EBIT Adjusted EBIT 2014 236.5 235.7 141.1 152.5 124.1 135.5 2013 235.1 235.1 88.7 90.4 71.8 73.5 TABLE 024 Change 0.6% 0.3% 59.2% 68.7% 72.8% 84.3% subsidiaries compared with 2013, as a consequence of which risk. In this way, the KION Group creates a stable funding position intra-group dividend income for the segment rose to €169.4 mil- to maintain profitable growth. lion (2013: €117.3 million). This was significantly more than enough The financial resources within the KION Group are provided to offset the primary costs for the Group head office functions. based on an internal funding approach. The KION Group collects These earnings are eliminated as part of the consolidation for the liquidity surpluses of the Group companies in central or regional KION Group. > TABLE 024 cash pools and, where possible, covers subsidiaries’ funding requirements with intercompany loans. This funding enables the Consolidation/reconciliation KION Group to present a united front in the capital markets and strengthens its bargaining position with banks and other market Besides the intra-group supply relationships between the brand participants. segments and with Financial Services, the main factor in the EBIT As a listed group of companies that also obtains funding effect of minus €167.9 million (2013: minus €90.6 million) across using corporate bonds and loan facilities, the KION Group con- all segments was the intra-group dividend income. siders the interests of shareholders, bond holders and banks in its financial management. For the sake of these stakeholders, the KION Group makes sure that it maintains an appropriate ratio of Financial position internal funding to borrowing. The KION Group’s borrowing is based on a long-term Principles and objectives of financial management approach. The core components of this borrowing will become due for repayment in the years 2018 to 2020. The Group occa- By pursuing an appropriate financial management strategy, the sionally arranges additional credit lines for KION Group compa- KION Group makes sufficient cash and cash equivalents availa- nies with local banks or leasing companies in order to comply ble at all times to meet the Group companies’ operational and with legal, tax and other regulations. strategic funding requirements. In addition, the KION Group opti- Among other things, the loan facility and the contractual con- mises its financial relationships with customers and suppliers, ditions relating to the issuance of the corporate bonds require manages any collateral security offered and mitigates the finan- compliance with loan conditions (‘covenants’). The loan facility cial risk to its enterprise value and profitability, notably currency also requires compliance with specific financial covenants during risk, interest-rate risk, price risk, counterparty risk and country the term of the agreement. Non-compliance with the covenants may, for example, give lenders the right to terminate the loan or We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Report on the economic position 97 permit bondholders to put the corporate bonds back to the issuer gramme; the shares equated to approximately 0.052 per cent of prior to their maturity date. All covenants and restrictions were the total share capital. Together with the 200,000 treasury shares comfortably complied with in the past financial year. already bought in 2013, these shares were offered from October Depending on requirements and the market situation, the initially to employees of the German companies of the KION KION Group will also avail itself of the funding facilities offered by Group participating in the KION Employee Equity Programme in the public capital markets in future. The KION Group therefore order to enable the employees to share in the benefits from the seeks to maintain a strong credit profile in the capital and funding performance of the business. Employees had acquired 87,438 markets by rigorously pursuing a value-based strategy, imple- shares by the end of the year. Over the coming years, it is planned menting proactive risk management and ensuring a solid funding to extend the KION Employee Equity Programme to cover sub- structure. On 7 April 2014, Moody’s raised the rating of the KION sidiaries outside Germany. Group and the bonds from Ba3 to Ba2 with a stable outlook. Then, on 15 April 2014, Standard & Poor's raised its rating for the Analysis of capital structure KION Group from BB- with a positive outlook to BB, still with a positive outlook. Financial debt The KION Group maintains a liquidity reserve in the form of Long-term borrowing totalled €648.0 million as at 31 December unrestricted, bindingly committed credit lines and cash in order to 2014 (31 December 2013: €975.0 million) and comprised the cor- ensure financial flexibility and solvency. porate bond due to mature in 2020 (€450.0 million) and the draw- The KION Group only uses derivatives to hedge underlying downs under the revolving credit facility classified as long term operational transactions; in particular, hedging for currency and (€198.0 million). The fixed-rate bond with a volume of €325.0 mil- interest-rate risks. To the greatest possible extent, only cash flow lion and a maturity date of 2018 was repaid early in April 2014. As hedges were used for this purpose in the reporting year. at the reporting date, an amount of €204.0 million had also been drawn down from the revolving credit facility on a short-term Main financing activities in the reporting period basis (31 December 2013: €184.4  million). As at 31 December 2014, the unused, unrestricted loan facility stood at €841.0 million On 15 April 2014, the KION Group repaid early and in full the or – including unrestricted cash and cash equivalents – at fixed-rate tranche of the corporate bond issued in 2011, which €939.7  million. was due to mature in 2018 and had a volume of €325.0 million, At €909.6 million, financial debt was lower overall at the end and the floating-rate tranche of the corporate bond issued in of 2014 than at the end of 2013 (31 December 2013: €1,198.6 mil- 2013, which was due to mature in 2020 and had a volume of lion). The main reason for this was the lower level of short-term €200.0  million. The funds used for the repayment mainly origi- borrowing. After deduction of cash and cash equivalents of nated from a revolving credit facility maturing in June 2018. Also €98.9 million, the remaining net financial debt came to €810.7 mil- in April 2014, this revolving credit facility was increased by lion (31 December 2013: €979.3 million). Net debt was approxi- €198.0  million to a total of €1,243.0 million on the basis of bilateral mately 1.0 times adjusted EBITDA compared with 1.4 times as at lending agreements with a group of banks. These additional 31 December 2013 and declined therefore significantly relative to loans mature in April 2019 and also have a variable interest rate. earnings. > TABLE 025 This credit facility currently has lower interest rates than the two repaid corporate bond tranches. A further core component of the long-term funding of the KION Group is the remaining fixed-rate corporate bond with a volume of €450 million, which is due for repayment in 2020. In September 2014, KION GROUP  AG purchased 51,000 no-par-value treasury shares as part of a share buy-back pro- We keep the world moving.KION GROUP AG | Annual Report 201498 Net financial debt in € million Corporate bond – fixed 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 2014 – 450.0 – 459.9 6.6 – 6.9 909.6 – 98.9 810.7 2013 325.0 450.0 200.0 233.7 6.6 – 16.7 1,198.6 – 219.3 979.3 TABLE 025 Change – 100.0% 0.0% – 100.0% 96.8% – 0.1% 58.8% – 24.1% 54.9% – 17.2% Retirement benefit obligation Further details about the retirement benefit obligation are The KION Group supports pension plans in many countries. provided in note [28] in the notes to the consolidated financial These plans comply with legal requirements, local practice and statements. the situation in the country in question. They are either defined benefit pension plans, defined contribution pension plans or mul- Lease liabilities ti-employer benefit plans. As at 31 December 2014, the retire- Continuing growth in the leasing business with end customers in ment benefit obligation under defined benefit pension plans 2014 led to a correspondingly higher funding requirement. Lease amounted to a total of €787.5  million (31 December 2013: liabilities under sale-and-leaseback arrangements rose to €560.1  million). Most of this obligation related to pension plans in €707.7  million (31 December 2013: €617.1 million). Of this total, Germany. The significant year-on-year increase overall was €461.7 million was accounted for by non-current lease liabilities largely attributable to changes in the discount rate, given the pre- (31 December 2013: €403.7 million) and €246.0 million by current vailing low level of interest rates. After deduction of the pension lease liabilities (31 December 2013: €213.3 million). plan assets amounting to €21.6 million, the remaining net obliga- Short-term rentals and procurement leases are allocated to tion came to €765.8 million (31 December 2013: €537.7 million). the brand companies. The corresponding liabilities are reported Contributions to pension plans that are entirely or partly under other financial liabilities (see note [33] in the notes to the funded via funds are paid in as necessary to ensure sufficient consolidated financial statements). As at 31 December 2014, assets are available and to be able to make future pension pay- other financial liabilities included liabilities of €339.1  million (31 ments to pension plan participants. These contributions are December 2013: €327.5 million) arising from sale-and-leaseback determined by various factors, such as the funded status, legal transactions used to finance the short-term rental fleet. The item and tax considerations, and local practice. The payments made also included liabilities from residual value guarantees amounting by the KION Group under retirement pension obligations in 2014 to €18.5 million (31 December 2013: €17.3 million). These residu- totalled €20.4 million, comprising €14.4 million for direct pension al-value liabilities relate to residual-value guarantees provided in payments and €5.6  million for employer contributions to plan connection with the sale of assets to leasing companies, where assets. Transfers to external pension funds resulted in further the guaranteed amount is more than 10.0 per cent of the fair value payments of €0.4 million. of the asset in question. We keep the world moving.KION GROUP AG | Annual Report 2014 GROUP MANAGEMENT REPORT Report on the economic position 99 Equity Funding vehicles not reported on the statement The level of equity changed only marginally in the reporting year. of financial position As at the reporting date, equity amounted to €1,647.1 million, an The KION Group also makes use of funding vehicles not reported increase of 2.3  per cent year on year (31 December 2013: in the statement of financial position. As part of its financing activ- €1,610.0  million). In addition to the positive effect from net income ities, the KION Group has entered into leases both for its own use there were significant negative effects recognised in other com- and for transfer to customers. In accordance with the relevant prehensive income amounting to €112.7  million, primarily as a IFRS requirements, such leases are not reported as either an result of the reduction in the discount rate used for pension obli- asset or a liability on the statement of financial position. The nom- gations. The equity ratio nevertheless improved slightly to inal amount of the contractual obligations arising from such 26.9 per cent (31 December 2013: 26.7 per cent). > TABLE 026 leases not reported in the statement of financial position was €250.8  million as at 31 December 2014 (31 December 2013: €206.0  million; see note [34] in the notes to the consolidated financial statements). (Condensed) balance sheet, equity and liabilities TABLE 026 in € million Equity Non-current liabilities thereof: Retirement benefit obligation Financial liabilities Deferred tax liabilities Lease liabilities Current liabilities thereof: Financial liabilities Trade payables Lease liabilities Total equity and liabilities 2014 1,647.1 in % 26.9% 2013 1,610.0 in % 26.7% Change 2.3% 2,688.3 43.9% 2,711.1 45.0% – 0.8% 787.5 646.8 320.9 461.7 12.8% 10.6% 5.2% 7.5% 560.1 971.1 306.2 403.7 9.3% 16.1% 5.1% 6.7% 40.6% – 33.4% 4.8% 14.4% 1,793.0 29.3% 1,705.3 28.3% 5.1% 262.9 564.6 246.0 6,128.5 4.3% 9.2% 4.0% – 227.5 550.5 213.3 6,026.4 3.8% 9.1% 3.5% – 15.5% 2.6% 15.3% 1.7% We keep the world moving.KION GROUP AG | Annual Report 2014100 Analysis of capital expenditure business. A higher level of working capital at the reporting date had the effect of reducing cash flow. Capital expenditure (excluding leased and rental assets) was Net cash used for investing activities was lower than in the again funded using cash flow from operating activities in the previous year at €297.8 million (2013: net cash used of €310.7 mil- reporting year. The volume of capital expenditure went up by lion). Capital expenditure on developments (R&D), property, plant 5.9 per cent year on year to €133.1 million (2013: €125.8 million). and equipment, and the rental fleet business (net) rose by As was the case in 2013, one major item of capital spending took €20.5  million year on year. In the previous year, net cash totalling the form of capitalised development costs in the Linde Material €25.1 million had been used to acquire Arser and the remaining Handling and STILL segments, for example in relation to the shares in Willenbrock. The main inflows from investing activities enhancement of electric forklift trucks, warehouse technology related to the disposal of an equity investment of the Willenbrock products, innovative intralogistics solutions and lithium-ion tech- Group, dividend payments and net inflows from disposals of nology. In addition, the KION Group continued to modernise its property, plant and equipment. production and technology sites, especially in Germany and Asia. Free cash flow – the sum of cash flow from operating activi- Another area of capital expenditure was the ongoing improve- ties and investing activities – increased by €110.3  million to ment of the IT infrastructure, including standardisation of the €305.9  million in the reporting period (2013: €195.6 million). As in global sales systems. 2013, a large part of it was used for repayments. The volume of capital expenditure rose in both brand seg- At minus €428.1  million, cash flow from financing activities ments, above all due to the modernisation of equipment and pro- was down significantly on the prior-year figure (2013: minus duction facilities. The construction of the new plant in the Czech €531.6 million), which had been particularly affected by the IPO Republic will only have a material impact on the volume of capital and the restructuring of financial debt. The net repayment of expenditure from 2015 onwards. financial debt in the year under review totalled €301.2  million Analysis of liquidity (2013: €1,105.7  million). The financial debt taken up during the year, which came to €1,375.2  million, was more than offset by repayments totalling €1,676.4 million. These repayments included Liquidity management is an important aspect of central financial €525.0  million in respect of the early redemption of the bond management. The sources of liquidity are cash and cash equiva- tranches plus early repayment charges of €14.8 million. Net cash lents, cash flow from operating activities and amounts available of €82.5 million was also used for regular interest payments (2013: under credit facilities. As at 31 December 2014, cash and cash €112.6 million). The distribution of a dividend for 2013 of €0.35 per equivalents had declined to €98.9 million owing to better utilisa- share resulted in an outflow of funds of €34.5 million, while the tion of intra-group cash on hand outside Germany (31 December acquisition of a further 51,000 shares for employees in 2014 gen- 2013: €219.3  million). Taking into account the undrawn credit erated an outflow of €1.5 million. > TABLE 027 facilities, the KION Group had unrestricted cash and cash equiv- alents of €939.7  million at the end of 2014, compared with €1,079.6 million as at 31 December 2013. Net debt decreased by €168.6 million. The KION Group’s net cash provided by operating activities totalled €603.8 million, which was significantly higher than the pri- or-year figure of €506.3  million after restatement to reflect the rental assets. The main reason for this was the €68.8  million decrease in tax payments, which had a positive impact on cash flow. This decrease was due to the fact that there had been one- off tax payments in connection with the sale of the hydraulics We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Report on the economic position 101 (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 2014 347.0 603.8 – 297.8 305.9 – 428.1 1.8 – 120.4 2013 374.2 506.3 – 310.7 195.6 – 531.6 – 7.0 – 343.0 TABLE 027 Change – 7.2% 19.2% 4.2% 56.4% 19.5% > 100.0% 64.9% * Last year's figures were adjusted due to a change in presentation, for details see ‘Other disclosures on Consolidated statement of cash flows’ Net assets Non-current assets Financial services activities also contributed to the increase in non-current assets. Leased assets under leases with end cus- tomers that are classified as operating leases rose slightly due to the overall growth in business, advancing by €27.1  million to Non-current assets had risen by €89.1 million compared with the €279.0  million (31 December 2013: €251.9  million). Long-term end of 2013, reaching €4,524.8  million. Intangible assets lease receivables arising from leases with end customers that are accounted for €2,412.5 million (31 December 2013: €2,428.7 mil- classified as finance leases went up by €36.4  million to lion). Goodwill and the KION Group’s brand names represented €345.3  million, compared with €308.8 million at the end of 2013. €2,092.4 million of that amount (31 December 2013: €2,089.4 mil- Another major factor in the rise in non-current assets was the rec- lion). Property, plant and equipment (including capitalised devel- ognition of deferred tax assets. However, the increase in assets opment costs) declined moderately because the capital expend- was partly offset by the impairment charge recognised on the iture of €133.1  million was more than offset by depreciation of stake held in Linde Hydraulics. Overall, equity-accounted invest- €150.3  million. Rental assets in the brand segments’ short-term ments fell from €138.6 million to €114.6 million. rental fleet rose to €487.1 million (31 December 2013: €461.2 million). An explanation of the change in deferred tax assets is provided in note [14] in the notes to the consolidated financial statements. We keep the world moving.KION GROUP AG | Annual Report 2014 102 Current assets Another factor was the rise in other current financial assets. The main reason for this was the remeasurement of existing The 0.8  per cent growth in current assets to €1,603.7  million options relating to Linde Hydraulics. (31  December 2013: €1,590.7 million) was the result of higher Lease receivables from external end customers advanced trade receivables and a slight increase in inventories. Inventories from €170.8 million as at 31 December 2013 to €202.5 million on had fallen again significantly from their level at 30  June  2014. the reporting date owing to the increase in business volume. The increase in the volume of receivables is attributable to The rise in current assets was restricted by the sharp higher product sales, especially in the second half of the year. decrease in cash and cash equivalents to €98.9  million There was only an insignificant change in the average number of (31   December  2013: €219.3  million), which was attributable to days outstanding of receivables. the increased use of Group liquidity to reduce financial debt. > TABLE 028 Inventories in € million Materials and supplies Work in progress Finished goods and merchandise Advances paid Total inventories 2014 122.2 71.5 330.8 4.7 529.2 2013 108.3 66.7 331.2 5.5 511.8 TABLE 028 Change 12.8% 7.1% – 0.1% – 14.5% 3.4% We keep the world moving.KION GROUP AG | Annual Report 2014 GROUP MANAGEMENT REPORT Report on the economic position 103 Working capital (inventories and trade receivables less trade payables) was €562.8 million as at the reporting date, which was higher than it had been a year earlier (31  December  2013: €520.0 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 and cash equivalents 2014 4,524.8 in % 73.8% 2013 4,435.8 in % 73.6% Change 2.0% 1,497.1 24.4% 1,494.7 24.8% 595.4 357.9 487.1 279.0 345.3 9.7% 5.8% 7.9% 4.6% 5.6% 594.7 295.5 461.2 251.9 308.8 9.9% 4.9% 7.7% 4.2% 5.1% 0.2% 0.1% 21.1% 5.6% 10.7% 11.8% 1,603.7 26.2% 1,590.7 26.4% 0.8% 529.2 598.2 202.5 168.2 98.9 8.6% 9.8% 3.3% 2.7% 1.6% 511.8 558.7 170.8 114.7 219.3 8.5% 9.3% 2.8% 1.9% 3.6% 3.4% 7.1% 18.6% 46.7% – 54.9% 1.7% Total assets 6,128.5 6,026.4 We keep the world moving.KION GROUP AG | Annual Report 2014 104 NON-FINANCIAL PERFORMANCE INDICATORS enables the Company to tackle the challenges of demographic change. The KION Group has strengthened its employer brands, par- ticularly those of LMH and STILL. In 2014, STILL was recognised as one of Germany’s best employers by the Top Employers Insti- The KION Group’s enterprise value is determined not only by tute, an international certification organisation, for the third time in financial KPIs but also by non-financial influencing factors. These a row. It also received a ‘Germany’s Top Employers’ award from factors relate to the Company’s relations with its customers and the CRF Institute. employees, to its technological position and to environmental considerations – and they also have an impact on the success of Headcount the Strategy 2020. The overarching objective of establishing the KION Group as the global market leader with above-average The average number of employees (full-time equivalents (FTEs), profitability, efficiency and resilience can only be achieved if the including trainees and apprentices) in the KION Group was Group succeeds in: competent and committed employees at all sites; – being an attractive and responsible employer that can retain – developing products that are closely tailored to customers’ – continually increasing the customer benefits provided by its needs and environmental requirements now and in future; products and services and designing production processes 22,438 in 2014 (2013: 21,632 FTEs). As at 31 December 2014, the KION Group companies employed 22,669 FTEs, 396 more than a year earlier. Much of this increase was accounted for by the rise in head- count at STILL GmbH in Hamburg – mainly in production and logistics departments – and at LMH China. This increase was partly offset by a reduction in employee numbers, primarily accounted for by the loss of 66 jobs at the plant in Merthyr Tydfil in such a way that resources are conserved and emissions (UK), which closed in 2014, and the disposal of Willenbrock are avoided as far as possible. Arbeitsbühnen GmbH & Co KG, which included the transfer of its 58 employees. 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 increases in Germany and China were attributable to environment. the factors mentioned above. There were also substantial rises in growth markets such as Poland. > TABLE 030 Employees HR strategy The KION Group’s success is founded on the capabilities and commitment of its employees. Its human resources (HR) strategy is geared towards providing the best possible support for stra- tegic 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 attrac- tive working conditions and the opportunities afforded by work- ing for an international group of companies. This strategy also We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Report on the economic position 105 Employees (full-time equivalents)* TABLE 030 31/12/2014 Western Europe Eastern Europe Americas Asia Rest of world Total 31/12/2013 Western Europe Eastern Europe Americas Asia Rest of world Total LMH 8,607 1,096 138 3,560 544 STILL 6,792 671 513 0 0 13,945 7,976 8,704 1,060 122 3,370 568 6,559 629 527 0 0 13,824 7,715 FS 60 0 0 0 0 60 59 0 0 0 0 59 Other 526 0 0 162 0 688 519 0 0 156 0 675 * Number of employees in full-time equivalents as at balance sheet date; Allocation according to the contractual realtionship Personnel expenses amounted to €1,231.9  million. The main reason for this advance of 7.7 per cent compared with 2013 was the increase in average headcount for 2014 and changes to collec- tive bargaining agreements. > TABLE 031 Personnel expenses in € million Wages and salaries Social security contributions Post-employment benefit costs and other benefits 2014 966.4 215.7 49.7 2013 900.5 203.7 39.5 Total 1,231.9 1,143.8 Total 15,985 1,767 651 3,722 544 22,669 15,841 1,689 649 3,526 568 22,273 TABLE 031 Change 7.3% 5.9% 25.8% 7.7% We keep the world moving.KION GROUP AG | Annual Report 2014 106 Diversity The KION Group endeavours to offer its employees interest- ing career opportunities and flexible, family-friendly working-time The KION Group sees itself as a global manufacturer with strong models. The Group companies also collaborate closely on areas intercultural awareness: as at 31 December 2014, people from such as talent management and training & development pro- 69 different countries were employed across the KION Group. grammes. This helps to systematically identify and support staff One of the ways in which the Company promotes inter- with potential, high performers and experts in key functions. national collaboration between employees is the KION expat pro- Organised in cooperation with the European School of Manage- gramme, which gives employees the opportunity to transfer to ment and Technology (ESMT), KION Campus is an international, different countries where the KION Group is represented. cross-brand executive development programme aimed at the The KION Group tackles the challenges of demographic Group’s 300 or so top executives. In addition, new managers at change by providing working conditions that are suited to STILL receive support under the First Leading programme during employees’ age-related requirements and organising healthy-liv- their first few years. Prospective managers can enhance their ing programmes so that it can continue to benefit from older skills through STILL’s Young Professional programme, while employees’ experience. As at 31 December 2014, 24.2 per cent highly talented staff around the world can participate in the Inter- of employees were over the age of 50 (31 December 2013: national Junior Circle. The STILL Academy offers subject-specific 23.5  per  cent). A total of 192 employees were participating in and interdisciplinary training courses. Opportunities at Linde partial retirement models as at the reporting date (31 Decem- Material Handling include a virtual assessment centre for future ber 2013: 250). managers. An important diversity objective is increasing the proportion of female employees. The proportion of the total workforce made Training and professional development up of women remained stable at 16.1  per  cent in 2014 (2013: 16.1 per cent). However, the proportion of management positions The companies in the KION Group currently offer training for occupied by women rose slightly, from 8.0  per  cent in 2013 to 21 professions in Germany. They employed a total of 577 trainees 8.2 per cent in 2014. Back in 2013, the Executive Board resolved and apprentices as at 31 December 2014 (31 December 2013: to double the proportion of women in management positions by 591). The ratio of trainees and apprentices to other employees 2020. Going forward, the KION Group intends to fill more man- therefore remains at a steady, high level. Besides providing dual agement positions with employees from outside Germany in vocational training schemes, KION Group companies offer work order to better reflect the Company’s international make-up. placements for students combining vocational training with a The KION Group offers flexible working-time models that degree course in cooperation with various universities. promote a good work-life balance. In addition, Linde Material Handling has implemented a company agreement about Sharing in the Company’s success ‘teleworking/home office’, which stipulates the terms on which employees can work at home on a mutually agreed and Having successfully floated on the stock exchange, the KION voluntary basis. Group launched the KION Employee Equity Programme (KEEP) in 2014. Initially limited to Germany, the programme is to be Development of specialist workers and executives successively rolled out to other countries. In 2014, around 1,800 employees in Germany participated in this share match- Finding highly qualified people to fill specialist and executive posi- ing programme, which means around 24 per cent of the employ- tions is crucial to the KION Group’s success. As a result, one of ees in Germany who were eligible to take part became employee the focuses of HR work across the Group was again the recruit- shareholders. Following the successful introduction in Germany, ment and development of suitable young talent in 2014. the plan for 2015 is to extend KEEP to China, France, Italy and the We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Report on the economic position 107 United Kingdom so that employees there also have the opportu- and logistics employees in 2014. Two pilot projects on behav- nity to share in the Company’s success. iour-based safety were also launched. Their objective is to create In 2014, the remuneration of the Group’s 300 or so top exec- greater awareness of health and safety in the workplace and utives was aligned with that of the Executive Board by introducing therefore to further reduce the number of accidents. At STILL in a remuneration component designed to provide a long-term Hamburg, the company doctor works closely with safety officers incentive. The first tranche of the KION Long-Term Incentive Pro- to optimise ergonomics at employees’ workstations in order to gramme (LIFT) was issued in the reporting year. lower health risks and the risk of accidents caused by working Employee commitment conditions. Healthy-eating initiatives also continued. Last year, more than 2,300 Linde Material Handling employees attended training courses designed to promote a The KION Group’s products and services destined for its cus- culture of safety. tomers are produced by committed and motivated employees. That is why all KION companies aim to ensure a high level of employee commitment. LMH surveyed a total of 8,480 em ploy- Research and development ees in China, France, Germany and the United Kingdom on this subject in 2014, with a response rate of 74 per cent. The results Strategic focus of research and development of the survey were presented and discussed in all departments, enabling improvement measures to then be identified. These The focus of research and development (R&D) is aligned with the measures were focused on establishing a culture of open dia- Strategy 2020. The KION Group pursues the primary objective of logue and discussion within teams and between the Company increasing the customer benefits in all price segments and sales and its employees. regions and, by adhering to modular and platform strategies, offering high quality at competitive prices. To this end, R&D is Health and safety in the workplace designed to be as cost-effective as possible in order to reduce the complexity and diversity of products and shorten develop- In the reporting year, the KION Group continued to expand its ment times. The cross-brand R&D platform enables research activities relating to health, safety and the environment (HSE). A results and technological expertise to be shared, although corporate policy sets out the KION Group’s obligations, which responsibility for product development lies mainly with the indi- include taking comprehensive precautions to create a safe work- vidual companies. ing environment and ensuring employees know how to avoid In the premium segment, the focus remains on total cost of risks and accidents. ownership (TCO) – including purchase price, maintenance and HSE activities centre on an internal audit programme, repair costs and fuel consumption – while complying with envi- which covers all of the Group’s production facilities. The aim of ronmental targets and regulatory requirements. The objective the regular audits is to systematically document existing HSE here is to ensure ongoing enhancement of the portfolio, which will measures and processes and provide specific ideas for how secure the Company’s position as a leading technology provider. they can be developed further (more details can be found in the Another aim is to integrate the KION Group’s logistics solutions ‘sustainability’ section). into customers’ value chains and harness the potential of new The health rate for 2014 stood at the high level of 96.5 per cent. application areas. In the volume and economy segments, the Fewer workplace accidents were registered than in 2013. KION Group is establishing shared, cross-brand and cost- STILL worked on implementing its detailed three-step con- efficient platforms that enable low-cost production yet allow a cept for health, safety and the environment in the year under strong degree of regional differentiation in the industrial trucks. review. All managers had attended comprehensive training on HSE in 2013, and the courses were extended to all production We keep the world moving.KION GROUP AG | Annual Report 2014108 Key R&D figures The KION Group takes comprehensive measures to protect the products it develops against imitations. In 2014, the KION com- In 2014, the KION Group actively stepped up its total spending on panies were granted a total of 140 patents (2013: 85). As at research and development, which amounted to €119.7  million. 31  December 2014, the companies of the KION Group held a This constituted a year-on-year rise of 4.8  per  cent (2013: total of 1,689 patent applications and issued patents (31 Decem- €114.2 million). The KION Group therefore channelled 2.6 per cent ber 2013: 1,596 patent applications and issued patents). of total revenue (2013: 2.5 per cent), or 4.7 per cent of revenue from new truck business (2013: 4.5 per cent), into R&D and was Focus of R&D in 2014 thus once again higher than the industry average in its R&D spending. Total R&D expenditure included €43.7 million in capi- Reduction of emissions and fuel consumption talised development costs (2013: €45.7 million). These expenses Tighter emissions standards for diesel trucks and the sustained were offset by depreciation and amortisation of €49.7  million trend for e-mobility have pushed up demand for zero-emission (2013: €45.1 million) (see note [17] in the notes to the consolidated electric forklift trucks, including those with large load capacities. financial statements). In response, both LMH and STILL have extended their range of The number of full-time jobs in R&D teams grew by 79 to electric counterbalance trucks that can lift up to eight tonnes. 