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Gencor Industries Inc.ANNUAL REPORT 00_Titel_GB_Vektor.indd 1 23.02.16 18:19 KION Group – Key figures for 2015 KION Group overview in € million Order intake 1 Revenue Order book 1, 2 Financial performance EBITDA Adjusted EBITDA 3 Adjusted EBITDA margin 3 EBIT Adjusted EBIT 3 Adjusted EBIT margin 3 2015 5,215.6 5,097.9 864.0 824.2 850.0 16.7% 422.8 482.9 9.5% 2014 4,771.2 4,677.9 764.1 714.2 780.4 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% Change 2015/2014 9.3% 9.0% 13.1% 15.4% 8.9% – 21.8% 9.0% – Net income 221.1 178.2 138.4 24.0% Financial position 2 Total assets Equity Net financial debt ROCE 4 Cash flow Free cash flow 5 Capital expenditures 6 6,440.2 1,848.7 573.5 11.9% 332.7 142.6 6,128.5 1,647.1 810.7 11.4% 305.9 133.1 6,026.4 1,610.0 979.3 – 195.6 125.8 5.1% 12.2% – 29.3% – 8.8% 7.1% Employees 7 23,506 22,669 22,273 3.7% 1 Prior-year figures restated to reflect the change in the order intake calculation introduced in 2015. 2 Figures as at balance sheet date 31/12/ 3 Adjusted for KION acquisition items and non-recurring items 4 ROCE is defined as the proportion of EBIT adjusted to capital employed. 5 Free cash flow is defined as cash flow from operating activities plus cash flow from investing activities. 6 Capital expenditure including capitalised development costs, excluding leased and rental assets 7 Number of employees (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 presented may result in minor rounding differences. The percentages shown are calculated on the basis of the respective amounts, rounded to the nearest thousand euros. I N O T A V O N N I D R A W R O F G N I V O M ANNUAL REPORT 2015 I N N O V A T I O N How do we take f u l l a d v a n t a g e o f o u r g l o b a l s t r u c t u re? – H ow i s th e fo u r th i n d u s t r i a l r e v o l u t i o n changing our sector? – How do we m a k e p r o d u c t s & p r o d u c t i o n even more efficient? – H o w d o w e b u i l d o n o u r success and that of our customers? Features, background information and interviews: We showcase how we are driving innovation worldwide in our web special at: kiongroup.com/ innovation The KION Group sells forklift trucks, warehouse technology and associated services from its seven brand companies around the world. It is the European market leader, number two in the world and a leading international supplier 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. Egemin Automation is a leading Belgian logistics automation specialist. Building on these strong foundations, the KION Group and its approximately 23,500 employees generated revenue of €5.1 billion in 2015, never losing sight of what is most important: our custo- mers, innovation and quality. We give concrete illustrations of how this works in practice in the innovation section of the report. And because our passion for innovation extends to our annual reports too, we provide in-depth features on our website, where further stories will be added over the course of the year. We keep the world moving. KION Group – Investment Highlights ATTRACTIVE MARKET ... GLOBAL LEADER ... TECHNOLOGY LEADERSHIP ... INTEGRATED BUSINESS MODEL ... PROFITABILITY BENCHMARK ... STRATEGY 2020 ... ... with growth profile ... strong home base ... drives premium … robust, with a ... well prepared ... for profitable above GDP and well positioned positioning and high share of service for future value growth in growth markets customer value revenue creation KION Group – Segments LINDE MATERIAL HANDLING STILL FINANCIAL SERVICES (FS) OTHER The Linde Material Handling The STILL and OM STILL The purpose of the Financial The Other segment comprises segment encompasses the Linde, brands are grouped in the STILL Services (FS) segment is to act Egemin Automation as well as Fenwick, Baoli and Voltas segment. as an internal funding partner holding and service companies, brands. for Linde Material Handling and that provide services across all STILL, providing finance solutions segments. that promote sales. €3,429.8 million €1,950.2 million €740.3 million €252.8 million REVENUE REVENUE REVENUE REVENUE €383.9 million €144.0 million – €1.8 million €155.3 million ADJUSTED EBIT ADJUSTED EBIT ADJUSTED EBIT ADJUSTED EBIT 1 14,486 EMPLOYEES 8,103 EMPLOYEES 59 EMPLOYEES 858 