1,023. Within the R&D organisation, the development centre in In June, STILL presented its reworked RX 20 with much the southern Chinese city of Xiamen carries out cross-brand improved performance capabilities. LMH launched the new E12- development work, focusing mainly on the economy and volume E20 EVO electric counterbalance truck models in the 1.2-2 tonne price segments in emerging markets. It is playing a crucial role in load capacity category. Thanks to this facelift, the new models bringing the groupwide platform strategy to fruition. That is why consume up to 17 per cent less energy than their predecessors. R&D headcount at the centre again increased particularly One of the reasons for this saving was the use of different driving strongly, climbing from 232 FTEs in the previous year to 282 FTEs dynamics programmes that provide the optimum balance in 2014. > TABLE 032 between high performance and low energy consumption for the specific situation. Research and development (R&D) in € million Research and development costs (P&L) Amortisation expense (R&D) Capitalised development costs Total R&D spending R&D spending as percentage of revenue 2014 125.7 – 49.7 43.7 119.7 2.6% 2013 113.6 – 45.1 45.7 114.2 2.5% TABLE 032 Change 10.6% – 10.3% – 4.2% 4.8% – We keep the world moving.KION GROUP AG | Annual Report 2014 GROUP MANAGEMENT REPORT Report on the economic position 109 To provide customers with clear information on how their environ- Automation and networking mental footprint is affected as a result of deploying a Linde truck, In May 2014, STILL received the International Forklift Truck of the Linde Material Handling worked with the Fraunhofer Institute for Year Award (IFOY Award) in the Automated Guided Vehicles cat- Building Physics (IBP) to develop a method for assessing the envi- egory for its iGoEasy automation solution, the world’s first system ronmental impact of its forklift trucks and warehouse trucks solution for facilities with small transport volumes. All configura- throughout the product lifecycle. In addition, lifecycle assessments tion, control and monitoring of the system is carried out using an for the company’s seven main product groups were prepared. iPad. Last year, STILL also created a raw materials warehouse equipped with all the necessary automated components: for the Modular and platform strategy first time, semi-automated shuttles communicate with fully auto- The KION Group is establishing shared, cross-brand and cost- mated reach trucks so that raw materials can be carried to the efficient platforms for product development and production that right production supply area at the right time. are geared to the volume and economy segments. However, Growing demand for individualised products means custom- market success depends on these platforms allowing a strong ers need increasingly flexible material flow strategies. That is degree of regional differentiation in the industrial trucks. One why more and more manufacturers are deploying tugger trains example is the diesel truck platform developed by Baoli in China, to move materials around their premises. Both STILL and which is used for region-specific economy trucks in India (Voltas) Linde updated their tugger train solutions in 2014. STILL and Brazil (STILL). Another platform, developed in Xiamen, was launched the first tow tractors in its LTX model series in July. also launched for the global volume segment in 2014. Available in many variants, this series provides custom trans- In western Europe, the premium brands, Linde and STILL, port solutions for various industries and applications. In May, will continue to use different platforms for their counterbalance LMH presented two new logistics train solutions: the Linde trucks in order to maintain the defining characteristics of their Logistic Train and Linde Factory Train are designed for the cycle- brands, but will increasingly deploy shared modules. Some of based flow of materials found in modern production facilities. their warehouse technology products have always had shared The automation and networking of supply chains remains an roots, such as the very narrow aisle trucks that are produced for important subject. In May 2014, LMH presented the latest gener- both brands in Reutlingen. Drive technology ation of its ‘connect:’ fleet management solution. This product family consists of a local database and a cloud-based data portal, new management and analysis software, and a suite of software As in the previous year, development of new drive technologies modules that can be combined to form individual functional pack- centred on powerful lithium-ion batteries for electric trucks. In ages that are tailored to the specific customer requirements. The October 2014, LMH and STILL added warehouse trucks (pedes- solution connects forklift trucks and warehouse trucks with the trian pallet trucks) fitted with lithium-ion batteries to their product local database or the servers of the Linde Data Cloud via Blue- ranges for the first time. Both solutions are highly efficient tooth or wireless. Because it can be retrofitted, the system can because each truck, including the controls, electronics, battery be installed on all trucks in a fleet, including older and third- and charger, forms a system whose different components com- party vehicles. municate with each other. During the reporting year, ‘connect:’ was used in a self- LMH and STILL are also pushing forward with the develop- driving car for the first time. In the XchangE concept vehicle ment of lithium-ion batteries for counterbalance trucks in higher developed by Rinspeed AG of Switzerland, the system uses RFID weight categories along with the necessary charging technology. technology to manage access control and transmits the technical The fuel-cell powered trucks of Linde Material Handling were data needed to monitor autonomous driving. It therefore per- designated ‘best innovation’ in the industrial truck category of the forms the same technical functions that it does in a fleet truck. LOGISTRA best practice: Innovations 2014 awards, which are Another application for ‘connect:’ was showcased in a service voted for by readers of the trade journal LOGISTRA. vehicle developed jointly with Deutsche Telekom. The interaction We keep the world moving.KION GROUP AG | Annual Report 2014110 between ‘connect:’ and Deutsche Telekom’s Arrival Control app Customers enables customers to track the service vehicle’s current location and estimated time of arrival minute by minute. Deutsche Tele- The KION brand companies regularly exhibit at the leading trade kom and LMH have signed a cooperation agreement under which fairs for their sector so that they can strengthen their relationships the app solution will be tested by LMH’s customer service organ- with customers and partners. Contact with customers at trade isation. Customers will benefit from more transparency and a fairs also makes it possible to gauge interest in the product inno- greater ability to plan. vations on show among new and existing customers. In May, LMH teamed up with 18 partners and suppliers to demonstrate Workplace safety and ergonomics intralogistics in an interactive exhibition entitled World of Material There was a world premiere for LMH in May 2014: the Linde Handling, which was held over a number of weeks in the grounds Safety Pilot is an electronic driver assistance system that helps to of Mainz’s exhibition centre. Some 6,000 customers, prospects, prevent operating and driving errors when trucks are used at their journalists and employees from more than 40 countries took up limits, thereby reducing the risk of accidents caused by trucks tip- the invitation to attend talks, exhibitions and product demonstra- ping over. Not only does the system provide the driver with visual tions. Linde Material Handling exhibited its ‘connect:’ connectivity and acoustic warnings, the truck control unit also actively inter- solution at the Geneva International Motor Show in 2014. venes by regulating the truck. STILL showcased its trucks and system solutions at LogiMAT Another driver assistance system has been developed as well as at the CeMAT trade fairs in Hannover and Russia. Visi- especially for Linde reach trucks with tall masts, which are tors were also able to see the cubeXX concept truck in action for becoming ever more common due to increasingly high racks. The the first time, following its unveiling in the previous year. In Sep- Dynamic Mast Control (DMC) system compensates for mast tember, existing and prospective customers were invited to an oscillations and deflections quickly, precisely and energy- international efficiency day at the STILL Arena in Hamburg, where efficiently. This means the driver does not have to wait for the load they attended presentations and workshops. to stop moving and can work much faster and more safely. In April 2014, STILL began offering a new reach truck (FM-X) with active load stabilisation, the first to achieve a lift height of up to Sustainability 13 metres. Active load stabilisation reduces the time that a driver has to wait before lifting a load onto a high rack by up to The KION Group strives for a balance between environmental, 80 per cent. economic and social considerations in its business activities. This Furthermore, LMH brought out two compact double stackers focus on sustainability is reflected in its eco-friendly and safe with enhanced safety features in February 2014. They are designed products that help customers to conserve energy, reduce emis- for light-duty logistics applications, such as in supermarkets. The sions and comply with strict workplace safety standards (see the features include SafetySpeed, which regulates driving speed, and ‘research and development’ section). Furthermore, the KION SafetyLift, which prevents the accidental raising or lowering of the Group ensures that its production processes have as minimal an lifting equipment. To avoid collisions, the double stackers are fitted impact on the environment as possible and that it offers safe and with four different braking systems. discrimination-free working conditions. The KION Code of Compliance lays down binding rules of conduct for all companies in the Group and their employees. All other standards and initiatives relating to health, safety and the environment (HSE) are derived from this code. The corporate policy on workplace safety, health and the environment defines a number of requirements for the KION Group companies, including: We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Report on the economic position 111 managers in sales & service was held for the first time. Following the same approach as the production departments, the aim is to set up a standardised reporting and analysis system for acci- dents and risks in the sales & service organisation. All plants capture data about their energy consumption, vol- umes of waste and recycling, water consumption and emissions of CO2 and volatile organic compounds (VOC). This data is included in an annual internal environmental report. Data for 2014 was not available at the time this group management report was compiled, so the key data from the 2013 environmental report is presented below. The total volume of primary energy consumed by all produc- with the necessary training; codes of conduct and industry standards; – as a minimum, complying with all relevant national laws, – ensuring safe working conditions and providing employees – avoiding the release of pollutants, discharge and emissions – reducing the volume of waste by making better use of raw – using materials, products and processes that comply with – using resources, energy and raw materials efficiently. materials and using recyclable materials; into the environment as far as possible; best environmental practice; In 2014, the KION Group established new minimum standards for tion sites in the KION Group in 2013 amounted to 285.5 gigawatt employment based on the fundamental conventions drawn up by hours, a far lower figure than in 2012. The largest source of energy the International Labour Organization (ILO). These include free- was electricity (36.9 per cent), followed by gas (32.1 per cent) and dom of association, the right to collective bargaining, elimination coal (22.3 per cent). of forced and child labour, and a ban on discrimination in respect At 39,735 tonnes, the volume of waste was also much of employment and occupation. Furthermore, the KION Group is smaller than in previous years. Of this total amount, 91.8 per cent committed to ensuring health and safety standards in the work- was recycled (2012: 92.2 per cent). There was a fall in both the place and to paying its employees remuneration that is appro- absolute volume of non-recycled waste and the proportion of priate to the industry in the particular country and, at the very that volume that consisted of environmentally hazardous waste least, provides a living wage. compared with 2012. Furthermore, the figures reported for Regular audits at all production sites increase awareness of water consumption and emissions of volatile organic com- workplace safety and environmental protection. The standard- ised system of HSE KPIs introduced in 2013 is proving its worth. pounds and the greenhouse gas CO2 were also lower in 2013 than in the previous year. It serves to bring HSE standards into line worldwide and to create The KION Group’s objective is to gradually establish a certi- a shared culture of awareness regarding the environment and fied system for quality, environmental and safety management at safety. All audits in the reporting year showed a clear improve- all sites. At the end of the year, KION sites had been certified in ment in the individual units compared with 2013. accordance with the following international standards: The KION Safety Championship was introduced in 2014 as a way of providing additional impetus and motivation for employees to engage with HSE matters. All production facilities take part. Based on regular reporting from the individual units, a panel of judges decides which units deserve to be rewarded for special dedication or considerable progress in an area of HSE. The assessment takes account of the units’ different economic and cultural situations. Safety experts at the KION Group’s various production facili- & service units – ISO 9001 (quality management): 12 production sites, 16 sales – ISO 14001 (environmental management): 6 production sites, – ISO 50.001 (energy management): 1 production site – OHSAS 18001 (occupational health & safety): 4 production 11 sales & service units sites, 8 sales & service units ties began to collaborate more closely last year. For a number of Linde Material Handling continued the work that it had begun in years now, the HSE managers at all production sites have met 2013 to implement a system for analysing environmental impact annually for an international summit at which they discuss current using lifecycle assessments. At the end of 2014, certified lifecycle topics and share best practice. In 2014, a summit for the HSE assessment studies were available for seven product clusters. We keep the world moving.KION GROUP AG | Annual Report 2014 112 A project was also launched to implement a sustainability report- Furthermore, all KION Group brands acknowledge their ing system and an internal sustainability policy was issued. responsibilities as corporate citizens. This is demonstrated by Energy efficiency is one of the major areas of focus when it the fact that both the Executive Board and employees person- comes to the ongoing development of products. Electric-drive ally support numerous different environmental and charitable variants were developed for further models in 2014. STILL now projects in different countries. One example is LMH’s donation includes its Blue-Q energy-saving programme in all new trucks as to the Spessart Hills Nature Park in connection with a sales standard. campaign in Germany for the new EVO diesel truck. Five oaks Checking compliance with minimum social standards and were planted for every truck sold. Many of the oak seedlings human rights is also becoming increasingly important in the pur- were planted by interns and apprentices from the local LMH site chasing function. To satisfy its own requirements and the wish of under the guidance of an expert. many big-ticket customers for end-to-end monitoring of the The plant in Pune (India) held an environmental day in which supply chain, the KION Group has developed a supplier policy all employees including the management team took part. Employ- that forms the basis for incorporating environmental and ethical ees adopted the new trees that were planted during the day as a stipulations into the supplier management process. lasting, tangible reminder to look after the environment. Events after the reporting date On 12 February 2015, KKR and Goldman Sachs placed a further 4.8 million shares (4.9 per cent of KION shares) in the market. As a result of this transaction, the free float increased again, from 47.7 per cent to 52.6 per cent. The proportion of shares held indi- rectly by KKR and Goldman Sachs via Superlift Holding therefore reduced from 18.8 per cent to 13.9 per cent. We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Events after the reporting date Outlook, risk report and opportunity report 113 Outlook, risk report and opportunity report OUTLOOK assumptions, such as those relating to changes in the cost of materials, the KION Group’s ability to command higher prices from customers and movements in exchange rates. Forward-looking statements Expected macroeconomic conditions The forward-looking statements and information given below are In the opinion of the International Monetary Fund (IMF), the pace based on the Company’s current expectations and assessments. of global economic growth will pick up in 2015, although not as Consequently, they involve a number of risks and uncertainties. strongly as forecast previously. In its January outlook, the IMF Many factors, several of which are beyond the control of the KION expects the global economy to grow at a rate of 3.5 per cent and Group, affect the Group’s business activities and profitability. Any the eurozone at 1.2 per cent in 2015. Growth of 2.4 per cent is unexpected developments in the global economy would result in predicted for the industrial countries in 2015 compared with the KION Group’s performance and profits differing significantly 1.8 per cent in 2014, with the United States as the biggest growth from those forecast below. The KION Group does not undertake driver. In view of slower growth in China and the anticipated to update forward-looking statements to reflect subsequently slump in Russia, growth in the emerging and developing coun- occurring events or circumstances. Furthermore, the KION Group tries is only expected to stay at around the same level of cannot guarantee that future performance and actual profits 4.3 per cent. The forecast for economic conditions is based on generated will be consistent with the stated assumptions and the assumption that, alongside tightening public finances, mone- estimates and can accept no liability in this regard. tary policy will remain expansionary and geopolitical tensions will Actual business performance may deviate from our forecasts ease. Moreover, the IMF believes advantages created by low oil due, among other factors, to the opportunities and risks described prices will be offset by unfavourable factors worldwide. here. Performance particularly depends on macro economic and industry-specific conditions and may be negatively affected by Expected sectoral conditions increasing uncertainty or a worsening of the economic and political situation. Forecast for 2014 The overall market for industrial trucks will continue to depend heavily on economic conditions in key sales markets, with the level of capital investment and the growth in global trade being particularly crucial. In 2014, the global market for industrial trucks expanded by around 8 per cent, a slightly stronger rate than in the The overall assessment of the financial situation compares the previous year despite mixed economic conditions overall. This forecasts included in the 2013 group management report and increase was primarily driven by a recovery of demand in western subsequent interim reports with actual performance in 2014. Europe coupled with strong growth in China and North America. Assumptions Given the overall economic prospects and in anticipation of a stable investment climate, the KION Group expects a further increase, albeit moderate, in the worldwide market volume in 2015. Besides the predicted growth in the emerging markets of The forecasts in this section are derived from the KION Group’s Asia, the major factors will be stabilisation of the sales situation in multiple-year market, business and financial plan, which is based western Europe with sustained replacement and catch-up invest- on certain assumptions. Market planning takes into account ment plus healthy market conditions in North America. However, macroeconomic and industry-specific performance, which is risks are presented by the unstable geopolitical situation and the described below. Business planning and financial planning are related significant slowdown in Russia’s growth. This could have based on expected market performance, but also draw on other a negative impact on neighbouring countries in eastern Europe We keep the world moving.KION GROUP AG | Annual Report 2014114 and for the eurozone. In addition deflationary tendencies could Expected financial position dampen companies’ willingness to invest. Market expectations also remain positive over the longer- Having repaid the corporate bonds in an amount exceeding term perspective. Based on current macroeconomic forecasts €500  million using funds from the revolving credit facility and and in view of the rise in global trade volumes, the KION Group other bank loans, the KION Group was able to further optimise its expects an average annual growth rate (in units) of about funding structure last year and considerably decrease the level of 4 per cent for the global market over the next few years and does interest payable in subsequent years. There was also a substan- not expect there to be significant changes in the proportion of tial reduction in net debt, which dropped to €811 million in 2014. total revenue generated by each product segment. In 2015, the KION Group plans to use free cash flow to lower its net debt still further. Expected business situation and financial performance Overall statement on expected performance By continuing with the implementation of its Strategy 2020, the The basis for the long-term success of the KION Group is the KION Group intends to achieve even better results in 2015 than strong position occupied by its global and regional brands in the record figures reported for 2014. western Europe and the emerging markets. The global brands Based on the forecasts for market conditions, the KION Linde Material Handling and STILL, in particular, safeguard their Group expects both order intake and consolidated revenue to be technology leadership and underline their status as premium slightly higher than in 2014. The growth in consolidated revenue brands by maintaining high levels of capital expenditure and R&D will continue to be underpinned by a strong contribution from the spending. service business in western Europe and the emerging markets in By pursuing its Strategy 2020 and other measures, the 2015. KION Group is expecting profitable growth for 2015 overall and The KION Group also expects a slight year-on-year rise in aims to achieve a sustained improvement in its market position adjusted EBIT in 2015. Costs resulting from implementation of the worldwide. Strategy 2020 will have to be factored in, which should lead to a sustained improvement in the EBIT margin in sub sequent years. For this reason, the Group expects the adjusted EBIT margin for 2015 to remain at the record level reached in 2014. The forecast is based on the assumption that material prices will remain stable. The KION Group expects free cash flow in 2015 to be slightly below the very high level achieved in the previous year. This is due to increased capital expenditure on the one hand, and to higher anticipated tax payments on the other. We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Outlook, risk report and opportunity report 115 RISK REPORT Risk strategy Group. His or her remit includes the definition and implementation of standards to ensure that risks are captured and evaluated. The risk management process is organised on a decentral- ised basis. Firstly, a groupwide risk catalogue is used to capture the risks attaching to each company. Each risk must be captured individually. If the losses caused by a specific risk or the likelihood The business activities of the KION Group necessarily involve of this risk occurring exceed a defined limit, the KION Group’s risk. Dealing responsibly with risk and managing it in a compre- Executive Board and its Accounting & Finance function are noti- hensive manner is an important element of corporate management. fied immediately. Each risk is documented in an internet-based The overarching aim is to fully harness business opportunities reporting system designed specifically for the requirements of while ensuring that risk always remains under control. Using its risk management. Risks affecting more than one Group com- groupwide risk management system, the KION Group contains all pany, such as market risks, competition risks, financial risks and identified risks by implementing suitable measures and takes risks arising from financial services are not recorded individually appropriate precautions. This ensures that the losses expected if but are instead evaluated at Group level. Consequently, such these risks arise will be largely covered and therefore will not risks are not quantified. jeopardise the Company’s continuation as a going concern. The scope of consolidation for risk management purposes is At the KION Group, risk management has always been the same as the scope of consolidation for the consolidated embedded in the Accounting & Finance function and now plays financial statements. The risks reported by the individual compa- an active and wide-ranging role due to the strategic focus of nies are combined to form divisional risk reports as part of a rig- Accounting & Finance. The operational units’ business models, orous reporting process. To this end, minuted risk management strategic perspectives and specific plans of action are examined meetings are held once a quarter. Moreover, material risks are systematically. Principles of risk management discussed with the segments at the business review meetings. The divisional risk reports are then used to compile an aggregate risk portfolio for the KION Group as a whole. To support this, the relevant departments of the holding company are consulted each quarter in order to identify and assess risk – particularly Company- To ensure that the risk management systems are fully integrated wide, cross-brand risk affecting areas such as treasury, purchas- into the KION Group’s overall financial planning and reporting ing, tax, human resources and financial services. The Executive process, they are located in the Group Accounting & Finance Board of KION GROUP AG and the Supervisory Board’s Audit function. Committee are informed of the Group’s risk position once a The procedures governing the KION Group’s risk manage- quarter. The Internal Audit department audits the risk manage- ment activities are laid down in internal risk guidelines. For certain ment system at regular intervals. 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 reflects the structure of the Group itself. Conse- quently, risk officers supported by risk managers have been appointed for each company and each division. A central Group risk manager is responsible for the implementation of risk man- agement processes in line with procedures throughout the We keep the world moving.KION GROUP AG | Annual Report 2014116 Material features of the internal control and risk management system pertaining to the (Group) accounting process Principles The employees involved in the Group’s accounting process receive regular training in this field. Throughout the accounting process, the local companies are supported by central points of contact. The consolidated accounts are drawn up centrally using data from the consolidated subsidiaries. A consolidation depart- ment with specially trained employees carries out the consolida- The main objectives of the special accounting-related internal tion activities, reconciliations and monitoring of the stipulated control system are to avoid the risk of material misstatements in deadlines and processes. Monthly checklists have been drawn financial reporting, to identify material mismeasurement and to up for the consolidation process and are worked through in a ensure compliance with the applicable regulations and internal standardised manner. All postings are managed centrally and instructions. This includes verifying that the consolidated financial documented. This team also monitors the system-based controls statements and group management report comply with the rele- and supplements them with manual checks. The entire account- vant accounting standards. There can, however, be no absolute ing process contains a number of specific approval stages, for certainty that these objectives are achieved in full and at all times. which extensive plausibility checks have been set up. Employees with the relevant expertise provide support on specialist ques- Material processes and controls in the tions and complex issues. The central Internal Audit department (Group) accounting process also checks, among other things, the reliability of the accounting work by the subsidiaries in Germany and abroad. It focuses pri- For its (Group) accounting process, the KION Group has marily on the following aspects: defined suitable structures and processes within its internal control and risk management system and implemented them in the organisation. Changes to the law, accounting standards and other pro- nouncements are continually analysed with regard to their rele- vance and effect on the consolidated financial statements and group management report; the relevant changes are then incor- porated into the Group’s internal policies and systems. All consolidated entities must follow the KION GROUP IFRS Executive Board, other policies and internal instructions; – compliance with legal requirements, directives from the – 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 avoiding financial losses; principles; that is based on the accounting) in terms of form and sub- Accounting Manual when preparing their IFRS reporting pack- stance. ages. This manual contains the recognition, measurement and disclosure rules to be applied in the KION Group’s accounting in Internal control mechanisms and ongoing analysis of the regu- accordance with IFRS. The accounting guidelines primarily latory framework enable any risks that might jeopardise com- explain the financial reporting principles specific to the KION pliance of the consolidated financial statements and group Group’s business. In addition, all companies must adhere to the management report with accounting standards to be identified schedule defined by head office for preparing the consolidated as soon as possible so that appropriate countermeasures can financial statements and group management report. be taken. Such risks form part of the KION Group’s aggregate The accounting-based internal control and risk manage- risk profile and are classified as operational risk. ment system encompasses defined control mechanisms, auto- mated and manual reconciliation processes, separation of func- tions, the double-checking principle and adherence to policies and instructions. We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Outlook, risk report and opportunity report 117 Risks Aggregate risk The market risks and competition risks described, the risks along the value chain, the human resources risks and the legal risks largely relate to the LMH and STILL segments. By contrast, risks arising from financial services mainly affect the Financial Services In 2014, the aggregate risk position was largely unchanged com- segment, while financial risks would predominantly impact on the pared with the previous year. With regard to 2015, the risks in the Other segment. risk matrix below will be continually observed and evaluated in terms of their extent and probability of occurrence. For example, Market risks and competition risks we consider the probability of market risk materialising as low because of the fairly positive market expectations. However, the Market risks possible impact of market risk continues to be rated at a medium Market risk can arise when the economy as a whole or a particu- risk level because of the importance of the market for the KION lar sector does not perform as well as had been anticipated in the Group’s business situation and financial performance. As things outlook. Cyclical fluctuations in macroeconomic activity affect the stand at present, there are no indications of any risks that could market for industrial trucks. Customers’ decisions on whether to jeopardise the Company’s continuation as a going concern. invest, particularly in new trucks, depend to a large degree on the > DIAGRAM 005 Risk matrix macroeconomic situation and conditions in their particular sector. During an economic downturn, customers tend to postpone their purchases of new trucks. Although demand for services is less DIAGRAM 005 cyclical, it correlates with the degree of utilisation in the truck H G H I L E V E L K S I R I M U D E M • Market risk • Procurement risk • Production risk W O L • Competition risk • R&D risk • IT risk • Financial risk • Risk arising from financial services • Human resources risk • Sales risk • Legal risk 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 mar- kets and, prospectively, North America, the proportion of revenue it earns in the eurozone remains high. As a result, the market con- ditions that prevail there impact significantly on the KION Group’s financial performance. Although the economic situation has stabilised somewhat, the eurozone remains susceptible to dis- ruption. 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’ willingness to invest and consequently the demand for the KION Group’s products. Slower than forecast macroeconomic growth in emerging markets could also have a negative impact on global trade vol- umes and thus on growth in the material handling market. The market risks referred to could be heightened by geopolitical risk, LOW MEDIUM HIGH possible currency crises and deflationary tendencies. PROBABILITY OF OCCURRENCE HIGH RISK MEDIUM RISK LOW RISK Various measures aimed at making cost structures more flexible – such as the consolidation of production facilities and the global platform strategy – help to contain the earnings risk arising We keep the world moving.KION GROUP AG | Annual Report 2014 118 from reductions in revenue caused by economic conditions. It is also conceivable that competitors will join forces and Diversification of the customer base in terms of industry and their resulting stronger position will be detrimental to the KION region as well as expansion of service activities also play a role in Group’s sales opportunities. Moreover, predictions of higher mitigating risk. Moreover, the KION Group closely monitors the volumes and margins may lead to overcapacity, which would put market and its competitors so that it can identify market risks at increased pressure on prices. an early stage and adjust its production capacities in good time. Although the KION Group’s strengths in the premium seg- Besides global economic growth, the KION Group also analyses ment have enabled it to charge appropriate prices until now, it is exchange rates, price stability, the consumer and investment cli- taking a variety of steps to contain competition risk. Alliances, mate, foreign trade activity and political stability in its key sales partnerships, acquisitions and other measures are playing an markets. The risk management function continually analyses the increasing role in improving the KION Group’s competitiveness in possible impact of the situation in the eurozone on the Group’s terms of resources, market access and product range. The steps financial position and financial performance. In addition to ongo- that the KION Group is taking to mitigate its competition risk also ing screening and monitoring, the risk reports regularly include a include making its plants more efficient and securing low-cost separate assessment of the risks arising from the sovereign debt sources of supply. crisis. The KION Group also continually evaluates its options for Other risks arise as a result of constant changes in the strengthening and consolidating its position in emerging markets, Company’s political, legal and social environment. Because it in particular through strategic partnerships, the creation of joint operates in countries in which the political or legal situation is ventures or acquisition of local manufacturers. One of the risks of uncertain, the KION Group is exposed to the consequent risk of such alliances and acquisitions is that the expected benefits will government regulation, capital controls and expropriations. The materialise only partly or not at all. For example, the organisa- KION Group mitigates such strategic risks by, for example, tional integration of new units can harm financial performance for carry ing out in-depth market research, conducting thorough a variety of reasons. It is also possible that a partner will collabo- evaluation procedures to assess political and economic condi- rate with competitors if exclusivity agreements are not in place. tions and drafting contracts appropriately. Competition risks Risks along the value chain Competition risk describes the risk that growing competitive Research and development risks pressure will prevent the KION Group from achieving its predicted The KION Group’s market position and business performance margins and market share. The markets in which the KION Group depend to a large extent on its ability to remain a leading pro- operates are characterised by strong competition, often price- vider of technology. This requires the Group to continually driven. Price competition is compounded by some manufacturers develop products that meet customer expectations and comply having cost advantages in production, sometimes due to the cur- with changing regulatory and technological requirements. To rency situation and sometimes because local labour costs are this end, the KION Group must anticipate customers’ needs lower. Competition is therefore fierce, particularly in the economy and changing market conditions and has to quickly bring new and volume price segments, and the impact is especially strong products to market. If the Company does not succeed in doing in emerging markets. Building on their local competitive strength, this, its technological and competitive position could be com- manufacturers in emerging markets are also looking for opportu- promised in the long term. nities to expand. Although the high quality expectations and ser- The innovations developed by the KION Group are compre- vice needs of customers in developed markets present a barrier hensively protected by intellectual property rights, in particular to growth for many of these manufacturers, this situation is likely patents. Nevertheless, there is always the possibility that prod- to intensify competitive pressures in future. ucts or product components will be imitated. There is also a risk that patent applications will not be successful. We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Outlook, risk report and opportunity report 119 The KION Group mitigates research and development risk number of complaints could harm the KION Group’s positioning by focusing firmly on customer benefit in its development of in the price segments and sales markets that it serves and, as a products on the basis of overarching modular and platform result, could harm its financial situation. strategies. Customer needs are incorporated into the develop- To mitigate these risks, the KION Group carries out preven- ment process on an ongoing basis by ensuring close collabora- tive maintenance, implements fire protection measures, trains its tion between sales and development units and taking account staff and builds a pool of external suppliers. The Company has of all region-specific requirements. taken out a commercially appropriate level of insurance cover Procurement risks against loss. Quality assurance is a high priority throughout the value chain and reduces possible quality-related risks arising Procurement activities constitute a potential risk for the KION from the products and services provided. The KION Group miti- Group in terms of the lack of availability of parts and compo- gates its quality-related risks significantly by applying rigorous nents for logistical or quality reasons and the rising cost of raw quality standards to its development activities, conducting strin- materials, energy, base products and intermediate products. As gent controls throughout the process chain and maintaining a result, there is always the possibility that the KION Group will close contact with customers and suppliers. To mitigate risks face backlogs in the supply of individual raw materials and com- resulting from any restructuring measures, the KION Group ponents. KION obtains some of its key components, such as undertakes such measures only after a comprehensive planning combustion engines, tyres, high-performance forged and elec- process and works closely with employee representatives to tronic parts, from a limited number of core suppliers. ensure HR measures are implemented with the minimum possi- The risk of supply bottlenecks – for example in the event of a ble social impact. shortage of raw materials or financial difficulties at core suppliers – cannot be ruled out in future. The KION Group mitigates this risk Sales risks through appropriate diversification of its supplier structure in the The main sales risks – besides a drop in revenue caused by context of a global procurement organisation. In addition, the market conditions – result from dependence on individual cus- supplier development department, which focuses on improving tomers and sectors. For example, it is possible that customers suppliers’ production processes, helps suppliers to ensure that would postpone or cancel orders during a period of economic their processes are cost-efficient and offer excellent quality. difficulty. There have not been any significant cancellations in pre- Price changes present another procurement-related risk. In vious years, however. It is also conceivable that customers would 2014, around 26.5 per cent of the cost of materials for new trucks face a liquidity shortfall and therefore be unable to fulfil their pay- was directly influenced by changes in commodity prices. More- ment obligations immediately or even at all. Currently, there is little over, conditions in the commodity markets typically affect com- dependence on individual sectors in the KION Group’s customer ponent prices after a delay of three to six months. The KION portfolio. The KION Group’s reliance on individual customers also Group endeavours to pass on price increases to customers but remains low. Its business is also highly diversified from a regional cannot always do so entirely due to market pressures. perspective. In addition, the KION Group supplies companies of Production risks all sizes. Experience has shown that the KION Group’s exposure to the risk of possible payment defaults is low, but this risk can be Production risks are largely caused by quality problems, possible further mitigated by recovering any collateral. operational disruptions or production downtime at individual sites. In such cases, the KION Group’s closely integrated manu- IT risks facturing network presents a heightened risk to its ability to deliver A high degree of interconnectedness between sites and with cus- goods on time. There is also a risk that structural measures and tomers and other companies means that the KION Group also reorganisation projects will not be implemented owing to disrup- relies on functioning IT systems. The KION Group undertakes tion of production or strikes. Delays in delivery or a rise in the ongoing further development of a reliable, extendable and flexible We keep the world moving.KION GROUP AG | Annual Report 2014120 IT system environment with the aim of countering any IT-related Normally, at least 50 per cent of the currency risk related to the risks that may arise from the failure of IT systems and IT infra- planned operating cash flows of the local entities based on liquid- structure. Internal IT resources are pooled in KION Information ity planning is hedged by currency forwards in accordance with Management Services GmbH, which has well-established pro- the relevant guideline. cesses for portfolio management and project planning and con- Group Treasury rigorously complies with and monitors the trol. Independent external audits are conducted to provide addi- strict separation of functions between the front, middle and back tional quality assurance. Various technical and organisational offices. Each Group company’s liquidity planning is broken down measures protect the data of the KION Group and its Group com- by currency and incorporated into the KION Group’s financial panies against unauthorised access, misuse and loss. These planning and reporting process. Group Treasury checks the measures include procedures to validate and log access to the liquidity planning and uses it to determine the funding require- Group’s infrastructure. ments of each company. Financial risks The funding terms and conditions faced by the lenders themselves (manifested, for example, in the payment of liquidity premiums on interbank lending) may result in a future shortage Group Treasury is responsible for ensuring that sufficient finan- of lines of credit and/or increased financing costs for compa- cial resources are always available for the KION Group’s interna- nies. However, the Group currently does not expect any further tional growth. The main types of financial risk managed by changes in its lines of credit or any excessive increases in margins. Group Treasury, including risks arising from funding instru- Goodwill and the brands represented 34.2 per cent of total ments, are liquidity risk, currency risk, interest-rate risk and assets as at 31 December 2014 (31 December 2013: 34.7  per counterparty risk. Credit risk consists solely of counterparty cent). Pursuant to IFRS, these assets are not amortised and their risks attaching to financial institutions. Risk management proce- measurement depends, above all, on future expectations. If these dures issued by Group Treasury stipulate how to deal with the future expectations are not fulfilled, there is a risk that impairment aforementioned risks. losses will have to be recognised on these assets. The KION Group further reduced its financial debt in the year The individual Group companies directly manage counter- under review. Long-term borrowing totalled €648.0 million as at party risks involving customers. These counterparty risks have 31 December 2014 and comprised the corporate bond due to not changed significantly, despite the financial crisis. Each indi- mature in 2020 (€450.0 million) and the long-term portion of the vidual Group company has established a credit management revolving credit facility (€198.0 million), which expires in 2018/2019. system for identifying customer-related counterparty risks at an The unused, unrestricted loan facility stood at €841.0 million as at early stage and initiating the necessary countermeasures. Analysis 31 December 2014. Risk arising out of the lending conditions that of the maturity structure of receivables is an integral element of have been agreed was not regarded as material as at 31 Decem- monthly reporting. ber 2014. It relates in particular to the restrictions in respect of compliance with financial covenants and upper limits for certain Risks arising from financial services transactions and in respect of the obligation to submit special regular reports. The KION Group complied with all the lending The KION Group’s leasing business mean that it may be exposed covenants in the reporting year. to residual value risks from the marketing of trucks that are The Company generally refers to credit ratings to manage returned by the lessee at the end of a long-term lease and sub- counterparty risk when depositing funds with a financial institution. sequently sold or re-leased. Residual values in the markets for The KION Group only uses derivatives to hedge underlying used trucks are therefore constantly monitored and forecast. The operational transactions; they are not used for speculative pur- KION Group regularly assesses its aggregate risk position arising poses. It is exposed to currency risk because of the high propor- from financial services. tion of its business conducted in currencies other than the euro. We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Outlook, risk report and opportunity report 121 The risks identified are immediately taken into account by That is why the KION Group actively engages in HR work the Company in the costing of new leases by recognising write- aimed at identifying and developing young professionals with downs or valuation allowances and adjusting the residual high potential who already work for the Company and retaining values. Risk-mitigating factors include the demand for used them over the long term, thereby enabling succession planning trucks, which stabilises the residual values of the KION Group’s for key roles across the Group. The KION Group also positions industrial trucks. The majority of the residual values have under- itself in the external market as an employer of choice. This will lying remarketing agreements that transfer any residual-value enable it to make strategic additions to its portfolio of existing risk to the leasing company. This had a positive impact on the staff and, in this way, avert the risk of possibly losing expertise financial results in 2014. Groupwide standards to ensure that and thereby becoming less competitive. residual values are calculated conservatively, combined with an Any restructuring measures may result in a risk of strikes IT system for residual-value risk management, reduce risk and and reactions of other kinds by the workforce. As demonstrated provide the basis on which to create the transparency required. several times in the past, this risk is contained by collaborating The KION Group mitigates its liquidity risk and interest-rate closely with employee representatives and, if job losses are risk attaching to financial services by ensuring that most of its necessary, taking comprehensive steps to ensure they are transactions and funding loans have matching maturities and by achieved with the minimum possible social impact. constantly updating its liquidity planning. Long-term leases are The legal risks arising from the KION Group’s business are primarily based on fixed-interest agreements. The credit facilities typical of those faced by any company operating in this sector. provided by various banks and an effective dunning process The Group companies are a party in a number of pending law- ensure that the Group has sufficient liquidity. suits in various countries. The individual companies cannot In order to exclude currency risk, the KION Group generally assume with any degree of certainty that they will win any of the funds its leasing business in the local currency used in each lawsuits or that the existing risk provision in the form of insurance market. or provisions will be sufficient in each individual case. However, Because of low default rates, counterparty risk has not been the KION Group is not expecting any of these existing legal pro- significant to date in the Group. The KION Group has not identi- ceedings to have a material impact on its financial position or fied any material changes between 2013 and 2014. The Group financial performance. These lawsuits relate, among other things, also mitigates any losses from defaults by its receipt of the pro- to liability risks, especially as a result of legal action brought by ceeds from the sale of repossessed trucks. In addition, receiv- third parties because, for example, the Company’s products were ables management has been improved by enhancing the dunning allegedly faulty or the Company allegedly failed to comply with process. The credit portfolio management system was updated contractual obligations. Further legal risk may arise as a result of during 2014. Besides the design of the business processes, it the environmental restoration of sites that have been shut down in also encompassed the risk management and control processes. recent years, for example work required due to contamination. Moreover, the KION Group offers the majority of financial ser- Any damage to the environment may lead to legal disputes and vices indirectly via selected financing partners that bear the risks give rise to reputational risk. of the finance transaction. As far as these financial services are The Company has taken measures to prevent it from incur- concerned, the KION Group bears the counterparty risk in under ring financial losses as a result of these risks. Although legal dis- 5 per cent of cases. putes with third parties have been insignificant both currently and in the past, the Company has a centralised reporting sys- Human resources risks and legal risks tem to record and assist pending lawsuits. In addition to the high quality and safety standards applicable to all users of the The KION Group relies on having highly qualified managers and Company’s products, with which it complies when it develops experts in key roles. If they left, it could have a long-term adverse and manufactures the products, it has also taken out the usual impact on the Group’s prospects. types of insurance to cover any third-party claims. These issues We keep the world moving.KION GROUP AG | Annual Report 2014122 are also tackled by teams whose members come from a variety the KION Group’s position. Opportunities are divided into three of functions. The aim of the teams is to identify and avoid risks, categories: for example the risks arising from inadequate contractual Market opportunities describe the potential resulting from arrangements. A further objective of this cooperation across trends in the market and competitive environment and from the functions is to ensure compliance with mandatory laws, regula- regulatory situation. tions and contractual arrangements at all times. Strategic opportunities are based on implementation of the Owing to the KION Group’s export focus, legal risk and Group’s strategy. They may lead to positive effects that exceed reputational risk arise due to the numerous international and planning assumptions. local export controls that apply. The Company mitigates these Business-performance opportunities arise in connection with risks with a variety of measures. Consequently, export controls operational activities along the value chain, such as restructuring are an important part of the compliance activities carried out by or cost-cutting measures. the Group companies. OPPORTUNITY REPORT Management of opportunities Opportunity situation Market opportunities The economy as a whole may perform better than expected in 2015. In addition, circumstances may occur in the wider market at any time – such as quality problems at competitors or the Opportunity management, like risk management, forms a central effects of consolidation – that boost demand for products from part of the Company’s day-to-day management. Individual areas the KION Group brands. New, unforeseen regulatory initiatives of opportunity are identified within the framework of the strategy could be launched, for example the tightening of health and process. Opportunities are determined and managed on a decen- safety regulations or emissions standards, that would push up tralised basis in line with the Group strategy. demand for premium products offered by the KION Group There are monthly reports on the opportunity situation as brands. Average prices for procuring commodities over the year part of the regular Group reporting process. As a result, the KION may be cheaper than anticipated. Group is in a position to ascertain at an early stage whether mar- Medium- to long-term market opportunities are presented, in ket trends, competitive trends or events within the Group require particular, by: individual areas of opportunity to be re-evaluated. This may lead to reallocation of the budgets earmarked for the realisation of opportunities. Such decisions are made on the basis of the potential of the opportunity, drawing on empirical values. There is no management system for the evaluation of opportunities com- parable to the system for risk management. Categorisation of opportunities By ‘opportunities’, we mean positive deviations from the expecta- tions set out in the outlook relating to the economic situation and – growing demand for intralogistics products and services as a consequence of globalisation, industrialisation and fragmen- tation of supply chains; – high demand for replacement investments, especially in – the trend towards outsourcing service functions to indus- developed markets; trial truck manufacturers and growth in demand for finance solutions; – increased use of trucks powered by electric motors – one of the KION Group’s particular strengths. We keep the world moving.KION GROUP AG | Annual Report 2014GROUP MANAGEMENT REPORT Outlook, risk report and opportunity report 123 Strategic opportunities Business-performance opportunities Strategic opportunities are presented, above all, by implementing Business-performance opportunities primarily arise from ongo- the Strategy 2020, which is described in detail on pages 78 to 80. ing activities to modernise and streamline the KION Group’s The positive impact of strategic activities is already largely production facilities and from the worldwide integration of the reflected in the expectations regarding the KION Group’s financial production network. By investing in new locations, products can performance in 2015. Nevertheless, the individual activities could be assembled nearer to the markets in which they are to be create positive effects that exceed expectations. There is also a sold, economies of scale can be achieved across the Group and possibility that new strategic opportunities that were not part of synergies can be leveraged. Further development of the Group’s the planning may arise over the course of the year, for example in back-office services will also help to achieve these objectives. the form of acquisitions and strategic partnerships. The following may lead to an increase in profitability in the The KION Group’s medium- to long-term strategic opportu- medium term: nities arise, in particular, from: – a greater presence in the economy and volume price seg- ments, particularly as a result of the systematic implemen- tation of the groupwide platform strategy; – strengthening of its market-leading position in core western European markets by boosting its technological expertise – ongoing efficiency increases at production sites may boost – effective use of global development capacities within the sales and improve the gross margin; framework of an overarching modular and platform strategy may create synergies and economies of scale. and making greater use of shared modules; – expansion of the service portfolio, including financial ser- vices, at every stage of the product lifecycle, taking advan- tage of the high number of trucks in use; – harnessing of market potential in fast-growing regions by – continued expansion of business in North America. putting suitable production and sales structures in place; We keep the world moving.KION GROUP AG | Annual Report 2014 CONSOLIDATED FINANCIAL STATEMENTS Contents 125 Consolidated Financial Statements 126 CONSOLIDATED INCOME STATEMENT 127 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 128 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 130 CONSOLIDATED STATEMENT OF CASH FLOWS 132 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 134 134 151 161 196 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 238 AUDITORS’ OPINION 239 RESPONSIBILITY STATEMENT KION GROUP AG | Annual Report 2014 S T N E M E T A T S L A I C N A N I F D N O I T A M R O F N I L A N O I T I D D A E 126 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 Note [8] [9] [10] [11] [12] [13] [14] Attributable to shareholders of KION GROUP AG Attributable to non-controlling interests Earnings per share according to IAS 33 (in €) [16] Basic earnings per share Earnings per share – diluted TABLE 033 2013 4,494.6 – 3,255.2 1,239.4 – 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 2014 4,677.9 – 3,337.4 1,340.5 – 570.5 – 125.7 – 323.6 93.2 – 42.1 – 24.8 347.0 84.4 – 173.2 – 88.8 258.3 – 80.0 – 63.5 – 16.5 178.2 176.7 1.6 1.79 1.79 We keep the world moving.KION GROUP AG | Annual Report 2014 CONSOLIDATED FINANCIAL STATEMENTS Consolidated income statement Consolidated statement of comprehensive income 127 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 Changes in unrealised gains and losses from at-equity investments 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 (–) and losses (+) from at-equity investments thereof changes in unrealised gains and losses Note [28] [37] 2014 178.2 – 143.0 – 138.3 – 199.0 60.6 – 4.7 30.3 34.9 32.2 2.8 – 4.7 – 8.0 1.5 1.9 0.1 0.1 2013 138.4 0.7 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 Other comprehensive loss – 112.7 – 15.9 Total comprehensive income Attributable to shareholders of KION GROUP AG Attributable to non-controlling interests 65.5 63.8 1.7 122.5 123.1 – 0.6 We keep the world moving.KION GROUP AG | Annual Report 2014128 Consolidated statement of financial position Consolidated statement of financial position – Assets 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 Note [17] [17] [18] [19] [20] [21] [22] [23] [14] [24] [25] [22] [14] [23] [26] TABLE 035 2013 1,494.7 934.0 251.9 461.2 499.4 138.6 308.8 51.7 295.5 2014 1,497.1 915.5 279.0 487.1 494.1 114.6 345.3 34.3 357.9 4,524.8 4,435.8 529.2 598.2 202.5 6.6 168.2 98.9 511.8 558.7 170.8 15.4 114.7 219.3 1,603.7 1,590.7 6,128.5 6,026.4 We keep the world moving.KION GROUP AG | Annual Report 2014 CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement of financial position 129 Consolidated statement of financial position – Equity and liabilities TABLE 036 in € million Subscribed capital 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 Note [27] [28] [29] [30] [31] [33] [14] [29] [32] [30] [14] [31] [33] 2014 98.7 1,996.2 – 148.2 – 304.9 5.3 1,647.1 787.5 646.8 461.7 83.7 387.8 320.9 2013 98.7 2,223.2 – 524.9 – 192.0 5.0 1,610.0 560.1 971.1 403.7 77.8 392.1 306.2 2,688.3 2,711.1 262.9 564.6 246.0 31.3 84.4 603.9 1,793.0 227.5 550.5 213.3 27.7 110.3 576.0 1,705.3 Total equity and liabilities 6,128.5 6,026.4 We keep the world moving.KION GROUP AG | Annual Report 2014 130 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 (–) / expenses (+) Gains (–) / losses (+) on disposal of non-current assets Changes in leased assets (excluding depreciation) and lease receivables / liabilities 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 Change in rental assets (excluding depreciation) Dividends 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] [24] [25] [28] [31] [35] [35] [35] [19] [5] [35] 2014 347.0 367.2 50.0 6.4 – 66.5 – 9.0 – 25.4 – 20.4 – 17.6 23.1 – 51.0 603.8 – 133.1 7.7 – 183.4 8.1 0.0 4.6 – 1.5 – 297.8 2013 * 374.2 334.6 14.9 – 5.0 – 65.8 33.8 – 17.2 – 25.1 – 43.7 25.3 – 119.8 506.3 – 125.8 9.9 – 170.3 7.2 – 25.1 0.0 – 6.7 – 310.7 We keep the world moving.KION GROUP AG | Annual Report 2014CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement of cash flows 131 Consolidated statement of cash flows (continued) in € million Capital contribution from shareholders for the carried out capital increase Capital increase from issuing of employee shares Acquisition of treasury shares Dividend of KION GROUP AG Dividends paid to non-controlling interests Cash payments from changes in ownership interests in subsidiaries without loss of control Financing costs paid Proceeds from borrowings Repayment of borrowings Interest income received 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 TABLE 037 2013 * 741.8 0.0 – 5.6 0.0 – 2.1 – 16.3 – 56.3 1,095.9 – 2,201.6 7.0 – 119.6 25.1 – 531.6 2014 0.0 2.7 – 1.5 – 34.5 – 1.6 – 2.8 – 6.6 1,375.2 – 1,676.4 6.2 – 88.7 0.0 – 428.1 1.8 – 7.0 – 120.4 – 343.0 219.3 98.9 562.4 219.3 Note [35] [27] [35] [35] [35] [35] [35] [35] [35] * Last year’s figures were adjusted due to a change in presentation, for details see ‘Other disclosures on Consolidated statement of cash flows’ We keep the world moving.KION GROUP AG | Annual Report 2014132 Consolidated statement of changes in equity Consolidated statement of changes in equity in € million 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 paid to non-controlling interests Acquisition of treasury shares Effects from the acquisition / disposal of non-controlling interests Balance as at 31/12/2013 Balance as at 01/01/2014 Net income for the year Other comprehensive income (loss) Comprehensive income (loss) Withdrawal from capital reserve Dividend of KION GROUP AG Dividends paid to non-controlling interests Acquisition of treasury shares Capital increase issuing of employee shares Effects from the acquisition / disposal of non-controlling interests Changes from at-equity accounting Other changes Balance as at 31/12/2014 Contributions for carrying out the approved capital increase 1,132.6 Capital reserves 348.5 1,132.6 348.5 0.0 – 1,132.6 0.0 0.0 0.0 0.0 1,894.0 – 13.9 – 5.4 2,223.2 2,223.2 0.0 – 228.1 – 1.5 2.6 Note Subscribed capital 0.5 0.5 0.0 98.4 – 0.2 98.7 98.7 0.0 – 0.1 0.1 [27] [27] [27] [27] [27] [27] [27] [27] [27] [27] [27] [27] 98.7 0.0 1,996.2 – 148.2 – 31.7 – 264.6 – 4.2 – 4.3 1,641.8 1,647.1 Accumulated other comprehensive income (loss) Gains / losses Equity attribu- table to Cumulative on defined Gains / losses Gains / losses shareholders Non- Retained earnings translation adjustment benefit on cash flow from equity of KION controlling obligation hedges investments GROUP AG interests – 32.8 – 32.8 – 33.7 – 33.7 – 130.4 3.4 – 127.0 0.7 0.7 – 66.5 – 126.3 – 66.5 – 126.3 34.8 34.8 – 138.3 – 138.3 – 16.9 – 16.9 17.4 17.4 0.5 0.5 – 4.8 – 4.8 0.4 0.4 – 0.1 – 0.1 0.3 0.3 – 4.6 – 4.6 – 647.7 – 3.0 – 650.7 138.8 138.8 – 13.0 – 524.9 – 524.9 176.7 176.7 228.1 – 34.5 9.7 – 3.2 654.2 0.3 654.5 138.8 – 15.7 123.1 859.9 – 13.9 0.0 – 5.6 – 13.0 1,605.0 1,605.0 176.7 – 112.9 63.8 0.0 – 34.5 0.0 – 1.5 2.7 0.0 9.7 – 3.2 Total 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 1,610.0 178.2 – 112.7 65.5 0.0 – 34.5 – 1.6 – 1.5 2.7 0.1 9.7 – 3.2 6.2 0.0 6.2 – 0.4 – 0.2 – 0.6 0.0 0.0 – 2.1 0.0 1.6 5.0 5.0 1.6 0.2 1.7 0.0 0.0 0.0 0.0 0.1 0.0 0.0 5.3 – 1.6 * Adjusted due to the retrospective application of IAS 19R (2011), for details see also ‘Note [7] Accounting policies in the 2013 consolidated statements’ We keep the world moving.KION GROUP AG | Annual Report 2014CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement of changes in equity 133 Consolidated statement of changes in equity in € million 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 paid to non-controlling interests Acquisition of treasury shares Effects from the acquisition / disposal of non-controlling interests Balance as at 31/12/2013 Balance as at 01/01/2014 Net income for the year Other comprehensive income (loss) Comprehensive income (loss) Withdrawal from capital reserve Dividend of KION GROUP AG Dividends paid to non-controlling interests Acquisition of treasury shares Capital increase issuing of employee shares Effects from the acquisition / disposal of non-controlling interests Changes from at-equity accounting Other changes Balance as at 31/12/2014 Contributions for carrying out the Subscribed approved Note capital capital increase Capital reserves 348.5 1,132.6 1,132.6 348.5 0.5 0.5 0.0 98.4 – 0.2 98.7 98.7 0.0 – 0.1 0.1 [27] [27] [27] [27] [27] [27] [27] [27] [27] [27] [27] [27] 0.0 – 1,132.6 0.0 0.0 0.0 0.0 1,894.0 – 13.9 – 5.4 2,223.2 2,223.2 0.0 – 228.1 – 1.5 2.6 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 shareholders of KION GROUP AG Non- controlling interests Retained earnings – 647.7 – 3.0 – 650.7 138.8 138.8 – 13.0 – 524.9 – 524.9 176.7 176.7 228.1 – 34.5 9.7 – 3.2 – 32.8 – 32.8 – 33.7 – 33.7 – 130.4 3.4 – 127.0 0.7 0.7 – 66.5 – 126.3 – 66.5 – 126.3 34.8 34.8 – 138.3 – 138.3 – 16.9 – 16.9 17.4 17.4 0.5 0.5 – 4.8 – 4.8 0.4 0.4 – 0.1 – 0.1 0.3 0.3 – 4.6 – 4.6 654.2 0.3 654.5 138.8 – 15.7 123.1 859.9 – 13.9 0.0 – 5.6 – 13.0 1,605.0 1,605.0 176.7 – 112.9 63.8 0.0 – 34.5 0.0 – 1.5 2.7 0.0 9.7 – 3.2 TABLE 038 Total 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 1,610.0 178.2 – 112.7 65.5 0.0 – 34.5 – 1.6 – 1.5 2.7 0.1 9.7 – 3.2 1,647.1 6.2 0.0 6.2 – 0.4 – 0.2 – 0.6 0.0 0.0 – 2.1 0.0 1.6 5.0 5.0 1.6 0.2 1.7 0.0 0.0 – 1.6 0.0 0.0 0.1 0.0 0.0 5.3 * Adjusted due to the retrospective application of IAS 19R (2011), for details see also ‘Note [7] Accounting policies in the 2013 consolidated statements’ 98.7 0.0 1,996.2 – 148.2 – 31.7 – 264.6 – 4.2 – 4.3 1,641.8 We keep the world moving.KION GROUP AG | Annual Report 2014134 Notes to the consolidated financial statements Basis of presentation [1] GENERAL INFORMATION ON THE COMPANY income statement. The items concerned are disclosed and explained separately in the notes. Assets and liabilities are broken down into current and non-current items in accordance with IAS  1.60. The consolidated income statement is prepared in accordance with the cost of sales (function-of-expense) method. KION GROUP AG, whose registered office is at Abraham- Lincoln- The consolidated financial statements are prepared in euros, Strasse 21, 65189 Wiesbaden, is entered in the commercial reg- which is the Group’s functional currency and reporting currency. ister at the Wiesbaden local court under reference HRB 27060. All amounts are disclosed in millions of euros (€ million) unless The KION Group is a leading global supplier of industrial stated otherwise. The addition of the totals presented may result trucks (forklift trucks and warehouse trucks). It generated in minor rounding differences. The percentages shown are revenue of €4,677.9  million in the 2014 financial year from its calculated on the basis of the respective amounts, rounded to the Linde, Fenwick, STILL, OM STILL, Baoli and Voltas brands (2013: nearest thousand euros. The separate financial statements of the €4,494.6 million). subsidiaries included in the consolidation were prepared as at The consolidated financial statements and the group the same reporting date as the annual financial statements of manage ment report were prepared by the Executive Board of KION GROUP AG. KION GROUP AG on 10 March 2015. [2] BASIS OF PREPARATION The consolidated financial statements of the KION Group for the financial year ended 31 December 2014 have been prepared in accordance with section 315a of the German Commercial Code (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 Financial reporting standards to be adopted for the first time in the current financial year The following financial reporting standards were adopted for the first time in 2014: – IFRS 10 ‘Consolidated Financial Statements’ – IFRS 11 ‘Joint Arrangements’ – IFRS 12 ‘Disclosure of Interests in Other Entities’ – Transition Guidance (Amendments to IFRS 10, IFRS 11 and – Amendments to IFRS 10 ‘Consolidated Financial Statements’, IFRS 12) IFRS 12 ‘Disclosure of Interests in Other Entities’ and IAS 27 accordance with Regulation (EC) No. 1606 / 2002 of the European ‘Separate Financial Statements’: amendments relating to the Parliament and of the Council concerning the application of inter- national accounting standards. All of the IFRSs and IFRICs that had been enacted by the reporting date and that were required to be applied in the 2014 financial year have been applied in pre paring the consolidated financial statements. In order to improve the clarity of presentation, certain items are aggregated in the statement of financial position and the consolidation of investment entities – IAS 27R ‘Separate Financial Statements’ – IAS 28R ‘Investments in Associates and Joint Ventures’ – Amendments to IAS 32 ‘Financial Instruments: Presentation’: offsetting of financial assets and financial liabilities We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 135 Basis of presentation – Amendments to IAS 39 ‘Financial Instruments: Recognition and Measurement’: amendments relating to the novation of – Amendments to IAS 27 ‘Separate Financial Statements’: amendments relating to the application of the equity method derivatives and continuation of hedge accounting. for subsidiaries, joint ventures and associates in separate The first-time adoption of these standards has had no significant effect on presentation of the financial performance, financial position or notes to the financial statements of the KION Group. financial statements – IFRIC 21 ‘Levies’ – Annual Improvements to IFRSs (2010–2012) – Annual Improvements to IFRSs (2011–2013) – Annual Improvements to IFRSs (2012–2014). Financial reporting standards released but not yet adopted These standards and interpretations are expected to be applied by the entities included in the KION Group only from the date on which they must be adopted for the first time. Their effects on the In its consolidated financial statements for the year ended financial performance and financial position of the KION Group 31 December 2014 the KION Group has not applied the following are still being analysed. standards and interpretations, which have been issued by the IASB but are not yet required to be adopted in 2014: – IFRS 9 ‘Financial Instruments’ – Amendments to IFRS 10 ‘Consolidated Financial Statements’, IFRS 12 ‘Disclosure of Interests in Other Entities’ and IAS 28 [3] PRINCIPLES OF CONSOLIDATION ‘Investments in Associates and Joint Ventures’, clarification Acquisitions are accounted for using the acquisition method. In relating to application of the consolidation exception for accordance with IFRS 3, the identifiable assets and the liabilities investment entities – Amendments to IFRS 10 ‘Consolidated Financial Statements’ and IAS 28 ‘Investments in Associates and Joint Ventures’: assumed on the acquisition date are recognised separately from goodwill, irrespective of the extent of any non-controlling inter- ests. The identifiable assets acquired and the liabilities assumed amendments relating to the sale or contribution of assets are measured at their fair value. between an investor and its associate or joint venture relating to the acquisition of interests in joint operations – Amendments to IFRS 11 ‘Joint Arrangements’: clarification – IFRS 14 ‘Regulatory Deferral Accounts’ – IFRS 15 ‘Revenue from Contracts with Customers’ – Amendments to IAS 1 ‘Presentation of Financial Statements’: – Amendments to IAS 16 ‘Property, Plant and Equipment’ and amendments in connection with the disclosure initiative IAS  38 ‘Intangible Assets’: clarification relating to revenue- based depreciation and amortisation – Amendments to IAS 16 ‘Property, Plant and Equipment’ and IAS 41 ‘Agriculture’: amendments relating to the accounting for bearer plans – Amendments to IAS 19 ‘Employee Benefits’: defined benefit plans: employee contributions The amount recognised as goodwill is calculated as the amount by which the acquisition cost, the amount of non- controlling interests in the acquiree and the fair value of all previously held equity interest at the acquisition date exceeds the fair value of the acquiree’s net assets. If the cost of acquisition is lower than the fair value of the acquiree’s net assets, the differ- ence is recognised in income. For each acquisition, the Group decides on a case-by-case basis whether the non-controlling interest in the acquiree is recognised 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 recognised at the proportionate value of the net assets attributable to them excluding goodwill. We keep the world moving.KION GROUP AG | Annual Report 2014136 In the case of business combinations in stages, previously held equity interests are recognised at their fair value at the acquisi- tion date. The difference between their carrying amount and fair value is recognised in the consolidated income statement. [4] BASIS OF CONSOLIDATION For the purpose of impairment testing, goodwill is allocated KION GROUP AG’s equity investments include subsidiaries, joint to cash-generating units that are likely to benefit from the busi- ventures, associates and financial investments. ness combination. In addition to KION GROUP AG, the consolidated financial Transaction costs are immediately taken to income. Contin- statements of the KION Group include, using the acquisition gent consideration elements are included at fair value at the date method, all material subsidiaries over which KION GROUP AG of acquisition when determining the purchase consideration. exercises control. KION GROUP AG controls a subsidiary if it has Contingent consideration elements may consist of equity instru- decision-making power over the main activities of the entity and ments or financial liabilities. Depending on the category, changes can use this power to affect the amount of the variable returns to in their fair value are included in subsequent measurements. which it is exposed as a result of the equity investment. Subsidi- The consolidated financial statements include all of the aries acquired in the course of the financial year are consolidated parent company’s material subsidiaries. Intragroup balances, from the date on which control is obtained. Companies sold in the transactions, income and expenses, and gains and losses on course of the financial year are deconsolidated from the date on intercompany transactions are eliminated in full. Deferred taxes which control is lost. are recognised on temporary differences arising from consoli- A joint venture is an equity interest in which the entity is jointly dation transactions. managed by companies in the KION Group and one or more Transactions with non-controlling interests are treated as partners on the basis of a contractual agreement, and these transactions with the Group’s equity providers. Differences parties have rights to the net assets of the joint venture. between the consideration paid for the acquisition of a non- Associates are entities in which companies in the KION Group controlling interest and the relevant proportion of the carrying are able to exercise significant influence, either directly or amount of the subsidiary’s net assets are recognised in equity. indirectly, over the financial and operating policies of the entity Gains and losses arising from the sale of non-controlling concerned. Significant influence is assumed when KION GROUP interests are also recognised in equity, provided there is no AG holds between 20 per cent and 50 per cent of the voting rights. change in control. All other equity interests over which KION GROUP AG is Associates and joint ventures that are of material importance unable to exercise control or a significant influence, or that are not to the presentation of the financial position and financial per- jointly controlled by KION GROUP AG, are classified as financial formance of the KION Group are accounted for using the equity investments. Financial investments are not consolidated. method. The number of equity investments broken down by category is shown in > TABLE 039 We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 137 Basis of presentation 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 01/01/2014 Additions Disposals 31/12/2014 99 22 77 8 6 2 53 13 40 – – – 2 – 2 4 1 3 3 1 2 1 1 – 5 1 4 96 21 75 9 5 4 52 13 39 A total of 21 German (2013: 22) and 75 foreign (2013: 77) sub- 52 (2013: 53) companies with minimal business volumes or sidiaries were fully consolidated in addition to KION GROUP AG no business operations were not included in the consolidation. as at 31 December 2014. The unconsolidated subsidiaries and the joint ventures and Three subsidiaries were deconsolidated in 2014. Information associates not accounted for using the equity method are of on the disposal of one subsidiary can be found in note [5]. minor importance to the presentation of the financial position Nine joint ventures and associates were accounted for under and financial performance of the KION Group, both individually the equity method as at 31 December 2014 (31 December 2013: and as a whole. eight). Two equity investments have been accounted for using the Where other requirements are met, the following fully con- equity method since 1 January 2014 owing to their increased solidated companies are exempt from the requirement to prepare financial significance. One insignificant equity investment is now annual financial statements and management reports in accord- accounted for at cost rather than using the equity method. In ance with sections 264 (3) and 264b HGB on account of their each case, measurement under the equity method was performed inclusion in the consolidated financial statements: > TABLE 040 on the basis of the last available annual financial statements. We keep the world moving.KION GROUP AG | Annual Report 2014 138 German entities exempted from disclosure requirements 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 A detailed overview of all the direct and indirect shareholdings of KION GROUP AG is shown in the list of shareholdings (note [45]). [6] CURRENCY TRANSLATION [5] DISPOSAL OF SUBSIDIARIES Financial statements in foreign currencies are translated in accordance with the functional currency concept (IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’). The functional currency is the currency of the primary economic environment in The KION Group sold the entirety of its controlling interest in which an entity operates. The modified closing-rate method is Willenbrock Arbeitsbühnen GmbH & Co. KG (referred to below used for currency translation. as Willenbrock Arbeitsbühnen) and deconsolidated it with effect The assets and liabilities of foreign subsidiaries, including from 16 December 2014. Before that, the KION Group had held a goodwill, are translated at the middle spot exchange rate, i.e. at 74 per cent stake in Willenbrock Arbeitsbühnen indirectly through the average of the bid or offer rates on the reporting date. Income Willenbrock Fördertechnik Holding GmbH. A shareholder loan and expenses are translated at the average rate. With the excep- was also transferred in connection with the disposal. The pur- tion of income and expenses recognised as other comprehensive chase price for the shares and the loan amounted to €4.6 million income (loss), equity is recognised at historical rates. The and was paid entirely in cash. resulting translation differences are not taken to income and Assets totalling €16.0 million and liabilities totalling €13.1 mil- are recognised in other comprehensive income (loss) until sub- lion were eliminated as a result of the disposal. Most of these sidiaries are disposed of. assets (€14.0 million) constituted leased and rental assets, while Transactions of the consolidated entities in foreign currencies most of the liabilities (€11.5 million) were lease liabilities. are translated into the relevant company’s functional currency at The disposal of Willenbrock Arbeitsbühnen generated a profit the rate prevailing on the transaction date. On the reporting date, of €1.7 million, which was included in earnings before interest and monetary items are translated at the closing rate and non-monetary tax. The transfer of the shareholder loan of €5.0 million resulted in items at the rate prevailing on the transaction date. Currency a loss of €0.8  million, which was recognised in net financial translation differences are taken to income and recognised in expenses. other income / expenses or in net financial income / expenses. We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 139 Basis of presentation Major foreign currency rates in € Australia (AUD) Brazil (BRL) Switzerland (CHF) China (CNY) United Kingdom (GBP) Russia (RUB) U.S.A. (USD) Average rate Closing rate 2014 1.4727 3.1209 1.2147 8.1914 0.8064 50.9191 1.3294 2013 1.3782 2.8706 1.2308 8.1659 0.8492 42.3328 1.3284 2014 1.4809 3.2152 1.2029 7.5085 0.7768 70.2294 1.2099 TABLE 041 2013 1.5414 3.2470 1.2276 8.3218 0.8302 45.2175 1.3746 The translation rates above were used for currencies that are economic benefit will accrue to the entity and that it can be material to the financial statements. > TABLE 041 reliably measured. Other criteria may arise, depending on each [7] ACCOUNTING POLICIES individual transaction, such as: Sale of goods With the exception of items classified as ‘sale with risk’, revenue from the sale of goods is recognised when the KION Group The accounting policies applied in these consolidated financial delivers goods to a customer, the goods are accepted by the statements are, besides the aforementioned accounting policies customer and the flow of benefits to the Group is considered to to be adopted for the first time in 2014, fundamentally the same be probable. If a customer is expected to accept goods but has as those used for the year ended 31 December 2013. These yet to do so, the corresponding revenue is only recognised when consolidated financial statements are based on the financial the goods are accepted. Appropriate provisions are recognised statements of the parent company and its consolidated sub- for risks relating to the sale of goods. In the case of revenue from sidiaries prepared in accordance with the standard accounting agreements classified as ‘sale with risk’, the revenue is recog- policies applicable throughout the KION Group. nised pro rata over the term of the agreement. The term ‘sale with risk’ and the corresponding revenue recognition are discussed in the following section and under ‘Rental assets’ below. Revenue recognition Revenue is the fair value received for the sale of products and services and rental and lease income (excluding VAT) after deduc- tion of trade discounts and rebates. In accordance with IAS 18, revenue is recognised when it is sufficiently probable that a future We keep the world moving.KION GROUP AG | Annual Report 2014 140 Rendering of services in the amount of the estimated cost at the date on which the related product is sold. Revenue from the rendering of services is recognised in the year in which the services are rendered. For services provided over several periods, revenue is recognised in accordance with the Financial income and expenses proportion of the total services rendered in each period (stage of completion). Revenue from long-term service agreements is there- Financial income and expenses mainly consist of interest fore recognised on the basis of the average term of the service expenses on financial liabilities, interest income from financial agreements and in line with progressive costs (constant margin). receivables, gains and losses on financial instruments recognised Revenue from financial service transactions is recognised in through profit or loss, exchange rate gains and losses on financial the amount of the sales value of the leased asset if classified as activities and the interest expenses on pension provisions. The a finance lease and in the amount of the lease payments if classi- expected return on plan assets relating to pension provisions is fied as an operating lease. As part of the financial services also included in financial income. provided by the Group, industrial trucks are also sold to finance Interest income and expenses are recognised in profit and partners who then enter into leases directly with the end cus- loss in accordance with the effective interest method. The effec- tomer (‘indirect end customer finance’). If significant risks and tive interest method is used for calculating the amortised cost of rewards remain with the KION Group as a result of an agreed a financial asset or financial liability and the allocation of interest residual value guarantee that accounts for more than 10 per cent income and interest expenses over the relevant periods. The of the asset’s value or as a result of an agreed customer default effective interest rate is the interest rate at which the estimated guarantee (‘sale with risk’), the proceeds from the sale are future incoming and outgoing payments (including all fees that deferred and recognised as revenue on a straight-line basis are part of the effective interest rate, transaction costs and other over the term until the residual value guarantee or the default premiums and discounts) are discounted to the net carrying guarantee expires. amount of the financial asset or liability over the expected term of Interest income and royalties Dividends are recognised in income when a resolution on distribution has been passed. They are reported in the consoli- Interest income is recognised pro rata temporis in accordance dated income statement under other income, provided they are with the effective interest method. Income from royalties is dividends from subsidiaries carried at amortised cost. the financial instrument. deferred in accordance with the substance of the relevant agree- ments and recognised pro rata temporis. Information on the deferral of lease income is contained in the Goodwill disclosures on the accounting treatment of leases. Cost of sales Goodwill has an indefinite useful life and is not amortised. Instead, it is tested for impairment in accordance with IAS 36 (‘Impairment of Assets’) at least once a year, and more frequently if there are indications that the asset might be impaired. The cost of sales comprises the cost of goods and services sold Impairment testing is performed at the level of the individual and includes directly attributable material and labour costs as cash-generating units (CGUs) or groups of CGUs. A CGU is well as directly attributable overheads, including depreciation of defined as the smallest identifiable group of assets that generates production equipment and amortisation of certain intangible cash inflows from continuing use that are largely independent of assets, as well as write-downs of inventories. Cost of sales also the cash inflows from other assets or groups of assets. CGUs are includes additions to warranty provisions, which are recognised generally based on the lowest level of an entity at which – for We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 141 Basis of presentation internal management purposes – the management systematically CGU cash flows are discounted using a weighted average monitors and controls the contribution to earnings made by the cost of capital (WACC) that reflects current market assessments assets concerned, including goodwill. However, a CGU may not of the specific risks to individual CGUs. The underlying capital be larger than an operating segment as defined in IFRS  8 structure for the LMH and STILL CGUs is determined by com- ‘Operating Segments’. In particular, CGUs are considered to be paring peer group companies in the same sector. The beta factor clearly defined and independent if the entity’s management has derived from the peer group was 1.09 (2013: 1.07). Yield curve prepared independent forecasts relevant to decision-making for data from the European Central Bank (three-month average, the individual CGUs. rounded) was used to determine the risk-free interest rate; as at For the purposes of internal and external reporting, the 1 November 2014 the rate was 2.0 per cent (2013: 2.75 per cent). activities of the KION Group are broken down into the LMH, The market risk premium derived from empirical studies of the STILL, Financial Services and Other segments on the basis of capital markets was set at 6.75 per cent (2013: 5.75 per cent) and their characteristics and risk profile. The 2014 forecast, the was within the bandwidth recommended by the technical com- budget for 2015, the medium-term planning for 2016 to 2017 and mittee for business valuation and administration (FAUB) of the the KION Group’s internal projections for 2018 to 2019 were German Institute of Auditors (IDW), which is 5.5  per  cent to drawn up on the basis of this segment structure. 