EMPLOYEES 1 before consolidation BREAKDOWN OF TOTAL REVENUE IN 2015 BREAKDOWN OF ADJUSTED EBIT IN 2015 60.0% LINDE MATERIAL HANDLING 30.8% STILL 8.2% FINANCIAL SERVICES 1.0% OTHER 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% – 10% 79.5% 29.8% – 0.4% – 8.9% LINDE MATERIAL HANDLING STILL FINANCIAL SERVICES OTHER 2 2 including effects of consolidation / reconciliation KION Group – Company profile Linde is a global premium STILL is predominantly a The Baoli brand covers the Egemin Automation offers brand and a technology global premium provider value and economy seg- customized solutions for leader that has many years’ of trucks with electric and ments in China and other the automation of logistics experience of hydrostatic diesel-electric drives. It emerging markets in Asia, in warehouses, distribution drive technology. It has mainly focuses on the eastern Europe, the Middle centres and factories. It de- also been developing and European and Latin Ame- East, Africa, and Central livers automated warehouse manufacturing electric drive rican markets. Its portfolio and South America. systems, automated guided systems for decades and consists of forklift trucks makes the resulting expertise and warehouse trucks plus available to external custo- associated services. STILL mers for use in a variety of has also positioned itself as applications. a leading provider of intelli- gent intralogistics solutions. vehicles and in-floor chain conveyors. In France, Linde products In Italy, STILL products are Voltas is a leading provider are sold under the Fenwick sold under the OM STILL of industrial trucks in India. brand. Fenwick is the biggest brand. OM STILL is a market It manufactures diesel trucks, material-handling provider leader in Italy and offers both electric forklift trucks and in France. Fenwick and Linde trucks and fully integrated warehouse trucks for the meet customers’ most so- warehouse systems, including Indian market and can draw phisticated requirements in automation and fleet manage- on a network of more than terms of technology, efficiency, ment solutions. 50 dealers providing sales functionality and design. and service. PRODUCTS AND SERVICES Diesel and LPG forklift trucks Service contracts Electric forklift trucks Ad hoc service Fleet data management Automation Warehouse handling equipment Platform trucks and tractors Spare parts Stock management and transport control systems Rental RFID systems Used trucks Racking systems Direct sale Leasing KION leasing via Financial Services PRODUCTS SERVICE SOLUTIONS FINANCING I N O T A V O N N I D R A W R O F G N I V O M ANNUAL REPORT 2015 Register for our – newsletter kiongroup.com/ newsletter Investor – Relations kiongroup.com/ ir Facts, figures – & key data reports.kiongroup.com The KION Group sells forklift trucks, warehouse technology and associated services from its seven brand companies around the world. It is the European market leader, number two in the world and a leading international supplier 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. Egemin Automation is a leading Belgian logistics automation specialist. Building on these strong foundations, the KION Group and its approximately 23,500 employees generated revenue of €5.1 billion in 2015, never losing sight of what is most important: our custo- mers, innovation and quality. We give concrete illustrations of how this works in practice in the innovation section of the report. And because our passion for innovation extends to our annual reports too, we provide in-depth features on our website, where further stories will be added over the course of the year. We keep the world moving. Contents A 4 6 8 18 21 B 24 33 38 C 54 66 94 95 D 108 109 110 112 114 116 220 221 E 224 225 226 227 227 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’ report Responsibility statement ADDITIONAL INFORMATION Quarterly information Multi-year overview Disclaimer Financial calendar Contact Whether in products, production, sales or human resources, innovation can be found throughout the KION Group. And it serves just one purpose: helping our customers to create value. Around the world and around the clock. Features, background information and interviews showcase how the KION Group is turning ideas into innovations. Online. kiongroup.com/ innovation Thinking