7.0 per cent. The market risk premium increased by 1.0 percent- The relevant CGUs for the purposes of goodwill impairment age point compared with 2013 owing to the decrease in the risk- testing and the CGUs to which brand names have been allocated free base rate from 2.75  per  cent to 2.0  per  cent. The inflation are the LMH and STILL segments and the KION India Pvt. Ltd., forecast for Germany and the implied return on equity remained Pune, India CGU (formerly Voltas Material Handling Pvt. Ltd.), unchanged year on year at 1.75  per  cent and 8.75  per  cent which is assigned to the Other segment. The Financial Services respectively. The assumed country risk was 0.25 per cent for the segment only generates a finance margin to cover costs and LMH CGU (2013: 0.28 per cent) and 0.42 per cent for the STILL consequently has almost no impact on cash flow and does not CGU (2013: 0.45 per cent). A leverage ratio of 27.8 per cent (2013: earn any material excess profit. As a result, no goodwill from the 25.4  per  cent) was calculated based on the capital structure original purchase price allocation (PPA) was allocated to this determined for the peer group. CGU when the new segment structure was defined in 2012 in A leveraged beta of 1.09 (2013: 1.06) was used to determine accordance with IAS 36.87. the country-specific WACC for KION India. The risk-free interest The recoverable amount of a CGU is determined by calcu- rate for India as at 1 November 2014 was 7.4  per  cent (2013: lating its value in use on the basis of the discounted cash flow 8.9 per cent); the country-specific risk premium for India was set method. The cash flows forecast for the next five years are at 2.2 per cent (2013: 2.4 per cent). The WACC before tax, which included in the calculation for the impairment test in accordance is used to discount the estimated cash flows, was calculated at with IAS 36.33(b). The financial forecasts are based on assump- 10.7  per  cent for LMH (2013: 10.5  per  cent), 10.9  per  cent for tions relating to the development of the global economy, com- STILL (2013: 10.8 per cent) and 15.6 per cent (2013: 16.4 per cent) modity prices and exchange rates. The budget for 2015, the for KION India. The WACC after tax was 7.7  per  cent for LMH medium-term planning for 2016 to 2017 and the projections for (2013: 7.7 per cent), 7.9 per cent for STILL (2013: 7.9 per cent) and 2018 to 2019 were used to determine the cash flows. Cash flows 14.1 per cent for KION India (2013: 14.9 per cent). beyond the five-year planning horizon were extrapolated for the The impairment test carried out in the fourth quarter of 2014 LMH and STILL CGUs using a growth rate of 1.0 per cent (2013: did not reveal any need to recognise impairment losses for the 1.0 per cent). A growth rate of 5.0 per cent (2013: 5.0 per cent) existing goodwill of the LMH, STILL and KION India CGUs. Based was used for KION India Pvt. Ltd., Pune, India (referred to below on the results of sensitivity analysis, we do not expect that sig- as KION India) on a perpetuity basis to take account of forecast nificant impairment losses will need to be recognised for goodwill, trends for the high-growth market of India and the high level of even if key assumptions vary within realistic limits. inflation. We keep the world moving.KION GROUP AG | Annual Report 2014142 Other intangible assets Capitalised development costs include all costs and overheads directly attributable to the development process. Once they have Other purchased intangible assets with a finite useful life are been initially capitalised, these costs and internally generated carried at cost less all accumulated amortisation and all accu- intangible assets – particularly internally generated software – are mulated impairment losses. If events or market developments carried at cost less accumulated amortisation and accumulated suggest impairment has occurred, impairment tests are carried impairment losses. Internally generated intangible assets are not out on the carrying amount of items classified as other intangible qualifying assets so finance costs are not capitalised. All assets with a finite useful life. The carrying amount of an asset is non-qualifying development costs are expensed as incurred and compared with its recoverable amount, which is defined as the reported on the income statement under research and develop- higher of its value in use and its fair value less costs to sell. If the ment costs together with research costs and the amortisation on reasons for recognising impairment losses in the past no longer capitalised development costs. apply, impairment losses not exceeding the amortised cost of the Amortisation of intangible assets with a finite useful life is assets are reversed. recognised on a straight-line basis and reported under functional Other intangible assets with an indefinite useful life are carried costs. The impairment losses on intangible assets are reported at cost and are mainly capitalised brand names. Brand names are under other expenses. not amortised because they have been established in the market The following useful lives are applied in determining the for a number of years and there is no foreseeable end to their carrying amounts of other intangible assets: > TABLE 042 useful life. In accordance with IAS 36, they are tested for impair- ment 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 impairment test for goodwill. Assessments of indefinite useful life are carried out in every period. The Voltas brand name at KION India, which is allocated to the Other segment, is subject to a usage right with a contractually limited term and it will therefore be amortised over its useful life. Development costs are capitalised if the following can be demonstrated: – 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 – the availability of adequate technical, financial and other economic 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. We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 143 Basis of presentation Useful life of other intangible assets Customer relationships / client base Technology Development costs Patents and licences Software TABLE 042 Years 4 – 10 10 5 – 7 3 – 15 2 – 10 Leases / short-term rentals Leased assets KION Group entities lease equipment, mainly various industrial If the economic ownership of leased assets remains with a KION trucks, to their customers in order to promote sales. The leases Group entity as the lessor under an operating lease, the assets may be of a short-term nature (short-term rental) or long-term are reported as leased assets in a separate item in the statement nature (leasing). of financial position. The leased assets are carried at cost and Entities in the KION Group enter into leases as lessors and as depreciated over the term of the underlying leases. lessees. In line with IAS 17, these contracts are classified as To fund leases, industrial trucks are generally sold to leasing finance leases if substantially all of the risks and rewards inciden- companies. The industrial trucks are then leased back to entities tal to ownership of the leased / rental asset are transferred to the in the KION Group (head lease), who sub-lease them to external lessee. All other rentals and leases are classified as operating end customers (described below as ‘sale and leaseback sub- leases, again in accordance with IAS 17. leases’). These long-term leases generally have a term of four to If a KION Group entity enters into a finance lease as the five years. If, in the case of sale and leaseback sub-leases, the lessor, the future lease payments to be made by the lessee are risks and rewards incidental to the head lease are substantially recognised as lease receivables at an amount equal to the net borne by KION Group entities and are not transferred to the end investment in the lease. Interest income is allocated to each customer, the corresponding assets are reported as non-current reporting period in order to ensure a constant return on the out- leased assets. However, if substantially the risks and rewards standing net investment in the lease. incidental to the head lease are transferred to the end customer, a corresponding lease receivable is recognised. In both cases, the funding items for these long-term customer leases, which are funded for terms that match those of the leases, are recognised as lease liabilities. We keep the world moving.KION GROUP AG | Annual Report 2014 144 Rental assets Other property, plant and equipment Rental assets are assets resulting from short-term rentals as well Property, plant and equipment are carried at cost less straight- as industrial trucks in relation to which significant risks and line depreciation and impairment losses. The cost of internally rewards remain with the KION Group despite the trucks having generated machinery and equipment includes all costs directly been sold (‘sale with risk’). attributable to the production process and an appropriate In the case of short-term rentals, LMH and STILL brand portion of production overheads. This includes production- companies rent industrial trucks to customers directly. Short- related depreciation and proportionate costs for administration term rental agreements usually have a term of one day to one and social insurance / employee benefits. year. The significant risks and rewards remain with the LMH and The cost of property, plant and equipment is reduced by the STILL brand companies. The industrial trucks are carried at cost amount of any government grants received. Expenses for main- and depreciated over the normal useful life of between five and tenance and repairs are recognised in income to the extent that seven years, depending on the product group. they are not required to be capitalised. Borrowing costs are In an indirect end customer finance arrangement, industrial capitalised for certain items of property, plant and equipment trucks are sold to finance partners who then enter into leases with whose acquisition or production exceeds one year as soon as the end customers. If LMH and STILL brand companies provide definition of a qualifying asset is met. As was the case in the material residual value guarantees or a customer default guar- previous year, there were no qualifying assets in 2014. antee (‘sale with risk’), these transactions, which are classified as Depreciation of property, plant and equipment is recognised sale agreements under civil law, are recognised in accordance on a straight-line basis and reported under functional costs. The with the provisions on lessors with operating leases in conjunc- useful lives and depreciation methods are reviewed annually and tion with the IFRS principles for revenue recognition. In this case, adjusted to reflect changes in conditions. the trucks are recognised as assets in the statement of financial The useful lives below are applied in determining the carrying position at their cost on the date of the sale and written down to amounts of items of property, plant and equipment. > TABLE 043 their guaranteed residual value, or zero, on a straight-line basis over the period until the residual value guarantee or the customer default guarantee expires. If the KION Group provides a residual value guarantee, an amount equivalent to the residual value obligation is recognised under other financial liabilities. Useful life of other property, plant and equipment Buildings Plant and machinery Office furniture and equipment TABLE 043 Years 10 – 50 3 – 15 2 – 15 We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 145 Basis of presentation KION Group companies also lease property, plant and equip- If an impairment test for an item of property, plant and ment for their own use using finance leases, which are recog- equipment is performed at the level of a cash-generating unit to nised as other property, plant and equipment. In this case, the which goodwill is allocated and results in the recognition of an lower of the fair value and present value of future lease payments impairment loss, first the goodwill and, subsequently, the assets is recognised at the inception of the lease. A corresponding must be written down in proportion to their relative carrying liability to the lessor is recognised under other financial liabilities amounts. If the reason for an impairment loss recognised in prior in the statement of financial position. years no longer applies, impairment losses not exceeding the Property, plant and equipment covered by finance leases is amortised cost of the asset concerned are reversed. This does depreciated over the shorter of its useful life or the term of the not apply to goodwill. lease, unless title to the leased assets passes to the lessee when the lease expires, in which case the property, plant and equip- ment is depreciated and the other financial liabilities are reversed Equity-accounted investments over the useful life of the leased assets. The difference between total finance lease liabilities and In accordance with the equity method, associates and joint the fair value of the financed leased assets represents the finance ventures are measured as the proportion of the interest in the charge which is recognised in the income statement over the equity of the investee. They are initially carried at cost. Sub- term of the lease at a constant rate of interest on the outstanding sequently, the carrying amount of the equity investment is balance in each period. At the end of the lease term, the leased adjusted in line with any changes to the KION Group’s interest in assets are either returned or purchased, or the contract is the net assets of the investee. The KION Group’s interest in the extended. profit or loss generated after acquisition is recognised in income. If there are certain indications of impairment of the property, Other changes in the equity of associates and joint ventures are plant and equipment, the assets are tested for impairment by recognised in other comprehensive income (loss) in the consoli- comparing the residual carrying amount of the assets with their dated financial statements in proportion to the Group’s interest in recoverable amount, which is defined as the higher of value in use the associate or joint venture. and fair value less costs to sell. If the residual carrying amount is If the Group’s interest in the losses made by an associate or greater than the recoverable amount, an impairment loss is joint venture exceeds the carrying amount of the proportionate recognised for an asset. The impairment losses on property, equity attributable to the Group, no additional losses are recog- plant and equipment are reported under other expenses. nised. Any goodwill arising from the acquisition of an associate or The KION Group calculates the recoverable amount primarily joint venture is included in the carrying amount of the investment on the basis of value in use. In determining value in use, the in the associate or joint venture. expected future cash flows are discounted using a risk-adjusted If there is evidence that an associate or joint venture may be discount rate, taking into account the current and future level of impaired, the carrying amount of the investment in question is earnings and segment-specific, technological, economic and tested for impairment. The carrying amount of the asset is general trends. compared with its recoverable amount. If the carrying amount is greater than the recoverable amount, an impairment loss is recognised for the equity investment. We keep the world moving.KION GROUP AG | Annual Report 2014146 Income taxes Inventories In the consolidated financial statements, current and deferred Inventories are carried at the lower of cost and net realisable value. taxes are recognised on the basis of the tax laws of the juris- The acquisition costs of raw materials and merchandise are dictions involved. Deferred taxes are recognised in other calculated on the basis of an average. comprehensive income (loss) if they relate to transactions also The cost of finished goods and work in progress includes recognised in other comprehensive income (loss). direct costs and an appropriate portion of the material and pro- Deferred tax assets and liabilities are recognised in accord- duction overheads and production-related depreciation directly ance with the liability method for all temporary differences attributable to the production process. Administrative costs and between the IFRS carrying amounts and the tax base, as well as social insurance / employee benefits are included to the extent for temporary consolidation measures. that they are attributable to the production process. Borrowing Deferred tax assets also include tax refund claims that arise costs as defined by IAS 23 are not a component of cost as they from the expected utilisation of existing tax loss carryforwards are not qualifying assets as defined by IAS 23.4. The amount rec- and interest carryforwards in subsequent years and whose utili- ognised is an average value or a value determined in accordance sation is reasonably certain according to current forecasts. On with the FIFO method. the basis of this estimate, deferred tax assets have been recog- Net realisable value is the selling price that can be realised nised on some loss carryforwards and interest carryforwards. less the estimated costs of completion and the estimated costs Deferred taxes are determined on the basis of the tax rates necessary to make the sale. that will apply or have been announced at the realisation date in Write-downs are recognised for inventory risks resulting from accordance with the current legal situation in each country con- duration of storage, impaired recoverability, etc. Write-downs are cerned. In accordance with the provisions in IAS 12, deferred tax reversed up to a maximum of cost if the reasons for their recog- assets and liabilities are not discounted. nition no longer apply. Deferred tax assets are offset against deferred tax liabilities to the extent that they have the same maturity and relate to the same taxation authority. We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 147 Basis of presentation Trade receivables Available-for-sale financial assets (AfS) are carried at fair value. If they are equity investments for which no market price is In the first period in which they are recognised, trade receivables available, they are carried at cost. Unrealised gains and losses, categorised as loans and receivables (LaR) are carried at fair including deferred taxes, are reported in other comprehensive value including directly attributable transaction costs. In sub- income (loss) until they are realised. The equity investments in sequent periods they are measured at amortised cost using the subsidiaries that are reported in other non-current financial effective interest method. Appropriate valuation allowances are assets are carried at amortised cost less impairment losses, as recognised for identifiable individual risks. Low-interest or non-in- observable fair values are not available and reliable results cannot terest-bearing receivables due in more than one year are carried be obtained using other permitted measurement techniques. At at their present value. Cash and cash equivalents present there is no intention to sell these financial instruments. In the first period in which they are recognised, other financial assets categorised as loans and receivables (LaR) are carried at fair value including directly attributable transaction costs. In sub- sequent periods they are measured at amortised cost using the Cash and cash equivalents comprise cash, credit balances with effective interest method. Appropriate valuation allowances are banks and current financial assets that can be transformed into recognised for identifiable individual risks. Low-interest or non- cash at any time and are only subject to a minor level of volatility. interest-bearing receivables due in more than one year are Other financial assets carried at their present value. Carrying amounts of financial assets are tested for impair- ment on every reporting date and whenever indications of impair- ment arise. If there is an objective indication of impairment (such Primary financial assets are initially recognised and derecognised as a borrower being in significant financial difficulties), an impair- in the financial statements on their settlement dates. ment loss must be recognised directly in the income statement. Under IAS  39 (‘Financial Instruments: Recognition and If objective facts in favour of reversing impairment losses are Measurement’), financial assets are classified as financial assets present on the reporting date, reversals are carried out to an held for trading and carried at fair value through profit and loss appropriate extent. Reversals do not exceed the amortised cost (FAHfT), financial assets carried at fair value through profit or loss that would have arisen if the impairment loss had not been recog- upon initial recognition (FAFVtPL), available-for-sale financial nised. In the case of debt instruments classified as availa- assets (AfS), financial assets classified as loans and receivables ble-for-sale financial assets (AfS), reversals of impairment losses (LaR) or held-to-maturity financial assets (HtM). are recognised in the income statement. As in the previous year, the KION Group did not designate Held-to-maturity financial assets (HtM) are carried at amor- any financial asset as carried at fair value through profit and loss tised cost less impairment losses in accordance with the effective (FAFVtPL) in the reporting year. The FAHfT category contains interest method. As in the previous year, the KION Group did not derivative financial instruments that do not form part of a formally categorise any financial assets as HtM in the reporting year. documented hedge. We keep the world moving.KION GROUP AG | Annual Report 2014148 Derivative financial instruments If the criteria for hedge accounting are not satisfied, changes in the fair value of derivative financial instruments are recognised Derivative financial instruments are measured at their fair value in the income statement. and are reported as financial assets or financial liabilities as at the In the case of hedges of net investments in foreign subsidiar- reporting date. They are initially recognised and derecognised in ies, the translation risks resulting from investments with a different the financial statements on their settlement dates. functional currency are hedged. Unrealised gains and losses on Currently, derivative financial instruments in the KION Group hedging instruments are reported in other comprehensive income mainly comprise currency forwards that are used for hedging (loss) until the company is sold. In the past financial year, as was purposes to mitigate currency risk. In addition, the options on the the case in the previous year, KION Group companies did not shares in Linde Hydraulics are reported as derivative financial enter into any hedges for net investments in foreign subsidiaries. instruments (see note [36]). In the previous year, the KION Group Further information on risk management and accounting for used interest-rate derivatives to hedge interest-rate risk resulting derivative financial instruments can be found in notes [36] and [37]. from loans with variable interest rates in various currencies. Because these loans were repaid in the previous year, there were no longer any material interest-rate derivatives in the KION Group Retirement benefit obligation as at 31 December 2013 or in 2014. In accordance with IAS 39 (Financial Instruments: Recog- The retirement benefit obligation is calculated in accordance with nition and Measurement), all derivative financial instruments the projected unit credit method. Future pension obligations are must be measured at their fair value irrespective of an entity’s measured on the basis of the pro rata vested benefit entitlements purpose or intention in entering into the derivative contract. as at the reporting date and discounted to their present value. Changes in the fair value of derivative financial instruments in a The calculations include assumptions about future changes in formally documented hedge are reported in the income state- certain parameters, such as expected salary and pension ment (for fair value hedges) or in other comprehensive income increases and biometric factors affecting the amount of future (loss) (for cash flow hedges). benefits. Pension provisions are reduced by the fair value of the The KION Group currently only uses cash flow hedges, mainly plan assets used to cover the Group’s benefit obligations. Plan for currency risk. In the previous year, cash flow hedges were assets are measured at fair value. used for interest-rate risk until the variable-rate loans were repaid. Remeasurements, including deferred taxes, are recognised In the case of cash flow hedges, derivatives are employed to in other comprehensive income (loss). It is not permitted to hedge future cash flow risks from planned transactions and from reclassify remeasurements recognised in other comprehensive firm obligations not reported in the statement of financial position. income (loss) to profit or loss in future periods. The cost of The effective portion of changes in the fair value of derivatives is additions to pension provisions is allocated to functional costs. initially recognised in other comprehensive income (loss), and is The interest cost on pension obligations and the interest income subsequently reclassified to the income statement when the rev- from plan assets are netted and reported in net financial enue from the corresponding underlying transaction is realised. income / expenses. Further details can be found in note [28]. The ineffective portion of the changes in fair value is recognised immediately in the income statement. We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 149 Basis of presentation Other provisions Share-based payments Other provisions are recognised when the Group has a legal or IFRS 2 distinguishes between equity-settled and cash-settled constructive obligation to a third party as the result of a past event share-based payment transactions. that is likely to lead to a future outflow of resources and that can Equity-settled share-based payment transactions are be reliably estimated. Where there is a range of possible out- recognised at their fair value at the date of grant. The fair value of comes and each individual point within the range has an equal the obligation is recognised as an expense under functional costs probability of occurring, a provision is recognised in the amount over the vesting period and offset against capital reserves. of the mean of the individual points. Measurement is at full cost. The portion of the fair value of cash-settled share-based pay- Provisions for identifiable risks and contingent liabilities are ments that is attributable to service provided up to the valuation recognised in the amount that represents the best estimate of the date is recognised as an expense under functional costs and is cost required to settle the obligations. Recourse claims are not also reported as a liability. The fair value is recalculated on each taken into account. The settlement amount also includes cost reporting date until the end of the performance period. Any increases identifiable as at the reporting date. Provisions with a change in the fair value of the obligation must be recognised (pro maturity of more than twelve months are discounted using the rata temporis) under expenses. standard market interest rate. The discount rate is a before-tax rate that reflects current market expectations for the time value of money and the specific risks inherent in the liability. Accrued Financial liabilities and other financial liabilities interest is recognised in interest expenses. Warranty provisions are recognised on the basis of past or These liabilities are initially recognised at fair value at the time they estimated future claim statistics. The corresponding expense is are entered into. Directly attributable transaction costs are recognised in cost of sales at the date on which the revenue is deducted for all financial liabilities that are not subsequently recognised. Individual provisions are recognised for claims that designated as at fair value through profit or loss (FLaC). These are known to the Group. liabilities are then measured at amortised cost. Any differences Provisions for expected losses from onerous contracts and between historical cost and the settlement amount are recog- other business obligations are measured on the basis of the work nised in accordance with the effective interest method. yet to be performed. Other financial liabilities also include derivative financial A restructuring provision is recognised when a KION Group instruments. Derivative liabilities that do not form part of a formally entity has prepared a detailed, formal restructuring plan and this documented hedge must be categorised as FLHfT and carried at plan has raised a valid expectation in those affected that the entity fair value through profit or loss. 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 entity concerned. We keep the world moving.KION GROUP AG | Annual Report 2014150 Trade payables Information on leases can be found in the sections on leases / short-term rentals, leased assets, rental assets and other Trade payables are categorised as FLaC and, in the first period in property, plant and equipment in this note. which they are recognised, are carried at fair value net of the Defined benefit pension obligations are calculated on the directly attributable transaction costs. In subsequent periods, basis of actuarial parameters. As differences due to remeasure- these liabilities are measured at amortised cost using the effec- ments are taken to other comprehensive income (loss), any tive interest method. Low-interest or non-interest-bearing liabili- change in these parameters would not affect the net profit for the ties due in more than one year are carried at their present value. current period. For further details about sensitivity analysis in rela- Assumptions and estimates tion to the impact of all significant assumptions, please refer to the information about the retirement benefit obligation in note [28]. Significant estimates are involved in calculating provisions for tax. These estimates may change on the basis of new information The preparation of the IFRS consolidated financial statements and experience (see also note [14]). requires the use of assumptions and estimates for certain line The recognition and measurement of other provisions is items that affect recognition and measurement in the statement based on an estimate of the probability of the future outflow of of financial position and the income statement. The actual resources, supplemented by past experience and the circum- amounts realised may differ from estimates. Assumptions and stances known to the Group at the reporting date. Accordingly, estimates are applied in particular: the actual outflow of resources for a given event may be different – 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 pen- – in assessing the recoverability of deferred tax assets. sion obligations, provisions for tax, and other provisions; and from the amount recognised in other provisions. Further details can be found in note [31]. Deferred tax assets on tax loss carryforwards and interest carryforwards 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 correspond- ing deferred tax assets were recognised. Goodwill is tested for impairment annually at the level of the Where necessary, the KION Group’s accounting depart- cash-generating units to which goodwill is allocated, applying the ments receive assistance from external legal advisors and tax budget for 2015 and the medium-term planning for 2016 to 2017 consultants when making the estimates required. combined with the growth predicted in the market forecasts for The carrying amounts of the affected line items can be found the projections for 2018 to 2019 and assuming division-specific in the relevant notes / the consolidated statement of financial growth rates for the period thereafter. Any material changes to position. these and other factors might result in the recognition of impair- The impact of a change to an estimate is recognised in profit ment losses. Further information on goodwill can be found earlier or loss prospectively when it becomes known and assumptions in this note and in note [17]. are adjusted accordingly. We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated income statement 151 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 044 Revenue by product category in € million New business Service offering – Aftersales – Rental business – Used trucks – Other Total revenue Further information on revenue can be found in the segment report in note [39]. TABLE 044 2013 2,519.6 1,975.0 1,174.2 443.1 226.4 131.3 2014 2,533.0 2,144.9 1,250.4 486.9 264.9 142.7 4,677.9 4,494.6 We keep the world moving.KION GROUP AG | Annual Report 2014 152 [9] OTHER INCOME The breakdown of other income is as follows: > TABLE 045 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 included gains amount- ing to €12.8  million (2013: €7.6  million) on derivative financial instruments used to hedge operating currency risk. These gains were offset by foreign currency exchange rate losses (other expenses) of €4.3 million in 2014 (2013: €7.3 million). Overall, this resulted in a net gain of €8.5 million on derivative financial instru- ments used to hedge operating currency risk (2013: €0.3 million). The sundry income that was reported predominantly included earnings from commission collected of €19.0  million (2013: €15.7 million), which are not reported under revenue. TABLE 045 2013 24.2 10.6 8.4 8.1 7.3 2.0 61.0 121.7 2014 16.2 11.4 9.9 – 4.6 2.9 48.2 93.2 We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated income statement 153 [10] OTHER EXPENSES The breakdown of other expenses is as follows: > TABLE 046 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 The change in foreign currency exchange rate gains and losses is attributable to exchange rate movements (see also note [9]). TABLE 046 2013 22.3 1.8 1.2 21.4 46.7 2014 13.7 10.8 – 17.6 42.1 We keep the world moving.KION GROUP AG | Annual Report 2014 154 [11] SHARE OF PROFIT (LOSS) OF EQUITY-ACCOUNTED INVESTMENTS The amount for the previous year included income of €7.0 million arising from the remeasurement of an existing equity- accounted investment of 23.0  per  cent held in Willenbrock Fördertechnik Holding GmbH, Bremen, Germany, over which a controlling influence can be exerted following the acquisition of The share of profit (loss) of equity-accounted investments in the further shares. Further details on equity-accounted investments reporting year amounted to a loss of €24.8 million (2013: profit of can be found in note [21]. €1.7 million). This loss was partly the result of a write-down that had to be recognised on the stake held in Linde Hydraulics GmbH & Co. KG, Aschaffenburg (referred to below as Linde Hydraulics), which in turn was due to a downturn in business. The value in use for Linde Hydraulics, which was calculated as part of an impair- ment test using a discount rate of 7.4  per  cent, amounted to [12] FINANCIAL INCOME €64.1 million. The total non-cash impairment loss recognised was Financial income breaks down as follows: > TABLE 047 €13.5 million. Financial income in € million Foreign currency exchange rate gains (financing) Interest income from leases Net interest income from defined benefit plans Other interest and similar income Total financial income TABLE 047 2013 13.6 27.2 1.1 6.6 48.5 2014 4.3 29.6 1.1 49.5 84.4 We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated income statement 155 The interest income from leases relates to the interest portion of the shares in Linde Hydraulics resulted in total income of lease payments in financial services transactions in which KION €43.2 million in 2014, which was recognised under other interest Group entities operate as lessors (finance leases). and similar income (2013: expenses of €14.7  million under Foreign currency exchange rate gains (financing) include other interest expenses and similar charges). The impairment gains of €0.7 million on hedging transactions (2013: €6.8 million). loss relating to the stake held in Linde Hydraulics is included in In the previous year, this line item had also included gains of the  share of profit (loss) of equity-accounted investments (see €6.2  million from the repayment of a foreign-currency loan also note [11]). denominated in US dollars. 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. Measurement of the put option of Linde Material Handling [13] FINANCIAL EXPENSES GmbH, Aschaffenburg, and the two call options of Weichai Power Financial expenses break down as follows: > TABLE 048 Co. Ltd., Weifang, China (referred to below as Weichai Power), on Financial expense in € million Interest expense from loans Interest expense from corporate bond Interest cost of leases Net interest expense from defined benefit plans Amortisation of finance costs Foreign currency exchange rate losses (financing) Interest cost of non-current financial liabilities Other interest expenses and similar charges Total financial expense TABLE 048 2013 59.1 65.2 43.0 18.7 30.2 9.6 1.2 41.5 268.4 2014 12.5 40.5 48.1 20.4 10.3 3.5 1.8 36.2 173.2 We keep the world moving.KION GROUP AG | Annual Report 2014 156 Interest expenses arising from loans and interest expenses from corporate bond decreased by a substantial €46.6  million and €24.6 million respectively in 2014 because the IPO resulted in a vastly improved funding structure and funding conditions com- [14] INCOME TAXES pared with 2013. In the reporting year, interest expenses arising The income tax expense of €80.0  million (2013: expense of from loan liabilities related to a low-interest revolving credit facility €15.9  million) consisted of €63.5  million in current tax expense under the SFA, whereas in the previous year they largely related (2013: €59.0  million) and €16.5  million in deferred tax expense to a number of higher-interest loan liabilities under the SFA (2013: deferred tax income of €43.1  million). The current tax amounting to €32.4  million and losses of €26.7  million on inter- expense included expenses of €6.9  million (2013: expenses of est-rate swaps. €9.1 million) relating to previous financial years. The interest cost of leases relates to the interest portion of At the reporting date there were income tax assets of lease payments in financial services transactions in which the €6.6  million receivable from tax authorities (2013: €15.4  million) material risks and rewards are borne by KION Group entities as and income tax liabilities of €31.3 million (2013: €27.7 million). lessees (finance leases). Sale and finance leaseback operating Deferred taxes are recognised for temporary differences sub-leases (SALB-FL-OL) incurred interest expenses of €27.2 mil- between the tax base and IFRS carrying amounts. Deferred taxes lion (2013: €24.0  million). The income from corresponding cus- are determined on the basis of the tax rates that will apply or have tomer agreements is, according to IAS 17, a component of the been announced at the realisation date in accordance with the rental and lease payments received and is therefore reported current legal situation in each country concerned. The current within revenue rather than as interest income. corporate income tax rate in Germany is 15.0 per cent plus the Net interest expense from defined benefit plans relates to the solidarity surcharge (5.5 per cent of corporate income tax). Taking net interest cost of the net liability of pension plans applying the into account the average trade tax rate of 14.63 per cent (2013: discount rate for plans in which pension obligations exceed plan 14.14  per  cent), the combined nominal tax rate for entities in assets. Germany was 30.5 per cent (2013: 30.0 per cent). The income tax Early repayment in April 2014 of the fixed-rate tranche of the rates for foreign companies used in the calculation of deferred corporate bond issued in 2011, which was due to mature in 2018 taxes are between 10.0  per  cent and 35.0  per  cent (2013: and had a volume of €325.0 million, and the floating-rate tranche between 10.0 per cent and 37.6 per cent). of the corporate bond issued in 2013, which was due to mature in No deferred taxes have been recognised on temporary 2020 and had a volume of €200.0  million, led to non-recurring differences of €88.8  million (2013: €88.5  million) between the financial expenses. An amount of €8.4  million representing the net assets reported in the consolidated financial statements for proportion of the deferred finance costs relating to these bonds the Group companies and the tax base for the shares in these was recognised as an expense as amortisation of finance costs. Group companies (outside basis differences) because the A payment of €14.8 million representing early repayment charges KION Group is in a position to manage the timing of the reversal was recognised as other interest expenses and similar charges. of temporary differences and there are no plans to dispose of Foreign currency exchange rate losses (financing) included investments in the foreseeable future. losses on derivative financial instruments amounting to €0.4 mil- lion (2013: €6.6 million). We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated income statement 157 Deferred tax assets are allocated to the following items in the statement of financial position: > TABLE 049 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 liabilities are allocated to the following items in the statement of financial position: > TABLE 050 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 049 2013 115.1 2.6 45.1 0.8 112.0 317.4 41.0 62.2 – 400.7 295.5 TABLE 050 2013 489.1 7.8 167.7 0.3 21.9 19.8 0.3 – 400.7 306.2 2014 136.0 0.1 40.5 0.5 178.1 295.1 46.2 62.1 – 400.6 357.9 2014 483.7 5.0 196.2 2.1 23.5 10.6 0.5 – 400.6 320.9 We keep the world moving.KION GROUP AG | Annual Report 2014 158 The deferred tax liabilities essentially relate to the purchase price The KION Group’s corporation-tax loss carryforwards in allocation in the acquisition of the KION Group, particularly for Germany as at 31 December 2014 amounted to €108.2  million intangible assets and property, plant and equipment. (31 December 2013: €169.8 million), while trade-tax loss carryfor- In 2014, deferred taxes of €62.5  million were recognised in wards stood at €59.9 million (31 December 2013: €140.5 million). other comprehensive income (loss), resulting in an increase in There were also foreign tax loss carryforwards totalling €214.4 mil- other comprehensive income (loss) (2013: €8.6 million, resulting in lion (31 December 2013: €228.5 million). a decrease in other comprehensive income (loss)). Of this amount, The interest that can essentially be carried forward indefi- deferred taxes of €60.6  million (2013: minus €1.1  million) arose nitely in Germany as at 31 December 2014 amounted to from the remeasurement of the defined benefit obligation. Fur- €332.5 million (31 December 2013: €359.0 million). thermore, deferred taxes of €1.9 million (2013: minus €7.5 million) The table below shows the reconciliation of expected income were recognised in connection with realised and unrealised tax expense to effective income tax expense. The Group recon- changes in the fair value of derivatives in cash flow hedges. ciliation is an aggregation of the individual company-specific Deferred taxes of €1.0 million were reclassified from accu- reconciliations prepared in accordance with relevant local tax mulated other comprehensive income (loss) to retained earnings rates, taking into account consolidation effects recognised in in connection with the deconsolidation of Linde Heavy Truck income. The expected tax rate applied in the reconciliation is Division Ltd. 30.5 per cent (2013: 30.0 per cent). > TABLE 051 No deferred tax assets have been recognised on tax loss carryforwards of €162.0 million (2013: €231.8 million), on interest carryforwards of €262.1 million (2013: €351.1 million) or on other temporary differences of €1.2 million (2013: €0.7 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 therefore €34.2 million (2013: €49.7 million), of which €32.3 million (2013: €41.0 million) concerns tax losses that can be carried forward indefinitely. We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated income statement 159 Income taxes in € million Earnings before taxes Anticipated income taxes Deviations due to the trade tax base Deviations from the anticipated tax rate 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 relating to prior periods * Other TABLE 051 2013 154.3 2014 258.3 – 78.7 – 46.2 – 5.3 8.2 – 5.6 – 1.0 – – 5.9 – 2.6 – 6.9 7.5 5.0 – 4.0 13.3 – 7.1 0.1 – 7.0 – 8.1 5.7 2.2 – 9.1 40.6 3.7 Effective income taxes (current and deferred taxes) – 80.0 – 15.9 * In 2013 mainly due to the actual usability of tax loss carryforwards of KION Material Handling GmbH [15] OTHER INCOME STATEMENT DISCLOSURES entitlements of €23.4  million (2013: €23.0  million) and unrecog- nised past service cost of €2.6 million (2013: unrecognised past service income of €1.7 million) arising from plan amendments and curtailments. Impairment losses and depreciation expenses on property, The cost of materials rose by €99.0 million in the reporting year to plant and equipment together with impairment losses and amor- €2,220.7 million (2013: €2,121.7 million). tisation expenses on intangible assets amounted to €367.2 mil- Personnel expenses went up by €88.1 million to €1,231.9 mil- lion in the reporting year (2013: €335.0 million). Inventories were lion in 2014 (2013: €1,143.8  million). These personnel expenses written down by €9.1 million (2013: €13.7 million). included wages and salaries of €966.4 million (2013: €900.5 mil- The breakdown of rental and lease payments expensed in lion), social security contributions of €215.7  million (2013: the period and arising in connection with operating leases in €203.7 million) and expenses for pensions of €49.7 million (2013: which KION Group entities are lessees is as follows: > TABLE 052 €39.5  million). The interest cost from the unwinding of the dis- count on estimated pension obligations is not recognised under personnel expenses and is instead reported under financial expenses as a component of interest cost of the defined benefit obligation. Pension expenses essentially comprised the pension We keep the world moving.KION GROUP AG | Annual Report 2014 160 Lessee: Expenses recognised for operating lease payments in € million Procurement lease contracts Sublease contracts Total recognised expenses for lease payments TABLE 052 2013 75.1 20.3 95.4 2014 81.0 16.2 97.1 The expenses in connection with sub-leases relate to leases and Diluted earnings per share are calculated by adding the rental agreements in which KION Group entities are both lessors potential dilutive no-par-value shares that employees can obtain and lessees. These expenses were offset by income of €37.6 mil- for free under the employee share option programme to the lion in 2014 (2013: €40.9 million). weighted average number of shares outstanding during the reporting period. The calculation of diluted earnings per share was based on a weighted average of 98,693,221 no-par-value shares issued. Diluted earnings per share for the reporting period came to €1.79 (2013: €1.69). In the previous year, there had been no equity instruments that diluted the earnings per share for the number of shares issued. [16] EARNINGS PER SHARE Basic earnings per share are calculated by dividing the net income (loss) accruing to the KION GROUP AG shareholders by the weighted average number of shares outstanding during the reporting period (2014: 98,692,041 no-par-value shares; 2013: 81,982,231 no-par-value shares). The net income accruing to the shareholders of KION GROUP AG was €176.7  million (2013: €138.8  million). Information about determining the net income (loss) accruing to the KION GROUP AG shareholders can be found in the consolidated income statement. Basic earnings per share for the reporting period came to €1.79 (2013: €1.69). The 163,562 no-par-value treasury shares repurchased by KION GROUP AG were not included in this figure as at 31  Decem- ber 2014 (31 December 2013: 200,000). We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 161 Notes to the consolidated statement of financial position [17] GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill is allocated to the segments as follows: > TABLE 053 Goodwill broken down by segment in € million LMH STILL Other Total goodwill The change in the amount of goodwill in 2014 was the result of currency effects. In the previous year, the change in goodwill 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. TABLE 053 2013 925.1 556.5 13.1 2014 927.8 556.7 12.5 1,497.1 1,494.7 We keep the world moving.KION GROUP AG | Annual Report 2014 162 Intangible assets in € million Goodwill Brand names Technology & development Sundry intangible assets Balance as at 01/01/2013 1,473.2 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 Balance as at 01/01/2014 Group changes Currency translation adjustments Additions Disposals Amortisation Balance as at 31/12/2014 Gross carrying amount as at 31/12/2014 Accumulated amortisation 23.1 – 1.6 – 0.0 – – – 1,494.7 1,494.7 – 0.0 1,494.7 – 2.3 – – – 1,497.1 1,497.1 – 0.0 593.9 1.5 – 0.5 – – – 0.3 – 594.7 595.4 – 0.7 594.7 – 1.0 – – – 0.3 595.4 596.5 – 1.1 TABLE 054 Total 2,407.2 38.4 – 3.8 62.6 – 0.9 – 73.6 – 1.2 217.9 – – 0.4 45.7 – 0.0 – 45.1 – 1.2 122.1 13.8 – 1.4 17.0 – 0.9 – 28.2 – 216.9 122.4 2,428.7 470.4 – 253.5 216.9 – 1.5 43.7 – 2.4 – 49.7 253.4 – 131.0 122.4 – 0.0 1.2 17.2 – 0.1 – 30.5 2,813.9 – 385.2 2,428.7 – 0.0 6.0 60.9 – 2.5 – 80.5 210.0 110.1 2,412.5 492.5 – 282.5 270.0 – 159.9 2,856.0 – 443.5 The Group intends to retain and further strengthen the Linde, brand name is amortised over its useful life of five years. As at STILL, OM STILL and KION brand names on a long-term basis. 31 December 2014, the brand names allocated to the Other seg- Brand names worth €474.5  million are assigned to the LMH ment (KION and Voltas) had a residual value of €5.5  million segment (31 December 2013: €473.6 million) and brand names (31 December 2013: €5.8 million), of which €5.1 million was attrib- worth €115.3 million to the STILL segment (31 December 2013: utable to brand names with an indefinite useful life (31 Decem- €115.3 million). These assets are not amortised as they have an ber 2013: €5.1 million). > TABLE 054 indefinite useful life. A value of €1.8 million was attributed to the Voltas brand name and allocated to the Other segment. This We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 163 The total carrying amount for technology and development assets Other intangible assets relate in particular to the intangible as at 31 December 2014 was €210.0 million (31 December 2013: assets identified in the course of purchase price allocation for the €216.9 million). Development costs of €43.7 million were capital- acquisition of the KION Group, such as the customer base. ised in the reporting year (2013: €45.7 million). Total research and development costs of €125.7  million (2013: €113.6  million) were expensed. Of this amount, €49.7  million (2013: €45.1  million) related to amortisation. Impairment losses of €1.2 million were recognised on capital- ised development costs in the previous year to reflect the lack of [18] LEASED ASSETS opportunities to use them in future as a result of the closure of the The changes in leased assets in 2014 and 2013 were as follows: heavy truck plant in Merthyr Tydfil (LMH segment). > TABLE 055 Leased assets in € million Balance as at 1/1/ Group changes Currency translation adjustments Additions Disposals Depreciation Reclassification Balance as at 31/12/ Gross carrying amount as at 31/12/ Accumulated depreciation TABLE 055 2013 191.3 35.2 – 11.4 146.9 – 59.8 – 58.0 7.8 251.9 603.5 – 351.5 2014 251.9 – – 1.1 172.8 – 73.9 – 69.5 – 1.3 279.0 615.4 – 336.5 Leased assets are attributable to the Financial Services segment €48.5 million (31 December 2013: €50.7 million) that are largely and relate to industrial trucks in the amount of €278.4  million funded internally or by means of bank loans. (2013: €251.6 million) that are leased to external customers under Leased assets resulted in non-cancellable minimum lease operating leases and to office furniture and equipment in the payments from customers amounting to €285.6 million (31 Decem- amount of €0.6 million (2013: €0.3 million). ber 2013: €225.8 million). Leased assets include assets leased over the long term with a residual value of €230.5 million (31 December 2013: €201.2 mil- lion) that are funded by means of sale and leaseback transactions with leasing companies and leased assets with a residual value of We keep the world moving.KION GROUP AG | Annual Report 2014 164 The following table shows the maturity structure of these payments: > TABLE 056 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 2014 and 2013 were as follows: > TABLE 057 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 TABLE 056 2013 225.8 89.6 134.7 1.5 2014 285.6 107.8 174.9 2.9 TABLE 057 2013 395.1 42.6 – 6.8 229.4 – 59.1 – 134.3 – 5.6 461.2 859.2 – 398.1 2014 461.2 – 12.2 2.1 264.9 – 81.4 – 147.4 – 0.1 487.1 899.1 – 412.0 We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 165 Acquisitions amounting to €146.0  million (2013: €127.1  million) and disposals amounting to €50.5  million (2013: €37.8  million) were attributable to the LMH segment. Acquisitions amounting to €119.1 million (2013: €102.4 million) and disposals amounting to €30.9  million (2013: €21.4  million) were attributable to the STILL segment. The breakdown of rental assets by contract type is shown in the following table: > TABLE 058 Rental assets broken down by contract types TABLE 058 Operating leases as lessor Sale with risk Total in € million Industrial trucks Truck equipment Total rental assets 2014 410.9 9.5 420.3 2013 375.3 21.5 396.8 2014 66.7 0.1 66.7 2013 64.3 0.1 64.4 2014 477.5 9.5 487.1 2013 439.6 21.5 461.2 Rental assets comprise assets resulting from short-term rentals (‘operating leases as lessor’) and assets in relation to which significant 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 2014 166 [20] OTHER PROPERTY, PLANT AND EQUIPMENT The changes in the carrying amounts of other property, plant and equipment were as follows: > TABLE 059 Other property, plant and equipment in € million Balance as at 01/01/2013 Group changes Currency translation adjustments Additions Disposals Depreciation Reversal of impairment Reclassification Balance as at 31/12/2013 Gross carrying amount as at 31/12/2013 Accumulated depreciation Balance as at 01/01/2014 Group changes Currency translation adjustments Additions Disposals Depreciation Reclassification Balance as at 31/12/2014 Gross carrying amount as at 31/12/2014 Accumulated depreciation Plant, machinery, and office furniture and equipment Advances paid and assets under construction Land and buildings 322.3 11.8 – 5.2 6.2 – 3.2 – 14.7 – 2.8 320.0 647.2 – 327.2 320.0 – 7.1 5.3 – 13.8 – 14.4 4.0 308.1 644.2 – 336.1 162.4 6.1 – 2.7 46.5 – 2.9 – 53.1 0.5 1.5 158.3 939.6 – 781.3 158.3 – 1.7 2.2 54.0 – 1.4 – 55.4 8.3 164.3 952.7 – 788.4 15.6 0.6 – 0.2 11.7 – 0.1 – – – 6.5 21.1 21.1 – 21.1 – 0.2 12.8 – 1.4 – – 10.9 21.7 21.7 0.0 TABLE 059 Total 500.3 18.5 – 8.1 64.4 – 6.2 – 67.8 0.5 – 2.2 499.4 1,607.9 – 1,108.5 499.4 – 1.7 9.4 72.1 – 16.6 – 69.8 1.3 494.1 1,618.6 – 1,124.5 We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 167 Land and buildings in the amount of €18.3 million (31 Decem- ber 2013: €18.3  million) were largely pledged as collateral for accrued retirement benefits under partial retirement agreements. As in the previous year, the KION Group did not recognise any significant impairment losses in accordance with IAS 36 on [21] EQUITY-ACCOUNTED INVESTMENTS other property, plant and equipment in 2014. The KION Group reported equity-accounted investments with a Plant & machinery and office furniture & equipment include total carrying amount of €114.6 million as at 31 December 2014 assets from procurement leases (finance leases) amounting to (31 December 2013: €138.6 million). A significant portion of the €13.1 million (31 December 2013: €13.3 million). Depreciation on carrying amount of the associates resulted from the shares these assets came to €5.3 million in 2014 (2013: €3.7 million). The (30.0 per cent) in Linde Hydraulics. The associates and joint ven- corresponding liabilities are reported as other financial liabilities. tures can be seen in the list of shareholdings (see note [45]). Their financial information is summarised below. > TABLES 060 – 061 Summarised financial information: associates in € million Total carrying amount Profit (+) / loss (–) from continuing operations Other comprehensive income Total comprehensive income Summarised financial information: joint ventures in € million Total carrying amount Profit (+) / loss (–) from continuing operations Other comprehensive income Total comprehensive income TABLE 060 2013 112.6 – 3.8 – 1.1 – 4.9 TABLE 061 2013 26.0 5.5 – 1.1 4.4 2014 88.5 – 29.8 – 2.6 – 32.3 2014 26.1 4.9 – 0.9 4.0 We keep the world moving.KION GROUP AG | Annual Report 2014 168 The amounts in the tables are based on the share held by the Gross investments include minimum lease payments from KION Group in the relevant associate or joint venture. non-cancellable sub-leases amounting to €488.8 million (31 [22] LEASE RECEIVABLES In the case of leases under which KION Group entities 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 December 2013: €434.0 million). Lease receivables include unguaranteed residual values of €63.9 million (31 December 2013: €52.1 million). TABLE 062 2013 537.5 194.8 326.9 15.8 479.6 170.8 293.6 15.2 2014 611.8 228.7 364.6 18.5 547.8 202.5 327.5 17.8 Unrealised financial income 64.0 57.9 We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 169 [23] OTHER FINANCIAL ASSETS The current derivative financial instruments essentially include the put option on a portion of the shares in Linde Hydraulics amounting to €34.7  million. As at 31 December 2013, this put option had been recognised under non-current derivative finan- Other financial assets of €202.5  million (31 December 2013: cial instruments in the amount of €15.7 million. €166.3 million) comprise the following: > TABLE 063 The sundry financial assets essentially include non-derivative financial receivables amounting to €62.3  million (31 Decem- Pension assets relate to asset surpluses from two defined benefit ber 2013: €35.7 million) that fall within the scope of IFRS 7. plans in the United Kingdom (31 December 2013: four) in which plan assets exceed the present value of the defined benefit obliga- tion (see note [28]). 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 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 2014 21.6 7.9 3.4 0.6 0.8 – 34.3 43.7 6.8 5.6 28.8 83.3 168.2 Total other financial assets 202.5 166.3 We keep the world moving.KION GROUP AG | Annual Report 2014 170 [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 slight year-on-year rise in inventories was largely attributable to the increase in materials and supplies (up by 12.8 per cent) and work in progress (up by 7.1 per cent). In 2014, impairment losses of €9.1  million were recognised on inventories (2013: €13.7  mil- lion). Reversals of impairment losses had to be recognised in the amount of €4.1 million (2013: €7.0 million) because the reasons for the impairment losses no longer existed. [25] TRADE RECEIVABLES The trade receivables break down as follows: > TABLE 065 TABLE 064 2013 108.3 66.7 331.2 5.5 511.8 2014 122.2 71.5 330.8 4.7 529.2 We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 171 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 TABLE 065 2013 540.1 582.6 – 6.2 – 25.8 – 10.4 5.8 12.8 558.7 2014 582.6 622.8 – 6.9 – 22.3 – 11.1 4.7 10.9 598.2 Valuation allowances of €40.2  million (31 December 2013: €42.4 million) were recognised for trade receivables. [26] CASH AND CASH EQUIVALENTS The change in cash and cash equivalents is shown in the consol- idated statement of cash flows. For more detailed information, please also refer to note [35]. > TABLE 066 Cash and cash equivalents in € million Cash held by banks, on hand and cheque Pledged cash Total cash and cash equivalents TABLE 066 2013 219.1 0.3 219.3 2014 98.7 0.2 98.9 We keep the world moving.KION GROUP AG | Annual Report 2014 172 [27] EQUITY €9.89 million by way of an issue of up to 9,890,000 new no-par- value bearer shares (2014 Authorised Capital). To safeguard the Company’s funding options, the Executive Board is also authorised until 18 May 2019 to issue warrant-linked Subscribed capital and capital reserves bonds, convertible bonds or profit-sharing rights with a total par value of up to €800 million that contain pre-emptive rights / obliga- As at 31 December 2014, the Company’s share capital amounted tions for up to 9,890,000 no-par-value shares. To this end, a to €98.9 million, which was unchanged on 31 December 2013, conditional increase was decided upon in order to increase the and was fully paid up. It was divided into 98.9  million no-par- Company’s share capital by up to €9.89 million by way of an value shares. issue of up to 9,890,000 new no-par-value bearer shares (2014 As authorised by the Annual General Meeting on 13 June Conditional Capital). 2013, 200,000 treasury shares had been repurchased via the The total amount attributable to shares that was spent in stock exchange in 2013 for a planned share-based remunera- connection with this authorised/conditional capital may not tion programme. exceed 10  per  cent of the share capital. In both cases, the In 2014, the Executive Board of KION GROUP AG decided to pre-emptive right of shareholders can be excluded in certain introduce an employee share option programme to enable staff circumstances. The corresponding amendments to the Articles members, initially those working for the participating German of Incorporation were entered in the commercial register on companies in the KION Group, to derive greater benefit from the 16 June 2014. success of the Company. Between 10  September  2014 and 30 September 2014, a further 51,000 treasury shares were repurchased via the stock Retained earnings exchange at an average price of €30.29 in order to provide the shares for employees’ own investments and the free shares The development of retained earnings is shown in the consolidated under the programme. The total cost was €1.5 million. Due to the statement of changes in equity in > TABLE 038. The retained earn- issue of 87,438 no-par-value shares under the employee share ings comprise the net income (loss) for the financial year and past option programme, KION GROUP AG held 163,562 treasury contributions to earnings by the consolidated entities, provided shares at the reporting date (31 December 2013: 200,000). These they have not been distributed. are not dividend-bearing and do not confer any voting rights. The distribution of a dividend of €0.35 per share to the share- Further details on the employee share option programme can be holders of KION GROUP AG resulted in an outflow of funds of found in note [42]. €34.5 million in 2014. The total number of shares outstanding as at 31 December 2014 was 98,736,438 no-par-value shares (31 December 2013: 98,700,000 no-par-value shares). Appropriation of profit As at 31 December 2014, KION Group employees held options on a total of 29,116 no-par-value shares. The share The Executive Board and Supervisory Board of KION GROUP AG options granted under the employee share option programme will propose a dividend of €0.55 per share to the Annual General are not dividend-bearing and do not confer any voting rights. Meeting on 12 May 2015. As there were 98,736,438 dividend- The Annual General Meeting on 19 May 2014 voted to cre- bearing shares as at 31 December 2014, this equates to a total ate authorised capital that will enable the KION Group to meet dividend payout of €54.3 million. Roughly 31 per cent of the net its funding needs quickly and flexibly. Subject to the consent of income accruing to the KION Group shareholders will therefore the Supervisory Board, the Executive Board is authorised until be distributed in dividends. 18 May 2019 to increase the Company’s share capital by up to We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 173 Accumulated other comprehensive income (loss) butions paid by employers into government-run schemes came to €52.4  million (2013: €52.8  million). The defined contribution plan expense is reported within the functional costs. Accumulated other comprehensive income (loss) includes the currency translation differences arising from the translation of the financial statements of foreign subsidiaries, the effects of the fair Defined benefit plans value measurement of derivative financial instruments, the share of profit (loss) of equity-accounted investments, and the gains and In the case of defined benefit plans, the beneficiaries are granted losses in connection with defined benefit pension obligations. a specific benefit by the Group or an external pension fund. Due Non-controlling interests to future salary increases, the benefit entitlement at the retirement age of the beneficiary is likely to be higher than the amount granted as at the reporting date. Pensions are often adjusted after an employee reaches retirement age. The amount of the Non-controlling interests in companies in the KION Group Group’s obligation, which is defined as the actuarial present value amounted to €5.3 million (31 December 2013: €5.0 million). of the obligation to provide the level of benefits currently earned [28] RETIREMENT BENEFIT OBLIGATION by each beneficiary, is expressed as the present value of the defined benefit obligation, which includes adjustments for future salary and pension increases. The KION Group currently grants pensions to almost all employees in Germany and a number of foreign employees. These pensions consist of fixed benefit entitlements and are therefore reported as defined benefit plans in accordance with The retirement benefit obligation is recognised for obligations IFRS. As at 31 December 2014, the KION Group had set up to provide current and future post-employment benefits. Post- defined benefit plans in 13 countries. For all of the significant employment benefit plans are classified as either defined benefit defined benefit plans within the Group, the benefits granted to plans or defined contribution plans, depending on the substance employees are determined on the basis of their individual income, of the plan as derived from its principal terms and conditions. i.e. either directly or by way of intermediate benefit arrange- Defined contribution plans ments. The largest of the KION Group’s defined benefit plans – accounting for 91.2 per cent of the global defined benefit obli- gation (31 December 2013: 91.3 per cent) – are in Germany and the United Kingdom. In the case of defined contribution pension plans, the Group pays contributions to government or private pension insurance provid- Germany ers based on statutory or contractual provisions, or on a voluntary In Germany, the pension benefits granted under the 2001 pension basis. The Group does not enter into any obligations above and benefit conditions and 2002 pension benefit conditions depend beyond the payment of contributions to an external pension fund. on employees’ length of service and gross annual remuneration The amount of future pension benefits is based solely on the (pension component entitlement). The pension component is cal- amount of the contributions paid by the employer (and in some culated by multiplying a certain percentage by an age-dependent cases the beneficiaries themselves) to the external pension fund, annuitisation factor. The contribution rate is 3.4  per  cent (2001 including income from the investment of these contributions. The pension benefit conditions) or 2.0 per cent (2002 pension benefit total expense arising from defined contribution plans amounted conditions) of the gross remuneration that an employee earns in the to €58.3 million in 2014 (2013: €57.6 million). Of this total, contri- computation period. Employees receive the pension entitlement We keep the world moving.KION GROUP AG | Annual Report 2014174 that they have earned in the form of a monthly retirement pension the Company’s insolvency, the company pension scheme is to a or invalidity benefit or, in the event of their death, the entitlement large extent protected by law by the Pension Security Association. is paid to their surviving dependants in the form of a widow’s / widower’s pension or orphans’ pension. Members of the Executive United Kingdom Board and other executives are predominantly covered by indi- Previously in the United Kingdom, defined benefit pension obliga- vidual pension plans. For details of the pension entitlements of tions predominantly related to four plans. Following the deconsol- KION GROUP AG Executive Board members, please refer to the idation of Linde Heavy Truck Division Ltd. in December 2014, two information in note [43]. The amount of the benefits paid to of these pension plans (Blackwood Schemes) were eliminated executives depends on the type of entitlement. Under the ‘old’ from the basis of consolidation. The defined benefits include not individual pension plans, executives were entitled to a certain only a life-long retirement pension but also surviving dependants’ percentage of income as their pension benefit. By contrast, the benefits. The amount of the pension depends on employees’ employer-funded entitlement under the ‘new’ individual pension length of service and final salary. The two plans still remaining on plans consists of two components: a fixed basic pension and a the reporting date were closed to new employees more than ten variable top-up pension through which annual components are years ago. Production at the heavy truck plant in Merthyr Tydfil earned within a defined contribution system. Both components (Wales, United Kingdom) was shut down in 2013 as planned, depend on the seniority of the executive. resulting in gains on plan curtailments from the Blackwood In addition, employees in Germany are able to pay part of Schemes in the previous year. their salary into a company pension plan, for which KION pro- Each of the two plans is monitored by its own board of trus- vides a defined minimum interest rate to enable employees to tees, which oversees the running of the plan as well as its funded build up their personal pension provision. The pension benefits status and the investment strategy. The members of the boards consist of retirement, invalidity and surviving dependants’ ben- of trustees comprise people appointed by the companies involved efits. Each contribution made is converted into a capital compo- and selected plan beneficiaries. nent on the basis of a guaranteed minimum interest rate of Under UK law, the board of trustees is obliged to have a valu- 3.0  per  cent and depending on the age of the employee. The ation of the plan carried out at least every three years. In connection capital components acquired each calendar year are added up with the 2012 valuation of the pension plans for the employees of to give the pension capital. When an insured event occurs, the the KION Group’s UK companies, the Company and the trustees pension capital is converted into an ongoing life-long pension or of the pension funds agreed on a calculation method in May 2014, a one-off capital payment. according to which the deficit for the two remaining pension plans In Germany, the KION Group also helps employees to build amounted to €8.6  million as at 1 July 2013. On this basis, the up their own pension provision with an additional matching con- KION Group agreed with the trustees that it would pay approxi- tribution for those employees who pay part of their salary into the mately the equivalent of €4.5 million in 2015 and around €2.3 mil- KION pension plan. The additional matching contribution received lion in 2016 in order to reduce the deficit. However, these pay- by executives is 50.0 per cent of the amount they defer in a calendar ments are subject to the condition that the annual review of the year, although the absolute amount of this contribution is limited pension plans’ funding position continues to reveal a deficit. If a to a certain percentage of income (ranging from 2.5 per cent to a payment would result in the pension plans being overfunded, the maximum of 5.0 per cent). All other employees who participate in KION Group would be exempt from its payment obligation in that the company pension scheme receive up to 0.4 per cent of their year. Between January and May 2014, the KION Group made gross remuneration. one-off payments equivalent to €1.4  million. Under the new Some of the KION Group’s pension obligations in Germany agreement, no further payments were due in 2014. are financed by way of contractual trust arrangements (CTAs), In addition, KION Material Handling GmbH has given default which qualify as plan assets within the meaning of IAS 19. There guarantees to the trustees of the Blackwood Schemes under are no statutory minimum funding requirements. In the event of which, if the employer defaults, KION Material Handling GmbH We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 175 will assume all obligations of the employer up to the amount of the account the change in plan assets and pension obligations. They buy-out deficit, provided certain conditions are met. also take into account the statutory minimum coverage require- These guarantees replace the letters of support issued in ments and the amounts deductible under local tax rules. 2013, which themselves had replaced the guarantees given to the Blackwood Schemes by KION Material Handling GmbH (formerly KION GROUP GmbH) after KION GROUP AG’s IPO, as set forth Measurement assumptions in the original guarantee agreements. Where these letters of sup- port had been given in respect of UK pension plans other than the In accordance with IAS 19 (‘Employee Benefits’), pension provi- Blackwood Schemes, these letters of support were amended by sions are recognised to cover obligations arising from the current mutual agreement so that the trustees were able to measure the and future pension entitlements of active and (after the vesting deficits of the pension plans at any time in future without losing period has expired) former employees of the KION Group and the entitlements in the relevant letter of support. their surviving dependants. The discount rate used to calculate The trustees of all four plans were also granted collateral in the defined benefit obligation at each reporting date is deter- rem in the form of charges on the real estate of Group compa- mined on the basis of current capital market data and long-term nies in the UK and flexible collateral in respect of the rental fleets assumptions about future salary and pension increases in of UK dealers within a maximum overall limit of approximately accordance with the best estimate principle. These assumptions €23.2 million. The term of this collateral is limited to five years vary depending on the economic conditions affecting the cur- (1  July 2018), and the overall limit will not be reduced by pay- rency in which benefit obligations are denominated and in which ments made by the KION Group. The likelihood of the guarantee fund assets are invested, as well as capital market expectations. being used is deemed low in view of the position of the individ- Benefit obligations are calculated on the basis of current ual companies with regard to their current and future financial biometric probabilities as determined in accordance with actu- and earnings situations. Other countries arial principles. The calculations also include assumptions about future employee turnover based on employee age and years of service and about the probability of retirement. The defined Furthermore, significant asset volumes are invested in external benefit obligation is calculated on the basis of the significant pension funds with restricted access in Switzerland and the weighted- average assumptions as at the reporting date shown Netherlands. Decisions on additions to plan assets take into in > TABLE 067. Assumptions underlying provisions for pensions and other postemployment benefits TABLE 067 Germany UK Other Discount rate Salary increase rate Pension increase rate 2014 2.20% 2.75% 1.75% 2013 3.60% 2.75% 1.75% 2014 3.55% 4.25% 3.18% 2013 4.40% 4.16% 3.53% 2014 1.79% 2.49% 0.42% 2013 2.95% 2.44% 0.48% We keep the world moving.KION GROUP AG | Annual Report 2014 176 The assumed discount rate is determined on the basis of the yield The significant weighted-average assumptions shown in as at the reporting date on AA-rated, investment-grade, fixed- >  TABLE  068 were applied to the calculation of the net interest interest corporate bonds with maturities that match the expected cost and the cost of benefits earned in the current year (current maturities of the pension obligations. Pension obligations in for- service cost). eign companies are calculated on a comparable basis taking into Differences between the forecast and actual change in the account any country-specific requirements. defined benefit obligation and changes in related assets (known Future increases in salaries are estimated on an annual basis as remeasurements) are recognised immediately in other com- taking into account factors such as inflation and the overall eco- prehensive income in accordance with IAS 19. This serves to nomic situation. ensure that the pension liability in the statement of financial The biometric mortality rates used in the calculation are position is the present value of the defined benefit obligation. based on published country-specific statistics and empirical In the case of externally financed pension plans, this present values. Since 31 December 2009, the modified Heubeck 2005 value of the defined benefit obligation is reduced by the fair value G mortality tables have been used in Germany as the biomet- of the assets of the external pension fund (plan assets). If the plan ric basis; the modified tables include a somewhat higher assets exceed the present value of the defined benefit obligation life expectancy for males than the unmodified tables. The (net assets), a corresponding asset is recognised in accordance S1NA CMI 2013 (standard mortality tables for self-administered with IAS 19. IAS 19.64 in conjunction with the supplementary pension schemes (SAPS) based on normal health) with a long- explanatory information in IFRIC 14 states that the recognition term trend of 1.25 per cent p.a. is applied to the two defined of  an asset for an excess of plan assets is only permitted if benefit plans in the United Kingdom that were still remaining as the company concerned, in its function as the employer, gains at the reporting date. economic benefits in the form of reductions in future contribu- The actuarial assumptions not listed in > TABLE 067, such as tions to the plan or in the form of refunds from the plan. If the employee turnover, invalidity, etc., are determined in accordance present value of the defined benefit obligation is not covered by with recognised forecasts in each country, taking into account the plan assets, the net obligation is reported under the retirement the circumstances and forecasts in the companies concerned. benefit obligation. Assumptions underlying for pensions expenses Germany UK Other Discount rate Salary increase rate Pension increase rate 2014 3.60% 2.75% 1.75% 2013 3.50% 2.75% 1.75% 2014 4.40% 4.16% 3.53% 2013 4.35% 4.17% 2.94% 2014 2.95% 2.44% 0.48% TABLE 068 2013 2.57% 2.36% 0.26% We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 177 In two defined benefit plans in the United Kingdom, plan assets ties in the same amount relating to the direct pension entitlement exceed the present value of the defined benefit obligation. Stipu- scheme are included in > TABLES 069 – 075. As a result, the present lations limiting the asset to be recognised in the statement of value of the defined benefit obligation and the fair value of the financial position do not apply. plan assets shown in the tables as at 1 January 2013 and 31 Decem- ber 2013 increased by €19.5 million and €23.1 million respectively. The change in the present value of the defined benefit obliga- Statement of financial position tion (DBO) is shown in > TABLE 069. Plan assets from employee contributions in Germany, which were ble to subsidiaries in Switzerland (2014: €48.7  million; 2013: reported separately in previous years, amounted to €28.2 million €40.0 million) and the Netherlands (2014: €38.4 million; 2013: (31 December 2013: €23.1 million) and the corresponding liabili- €27.7 million). The DBO in the other countries was predominantly attributa- Changes in defined benefit obligation TABLE 069 Germany UK Other Total in € million 2014 2013 2014 2013 2014 2013 2014 2013 Present value of defined benefit obligation as at 01/01/ Group changes Exchange differences Current service cost 588.1 564.9 – – 0.0 – 19.1 18.3 422.1 – 53.2 30.5 1.1 419.5 95.7 98.4 1,106.0 1,082.7 – – 8.5 1.2 – 1.0 3.1 0.0 – 0.8 3.4 – 53.2 31.5 23.4 0.1 – 9.2 23.0 Past service cost (+) and income (–) from plan amendments Past service cost (+) and income (–) from curtailments Interest expense on defined benefit obligation Employee contributions 3.4 – 21.3 3.2 – – 19.6 2.5 Pension benefits directly paid by company – 12.9 – 12.1 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 – 0.2 – 0.4 188.0 809.6 334.4 475.2 – 0.4 – 4.7 588.1 237.9 350.3 0.1 0.3 – 0.9 – 1.3 2.6 – 1.0 – 18.7 – – – 0.7 17.1 0.0 – – – 38.0 11.0 – – 18.9 – 17.7 – 2.8 0.9 – 1.6 – 2.2 – 0.0 22.0 – 2.5 0.9 – 1.0 – 1.4 – – 42.7 4.1 – 14.4 – 21.4 – 0.5 – 5.0 247.9 – 0.7 39.2 3.4 – 13.1 – 19.1 – 0.4 1.3 438.4 422.1 120.8 95.7 1,368.8 1,106.0 – – 438.4 422.1 33.6 87.2 28.0 368.1 67.8 1,000.7 265.9 840.2 We keep the world moving.KION GROUP AG | Annual Report 2014 178 The components of the remeasurements are listed in > TABLE 073. ered by corresponding reimbursements from plan assets. The change in the fair value of plan assets is shown in According to local valuation rules, there continue to be gaps in > TABLE 070. the coverage of two defined benefit pension plans in the United Employees in Germany paid a total of €3.2  million (2013: Kingdom, as a result of which the expected employer contribu- €2.5 million) into the KION pension plan in 2014. tions in 2015 include one-off payments of €4.5  million (2014: In 2014, employer contributions in the United Kingdom, €6.9 million for all four plans) in line with the agreements reached which amounted to €2.4  million, included one-off payments of with the trustees. €1.4 million into pension funds on the basis of contractual agree- The reconciliation of funded status and net defined benefit ments. In Germany, one-off payments of €0.6  million (2013: obligation to the amounts reported in the consolidated statement €2.4 million) were also made to a German CTA for the other mem- of financial position as at 31 December is shown in > TABLE 071. bers of the KION GROUP AG Executive Board. As a result, the funding ratio (ratio of plan assets to the pres- The payments expected for the following year amount to ent value of the defined benefit obligation) in the KION Group was €22.6  million (2014: €23.7  million), which includes expected 44.0 per cent (2013: 51.4 per cent). employer contributions of €7.3  million to plan assets (2014: The change in the retirement benefit obligation reported in €9.2  million) and expected direct payments of pension benefits the statement of financial position is shown in > TABLE 072. amounting to €15.3 million (2014: €14.6 million) that are not cov- 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 Liability transfer out to third parties Remeasurements Fair value of plan assets as at 31/12/ Germany UK Other Total 2014 65.0 – – 2.1 3.2 1.0 – 0.2 – 0.1 2.6 73.6 2013 59.5 – – 2.1 2.5 2.4 – – – 1.5 65.0 2014 441.6 – 56.5 31.8 19.6 – 2.4 2013 439.5 – – 8.9 18.1 0.0 7.3 2014 61.7 – 0.8 1.7 0.9 2.2 2013 58.9 – – 0.6 1.4 0.9 1.9 2014 568.3 – 56.5 32.6 23.4 4.1 5.6 2013 557.9 – – 9.5 21.6 3.4 11.6 – 18.9 – 17.7 – 2.2 – 1.4 – 21.4 – 19.1 – 35.5 – 3.3 – 8.8 – 0.6 – 0.1 46.9 – 2.4 455.5 441.6 73.8 61.7 603.0 568.3 We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 179 Statement of cash flows During the reporting year, pension benefits of €35.8  million (2013: €32.2  million) were paid in connection with the main In the case of obligations not covered by external assets, pay- pension entitlements in the KION Group, of which €14.4 million ments to beneficiaries are made directly by the Company and (2013: €13.1  million) was paid directly by the Company and therefore have an impact on cash flow from operating activities. If €21.4 million (2013: €19.1 million) was paid from plan assets. Cash the benefit obligations are backed by external assets, the pay- contributions to plan assets in 2014 amounted to €5.6 million ments are made from existing plan assets and have no effect on (2013: €11.6  million). Furthermore, pension benefit payments the Company’s cash flow. Instead, any contributions made to the totalling €0.4  million (2013: €0.4  million) were transferred to external pension fund by the Company result in a cash outflow for external pension funds. operating activities. Funded status and net defined benefit obligation TABLE 071 Germany UK Other Total in € million 2014 2013 2014 2013 2014 2013 2014 2013 Present value of the partially or fully funded defined benefit obligation Fair value of plan assets Surplus (+) / deficit (–) – 475.2 – 350.3 – 438.4 – 422.1 – 87.2 – 67.8 – 1,000.7 – 840.2 73.6 65.0 455.5 441.6 73.8 – 401.6 – 285.3 17.2 19.5 – 13.3 61.7 – 6.1 603.0 568.3 – 397.8 – 271.8 Present value of the unfunded defined benefit obligation – 334.4 – 237.9 Net liability (–) / net asset (+) as at 31/12/ – 736.0 – 523.1 Reported as ‘retirement benefit obligation’ – 736.0 – 523.1 – 17.2 – 4.5 – 19.5 – 2.9 – 33.6 – 47.0 – 47.0 – 28.0 – 368.1 – 265.9 – 34.1 – 765.8 – 537.7 – 34.1 – 787.5 – 560.1 Reported as ‘Other non-current financial assets’ – – 21.6 22.4 – 0.0 21.6 22.4 We keep the world moving.KION GROUP AG | Annual Report 2014 180 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 2014 523.1 – – 22.5 19.2 2013 505.4 0.0 – 18.3 17.5 – 12.9 – 12.1 – 1.0 – 0.3 185.4 736.0 – 2.4 – 0.4 – 3.2 523.1 2014 2013 2.9 – 0.3 – 0.1 – 2.7 – – 0.1 – 0.1 – – 0.2 – 0.2 – 1.4 4.5 – 0.4 2.9 2014 34.1 – 0.2 2.2 1.1 – 1.6 – 2.2 – 0.0 13.2 47.0 2013 39.5 0.0 – 0.2 2.1 1.1 – 1.0 – 1.9 – – 5.6 34.1 2014 560.1 – 0.4 24.7 20.4 2013 547.6 0.1 – 0.2 20.4 18.7 – 14.4 – 13.1 – 3.4 – 0.4 200.0 787.5 – 4.5 – 0.4 – 8.4 560.1 Income statement present value of the defined benefit obligation) by the discount rate at the start of the year, is also recognised in the income statement. In accordance with IAS 19, actuarial computations are performed The breakdown of the net cost of the defined benefit obligation for benefit obligations in order to determine the amount to be (expenses less income) recognised in the income statement for expensed in each period in accordance with fixed rules. The 2014 is shown in > TABLE 073. expenses recognised in the income statement for pensions and The KION Group’s net financial income/expenses includes a similar obligations consist of a number of components that must net interest cost of €19.3  million (2013: €17.6  million). All other be calculated and disclosed separately. components of pension expenses are recognised under func- The service cost is the new pension entitlement arising in tional costs. the financial year and is recognised in the income statement. It is The actual total return on plan assets in 2014 was €70.3 mil- calculated as the present value of that proportion of the expected lion (2013: €24.0 million). defined benefit obligation when the pension is paid attributable to the year under review on the basis of the maximum length of service achievable by each employee. Other comprehensive income (loss) Past service cost arises if there is a change to the pension entitlement and it is recognised immediately in full. The breakdown of the remeasurement of the defined benefit obli- The net interest cost/income, which is calculated by multiplying gation recognised in the statement of comprehensive income in the net liability (present value of the defined benefit obligation 2014 is as follows: > TABLE 074 minus plan assets) or the net assets (if the plan assets exceed the We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 181 Cost of defined benefit obligation TABLE 073 Germany UK Other Total 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 2014 1.1 0.1 – 1.2 18.7 2014 19.1 3.4 – 22.5 21.3 – 2.1 19.2 2013 18.3 – – 18.3 19.6 – 2.1 17.5 2013 1.2 2014 3.1 2013 3.4 2014 23.4 2013 23.0 0.3 – 0.9 – 1.3 2.6 – 1.0 – 0.7 0.8 17.1 – 2.2 2.8 – 1.7 1.1 – 2.1 2.5 – 1.4 1.1 – 26.0 42.7 – 0.7 21.2 39.2 – 23.4 – 21.6 19.3 17.6 – 19.6 – 18.1 – 1.0 – 1.0 41.7 35.8 0.3 – 0.2 3.3 3.2 45.3 38.8 Accumulated other comprehensive income (loss) TABLE 074 Germany UK Other Total in € million 2014 2013 2014 2013 2014 2013 2014 2013 Accumulated other comprehensive income / loss as at 01/01/ Group changes Exchange differences Gains (+) and losses (–) arising from remeasure- ments 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 remeasure- ments of plan assets Accumulated other comprehensive income / loss as at 31/12/ – 114.8 – 118.0 – 44.1 – 37.0 – 14.4 – 20.2 – 173.3 – 175.1 – – – – 5.3 – 3.1 – 0.6 – – 0.1 – 0.1 5.3 – 3.2 – 0.7 – 188.0 4.7 – 38.0 – 11.0 – 22.0 5.0 – 247.9 – 1.3 – – – 0.2 2.7 – 0.2 0.1 – 0.4 2.8 – 194.4 6.4 9.7 – 5.0 – 37.8 – 13.2 – 21.8 0.1 – 0.5 – 0.0 4.1 0.9 – 254.0 6.4 0.6 – 4.7 2.6 – 1.5 35.5 3.3 8.8 0.6 46.9 2.4 – 300.1 – 114.8 – 44.4 – 44.1 – 27.8 – 14.4 – 372.3 – 173.3 We keep the world moving.KION GROUP AG | Annual Report 2014 182 The gains and losses on the remeasurement of plan assets are attributable entirely to experience adjustments. The changes in estimates relating to defined benefit pension entitlements resulted in a €138.3  million decrease in equity as at 31 December 2014 after deduction of deferred taxes (31 December 2013: increase of €0.7 million). 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 2014 25.7 28.4 4.8 – 14.6 73.6 9.0 – 9.0 2013 20.6 25.9 4.4 – 14.1 65.0 9.0 – 9.0 2014 83.8 2013 96.0 368.3 344.8 – – – – 3.4 0.8 455.5 441.6 – – – – – – 2014 2013 10.1 12.0 4.3 43.9 3.6 73.8 44.7 43.9 0.9 8.4 12.1 4.0 33.9 3.2 61.7 34.7 33.9 0.8 2014 119.7 408.7 9.1 43.9 21.6 2013 125.0 382.8 8.4 33.9 18.2 603.0 568.3 53.7 43.9 9.9 43.7 33.9 9.8 The plan assets do not include any real estate or other assets used by the KION Group itself. We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 183 Sensitivity analysis Future pension benefit payments The present value of the defined benefit obligation is based on The pension benefit payments shown in > TABLE 077 are forecast the significant assumptions detailed in > TABLE 067 above. If one for the next ten years for the defined benefit pension entitlements assumption were to vary and the other assumptions remained in existence as at 31 December 2014. The expected pension ben- unchanged, the impact on the present value of the defined benefit efits break down into future benefits to be paid directly by the obligation would be as shown in > TABLE 076. employer (for 2015: €15.3 million) and future benefits to be paid The sensitivity analysis shown in > TABLE 076 is not represent- from existing plan assets (for 2015: €19.7 million). ative of an actual change in the present value of the defined As at the reporting date, the weighted average duration of the benefit obligation because variations in the significant assump- obligation was 21.7 years in Germany (2013: 19.8 years), 13.6 tions are unlikely to occur in isolation as, to some extent, the years in the United Kingdom (2013: 14.7 years) and 17.1 years in assumptions are interrelated. Sensitivity is determined using the the other countries (2013: 15.1 years). same methods (projected unit credit method) as for the measure- ment of the obligation recognised in the consolidated statement of financial position as at 31 December 2014. Sensitivity defined benefit obligation in € million 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 Expected payments for pension benefits in € million 2015 2016 2017 2018 2019 2020 to 2024 Germany 14.4 15.8 16.8 17.9 19.1 UK 17.4 17.8 18.3 18.8 19.3 120.1 104.7 TABLE 076 2013 – 159.4 207.8 12.9 – 11.7 32.7 – 27.5 34.1 TABLE 077 Total 34.9 37.6 39.6 40.6 43.3 250.4 2014 – 218.3 290.6 17.2 – 17.9 39.5 – 35.7 44.7 Other 3.1 4.0 4.5 3.9 4.9 25.5 We keep the world moving.KION GROUP AG | Annual Report 2014 184 Risks [29] FINANCIAL LIABILITIES The funding ratio, the defined benefit obligation and the asso- ciated costs depend on the performance of financial markets. The return on plan assets is assumed to equal the discount The financial liabilities reported by the KION Group as at 31 Decem- rate, which is determined on the basis of the yield earned on ber 2014 essentially comprised interest-bearing liabilities to banks AA-rated, investment-grade, fixed-interest corporate bonds. If and capital market liabilities in connection with the corporate the actual return on plan assets falls below the discount rates bond that was issued. The liabilities to banks stemmed largely applied, the net obligation arising out of the pension plans from the revolving credit facility. increases. The amount of the net obligation is also particularly >  TABLE 078 shows the contractual maturity structure of the affected by the discount rates, and the current low level of financial liabilities. interest rates – especially in the eurozone – is resulting in a comparatively large net obligation. The plan assets are predominantly invested in corporate bonds and inflation-linked UK government bonds, particularly in the United Kingdom. The market risk attaching to plan assets – above all in the case of equities – is mitigated by defining an investment strategy and guidelines and constantly monitoring the assets’ performance. Moreover, a downward trend on financial markets could have a significant effect on minimum funding requirements, some of which apply outside Germany. The KION Group also bears the full risk of possible future pen- sion adjustments resulting from changes in longevity and inflation. Payroll-based contributions to the KION pension plan made by employees in Germany are invested in fund units. If the actual returns on these fund units fall below the interest rate of 3.0 per cent that has been guaranteed to participating employ- ees, the KION Group’s personnel expenses rise. We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 185 Maturity structure of financial liabilities TABLE 078 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 Liabilities to banks 2014 459.9 257.7 202.2 – 443.1 – – 443.1 6.6 5.1 1.2 0.2 262.9 646.8 2013 233.7 224.6 9.1 – 958.3 – 319.5 638.8 6.6 2.9 – 3.7 227.5 971.1 for €1,045.0 million that will mature in mid-2018. In connection with the repayment of two corporate bonds in April 2014, the credit In connection with its acquisition of Linde AG’s material handling facility was increased by €198.0 million to a total of €1,243.0 mil- business, the KION Group signed a loan agreement (a senior lion. This was achieved through bilateral lending agreements with facilities agreement and a subordinated facility agreement, a group of banks. These additional loans mature in April 2019 and referred to below as ‘SFA’) for a total original amount of have a variable interest rate. As at 31 December 2014, an amount €3,300.0 million with the lead banks Barclays Bank PLC, Bayeri- of €402.0 million had actually been drawn down from the revolv- sche Hypo- und Vereinsbank AG, Credit Suisse (London branch), ing credit facility, which includes other loan liabilities and contin- Goldman Sachs International Bank, Lehman Commercial Paper gent liabilities (31 December 2013: €184.4  million). Of this total, Inc. (UK branch) and Mizuho Corporate Bank Ltd. on 23 Decem- €204.0 million had been drawn down on a short-term basis (31 ber 2006. This loan agreement has been amended to reflect the December 2013: €184.4 million). The long-term drawdowns from KION Group’s changed financial circumstances on a number of the credit facility amounted to €198.0 million (31 December 2013: occasions, particularly in connection with KION GROUP AG’s €0.0 million) and were used in April 2014 to repay the floating-rate IPO in June 2013. tranche of the corporate bond issued in 2013, which was due to In the previous year, the KION Group had agreed a variable - mature in 2020 and had a volume of €200.0 million. Arrangement rate revolving credit facility with a group of banks under the SFA of the revolving credit facility of €1,045.0  million in 2013 had We keep the world moving.KION GROUP AG | Annual Report 2014 186 resulted in directly attributable transaction costs of €9.3 million. €8.4  million representing the proportion of the related deferred The transaction costs directly attributable to the increase in the borrowing costs relating to these bonds and a payment of revolving credit facility came to €1.0 million. The transaction costs €14.8 million representing early repayment charges were recog- are recognised as prepaid expenses under current financial nised as financial expenses. assets and expensed over the term of the credit facility. The fixed-rate tranche of the bond issued in 2013, which has a volume of €450.0 million and a maturity date of 2020, remained unchanged as at 31 December 2014. Capital market liabilities In April 2014, the fixed-rate tranche of the corporate bond issued Changes in net financial debt in 2011, which was due to mature in 2018 and had a volume of €325.0  million, and the floating-rate tranche of the corporate The KION Group uses its net financial debt as a key internal figure bond issued in 2013, which was due to mature in 2020 and had a for analysing the changes in its financial liabilities. Net financial volume of €200.0 million, were repaid early in full. Most (€523 mil- debt is defined as the difference between financial liabilities lion) of the funds used for the repayment were drawn down from (excluding lease liabilities) and cash and cash equivalents. the revolving credit facility. This credit facility currently has far The table below gives a breakdown of the KION Group’s net lower interest rates than the two corporate bonds. An amount of financial debt as at 31 December 2014: > TABLE 079 Net financial debt in € million Corporate bond – fixed 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 079 2013 325.0 450.0 200.0 233.7 6.6 – 16.7 1,198.6 219.3 979.3 2014 – 450.0 – 459.9 6.6 – 6.9 909.6 98.9 810.7 We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 187 The table below gives details of the changes in financial debt and lists the applicable terms and conditions: > TABLE 080 Credit terms in € million Interest rate Notional amount Maturity TABLE 080 Term Loan Facility H1a (Corporate bond – fixed rate) Term Loan Facility H2a (Corporate bond – fixed rate) Fixed rate Fixed rate Term Loan Facility H2b (Corporate bond – floating rate) 3-M-EURIBOR+Margin Multicurrency Revolving Credit Facility 3 EURIBOR + Margin Other liabilities to banks Financial liabilities to non-banks ./. Capitalised borrowing costs Total financial debt Various currencies and interest terms 2018 2020 2020 2018 2014 – 450.0 – 373.0 86.9 6.6 – 6.9 909.6 2013 325.0 450.0 200.0 130.0 103.7 6.6 – 16.7 1,198.6 We keep the world moving.KION GROUP AG | Annual Report 2014 188 Financial covenants The collateral includes guarantees, the assignment of shares in the guarantors (with the exception of shares in KION Material The SFA and the contractual terms and conditions governing the Handling GmbH (formerly KION GROUP GmbH)), the assignment issuance of the corporate bond require compliance with certain of certain bank accounts and certain guarantor receivables, the undertakings and covenants. The SFA also requires compliance assignment of claims arising from and in connection with the with specific financial covenants during the term of the agreement. share purchase agreement between Linde Material Handling The financial covenants specify required ratios for the financial GmbH and Linde AG dated 5 November 2006 relating to the position and financial performance of the KION Group. Only the shares in the former KION GROUP GmbH, the assignment of financial covenant for gearing (the ratio of net financial debt to shares in KION Information Management Services GmbH and EBITDA) currently applies to the KION Group. If undertakings or assignments and transfers of title to intellectual property rights by financial covenants are breached, this may, for example, give guarantors in Germany. The statutory provisions in the United lenders the right to terminate the SFA or permit bondholders to Kingdom and the agreements entered into mean that all the call the corporate bond prior to its maturity date. assets of the UK guarantors are pledged as security. The financial covenants are reviewed every quarter. All the The carrying amounts of the financial assets pledged as undertakings and financial covenants were complied with in the collateral amounted to €340.8  million as at the reporting date past financial year. (31 December 2013: €348.7 million). As had been the case at the end of 2013, no material liabilities to banks were secured by mortgage charges at the end of 2014. Loan collateral Under the SFA, the KION Group is under an obligation to provide collateral for its obligations and liabilities. This obligation also extends to the corporate bond (tranche H2a). By the reporting date, a total of 25 (31 December 2013: 26) KION Group companies (guarantors) in five countries – Germany, the UK, France, Spain and Italy – had provided the necessary collateral. We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 189 [30] LEASE LIABILITIES Lease liabilities relate solely to finance lease obligations arising from sale and leaseback transactions for the funding of long-term leases with end customers. The amounts recognised as lease liabilities (the present value of future minimum lease payments) are based on the following data: > TABLE 081 Minimum lease payments 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 TABLE 081 2013 683.8 241.1 425.6 17.1 617.1 213.3 387.3 16.4 2014 768.2 271.9 475.9 20.5 707.7 246.0 442.0 19.7 Interest included in minimum lease payments 60.5 66.7 Whereas lease liabilities stood at €707.7 million (31 Decem- ber 2013: €617.1 million), lease receivables arising from sale and leaseback transactions amounted to €490.6 million (31 Decem- ber 2013: €431.4 million) and leased assets under sale and lease- back transactions totalled €230.5  million (31 December 2013: €201.2 million). We keep the world moving.KION GROUP AG | Annual Report 2014 190 [31] OTHER PROVISIONS Other provisions relate to the following items: > TABLE 082 Other provisions TABLE 082 in € million Balance as at 01/01/2014 thereof non-current thereof current Group changes Additions Utilisations Reversals Additions to accrued interest Currency translation adjustments Other adjustments Balance as at 31/12/2014 thereof non-current thereof current Provisions for product warranties Provisions for personnel Other obligations Total other provisions 53.8 53.5 0.4 – 0.4 21.6 – 18.0 – 4.8 0.0 1.1 – 0.1 53.3 53.3 – 66.4 18.1 48.3 – 1.5 24.6 – 23.7 – 2.1 1.5 0.2 – 65.5 24.1 41.4 68.0 6.3 61.6 – 3.7 13.5 – 17.7 – 12.3 0.0 1.5 0.1 49.3 6.3 43.0 188.2 77.8 110.3 – 5.5 59.6 – 59.4 – 19.1 1.5 2.8 – 0.0 168.1 83.7 84.4 The provisions for product warranties include contractual and Other obligations comprise, among others, provisions for statutory obligations arising from the sale of industrial trucks and restructuring, litigation and expected losses from onerous spare parts. It is expected that the bulk of the costs will be contracts. incurred within the next two years after the reporting date. Total restructuring provisions (including obligations under The provisions for personnel comprise provisions for partial social plans and termination benefits) came to €26.7 million as at retirement obligations, long-service awards, annual bonuses, 31 December 2014 (31 December 2013: €43.7 million). severance pay, obligations under social plans and obligations under the employee equity programmes. The provisions for par- tial retirement obligations are recognised on the basis of individ- ual contractual arrangements and agreements under collective bargaining law. We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 191 [32] TRADE PAYABLES [33] OTHER FINANCIAL LIABILITIES As at 31 December 2014, trade payables of €564.6  million Other financial liabilities comprise the following items: > TABLE 083 (31 December 2013: €550.5 million) included liabilities to affiliated companies of €3.8 million (31 December 2013: €4.5 million) and liabilities to other long-term equity investments of €4.4  million (31 December 2013: €6.0 million). 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 Total other liabilities TABLE 083 2013 220.0 139.4 5.6 27.2 392.1 143.0 81.3 160.7 1.9 36.4 66.3 32.4 1.8 18.9 33.4 2014 231.6 151.2 2.6 2.4 387.8 141.5 84.5 167.3 10.9 36.6 60.3 39.2 2.0 12.2 49.3 603.9 576.0 991.7 968.1 We keep the world moving.KION GROUP AG | Annual Report 2014 192 The non-current derivative financial instruments include a call lion (2013: €327.5  million) and residual value obligations of option on a portion of the shares in Linde Hydraulics amounting €18.5  million (2013: €17.3  million). The KION Group has also to €2.4 million (2013: €22.6 million). The current derivative finan- recognised other financial liabilities amounting to €15.6 million cial instruments include another call option on a portion of the (31 December 2013: €18.2  million) arising from procurement shares in Linde Hydraulics amounting to €0.6  million. In the leases, which are classified as finance leases due to their terms previous year, the latter call option had been reported under non- and conditions. current derivative financial instruments in an amount of €4.7 million. The finance lease obligations are based on the following The finance lease obligations comprise liabilities arising from future minimum lease payments: > TABLE 084 the financing of industrial trucks for short-term rental of €339.1 mil- Minimum lease payments 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 TABLE 084 2013 402.2 159.3 235.3 7.5 363.0 143.0 212.9 7.1 2014 405.0 155.1 239.7 10.2 373.1 141.5 221.8 9.8 Interest included in minimum lease payments 31.9 39.2 Other financial liabilities include other non-derivative financial liabilities of €169.0 million (31 December 2013: €161.1 million) that fall within the scope of IFRS 7. We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 193 [34] CONTINGENT LIABILITIES AND OTHER FINANCIAL COMMIT- MENTS Contingent liabilities Litigation The legal risks arising from the KION Group’s business are typical 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 the existing risk provision in the form of insurance or provisions The increase in guarantees essentially resulted from a new guar- will be sufficient in each individual case. However, the KION antee granted to the trustees of UK pension funds in 2014. Of Group believes it is unlikely that these ongoing lawsuits will require the total guarantees, €0.9  million related to contingent liabilities funds to be utilised that exceed the provisions recognised. assumed jointly with another shareholder of a joint venture (2013: €2.1 million). > TABLE 085 Contingent liabilities in € million Liabilities on bills of exchange Liabilities on guarantees Collateral security for third-party liabilities Total contingent liabilities TABLE 085 2013 1.1 4.5 0.2 5.8 2014 5.6 21.0 – 26.7 We keep the world moving.KION GROUP AG | Annual Report 2014 194 Other financial commitments Sundry other financial commitments included future payment obligations to an associate amounting to €21.0  million (2013: €0.0 million). > TABLE 086 Other financial commitments 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 087 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 TABLE 086 2013 206.0 8.6 2.2 38.4 255.1 TABLE 087 2013 206.0 71.2 99.3 35.4 2014 250.8 10.3 1.9 65.0 327.9 2014 250.8 61.4 114.8 74.5 We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 195 The minimum lease payments relate to payments for leased buildings, machinery, office furniture and equipment (procure- ment 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 088 Minimum lease payments broken down into procurement leases & sale and leaseback sub-leases TABLE 088 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 2014 205.4 44.1 87.4 73.9 – – – – 2013 145.3 38.5 71.4 35.4 – – – – 2014 45.3 17.3 27.4 0.6 4.1 1.6 2.5 0.0 2013 60.7 32.7 27.9 0.0 3.9 1.7 2.2 0.0 The future minimum lease payments for sale and leaseback transactions not recognised in the statement of financial position amounting to €45.3  million (2013: €60.7  million) are partially offset by payments received under non-cancellable sub-leases amounting to €4.1  million (2013: €3.9  million). The future pay- ments 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 2014 196 Other disclosures [35] CONSOLIDATED STATEMENT OF CASH FLOWS Net cash used for investing activities amounted to €297.8 mil- lion (2013: net cash used of €310.7 million). Capital expenditure on developments (R&D), property, plant and equipment, and the rental fleet business (net) rose by €20.5 million year on year. In the previous year, net cash totalling €25.1 million had been used to The consolidated statement of cash flows shows the changes in acquire Arser and the remaining shares in Willenbrock. The pro- cash and cash equivalents in the KION Group resulting from cash ceeds from the disposal of non-current assets primarily related to inflows and outflows in the year under review, broken down into disposals of assets no longer required for the Group’s operating cash flow from operating, investing and financing activities. At the activities. Other inflows from investing activities related to the dis- start of 2014, changes were made to how information is disclosed posal of an equity investment of the Willenbrock Group and divi- in the three categories. The LMH and STILL brand segments dend payments from equity investments. have operational responsibility for the short-term rental business Free cash flow – the sum of cash flow from operating activi- (rental assets) and use it to generate operating income – in the ties and investing activities – increased by €110.3  million to same way as they would with capital expenditure on property, €305.9 million in the reporting period (2013: €195.6 million). As in plant and equipment. That is why the change relating to the rental 2013, a large part of it was used for repayments. fleet business (net disbursals) will be reported in cash flow from At minus €428.1  million, cash flow from financing activities investing activities in future. The figures for 2013 have been was down significantly on the prior-year figure (2013: minus restated to reflect this disclosure change. As a result, cash flow €531.6 million), which had been particularly affected by the IPO from operating activities in 2013 has improved by €170.3 million, and the restructuring of financial debt. The net repayment of while cash flow from investing activities has decreased by the financial debt in the year under review totalled €301.2  million same amount. In addition, interest received has been reclassified (2013: €1,105.7  million). The financial debt taken up during the from cash flow from investing activities to cash flow from financ- year, which came to €1,375.2  million, was more than offset by ing activities because the KION Group’s cash and cash equiva- repayments totalling €1,676.4 million. These repayments included lents are also used to repay existing financial debt. Accordingly, €525.0  million in respect of the early redemption of the bond both interest payments and interest received will, as a component tranches plus early repayment charges of €14.8 million. Net cash of financing, be allocated to cash flow from financing activities in of €82.5 million was also used for regular interest payments (2013: future. As a result, cash flow from investing activities in 2013 has €112.6 million). The distribution of a dividend of €0.35 per share decreased by €7.0 million, while cash flow from financing activi- resulted in an outflow of funds of €34.5 million, while the acquisi- ties has increased by the same amount. tion of 51,000 treasury shares generated an outflow of €1.5 million. The effects on cash from changes in exchange rates are Despite favourable currency effects of €1.8  million (2013: shown separately. Cash flow from operating activities is pre- adverse currency effects of €7.0 million), this resulted overall in a sented using the indirect method in which the profit or loss for the sharp contraction in cash and cash equivalents, which fell from year is adjusted for non-cash operating items. €219.3  million as at the end of 2013 to €98.9  million as at The KION Group’s net cash provided by operating activities 31 December 2014. totalled €603.8 million, which was significantly higher than the pri- or-year figure of €506.3  million after restatement to reflect the rental assets. The main reason for this was the €68.8  million decrease in tax payments, which had a positive impact on cash flow. This decrease was due to the fact that there had been one- off tax payments in the previous year in connection with the sale of the hydraulics business. A higher level of working capital at the reporting date had the effect of reducing cash flow. We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 197 Other disclosures [36] INFORMATION ON FINANCIAL INSTRUMENTS 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. 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 089 – 090 Carrying amounts broken down by class and category 2014 TABLE 089 Classes in € million Financial assets Investments in non-consolidated subsidiaries / Other investments Loans receivable Financial receivables Non-current securities 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 FLaC FLHfT Fair value Categories 11.4 0.6 12.4 0.8 547.8 598.2 106.0 62.3 43.7 98.9 459.9 443.1 6.6 707.7 564.6 555.4 169.0 373.1 13.3 11.4 0.8 0.6 12.4 598.2 62.3 98.9 42.8 11.4 0.6 12.4 0.8 549.2 598.2 106.0 62.3 43.7 98.9 460.0 490.0 6.6 711.2 564.6 557.2 169.0 374.9 13.3 459.9 443.1 6.6 564.6 169.0 5.4 We keep the world moving.KION GROUP AG | Annual Report 2014198 Carrying amounts broken down by class and category 2013 TABLE 090 Classes in € million Financial assets Investments in non-consolidated subsidiaries / Other investments Loans receivable Financial receivables Non-current securities 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 FLaC FLHfT Fair value Categories 11.9 0.8 11.6 0.8 479.6 558.7 55.0 35.7 19.4 219.3 233.7 958.3 6.6 617.1 550.5 553.1 161.1 363.0 29.1 11.9 0.8 0.8 11.6 558.7 35.7 219.3 18.0 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 6.6 619.2 550.5 554.2 161.1 364.1 29.1 233.7 958.3 6.6 550.5 161.1 28.0 We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 199 Other disclosures The change in valuation allowances for trade receivables was as follows: > TABLE 091 Change in valuation allowances 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/ The net gains and losses on financial instruments are broken down by IAS 39 category as follows: > TABLE 092 Net gains and losses on financial instruments broken down by category in € million Loans and receivables (LaR) Financial instruments held for trading (FAHfT, FLHfT) Financial liabilities carried at amortised cost (FLaC) The above net gains and losses do not include losses arising on hedging transactions, which amounted to €7.5 million (2013: €26.7  million), because these losses form part of a docu- mented hedge. TABLE 091 2013 50.5 – 0.2 9.4 – 7.5 – 9.2 – 0.7 42.4 TABLE 092 2013 11.0 – 14.2 – 152.9 2014 42.4 – 7.1 – 4.6 – 5.1 0.3 40.2 2014 – 4.8 54.6 – 103.5 We keep the world moving.KION GROUP AG | Annual Report 2014 200 Offsetting of financial instruments cial collateral issued relates to collateral provided in the context of the SFA serving as collateral in case of default for the creditors of The potential offsetting volume essentially arises from netting all SFA tranches (including H2a), subject to the usual limitations arrangements in framework agreements governing derivatives and agreed recovery principles. The following tables show actual trading that the KION Group concludes with commercial banks. offsetting and potential offsetting volumes for financial assets and The potential offsetting volume reported in connection with finan- financial liabilities. > TABLES 093 – 096 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 598.3 43.7 642.0 – 0.1 – – 0.1 31/12/2014 598.2 43.7 641.9 – 0.0 – 5.8 – 5.8 – – – 598.2 37.9 636.2 We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 201 Other disclosures Financial assets 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 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 Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements TABLE 095 Potential net amount Gross amounts of recognised financial assets set off in the balance sheet Net amounts of financial liabilities presented in the balance sheet Gross amounts of recognised financial liabilities owing to netting agreements in connection with financial collaterals pledged Potential net amount in € million Financial liabilities Trade payables Derivative financial liabilities Total 909.6 564.7 13.3 1,487.6 – – 0.1 – – 0.1 31/12/2014 909.6 564.6 13.3 1,487.5 – – 0.0 – 5.8 – 5.8 – 340.8 – – 568.8 564.6 7.5 – 340.8 1,140.9 We keep the world moving.KION GROUP AG | Annual Report 2014 202 Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements TABLE 096 Potential net amount Gross amounts of recognised financial assets set off in the balance sheet Net amounts of financial liabilities presented in the balance sheet Gross amounts of recognised financial liabilities owing to netting agreements in connection with financial collaterals pledged 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 Fair value measurement The fair value of receivables and liabilities from finance leases corresponds to the present value of the net lease payments, tak- The majority of the cash and cash equivalents, loans receivable, ing account of the current market interest rate for similar leases. other non-derivative receivables and liabilities, trade receivables With the exception of derivative financial instruments and and trade payables held by the Group have short remaining terms long-term securities, all financial assets and liabilities are meas- to maturity. The carrying amounts of these financial instruments ured at amortised cost. are roughly equal to their fair values. The fair value of liabilities to The following tables show the assignment of fair values to the banks corresponds to the present value of the outstanding pay- individual classification levels as defined by IFRS 7 for financial ments, taking account of the current interest-rate curve and the instruments measured at fair value. > TABLES 097 – 098 Group’s own default risk. This fair value, calculated for the pur- poses of disclosure in the notes to the financial statements, is classified as level 2 of the fair value hierarchy. The fair value of the corporate bonds issued, calculated for disclosure in the notes to the financial statements, is determined using 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 middle rate applicable on the reporting date. We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 203 Other disclosures Financial instruments measured at fair value TABLE 097 in € million Financial assets thereof non-current securities thereof derivative instruments Financial liabilities thereof derivative instruments Fair Value Hierarchy Level 1 Level 2 Level 3 0.8 9.0 34.7 10.3 3.0 2014 44.5 0.8 43.7 13.3 13.3 Financial instruments measured at fair value TABLE 098 in € million Financial assets therof non-current securities 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 We keep the world moving.KION GROUP AG | Annual Report 2014 204 Level 1 comprises long-term securities for which the fair value is in Linde Hydraulics. The Black-Scholes model and probability- calculated using prices quoted in an active market. weighted scenario analysis are used to calculate the fair value of Interest-rate swaps and currency forwards are classified as the put option and the two call options. The measurement is Level 2. The fair value of derivative financial instruments is deter- based on the following significant, unobservable input para- mined using appropriate valuation methods on the basis of the meters as at 31 December 2014. An amount of €64.1  million observable market information at the reporting date. The default has been recognised as the fair value of the shares in Linde risk for the Group and for the counterparty is taken into account Hydraulics, both for the put option and for the two call options on the basis of gross figures. The fair value of interest rate swaps (31 December 2013: €116.1  million). A base exercise price of is calculated as the present value of the estimated future cash €77.4  million (31 December 2013: €77.4  million) and a term to flows. Both contractually agreed payments and forward interest maturity of 0.49 – 2.49 years (31 December 2013: 1.49 – 3.49 rates are used to estimate the future cash flows, which are then years) have been assumed for the put option. For the measure- discounted on the basis of a yield curve that is observable in the ment of call option  1, a base exercise price of €77.4  million market. The KION Group no longer had any material interest-rate (31 December 2013: €77.4 million) and a term to maturity of 2.99 hedging instruments in 2014 or as at 31 December 2013. The fair years (31 December 2013: 3.99 years) were used, while a base value of currency forwards is calculated by the system using the exercise price of €38.7 million (31 December 2013: €38.7 million) discounting method based on forward rates on the reporting date. and a term to maturity of 0.49 – 2.99 years (31 December 2013: The financial assets and liabilities allocated to Level 3 relate to 1.49 – 3.99 years) were used for call option 2. The following table a put option held by Linde Material Handling GmbH, Aschaffen- shows the material changes in fair value and the impact on the burg, and two call options held by Weichai Power on the shares income statement. > TABLE 099 Development of financial assets / liabilities classified as level 3 TABLE 099 in € million Value as at 01/01/ Gains / losses recognised in net financial expenses Value as at 31/12/ Gains / losses of the period relating to financial assets / liabilities held as at 31/12/ Change in unrealised gains / losses for the period relating to financial assets / liabilities held as at 31/12/ 2014 – 11.5 43.2 31.7 43.2 43.2 2013 3.2 – 14.7 – 11.5 – 14.7 – 14.7 We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 205 Other disclosures As at 31 December 2014, the net value calculated for the options on the shares in Linde Hydraulics came to €31.7 million (31 Decem- ber 2013: minus €11.5  million). If the fair value of the shares had been 10.0 per cent lower on the reporting date, the net value arising [37] FINANCIAL RISK REPORTING from the options would have increased by €5.3 million (31 Decem- Capital management ber 2013: €9.4 million) to €37.1 million (31 December 2013: minus €2.1 million) and led to an additional gain of €5.3 million (31 Decem- One of the prime objectives of capital management is to ensure ber 2013: lower expense of €9.4 million). A 10.0 per cent rise in the liquidity at all times. Measures aimed at achieving these objec- fair value of the shares in Linde Hydraulics would have reduced the tives include the optimisation of the capital structure, the reduc- net value arising from the options by €5.6 million (31 Decem- tion of liabilities and ongoing Group cash flow planning and man- ber 2013: by €9.4  million) to €26.2  million (31 December 2013: agement. The KION Group made further improvements to its minus €20.9  million) and the gain would have decreased by funding structure and funding conditions during the reporting €5.6 million (31 December 2013: additional expense of €9.4 million). year by repaying two corporate bonds ahead of schedule in April In order to eliminate default risk to the greatest possible 2014. The funds used for the repayment mainly originated from a extent, the KION Group only enters into derivatives with invest- revolving credit facility, which currently has far lower interest rates ment-grade counterparties. than the two corporate bonds. Against this background, the If events or changes in circumstances make it necessary to revolving credit facility was increased by €198.0 million to a total reclassify financial instruments as a different level, they are reclas- of €1,243.0 million in April 2014 on the basis of bilateral lending sified at the end of a reporting period. No financial instruments agreements with a group of banks (see note [29]). were transferred between Levels 1, 2 or 3 in 2014. Close cooperation between local units and the Group head office ensures that the local legal and regulatory requirements faced by foreign group companies are taken into account in cap- ital management. Net financial debt – defined as the difference between finan- cial liabilities (excluding lease liabilities) and cash and cash equiv- alents – is the key performance measure used in liquidity planning at Group level (see note [29]) and amounted to €810.7 million at 31 December 2014 (31 December 2013: €979.3 million). We keep the world moving.KION GROUP AG | Annual Report 2014206 Credit risk The following table shows the age structure of receivables as at the reporting date: > TABLE 100 In certain finance and operating activities, the KION Group is sub- ject to credit risk, i.e. the risk that partners will fail to meet their Impairment losses are based on the credit risk associated with contractual obligations. This risk is limited by diversifying busi- the receivables, the risk being assessed mainly using factors such ness partners based on certain credit ratings. The Group only as customer credit rating and failure to adhere to payment terms. enters into transactions with business partners and banks hold- Some of the receivables that were overdue as at the report- ing a good credit rating and subject to fixed limits. Counterparty ing date, but for which no impairment losses had been reported, risks involving our customers are managed by the individual were offset by corresponding trade payables. Apart from this Group companies. item, the Group did not hold any significant collateral. Age structure analysis of receivables TABLE 100 Thereof: Not impaired at the reporting date, but Thereof: Nei - t her 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 12.4 547.8 598.2 62.3 11.6 479.6 558.7 35.7 12.4 547.8 501.7 61.6 11.6 479.6 452.7 34.6 – – 3.2 – – – 2.8 0.5 – – 87.5 0.6 – – 97.2 0.4 – – 5.0 0.0 – – 4.5 0.2 2014 2013 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 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 207 Other disclosures Liquidity risk April 2014, Moody’s upgraded its corporate family rating for the KION Group from Ba3 to Ba2 with a stable outlook, while Standard Based on IFRS 7, a liquidity risk arises if an entity is unable to & Poor’s also improved its rating, from BB-/positive to BB/positive. meet its financial liabilities. The KION Group maintains a liquidity The following tables show all of the contractually agreed reserve in the form of lines of credit and cash in order to ensure payments under recognised financial liabilities as at 31 Decem- financial flexibility and solvency. The age structure of financial ber 2014 and 2013, including derivative financial instruments with liabilities is reviewed continually. The KION Group’s credit rating negative fair values. > TABLES 101 – 102 maintained its positive trajectory in the year under review. In Liquidity analysis of financial liabilities and derivatives 2014 TABLE 101 in € million Primary financial liabilities Liabilities to banks Corporate bond Borrowing costs Other financial liabilities Trade payables Lease liabilities Other financial liabilities Derivative financial liabilities Derivatives with negative fair value + Cash in – Cash out Carrying amount 2014 Cash flow 2015 Cash flow 2016 – 2019 Cash flow from 2020 459.9 450.0 – 6.9 903.0 6.6 564.6 707.7 542.1 10.3 – 262.4 – 30.5 – 214.1 – 121.3 – – 465.2 – 5.1 – 564.6 – 271.9 – 324.2 – 1.3 – – 475.9 – 239.7 270.2 – 280.0 4.2 – 4.2 – 0.2 – – 20.5 – 10.2 – – We keep the world moving.KION GROUP AG | Annual Report 2014 208 Liquidity analysis of financial liabilities and derivatives 2013 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 2013 Cash flow 2014 Cash flow 2015 – 2018 Cash flow from 2019 233.7 975.0 – 16.7 1,192.0 6.6 550.5 617.1 524.0 1.9 – 229.7 – 66.0 – 11.1 – 583.7 – 0.1 – 713.6 – 2.9 – 550.5 – 241.1 – 320.4 – – – 425.6 – 235.3 147.0 – 148.7 1.5 – 1.7 – 4.1 – – 17.1 – 7.5 – – The calculation of future cash flows for derivative financial liabili- primarily the provision of limited reserves for defaults. The recog- ties includes all currency forwards that have negative fair values nised assets that serve as reserves for defaults and are reported as at the reporting date. under other current financial assets, stood at €1.0 million as at Bank guarantee lines (e.g. sureties, performance bonds) 31 December 2014 (31 December 2013: €1.0 million). However, had been issued under the ancillary facility agreements for a the short residual maturity of these financial assets meant their total amount in the single-digit millions as at 31 December 2014 carrying amount was almost the same as their fair value. The (31 Decem ber 2013: low double-digit millions). They included maximum downside risk arising on the transferred and fully guarantees payable ‘on first demand’. As was the case in the pre- derecognised financial assets amounted to €5.0  million as at vious year, no guarantees were utilised in 2014. 31 December 2014 (31 December 2013: €5.0 million). In some cases, the KION Group retains insignificant rights and duties in connection with fully derecognised financial assets, We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 209 Other disclosures Default risk Because of low default rates, counterparty risk has not been significant to date in the Group. The Group did not identify any For financial assets, default risk is defined as the risk that a coun- material year-on-year changes in 2014. The KION Group’s losses terparty will default, and hence is limited to a maximum of the car- from defaults are also mitigated by its receipt of the proceeds rying amount of the assets relating to the counterparty involved. from the sale of repossessed trucks. In addition, it primarily offers The potential default risk attaching to financial assets is mitigated financial services indirectly via selected funding partners, and the by secured forms of lending such as reservation of title, credit KION Group bears the counterparty risk in less than 5 per cent of insurance and guarantees, and potential netting agreements. cases. The credit portfolio management system was updated Specific valuation allowances for defaults are recognised to during 2014. In particular, this involved revising procedures on reflect the risk arising from primary financial instruments. Financial operational and organisational structure as well as processes for transactions are only entered into with selected partners holding risk management and control. good credit ratings. Investments in interest-bearing securities are limited to securities with an investment-grade credit rating. Currency risk Risks arising from financial services In accordance with its treasury risk policy, the KION Group hedges currency risks both locally at the level of the individual The KION Group’s leasing activities mean that it may be exposed companies and centrally via KION Material Handling GmbH in to residual value risks from the marketing of trucks that are order to meet the prescribed minimum hedging ratios. returned by the lessee at the end of a long-term lease and subse- The main hedging instruments employed are foreign- currency quently sold or re-leased. Residual values in the markets for used forwards, provided that there are no country-specific restrictions trucks are therefore constantly monitored and forecast. on their use. The KION Group regularly assesses its overall risk position At company level, hedges are entered into for highly proba- arising from financial services, recognising write-downs, valua- ble future transactions on the basis of rolling 15-month forecasts, tion allowances or provisions to cover the risks it identifies. It as well as for firm obligations not reported in the statement of immediately takes account of any changes in residual values financial position. In accordance with IAS 39, these hedges are when calculating new leases. generally classified as cash flow hedges for accounting purposes In addition, residual values are mainly based on remarketing (see note [38]). agreements, which continued to achieve positive outcomes in Foreign-currency forwards are also employed to hedge the 2014. Any residual-value risk under these agreements is trans- currency risks arising in the course of internal financing. ferred to the 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. The KION Group also has an IT system for residu- al-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, the KION Group generally funds its leasing business in the local currency used in each market. We keep the world moving.KION GROUP AG | Annual Report 2014210 The following table shows an overview of the foreign-currency forwards entered into by the KION Group. > TABLE 103 Foreign-currency forwards Fair value Notional amount in € million Foreign-currency forwards (assets) Foreign-currency forwards (liabilities) 2014 2013 Hedge Trading Hedge Trading 0.9 8.1 7.7 2.3 1.3 2.3 0.7 0.8 2014 44.4 213.3 204.3 70.2 TABLE 103 2013 65.0 164.7 33.4 115.7 Significant currency risks from financial instruments are meas- nated in a currency other than the functional currency of the ured on the basis of value at risk (VaR). VaR figures are calculated reporting entity concerned. This means that currency risks result- using a historical variance-covariance matrix. Currency risks from ing from the translation of the separate financial statements of financial instruments as defined by IFRS 7 are only included in subsidiaries into the Group reporting currency, i.e. currency calculating value at risk if the financial instruments are denomi- translation risks, are not included. > TABLE 104 Value-at-Risk in € million Currency risk TABLE 104 2013 18.6 2014 19.7 The value at risk in respect of currency risk as at 31 December 2014 was €19.7 million (31 December 2013: €18.6 million). Value at risk is the loss that is not expected to be exceeded over a hold- ing period of one year with a confidence level of 97.7  per  cent (2013: 97.7 per cent). We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 211 Other disclosures Interest-rate risk The Group funds itself by, among other things, drawing down loans under its agreed loan facilities. In the previous year, inter- Interest-rate risk within the KION Group is managed centrally. est-rate derivatives – mainly interest-rate swaps – were used to The basis for decision-making includes sensitivity analyses of hedge the resultant interest-rate risk. The corresponding inter- interest-rate risk positions in key currencies. est-rate hedging instruments were terminated upon repayment in The cumulative effect of a rise or fall of 100 basis points 2013 of the floating-rate liabilities under the SFA, which means (bps) in the relevant interest-rate curves results from floating-rate that there were no material interest-rate hedging instruments as positions and is shown in the following table: > TABLE 105 at 31 December 2013 or in 2014. > TABLE 106 Interest-rate sensitivity TABLE 105 in € million Other comprehensive income (loss) Net income (loss) +100 bps – 100 bps +100 bps – 100 bps 2014 – – 3.3 2014 – 3.3 2013 – – 1.9 2013 – 1.9 Interest-rate swaps in € million Interest-rate swaps (assets) Interest-rate swaps (liabilities) Fair value Notional amount 2014 2013 Hedge Trading Hedge Trading – – 0.2 – – – 0.4 – 2014 – – 11.0 – TABLE 106 2013 – – 13.0 – We keep the world moving.KION GROUP AG | Annual Report 2014 212 [38] HEDGE ACCOUNTING Hedging of interest-rate risk Hedging currency risk The KION Group did not have any material interest-rate deriva- tives in 2014. In the previous year, the KION Group funded itself by, among other things, drawing down loans with variable interest rates in In accordance with its treasury risk policy, the KION Group various currencies. Interest-rate derivatives were used to hedge applies cash flow hedge accounting in hedging the currency risks the resultant interest-rate risk in 2013. These interest-rate deriva- arising from highly probable future transactions and firm obliga- tives were terminated in July 2013 when most of the floating-rate tions not reported in the statement of financial position in various loans were repaid. Upon early termination of the interest-rate currencies. Foreign-currency forwards with settlement dates in derivatives, the amounts totalling €14.4 million that were recog- the same month as the expected cash flows from the Group’s nised in OCI as part of cash flow hedge accounting were derecog- operating activities are used as hedges. nised and taken to income. The KION Group no longer had any The effectiveness of the Group’s hedging transactions is material interest-rate derivatives as at 31 December 2013. assessed on the basis of forward rates using the hypothetical derivative approach under the cumulative dollar-offset method. The effective portion of the changes in the fair value of foreign - currency forwards is recognised in accumulated other compre- hensive income (loss) and only reversed when the corresponding hedged item is recognised in income. [39] SEGMENT REPORT On account of the short-term nature of the Group’s payment The Executive Board divides the KION Group into financial services terms, reclassifications to the income statement and the recogni- (FS) activities and the Linde Material Handling (LMH) and STILL tion of the corresponding cash flows generally take place in the brands for management purposes. Segment reporting follows same reporting period. A foreign-currency receivable or liability is the same breakdown, taking into account the relevant organisa- recognised when goods are despatched or received. Until the tional structures and corporate strategy of the KION Group. corresponding payment is received, changes in the fair value of the derivative are recognised in the income statement such that they largely offset the effect of the measurement of the for- Description of the segments eign-currency receivable or liability at the reporting date. The changes in fair value recognised and reclassified in other The Linde Material Handling (LMH) segment encompasses the comprehensive income in 2014 are shown in the consolidated Linde, Fenwick and Baoli brands. The 30 per cent stake held in statement of comprehensive income. There were no significant inef- Linde Hydraulics is allocated to the LMH segment and accounted fective portions in 2014, as had been the case in the previous year. for using the equity method. In total, foreign-currency cash flows of €248.7 million (2013: The STILL segment comprises the STILL and OM STILL €162.1 million) were hedged and designated as hedged items, of brands. which €184.0 million is expected by 30 September 2015 (2013: FS activities include the financing of long-term leasing busi- €147.6 million by 30 September 2014). The remaining cash flows ness with external customers of the KION Group and short-term designated as hedged items essentially fall due in the period up rental business of the LMH and STILL operating segments as well to 31 December 2015. as risk management. When long-term leasing business is being conducted, FS operates as a contractual partner to external cus- tomers and provides the necessary funding in conjunction with external financial partners. Besides management of residual - We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 213 Other disclosures value risk, risk management also includes the management of Assets and liabilities associated with the long-term leasing credit risk. In addition, FS provides the financing for short-term business, including related income and expenses, are assigned rental fleets on behalf of the LMH and STILL brand segments, to the FS segment. which operate and maintain such fleets as part of their opera- Whereas the main feature of long-term leasing business is tional business. the provision of a financial service for the external lessee, the The Other segment comprises the subsidiary KION India as focus in short-term rental business is on the service function. well as holding companies and service companies in the KION External customers are offered rental trucks from a rental pool – Group. KION India manufactures diesel trucks, electric forklift including associated services – for short-term use. Unlike the sit- trucks and warehouse trucks under the Voltas brand. It has a net- uation in long-term leasing, financial performance in the short- work of more than 60 branches and dealers providing sales and term business is largely dependent on the achieved level of service. The service companies provide services for all segments utilisation of the rental fleet, management of which lies entirely in the KION Group. The bulk of the revenue in this segment is within the responsibility of the brand segments. Given this struc- generated by internal IT and logistics services. ture, 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 brand segments’ Segment management income statements. In an indirect end customer finance arrangement, the other- The KPIs used to manage the brand segments are order intake, wise typical financing function of the FS segment as a lender for revenue and adjusted EBIT. Segment reporting therefore includes the leasing transaction no longer applies. As a result of the sale of a reconciliation of externally reported consolidated earnings the leased asset to the external finance provider in such transac- before interest and tax (EBIT) – including KION acquisition items tions, the brand segments view the transactions in the same way and non-recurring items – to the adjusted EBIT for the segments as a sale to an end-user. Consequently, these transactions and all (‘adjusted EBIT’). the revenue that they generate are recognised in the LMH and Earnings before tax (EBT) and return on equity (ROE) are the STILL brand segments. KPIs used to manage the Financial Services segment. ROE is cal- culated on the basis of average equity employed excluding net income (loss) for the current period. As at 31 December 2014, ROE – earnings before tax as a percentage of average equity – remained unchanged on the prior year at 13.0 per cent. Intra-group transactions are generally conducted on an arm’s-length basis. The regular (interest) margin income that FS generates from its business activities reflects prevailing market conditions. Surpluses from leasing that exceed this interest mar- gin are reflected in the producer margin within the operating profit generated by the LMH and STILL brand segments. Segment reports are prepared in accordance with the same accounting policies as the consolidated financial statements, as described in note [7]. Contrary to these policies, however, the LMH and STILL brands’ intersegment sales to FS are always treated as revenue for the brand segments, irrespective of which entity might retain any opportunities and risks. We keep the world moving.KION GROUP AG | Annual Report 2014214 The following tables show information on the KION Group’s operating segments for 2014 and 2013: > TABLES 107 – 108 Segment report 2014 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 2,769.1 308.1 3,077.2 258.1 14.8 – 27.1 – 12.3 270.3 36.9 32.4 339.6 4,918.8 1,713.3 92.8 – 28.6 68.2 88.4 3,234.4 13,945 STILL 1,511.0 339.7 1,850.7 83.8 1.8 – 36.4 – 34.6 118.4 8.7 6.5 133.6 2,206.7 1,370.8 4.3 1.1 50.1 44.8 1,895.1 7,976 Financial Services 350.1 270.7 620.9 5.2 58.8 – 55.6 3.1 2.1 0.0 0.0 2.1 1,361.3 1,314.8 17.5 2.7 0.0 0.0 622.7 60 Other 47.6 188.1 235.7 79.8 55.3 – 99.6 – 44.3 124.1 11.4 0.0 135.5 1,241.7 3,669.4 0.0 0.0 14.8 17.0 236.5 688 Consolidation / Reconciliation – – 1,106.6 – 1,106.6 – 168.7 – 46.2 45.4 – 0.7 – 167.9 – – – 167.9 – 3,600.0 – 3,586.9 – – – – – 1,111.3 – Total 4,677.9 – 4,677.9 258.3 84.4 – 173.2 – 88.8 347.0 57.0 38.9 442.9 6,128.5 4,481.4 114.6 – 24.8 133.1 150.3 4,877.3 22,669 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 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 215 Other disclosures Segment report 2013 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 2,629.8 251.2 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 13,824 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 7,715 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 59 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 – 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 2014216 The table below gives a breakdown of the revenue from external customers by location. > TABLE 109 Segment revenue broken down by customer location in € million Western Europe Eastern Europe Americas Asia Rest of world TABLE 109 2013 3,223.9 369.7 279.4 453.5 168.1 2014 3,411.0 403.3 245.3 470.7 147.5 Total segment revenue 4,677.9 4,494.6 Revenue in Germany came to €1,221.8  million in 2014 (2013: €473.0 million (31 December 2013: €449.1 million), which primar- €1,114.5  million). There are no relationships with individual cus- ily resulted from the funding of the short-term rental business of tomers that generate revenue deemed to be significant as a pro- LMH and STILL. The leased assets of the Financial Services seg- portion of total consolidated revenue. ment amounted to €267.4 million at the reporting date (31 Decem- Financial income and expenses including all interest income ber 2013: €240.7 million). and expenses are described in notes [12] and [13]. The liabilities attributable to the Financial Services segment The non-recurring items mainly comprise consultancy costs largely comprised liabilities to leasing companies of €1,037.5 mil- and expenses in connection with severance payments. They lion (31 December 2013: €935.2  million) relating to sale-and- totalled €57.0 million in 2014 (2013: €12.8 million). In 2014, these leaseback transactions that resulted from the funding of long- items also included components of the share of profit (loss) of the term leases with external third parties and intra-group customers. equity-accounted Linde Hydraulics and expenses in connection In the reporting year, €702.9 million (2013: €615.5 million) of this with the impairment charge recognised on the investment in amount was attributable to the funding of leases with external Linde Hydraulics totalling €28.2  million (2013: net income of customers and €334.5 million (2013: €319.7 million) related to the €0.1 million), which relate to the LMH segment. funding of intra-group leases with the LMH and STILL brand The KION acquisition items relate to the acquisition of the companies as lessees, who had in turn entered into leases with KION Group, which was formed at the end of 2006 when it was external third parties. Moreover, they include net financial debt of spun off from Linde AG, Munich. These items comprise net write- €155.1 million (2013: €163.6 million) arising from general corpo- downs and other expenses in relation to the hidden reserves rate finance for the FS segment. identified as part of the purchase price allocation. The assets attributable to the Financial Services segment include long-term leases, which were reported as either leased assets or lease receivables, depending on the type of lease. As at the reporting date, lease receivables due from unrelated third parties amounted to €521.9  million (31 December 2013: €458.1 million). There were also intra-group lease receivables of We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 217 Other disclosures Capital expenditure by the Financial Services segment includes Capital expenditure in Germany came to €88.2  million in 2014 additions to intangible assets and property, plant and equipment. (2013: €82.2 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 2014 111.9 2.6 2.1 15.6 0.9 133.1 2013 105.0 3.7 2.2 13.9 0.9 125.8 Depreciation/amortisation relates to intangible assets with finite Non-current assets attributable to Germany amounted to useful lives and property, plant and equipment. €2,618.7  million at 31 December 2014 (31 December 2013: The regional breakdown of non-current assets excluding €2,676.6 million). financial assets, financial instruments, deferred tax assets and post-employment benefits is as follows: > TABLE 111 Non-current assets broken down by company location in € million Western Europe Eastern Europe Americas Asia Rest of world TABLE 111 2013 3,316.2 109.6 42.6 130.4 42.4 2014 3,303.7 112.5 51.5 156.9 48.2 Total non-current assets (IFRS 8) 3,672.7 3,641.2 We keep the world moving.KION GROUP AG | Annual Report 2014 218 [40] EMPLOYEES The KION Group employed an average of 22,438 full-time equiv- alents (including trainees and apprentices) in the reporting year (2013: 21,632). 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) Germany France UK Italy Rest of Europe Asia Rest of world Total employees TABLE 112 2013 7,625 3,160 1,881 786 3,565 3,438 1,177 2014 8,139 3,157 1,758 805 3,730 3,643 1,206 22,438 21,632 The KION Group employed an average of 536 trainees and ence generally exists if an entity holds between 20 per cent and apprentices in 2014 (2013: 506). 50 per cent of the shares in another entity. [41] RELATED PARTY DISCLOSURES The related parties that are solely or jointly controlled by the KION Group or over which significant influence can be exercised are included in the list of shareholdings as at 31 December 2014 (see note [45]). In addition, Weichai Power Co. Ltd., Weifang, China, which indirectly holds 33.3 per cent of the shares in KION GROUP AG and is also the largest single shareholder, Superlift In addition to the subsidiaries included in the consolidated finan- Holding S.à r.l., Luxembourg, which holds 18.8  per  cent of the cial statements, the KION Group has direct or indirect business shares in KION GROUP AG, Kohlberg Kravis Roberts & Co L.P., relationships with a number of unconsolidated subsidiaries, joint New York, USA, and Goldman, Sachs & Co., New York, USA, are ventures and associates in the course of its ordinary business also related parties. activities. According to IAS 24, related parties include entities that have control or significant influence over KION GROUP AG. An entity is usually assumed to have control (parent) if it holds more than 50 per cent of the shares in another entity. Significant influ- We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 219 Other disclosures The revenue that the KION Group generated in 2014 and 2013 from selling goods and services to related parties, and vice versa, is shown in > TABLES 113 – 114 along with the outstanding receiva- bles and liabilities. No valuation allowances for trade receivables had been recognised as at the reporting date, a situation that was unchanged on 31 December 2013. The members of the Executive Board and Supervisory Board of KION GROUP AG are also related parties. Details of the remu- neration of the Executive Board and Supervisory Board can be found in note [43]. Related party disclosures 2014 in € million Non-consolidated subsidiaries Associates Joint ventures Other related parties * Total Receivables Liabilities Sales of goods and services 8.3 8.9 1.1 4.4 22.7 4.9 2.2 45.1 0.9 53.1 9.4 115.8 63.9 15.3 204.5 * ‘Other related parties’ include, among others, transactions with Weichai and Superlift and their affiliated companies Related party disclosures 2013 in € million Non-consolidated subsidiaries Associates Joint ventures Other related parties * Total Receivables Liabilities Sales of goods and services 10.0 10.1 1.1 5.5 26.6 6.1 2.5 66.7 1.1 76.4 9.7 110.1 36.3 10.4 166.4 * ‘Other related parties’ include, among others, transactions with Weichai and Superlift and their affiliated companies TABLE 113 Purchases of goods and services 11.1 111.2 52.9 13.5 188.7 TABLE 114 Purchases of goods and services 7.4 114.6 51.6 14.1 187.8 We keep the world moving.KION GROUP AG | Annual Report 2014 220 [42] VARIABLE REMUNERATION The KEEP programme is a share matching plan. Participating employees acquire KION shares for their own investment pur- poses. Each set of three KION shares represents a block of shares. Once the three-year holding period has expired, employ- KEEP employee share option programme ees are entitled to one free matching share (bonus share) for each block. However, KION GROUP AG has the right to satisfy each On 1 October 2014, the Executive Board of KION GROUP AG programme participant’s entitlement by paying a cash settlement decided to introduce an employee share option programme for instead of granting a bonus share. For employees taking part for employees in Germany and to issue an offer in connection with the first time, the KION Group is offering a special incentive in the this programme. The period during which eligible employees form of starter blocks: the KION Group will bear the cost of one could take up this offer by making a declaration of acceptance KION share (free share) in each of the first twelve blocks of shares ran from 2 to 31 October 2014. To be eligible to participate in the that an employee takes up. KION Employee Equity Programme (KEEP), employees must, at The right to obtain a bonus share lapses if participants sell the start of the offer phase, have had a permanent, uninterrupted their own investment in KION shares or cease to work for the employment contract with a participating KION Group company KION Group. The change in the number of bonus shares to be for at least one year. Currently, KION GROUP AG plus twelve granted is shown in > TABLE 115. German subsidiaries are taking part in KEEP. The Company is considering whether to extend the employee share option programme to subsidiaries in China, Brazil, France, the United Kingdom, Italy, Spain, Poland and the Czech Republic over the coming years. Development of the granted bonus shares in units Balance as at 01/01/ Granted bonus shares Forfeited bonus shares Balance as at 31/12/ TABLE 115 2014 0 29,146 – 30 29,116 We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 221 Other disclosures Significant measurement parameters for the KION GROUP AG Share Matching Programme TABLE 116 Measurement parameters Expected dividend yield Price of the KION share as at valuation date Valuation date 31/12/2014 €0.88 €29.02 In 2014, 20,856 free shares were issued to employees as part of parts on the total shareholder return (TSR) of KION GROUP AG their starter blocks. shares compared with the STOXX® Europe TMI Industrial Engi- The free shares to be issued are measured at their fair value neering index as a measure of market performance, and with on the day on which employees obtain the right to acquire shares return on capital employed (ROCE) as an internal measure. It also as their own investment. The fair value on the grant date is deter- depends on the performance of KION GROUP AG shares during mined on the basis of Monte Carlo simulation. The measurement the relevant period. parameters used are shown in > TABLE 116. The first performance period for the 2014 tranche ends on For the 2014 programme, the fair value of a bonus share 31 December 2016. At the beginning of the performance period, was €26.59. the managers were granted a total of 0.2 million virtual shares for The fair value of the bonus shares to be granted is recognised this tranche based on a particular percentage of their individual as an expense and paid into capital reserves over the three-year gross annual remuneration at the time of grant. At the end of the holding period. performance period, the number of the virtual shares is amended In 2014, an expense of €0.7  million was recognised under depending on the degree to which the relevant targets are functional costs for free shares and bonus shares in connection achieved. The resulting final number of virtual shares multiplied by with the employee share option programme (2013: €0.0 million). the smoothed price of KION GROUP AG shares at the end of the Each year, the Executive Board of KION GROUP AG decides performance period determines the amount of cash actually paid. whether there will be an offer made under the share option pro- The KION Group has the right to adjust the amount payable at the gramme that year and which companies will participate. end of the performance period in the event of exceptional occur- KION performance share plan (PSP) for managers rences or developments. The maximum amount payable is limited to 200 per cent of the value of the shares allotted to an individual at the grant date. The pro-rata expense calculation based on the fair value of the virtual shares on each valuation date is carried out using In November 2014, the Company decided to introduce long-term, Monte Carlo simulation. The measurement parameters shown variable remuneration (the KION Long-Term Incentive Plan for Top in >  TABLE 117 were used to value the virtual shares on the Management 2014) for managers in the KION Group so that the reporting date. remuneration structure would be based on the sustainable per- formance of the Company. The plan was introduced retrospec- tively from 1 January 2014. Under this performance share plan, managers are granted virtual shares over a defined period (three years). The remunera- tion component measured over the long term is based in equal We keep the world moving.KION GROUP AG | Annual Report 2014 222 Significant measurement parameters of the PSP for Executive Employees 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 as at 31/12/2014 Initial value of the KION share (60 days average) Initial value of the STOXX® Europe TMI Industrial Engineering Index (60 days average) TABLE 117 Value as at 31/12/2014 30.0% 15.0% – 0.1% €0.88 €31.74 €29.49 €208.87 The historic volatility of shares in similar companies (peer group) The performance period for the 2014 tranche ends on was used to determine the volatility of KION shares on which the 31 Decem ber 2016 (2013 tranche: 31 December 2015). At the valuation is based. As at 31 December 2014, the fair value of one beginning of the performance period on 1 January 2014 (2013 virtual share was €27.23 for the 2014 tranche and the total fair tranche: 29 June 2013), the Executive Board members were value based on 0.2 million virtual shares was €4.9 million on that granted a total of 0.2 million virtual shares for this tranche (2013 date. Because the performance period for the 2014 tranche has tranche: 0.3 million virtual shares) with a specific fair value based been set at 36 months, a liability of €1.6 million was recognised as a on an allocation value in euros specified in each Executive Board pro-rata expense under functional costs for twelve months in 2014. member’s service contract. KION performance share plan (PSP) for the Executive Board At the end of the performance period, the number of the virtual shares is amended depending on the degree to which the relevant targets are achieved. The resulting final number of virtual shares multiplied by the smoothed price of KION GROUP AG shares at the end of the performance period determines the As part of the KION GROUP AG performance share plan, the amount of cash actually paid. The Supervisory Board can also Executive Board members are allocated virtual shares over a fixed use a discretionary personal performance factor to adjust the final period (two-and-a-half years for the 2013 tranche and three years payment at the end of the performance period by +/- 20 per cent. for all subsequent tranches). The remuneration component meas- The maximum amount payable is limited to 200 per cent of the ured over the long term is based in equal parts on the total share- value of the shares allotted to an individual at the grant date. holder return (TSR) of KION GROUP AG shares compared with The pro-rata expense calculation based on the fair value of the STOXX® Europe TMI Industrial Engineering index as a meas- the virtual shares on each valuation date is carried out using ure of market performance, and with return on capital employed Monte Carlo simulation. The measurement parameters shown (ROCE) as an internal measure. It also depends on the perfor- in >  TABLE 118 were used to value the virtual shares on the mance of KION GROUP AG shares during the relevant period. reporting date. We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 223 Other disclosures Significant measurement parameters for the KION GROUP AG Performance Share Plan TABLE 118 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) Valuation date 31/12/2014 Tranche 2014 Tranche 2013 30.0% 15.0% – 0.1% €0.88 €31.74 €29.49 25.0% 15.0% – 0.1% €0.88 €31.74 €26.64 Initial value of the STOXX® Europe TMI Industrial Engineering Index (60 days average) €208.87 €204.26 The historic volatility of shares in similar companies (peer group) was used to determine the volatility of KION shares on which the valuation for the 2014 tranche is based. Taking account of the remaining term of one year, the historic volatility of KION shares was used to determine the volatility on which the valuation for the 2013 tranche is based. As at 31 December 2014, the fair value of [43] REMUNERATION OF THE EXECUTIVE BOARD AND SUPERVISORY BOARD one virtual share was €27.72 for the 2013 tranche (31 December Executive Board 2013: €23.74) and €26.79 for the 2014 tranche. On that date, the total fair value based on 0.3 million and 0.2 million virtual shares Gordon Riske is Chief Executive Officer (CEO) and his responsi- respectively was €7.3 million (2013 tranche; 31 December 2013: bilities include strategy/business development, corporate com- €6.2 million) and €5.2 million (2014 tranche). Because the perfor- munications, the corporate office, internal audit, compliance, mance period for the 2013 tranche has been set at 30 months, a KION Warehouse Systems, KION synergies/platforms, the North pro-rata expense of €3.1  million for twelve months was recog- America region and the South America region. Since 15 Jan - nised in 2014 (2013: €1.2 million). The total carrying amount for uary 2015, he has also been CEO of both the Linde Material liabilities in connection with share-based remuneration was Handling GmbH and the STILL GmbH brand companies and has €4.4 million (2013 tranche; 31 December 2013: €1.2 million). A lia- assumed responsibility for quality. bility of €1.7 million in respect of the 2014 tranche was recognised Bert-Jan Knoef stepped down from the Executive Board of as a pro-rata expense for twelve months in 2014. KION GROUP AG on 15 January 2015. He was CEO and Labour Relations Director of the brand company STILL GmbH. He over- saw all cross-brand logistics activities and managed the intra- group logistics service provider, Urban. Theodor Maurer was CEO and Labour Relations Director of the brand company Linde Material Handling GmbH until his departure from the KION GROUP AG Executive Board on 15 Jan- uary 2015. He was also responsible for quality, facility manage- ment and health, safety & environment (HSE). We keep the world moving.KION GROUP AG | Annual Report 2014 224 Ching Pong Quek is Chief Asia Pacific Officer and heads up the is not required, nor of differences between variable remuneration KION Group’s entire Asia business. calculated on the basis of preliminary total target achievement Dr Thomas Toepfer is Chief Financial Officer (CFO) and his (benefits granted) and the one-year variable remuneration actually responsibilities include accounting, tax & financial services, cor- paid in the next year on the basis of the individual performance of porate finance/investor relations/M&A, controlling, HR (Labour each Executive Board member, which amounted to an expense Relations Director), legal affairs, IT, purchasing and data protec- of €0.3 million (allocation). On this basis, the total remuneration of tion. On 15 January 2015, he also assumed responsibility for facil- the members of the Executive Board pursuant to section 314 HGB ity management/HSE and logistics/Urban. came to €10.9 million (2013: €11.1 million). The remuneration paid to the Executive Board comprises a As in the previous year, no loans or advances were made to fixed salary and non-cash benefits, pension entitlements and members of the Executive Board in 2014. The present value of the performance-related components. The variable performance- defined benefit obligation in respect of Executive Board members related components are paid each year on the basis of the as at 31 December 2014 was €8.1  million (31 December 2013: Group’s performance. In addition, there are performance-related €5.9 million). components in the form of the KION performance share plan for The total remuneration paid to former members of the Exec- all Executive Board members and a bonus for Dr Thomas Toep- utive Board in 2014 amounted to €0.2 million (2013: €0.2 million). fer. The pension entitlements consist of retirement, invalidity and Defined benefit obligations to former members of the Executive surviving dependants’ benefits. Board or their surviving dependants amounting to €6.1  million An expense of €21.0  million was recognised for the total (2013: €5.2 million) were recognised in accordance with IAS 19. remuneration for members of the Executive Board in 2014 (2013: Further details of Executive Board remuneration, including €7.4 million). This consisted of short-term remuneration amount- the individual amounts for each member, can be found in the ing to €5.7 million (2013: €4.9 million), post-employment benefits remuneration report on pages 58 to 69 of this annual report. totalling €0.9  million (2013: €0.6  million), termination benefits of €8.8  million (2013: €0.0  million) and share-based payments of €5.6  million (2013: €1.9  million). The short-term remuneration Supervisory Board comprised non-performance-related components amounting to €3.0 million (2013: €2.8 million) and performance-related compo- The total remuneration paid to the members of the Supervisory nents amounting to €2.7 million (2013: €2.2 million). The current Board for the performance of their tasks at the parent company service cost resulting from pension provisions for the Executive and subsidiaries in 2014 amounted to €1.2 million (2013: €0.8 mil- Board is reported under post-employment benefits. The long- lion). There were no loans or advances to members of the Supervi- term incentive components take the form of a performance share sory Board in 2014. Furthermore, the members of the Supervisory plan (see note [42]). In addition, one Executive Board member Board did not receive any remuneration or benefits for services was promised a special bonus, to be paid in two tranches, that provided as individuals, such as consulting or brokerage activities. would be awarded in the event of a successful IPO; this bonus Members of the Supervisory Board also received short-term also counts as a long-term incentive. employee benefits of €0.7  million for employee services (2013: Under section 314 HGB, disclosure of the expense for share- €0.6 million). based payments is not required. Rather, they must be included in the Executive Board members’ remuneration for the year in which they are paid on the basis of the fair value at the individual grant dates. The fair value of the share-based payments at their individ- ual grant dates amounted to €5.6 million (2013: €6.2 million). Fur- thermore, disclosure of post-employment benefits (expense of €0.9 million) and of termination benefits (expense of €8.8 million) We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 225 Other disclosures [44] MEMBERS OF THE EXECUTIVE BOARD AND SUPERVISORY BOARD Bert-Jan Knoef Member of the Executive Board / CEO of STILL (until 14 January 2015) Executive Board Gordon Riske Chief Executive Officer (CEO) Member of the Executive Board of KION Material Handling GmbH, Wiesbaden Chief Executive Officer (CEO) and Labour Relations Director of STILL GmbH, Hamburg Presidente of the Consiglio di Amministrazione of OM Carrelli Elevatori S.p.A., Lainate, Italy Presidente of the Consiglio di Amministrazione of Chief Executive Officer of KION Material STILL ITALIA S.p.A., Lainate, Italy Handling GmbH, Wiesbaden Member of the Executive Board of KION Holding 2 GmbH, Theodor Maurer Wiesbaden Member of the Executive Board / CEO of LMH Member of the Asia Pacific Committee of KION Material (until 14 January 2015) Handling GmbH, Wiesbaden Chairman of the Supervisory Board of Linde Material Member of the Executive Board of KION Material Handling GmbH, Aschaffenburg (until 14 January 2015) Handling GmbH, Wiesbaden Chief Executive Officer of Linde Material Handling GmbH, Chief Executive Officer (CEO) and Labour Relations Director of Aschaffenburg (since 15 January 2015) Linde Material Handling GmbH, Aschaffenburg Chairman of the Board of Directors of Linde (China) Chairman of the Board of Directors of Linde Material Forklift Truck Co., Ltd., Xiamen, People’s Republic of China Handling (UK) Ltd., Basingstoke, United Kingdom Chairman of the Supervisory Board of STILL GmbH, Hamburg Chairman of the Board of Directors of Linde Heavy Truck (until 14 January 2015) Division Ltd., Merthyr Tydfil, United Kingdom Chief Executive Officer of STILL GmbH, Hamburg Member of the Board of Directors of LMH North America Corp., (since 15 January 2015) Summerville, USA Member of the Executive Board of the non-profit Hertie Member of the Board of Directors of Linde (China) Forklift Foundation, Frankfurt am Main Truck Co. Ltd., Xiamen, People’s Republic of China Non-Executive Director of Weichai Power Co., Ltd., Member of the Supervisory Board of Linde Hydraulics Weifang, People’s Republic of China Verwaltungs GmbH, Aschaffenburg (until 30 October 2014) Member of the Comité Consultatif of Fenwick-Linde S.à r.l., Elancourt, France Member of the Supervisory Board of Schöler Fördertechnik AG, Rheinfelden We keep the world moving.KION GROUP AG | Annual Report 2014226 Ching Pong Quek Member of the Executive Board of MPP Verwaltungs GmbH, Member of the Executive Board / Chief Asia Pacific Officer Wiesbaden Member of the Executive Board of MPP Beteiligungs GmbH, Member of the Executive Board / Chief Asia Pacific Officer Wiesbaden of KION Material Handling GmbH, Wiesbaden Administrador Solidario of Islavista Spain S.A., Barcelona, Spain Member of the Asia Pacific Committee of KION Material Chairman of the Board of Directors of LMH North Handling GmbH, Wiesbaden America Corp., Summerville, USA Chief Executive Officer of Linde (China) Forklift Truck Corp., Ltd., Member of the Board of Directors of Superlift UK Ltd., Xiamen, People’s Republic of China Basingstoke, United Kingdom Member of the Board of KION South Asia Pte Ltd., Singapore, Singapore President and CEO of KION Asia Ltd., Hong Kong, Supervisory Board People’s Republic of China Chairman of KION Baoli Forklift Co., Ltd., Jiangsu, Dr John Feldmann People’s Republic of China Chairman of the Supervisory Board Member of the Board of Directors of KION India Pvte. Ltd., Pune, India Former member of the Board of Executive Directors of BASF SE, Member of the Board of Directors of Linde Material Ludwigshafen Handling Asia Pacific Pte., Ltd., Singapore, Singapore Chairman of the Supervisory Board of KION Material Chairman of the Board of Directors of Linde Material Handling GmbH, Wiesbaden (until 25 April 2014) Handling Hong Kong Ltd., Hong Kong, People’s Republic of Member of the Supervisory Board of Bilfinger SE, Mannheim China Member of the Supervisory Board of Hornbach Baumarkt AG, Dr Thomas Toepfer Member of the Supervisory Board of Hornbach Holding AG, Bornheim Member of the Executive Board / CFO and Labour Relations Bornheim Director Joachim Hartig 1 Member of the Executive Board of KION Material Deputy Chairman of the Supervisory Board Handling GmbH, Wiesbaden Member of the Executive Board of KION Holding 2 GmbH, Head of Learning and Development at Linde Material Handling Wiesbaden GmbH, Aschaffenburg Member of the Asia Pacific Committee of KION Material Deputy Chairman of the Supervisory Board of Handling GmbH, Wiesbaden KION Material Handling GmbH, Wiesbaden (until 25 April 2014) Member of the Supervisory Board of STILL GmbH, Hamburg Deputy Chairman of the Supervisory Board of (until 14 January 2015) Linde Material Handling GmbH, Aschaffenburg Chairman of the Supervisory Board of STILL GmbH, Hamburg (since 15 January 2015) Birgit A. Behrendt (since 1 January 2015) Member of the Supervisory Board of Linde Material Handling Vice President, Global Programs and Purchasing Operations at GmbH, Aschaffenburg (until 14 January 2015) the Ford Motor Company, Dearborn, Michigan, USA Chairman of the Supervisory Board of Linde Material Handling GmbH (since 15 January 2015) We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 227 Other disclosures Holger Brandt 2 Member of the Supervisory Board of LEG Immobilien AG, Head of Sales Germany at STILL GmbH, Hamburg Düsseldorf (until 2 April 2014) Member of the Supervisory Board of KION Material Member of the Executive Board of Xella International Handling GmbH, Wiesbaden (until 25 April 2014) Holdings S.à r.l., Luxembourg Member of the Supervisory Board of STILL GmbH, Hamburg Member of the Executive Board of Xella HoldCo Dr Alexander Dibelius Member of the Executive Board of Xella Topco S.à r.l., Chairman of the Executive Board of Goldman Sachs AG, Luxembourg Frankfurt am Main Member of the Executive Board of Xenia S.à r.l., Finance S.A., Luxembourg Member of the Supervisory Board of KION Material Luxembourg Handling GmbH, Wiesbaden (until 25 April 2014) Member of the European Management Committee of Goldman Johannes P. Huth Sachs International, London, United Kingdom Partner at and member of the Executive Committee of Kohlberg Member of the Board of Directors of OOO Goldman Sachs, Kravis Roberts & Co. Partners LLP, London, United Kingdom Moscow, Russia Member of the Supervisory Board of KION Material Member of the Board of Directors of OOO Goldman Sachs Handling GmbH, Wiesbaden (until 25 April 2014) Bank, Moscow, Russia Chairman of the Supervisory Board of Finedining Capital AG, Member of the Shareholder Committee of Xella Munich (since 2 October 2014) International S.à r.l., Luxembourg Member of the Supervisory Board of German Estate Group AG Chairman of the Supervisory Board of Wincor Nixdorf AG, (GEG), Frankfurt am Main (since 21 January 2015) Paderborn Member of the Supervisory Board of Hertha BSC GmbH & Co. Member of the Supervisory Board of Wincor Nixdorf KGaA, Berlin (since 4 February 2014) International GmbH, Paderborn Deputy Chairman of the Supervisory Board of NXP BV, Denis Heljic 1 Chairman of the Supervisory Board of ProSiebenSat. 1 Spokesperson for the STILL branches, Field Technician at STILL Media AG, Unterföhring (until 26 June 2014) GmbH, Dortmund, and Chairman of the Supervisory Board of WMF AG, Deputy Chairman of the Works Council of STILL GmbH, Geislingen an der Steige Eindhoven, Netherlands Dortmund plant Member of the Supervisory Board of KION Material Handling Jiang Kui GmbH, Wiesbaden (until 25 April 2014) President and Director of Shandong Heavy Industry Group Co., Ltd., Jinan, People’s Republic of China Dr Martin Hintze (until 31 December 2014) Member of the Supervisory Board of KION Material Managing Director of Merchant Banking at Handling GmbH, Wiesbaden (until 25 April 2014) Goldman Sachs International, London, United Kingdom Chairman of the Asia Pacific Committee of KION Material Member of the Supervisory Board of KION Material Handling GmbH, Wiesbaden * Handling GmbH, Wiesbaden (until 25 April 2014) Director of Shantui Construction Machinery Co., Ltd., Non-Executive Director of Ceona Holding Ltd., Guernsey Jining, People’s Republic of China Member of the Board of Directors of DONG Energy A/S, Chairman of the Board of Strong Construction Fredericia, Denmark Machinery Co., Ltd., Linyi, People’s Republic of China Managing Director of New Energy Investment S.à r.l., Deputy Chairman of the Board of Weichai Luxembourg (until 17 December 2014) Holding Group Co., Ltd., Weifang, People’s Republic of China We keep the world moving.KION GROUP AG | Annual Report 2014228 Director of Weichai Power Co., Ltd., Weifang, Hans Peter Ring People’s Republic of China Management Consultant, Munich Director of Shandong Heavy Industry India Member of the Supervisory Board of KION Material Handling Private Ltd., Pune, India GmbH, Wiesbaden (until 25 April 2014) Director of Weichai Power Hong Kong International Member of the Supervisory Board of Airbus Defense und Space Development Co., Ltd., Hong Kong, People’s Republic of China GmbH, Ottobrunn (since 15 October 2014) Member of the Executive Board of Hydraulics Drive Member of the Supervisory Board of Elbe Flugzeugwerke Technology Beteiligungs GmbH, Aschaffenburg GmbH, Dresden Member of the Supervisory Board of Linde Hydraulics Member of the Supervisory Board of MAG IAS GmbH, Verwaltungs GmbH, Aschaffenburg Göppingen Member of the Supervisory Board of Fokker Technologies Olaf Kunz 1 (since 1 September 2014) Holding B.V., Papendrecht, Netherlands District Secretary/Lawyer at IG Metall, District Office for the Coast, Hamburg Alexandra Schädler 1 Member of the Supervisory Board of STILL GmbH, Hamburg Trade Union Secretary on the National Executive of IG Metall, Frankfurt am Main Thilo Kämmerer 1 (until 31 August 2014) Member of the Supervisory Board of KION Material Handling Trade Union Secretary, IG Metall, Administrative Office, GmbH, Wiesbaden (until 25 April 2014) Bamberg Member of the Supervisory Board of Fujitsu Technology Member of the Supervisory Board of KION Material Solutions GmbH, Munich Handling GmbH, Wiesbaden (until 25 April 2014) Özcan Pancarci 1 Silke Scheiber (until 31 December 2014) Partner at Kohlberg Kravis Roberts & Co. Partners LLP, Chairman of the Plants I & II Works Council of Linde Material London, United Kingdom Handling GmbH, Aschaffenburg Member of the Supervisory Board of KION Material Handling Chairman of the European Works Council of the KION Group GmbH, Wiesbaden (until 25 April 2014) Member of the Supervisory Board of KION Material Handling Member of the Supervisory Board of Finedining Capital AG, GmbH, Wiesbaden (until 25 April 2014) Munich (since 2 October 2014) Member of the Supervisory Board of Linde Material Handling Member of the Board of Directors of Jungbunzlauer Holding AG, GmbH, Aschaffenburg Basel, Switzerland Member of the Supervisory Board of WMF AG, Geislingen an Kay Pietsch 1 der Steige Chairman of the Group Works Council of the KION Group Member of the Supervisory Board of Van Gansewinkel Groep B.V., (until 22 January 2015) Rotterdam, Netherlands Member of the Supervisory Board of KION Material Handling GmbH, Wiesbaden (until 25 April 2014) Tan Xuguang Deputy Chairman of the Supervisory Board of STILL GmbH, Chief Executive Officer and Chairman of the Board of Directors Hamburg of Weichai Power Co. Ltd., Weifang, People’s Republic of China Member of the Supervisory Board of KION Material Handling GmbH, Wiesbaden (until 25 April 2014) Chairman of the Board of Directors of Shandong Heavy Industry Group Co., Ltd., Jinan, People’s Republic of China We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 229 Other disclosures 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 (until 25 April 2014) Xu Ping (since 1 January 2015) Partner at King & Wood Mallesons, Beijing, People’s Republic of China Member of the Board of Directors of Ferretti S.p.A., Cattolica, Italy Member of the Management Committee at King & Wood Mallesons, Beijing, People’s Republic of China 1 Employee representatives 2 Executive representatives * Not a committee or governing body of the KION GROUP AG required by law We keep the world moving.KION GROUP AG | Annual Report 2014 230 [45] LIST OF THE SHAREHOLDINGS OF KION GROUP AG, WIESBADEN The shareholdings of the KION Group as at 31 December 2014 are listed below. > TABLE 119 List of shareholdings as of 31 December, 2014 (continued) TABLE 119 No. Name Registered office Country Parent company Share- holding 2014 Share- holding 2013 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 Stuhr Wiesbaden Geisa Wiesbaden Wiesbaden 7 KION Information Management Services GmbH Wiesbaden 8 KION Material Handling GmbH 9 KION Warehouse Systems GmbH 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 8 100.00% 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% 12 LMH Immobilien GmbH & Co. KG Aschaffenburg Germany 11 & 13 99.64% 99.64% 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 Essen 17 STILL Financial Services GmbH Hamburg 18 STILL Gesellschaft mit beschränkter Haftung Hamburg Germany Germany Germany 19 Urban-Transporte Gesellschaft mit beschränkter Unterschleißheim Germany Haftung 20 Willenbrock Fördertechnik GmbH & Co. KG Hannover 21 Willenbrock Fördertechnik GmbH & Co. KG Bremen 22 Willenbrock Fördertechnik Holding GmbH Bremen Germany Germany Germany 11 11 11 11 5 11 11 22 22 11 94.00% 94.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 74.00% 74.00% 74.00% 74.00% 74.00% 74.00% We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 231 Other disclosures List of shareholdings as of 31 December, 2014 (continued) TABLE 119 No. Name Foreign Registered office Country Parent company Share- holding 2014 Share- holding 2013 Note 23 Linde Material Handling Pty. Ltd. Huntingwood Australia 11 100.00% 100.00% 24 STILL N.V. 25 KION South America Fabricação de Equipa- mentos para Armazenagem Ltda. Wijnegem Indaiatuba / São Paulo Belgium Brazil 26 KION Baoli (Jiangsu) Forklift Co., Ltd. Jiangjiang 27 Linde (China) Forklift Truck Corporation Ltd. 28 STILL DANMARK A/S 29 BARTHELEMY MANUTENTION SAS 30 Bastide Manutention SAS 31 Bretagne Manutention S.A. 32 FENWICK FINANCIAL SERVICES SAS 33 FENWICK-LINDE S.A.R.L. 34 KION France SERVICES SAS Xiamen Kolding Vitrolles Toulouse Pacé Elancourt Elancourt Elancourt China China Denmark France France France France France France 35 LOIRE OCEAN MANUTENTION SAS Saint-Herblain France 38 Société Angoumoisine de Manutention Champniers 36 Manuchar S.A. 37 MANUSOM SAS (SAMA) SAS 39 SM Rental SAS 40 STILL Location Services SAS 41 STILL SAS 42 KION FINANCIAL SERVICES Ltd. 43 Linde Castle Ltd. 44 Linde Creighton Ltd. 45 Linde Holdings Ltd. 46 Linde Jewsbury’s Ltd. 47 Linde Material Handling (UK) Ltd. 48 Linde Material Handling East Ltd. 49 Linde Material Handling Scotland Ltd. 50 Linde Material Handling South East Ltd. 51 Linde Severnside Ltd. 52 Linde Sterling Ltd. 53 McLEMAN FORK LIFT SERVICES LTD. Gond Pontouvre France Rivery France France France Roissy Charles de Gaulle Marne la Vallée France Marne la Vallée France Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. U.K. 18 & 66 100.00% 100.00% 18 100.00% 100.00% 56 11 18 33 33 33 34 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 87.00% 87.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 34 & 11 100.00% 100.00% 11 33 33 41 41 100.00% 100.00% 83.43% 86.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 33 100.00% 100.00% 34 34 55 47 47 55 47 45 47 47 47 47 47 44 100.00% 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% We keep the world moving.KION GROUP AG | Annual Report 2014232 List of shareholdings as of 31 December, 2014 (continued) TABLE 119 No. Name 54 STILL Materials Handling Ltd. 55 Superlift UK Ltd. Registered office Exeter Basingstoke Country U.K. U.K. 56 KION ASIA (HONG KONG) Ltd. Kwai Chung Hong Kong 57 Linde Material Handling Hong Kong Ltd. Kwai Chung Hong Kong 58 KION India Pvt. Ltd. (formerly: Voltas Material Pune India Handling Pvt. Ltd.) Parent company Share- holding 2014 Share- holding 2013 Note 55 11 11 11 80 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 59 Linde Material Handling (Ireland) Ltd. Walkinstown Ireland 45 100.00% 100.00% 60 KION Rental Services S.p.A. Milan 61 Linde Material Handling Italia S.p.A. Buguggiate 62 OM Carrelli Elevatori S.p.A. 63 QUALIFT S.p.A. 64 STILL ITALIA S.p.A. 65 KION Finance S.A. 66 STILL Intern Transport B.V. 67 AUSTRO OM PIMESPO Fördertechnik GmbH 68 Linde Fördertechnik GmbH Lainate Verona Lainate Hendrik Ido Ambacht Linz Linz Italy Italy Italy Italy Italy Luxembourg Luxembourg Netherlands 61 & 62 & 64 100.00% 100.00% 11 100.00% 100.00% 11 & 64 100.00% 100.00% 61 18 – 18 100.00% 100.00% 100.00% 100.00% – – [2] 100.00% 100.00% Austria Austria 62 100.00% 100.00% 11 & 67 100.00% 100.00% 69 STILL Gesellschaft m.b.H. Wiener Neudorf Austria 70 Linde Material Handling Polska Sp. z o.o. 71 STILL POLSKA Sp. z o.o. 72 OOO ‘Linde Material Handling Rus’ 73 OOO ‘STILL Forklifttrucks’ 74 STILL MOTOSTIVUITOARE S.R.L. 75 Linde Material Handling AB 76 STILL Sverige AB 77 Linde Material Handling Schweiz AG 78 STILL AG 79 KION South Asia Pte. Ltd. 80 Linde Material Handling Asia Pacific Pte. Ltd. Warsaw Gadki Moscow Moscow Giurgiu Örebro Malmö Dietlikon Otelfingen Singapore Singapore Poland Poland Russia Russia Romania Sweden Sweden Switzerland Switzerland Singapore Singapore 18 11 18 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 11 & 3 100.00% 100.00% 11 & 18 100.00% 100.00% 11 & 18 100.00% 100.00% 11 18 11 18 11 11 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 81 Linde Material Handling Slovenská Trenčin Slovakia 11 & 91 100.00% 100.00% republika s.r.o. 82 STILL SR, spol. s r.o. 83 Linde Viličar d.o.o. 84 IBER-MICAR S.L. Nitra Celje Gavà Slovakia Slovenia Spain 18 & 93 100.00% 100.00% 11 11 100.00% 100.00% 100.00% 100.00% We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 233 Other disclosures List of shareholdings as of 31 December, 2014 (continued) TABLE 119 No. Name 85 Islavista Spain S.A.U. 86 KION Rental Services S.A.U. 87 Linde Holding de Inversiones, S.R.L. 88 Linde Material Handling Ibérica, S.A.U. 89 STILL, S.A.U. Registered office L’Hospitalet de Llobregat Barcelona Pallejá Pallejá L’Hospitalet de Llobregat Country Spain Spain Spain Spain Spain Parent company Share- holding 2014 Share- holding 2013 Note 11 100.00% 100.00% 85 85 87 85 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 90 Linde Material Handling (Pty) Ltd. Linbro Park South Africa 11 100.00% 100.00% 91 Linde Material Handling Česká republika s r.o. Prague 92 Linde Pohony s r.o. Český Krumlov 93 STILL ČR spol. s r.o. Prague 94 STILL ARSER Iş Makineleri Servis ve Ticaret Izmir A.Ş. Czech Republic Czech Republic Czech Republic Turkey 95 Linde Magyarország Anyagmozgatási Kft. Dunaharaszti Hungary 96 STILL Kft. 97 KION North America Corp. (formerly: Linde Material Handling North America Corp.) Környe Hungary Summerville United States 11 & 18 100.00% 100.00% 11 100.00% 100.00% 11 & 18 100.00% 100.00% 18 51.00% 51.00% 11 18 11 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Non-consolidated subsidiaries (at amortised cost) Domestic 98 Klaus Pahlke Betriebsführungs-GmbH Haan 99 OM Deutschland GmbH Neuhausen a. d. Fildern Germany Germany 100 proplan Transport- und Lagersysteme GmbH Aschaffenburg Germany 101 Schrader Industriefahrzeuge Verwaltung GmbH Essen 102 Trainingscenter für Sicherheit und Transport Bremen GmbH 103 Willenbrock Fördertechnik Beteiligungs-GmbH Hannover 104 Willenbrock Fördertechnik Beteiligungs-GmbH Bremen Germany Germany Germany Germany Foreign 11 62 1 11 22 22 22 100.00% 100.00% 100.00% 100.00% [R] 100.00% 100.00% 100.00% 100.00% 74.00% 74.00% 74.00% 74.00% 74.00% 74.00% 105 Lansing Bagnall (Aust.) Pty. Ltd. Huntingwood Australia 47 & 11 100.00% 100.00% [R] 106 WHO Real Estate OÜ Tallinn Estonia 22 74.00% 74.00% We keep the world moving.KION GROUP AG | Annual Report 2014234 List of shareholdings as of 31 December, 2014 (continued) TABLE 119 No. Name 107 Baoli France SAS Registered office Elancourt Country France 108 OM PIMESPO FRANCE S.A.S. Marne la Vallée France 109 SCI Champ Lagarde 110 URBAN LOGISTIQUE SAS 111 Castle Lift Trucks Ltd. 112 Creighton Materials Handling Ltd. 113 D.B.S. Brand Factors Ltd. 114 Fork Truck Rentals Ltd. 115 Fork Truck Training Ltd. 116 Lancashire (Fork Truck) Services Ltd. 117 Linde Heavy Truck Division Ltd. 118 OM PIMESPO (UK) Ltd. Elancourt Elancourt Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke 119 Stephensons Enterprise Fork Trucks Ltd. Basingstoke 120 Sterling Mechanical Handling Ltd. 121 Trifik Services Ltd. 122 Urban Logistics (UK) Ltd. Basingstoke Basingstoke Basingstoke 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. 123 Handling & Storage Equipment (Ireland) Ltd. Walkinstown Ireland 124 Carest SRL 125 COMMERCIALE CARRELLI S.r.l. 126 Milano Carrelli Elevatori S.r.l. 127 URBAN LOGISTICA S.R.L. 128 WHO Real Estate UAB 129 TOO ‘Linde Material Handling Kazakhstan’ Lainate Lainate Monza Lainate Vilnius Almaty Italy Italy Italy Italy Lithuania Parent company 34 62 33 19 47 47 52 47 47 52 47 62 52 47 47 19 59 62 Share- holding 2014 Share- holding 2013 100.00% 100.00% Note 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% 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] [R] 64 & 60 100.00% 100.00% 62 19 22 100.00% 100.00% [R] 100.00% 100.00% 74.00% 74.00% Kazakhstan 11 & 3 100.00% 100.00% 130 Linde Material Handling (Malaysia) Sdn. Bhd. Shah Alam Malaysia 131 Linde Viljuškari d.o.o. Vrčin 132 Linde Material Handling (Thailand) Co., Ltd. Bangkok 133 Baoli Material Handling Europe s.r.o. Prague 134 Použitý Vozik CZ, s.r.o. (formerly: Baoli Material Prague Handling Česká republika s r.o.) Serbia Thailand Czech Republic Czech Republic 80 68 80 26 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% – [1] 91 100.00% 100.00% 135 Urban Transporte spol. s.r.o. Moravany u Brna Czech 19 100.00% 100.00% 136 TOV ‘Linde Material Handling Ukraine’ Kiev Republic Ukraine 11 & 3 100.00% 100.00% We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 235 Other disclosures List of shareholdings as of 31 December, 2014 (continued) TABLE 119 Registered office Country Parent company Share- holding 2014 Share- holding 2013 Note No. Name Associates (at-equity investments) Domestic 137 Beutlhauser-Bassewitz GmbH & Co. KG Hagelstadt 138 Hans Joachim Jetschke Indus- triefahrzeuge (GmbH & Co.) KG Hamburg Germany Germany 139 Linde Hydraulics GmbH & Co. KG Aschaffenburg Germany 140 Pelzer Fördertechnik GmbH Kerpen Germany Foreign 141 Linde High Lift Chile S.A. 142 Labrosse Equipement S.A. 143 Normandie Manutention S.A. Joint Ventures (at-equity investments) Domestic Santiago de Chile Chile Saint-Péray France Le Grand Quevilly France 11 11 11 11 11 33 33 25.00% 25.00% 21.00% 21.00% 30.00% 30.00% 24.96% 24.96% 45.00% 45.00% 34.00% 34.00% 34.00% 34.00% 144 Linde Leasing GmbH Wiesbaden Germany 11 45.00% 45.00% Foreign 145 JULI Motorenwerk s.r.o. Moravany u Brna Czech 11 & 18 50.00% 50.00% Republic Joint Ventures (at amortised cost) Domestic 146 Eisengießerei Dinklage GmbH Dinklage Germany 18 50.00% 50.00% Associates (at amortised cost) Domestic 147 JETSCHKE GmbH Hamburg Germany 148 Linde Hydraulics Verwaltungs GmbH Aschaffenburg Germany 149 MV Fördertechnik GmbH Blankenhain Germany 150 Supralift Beteiligungs- und Kommunikations- gesellschaft mbH Hofheim am Taunus Germany 11 11 11 11 21.00% 22.00% 30.00% 30.00% 25.00% 25.00% 50.00% 50.00% We keep the world moving.KION GROUP AG | Annual Report 2014236 List of shareholdings as of 31 December, 2014 (continued) TABLE 119 No. Name 151 Supralift GmbH & Co. KG Foreign Registered office Hofheim am Taunus Country Germany Parent company Share- holding 2014 Share- holding 2013 Note 11 50.00% 50.00% 152 Chadwick Materials Handling Ltd. 153 Bari Servizi Industriali S.C.A R.L. 154 EUROPA CARRELLI S.R.L. Corsham Modugno Bastia Umbra U.K. Italy Italy 155 Nordtruck AB Örnsköldsvik Sweden 156 Carretillas Elevadoras Sudeste S.A. Murcia Spain 157 Motorové závody JULI CZ s r.o. Moravany u Brna Czech Republic 47 62 64 75 88 11 48.00% 48.00% 25.00% – [1] 40.00% 40.00% 25.00% 25.00% 38.54% 38.53% 50.00% 50.00% Other investments (at amortised cost) Foreign 158 TPZ Linde Viličari Hrvatska d.o.o. Zagreb Croatia 11 20.00% 20.00% [3] [1] New during 2014 [2] Consolidated in accordance with IFRS 10 as structured entity as defined in IFRS 12 [3] No material influence [R] Dormant company We keep the world moving.KION GROUP AG | Annual Report 2014NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 237 Other disclosures [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 2014 amounted to The Executive Board of KION GROUP AG prepared the consoli- €1.0 million (2013: €0.9 million) for the audit of the financial state- dated financial statements on 10 March 2015 and approved them ments, €0.4  million (2013: €1.4  million) for other attestation ser- for forwarding to the Supervisory Board. The Supervisory Board vices, €0.1 million (2013: €0.4 million) for tax consultancy services has the task of examining and deciding whether to approve the and €0.1 million (2013: €0.0 million) for other services. consolidated financial statements. [47] COMPLY-OR-EXPLAIN STATEMENT REGARDING THE GERMAN COR- PORATE GOVERNANCE CODE (DCGK) Wiesbaden, 10 March 2015 The Executive Board Gordon Riske Ching Pong Quek In December 2014, the Executive Board and Supervisory Board Dr Thomas Toepfer of KION GROUP AG submitted their comply-or-explain statement for 2014 relating to the recommendations of the German Corpo- rate Governance Code government commission pursuant to sec- tion 161 AktG. The comply-or-explain statement has been made permanently available to shareholders on the website of KION GROUP AG at kiongroup.com/comply_statement. [48] EVENTS AFTER THE REPORTING DATE In the period after the end of the 2014 financial year up to 10 March 2015, 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 2014 or that it would be necessary to disclose. We keep the world moving.KION GROUP AG | Annual Report 2014238 Auditors’ opinion We have audited the consolidated financial statements prepared Our audit has not led to any reservations. by KION GROUP AG, Wiesbaden/Germany, – comprising the consolidated income statement, consolidated statement of com- In our opinion, based on the findings of our audit, the consoli- prehensive income, consolidated statement of financial position, dated financial statements of KION GROUP AG, Wiesbaden / consolidated statement of cash flows, consolidated statement of Germany, comply with IFRS, as adopted by the EU, as well as the changes in equity and the notes to the consolidated financial regulations under German commercial law complementarily statements - and the group management report for the business applicable under Sec. 315a (1) German Commercial Code (HGB) year from 1 January to 31 December 2014. The preparation of the and give a true and fair view of the net assets, financial position consolidated financial statements and the group management and results of operations of the Group in accordance with these report in accordance with IFRS, as adopted by the EU, as well as requirements. The group management report is consistent with the regulations under German commercial law complementarily the consolidated financial statements and as a whole provides a applicable under Sec. 315a (1) German Commercial Code (HGB) suitable view of the Group’s position and suitably presents the are the responsibility of the parent company’s Executive Board. opportunities and risks of future development. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based Frankfurt am Main / Germany, 10 March 2015 on our audit. We conducted our audit of the consolidated financial statements Wirtschaftsprüfungsgesellschaft Deloitte & Touche GmbH in accordance with Sec. 317 HGB (“German Commercial Code”) and German generally accepted standards for the audit of finan- cial statements promulgated by the Institut der Wirtschaftsprüfer. Those standards require that we plan and perform the audit such (Crampton) (Gräbner-Vogel) that misstatements materially affecting the presentation of the net Wirtschaftsprüfer Wirtschaftsprüferin assets, financial position and results of operations in the consoli- (German Public Auditor) (German Public Auditor) dated financial 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 determination 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 state- ments of those entities included in consolidation, the determina- tion of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by the Executive Board, as well as evaluating the overall presentation of the consolidated financial statements and the group manage- ment report. We believe that our audit provides a reasonable basis for our opinion. We keep the world moving.KION GROUP AG | Annual Report 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 239 Auditors’ opinion Responsibility statement Responsibility statement To the best of our knowledge, and in accordance with the applica- ble reporting principles for consolidated financial reporting, the consolidated financial statements give a true and fair view of the financial performance and financial position of the Group, and the management 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 2015 The Executive Board Gordon Riske Ching Pong Quek Dr Thomas Toepfer We keep the world moving.KION GROUP AG | Annual Report 2014ADDITIONAL INFORMATION Contents 241 Additional Information 242 QUARTERLY INFORMATION 243 MULTI-YEAR OVERVIEW 244 DISCLAIMER 245 FINANCIAL CALENDAR 245 CONTACT KION GROUP AG | Annual Report 2014 N O I T A M R O F N I L A N O I T I D D A E 242 Quarterly information KION Group overview in € million Order intake Revenue EBIT Adjusted EBIT Adjusted EBIT margin Adjusted EBITDA Adjusted EBITDA margin Q4 2014 1,311.0 1,305.6 109.4 134.2 10.3% 219.6 16.8% Q3 2014 1,142.2 1,139.0 69.1 111.8 9.8% 196.0 17.2% Q2 2014 1,227.9 1,144.4 91.5 109.5 9.6% 193.5 16.9% TABLE 120 Q1 2014 1,196.1 1,088.9 77.0 87.4 8.0% 171.2 15.7% We keep the world moving.KION GROUP AG | Annual Report 2014 ADDITIONAL INFORMATION Quarterly information Multi-year overview Multi-year overview KION Group multi-year 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 2014 4,877.3 4,677.9 787.2 714.2 780.4 16.7% 347.0 442.9 9.5% 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% 2011 4,681.9 4,368.4 953.0 569.2 665.3 15.2% 213.2 364.6 8.3% 243 TABLE 121 2010 3,859.7 3,534.5 801.3 380.2 462.2 13.1% 34.6 139.4 3.9% Net income (loss) 3 178.2 138.4 161.4 – 92.9 – 196.7 Financial position 1 Total assets Equity Net financial debt Cash flow Free cash flow 4 Capital expenditure 5 6,128.5 1,647.1 810.7 6,026.4 1,610.0 979.3 6,213.2 660.7 1,790.1 6,066.3 – 487.6 2,631.3 5,758.9 – 399.9 2,626.0 305.9 133.1 195.6 125.8 513.6 155.1 230.8 133.0 72.4 123.5 Employees 6 22,669 22,273 21,215 21,862 19,968 * 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. Last year's figures were adjusted due to a change in presentation, for details see ‘Other disclosures on Consolidated statement of cash flows’ 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/ We keep the world moving.KION GROUP AG | Annual Report 2014 244 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 statements 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 significantly 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 precisely 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 2014 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-looking statements or to change these to reflect events or developments that occur after the publication of this annual report. Rounding Certain numbers in this annual report have been rounded up or down. There may there- fore 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 corresponding 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 2014ADDITIONAL INFORMATION Disclaimer Financial calendar / Contact 245 FINANCIAL CALENDAR CONTACT 19 March 2015 Contacts for the media Contacts for investors Financial statements press conference Publication of 2014 annual report Michael Hauger Frank W. Herzog 7 May 2015 Phone: +49 (0) 611.770-655 Phone: +49 (0) 611.770-303 Interim report for the period ended michael.hauger@kiongroup.com frank.herzog@kiongroup.com Head of Corporate Communications Head of Corporate Finance 31 March 2015 12 May 2015 Frank Brandmaier Dr Karoline Jung-Senssfelder 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 karoline.jung-senssfelder@kiongroup.com 6 August 2015 Interim report for the period ended 30 June 2015 5 November 2015 Interim report for the nine months ended 30 September 2015 Subject to change without notice Securities identification numbers KION GROUP AG This annual report is available in German ISIN: DE000KGX8881 Abraham-Lincoln-Strasse 21 and English at kiongroup.com under WKN: KGX888 65189 Wiesbaden | Germany Investor Relations / Financial Reports. Phone: +49 (0) 611.770-0 Fax: +49 (0) 611.770-269 info@kiongroup.com www.kiongroup.com Only the content of the German version is authoritative. We keep the world moving.KION GROUP AG | Annual Report 2014KION GROUP AG KION GROUP AG Corporate Communications Corporate Communications Abraham-Lincoln-Strasse 21 Abraham-Lincoln-Strasse 21 65189 Wiesbaden | Germany 65189 Wiesbaden | Germany Phone: +49 (0) 611.770-0 Tel. +49 (0) 611.770-0 Fax: +49 (0) 611.770-269 Fax +49 (0) 611.770-269 info@kiongroup.com info@kiongroup.com www.kiongroup.com www.kiongroup.com 20150302_Kion_GB2014_image.indd 1 03.03.15 23:48 

Continue reading text version or see original annual report in PDF format above