globally – for greater added value Questioning the status quo – for optimum solutions Integrating machines and processes – for intelligent systems Understanding innovation – for a 360° view of markets and customers KION GROUP MAGAZINE 2015 Features, – background information & inter views We showcase how we are driving innovation worldwide in our web special at: kiongroup.com/ innovation P. 0 4 P.12 P. 0 8 P.16 02 I N N O VAT I O N I N T E R V I E W K I O N G R O U P A G MOVING FORWARDGordon Riske – & Eike Böhm, a dialogue 03 Mr Riske, what does innovation mean – E I K E B Ö H M : And the other area is our to you? relationship with our customers. Under- – G O R D O N R I S K E : I would say an idea standing their business and how we can turns into innovation when it’s useful for support them with our solutions is very the customer. So you come up with a new important. product, a new service, a new solution – G O R D O N R I S K E : Experience shows that the customer really wants to use. And that customers are often very willing to pay we don’t innovate merely for the sake of even for simple, but incremental innovations. innovating. We innovate so that our cus- Innovations that improve their process and tomers can increase their profitability and reduce costs. performance. – E I K E B Ö H M : And in the end if the cus- But, ultimately, how does innovation at tomer is willing to pay for this because it KION go beyond purely technological creates benefits, then it is a true innovation. aspects? – G O R D O N R I S K E : Innovation touches Mr Böhm, innovation is your day-to- every part of our company. Every depart- day business, how do you tackle this ment, every function. issue? – E I K E B Ö H M : We pursue a very holistic – E I K E B Ö H M : When I talk about innova- approach to innovation at KION. We look tion in my daily job, I have to distinguish to products, we look to processes, we look between two main areas. One is the pure to organisational issues. Most importantly, technology side. There is innovation in we have a real innovative spirit throughout the university and science community that the entire organisation. Because at the we at KION have to watch very closely. end of the day the strength of an organisa- We have to know and understand what’s tion’s innovation depends on a healthy going on there and always ask ourselves: corporate culture that promotes and facili- can we use these innovations for our tates innovation. customers? – G O R D O N R I S K E : Monetising those technology trends that are out there is crucial for KION. kiongroup.com/ interview We keep the world moving. 04 S T R AT E GY 2 0 2 0 K I O N G R O U P A G MOVING FORWARDS T R AT E GY 2 0 2 0 05 Thinking globally – for greater added value To achieve the full impact of our KION Strategy 2020, we have to think globally. We are a serious global player, represented in over 100 countries. Our 23,500-plus employees play their part each and every day to ensure that supermarket shelves are always fully stocked, that online bargains are delivered on schedule, and that components reach the assembly line just in time. Some 1,400 sales and service outlets with almost 14,000 service engineers around the world guarantee that the KION Group and its seven brands are always on track in their mission to create value for their customers. And it is no different for our production operations, which consist of 13 facilities for the production of industrial trucks in 9 countries. From Hamburg in Germany, or Holland in the US state of Michigan all the way to Indaiatuba near São Paulo in Brazil, or Pune in India. From Summer- ville in South Carolina, USA, to Xiamen or Jingjiang in eastern China. From Châtellerault in France to Stříbro in the Czech Republic via Aschaffenburg in Germany. Our global structure gives us huge potential to work even more efficiently and strategically to meet our clients’ requirements – no matter where in the world they will be using our equipment. Because the KION Group intelligently combines its expertise and its skills. No matter where. We keep the world moving. MOVING FORWARD06 B R O O K F I E L D , W I U S A M O V I N G F O R WA R D S T R AT E GY 2 0 2 0 The demand: from the USA After 25 years in the industry, Jerry Weidmann really knows his stuff. And he knows that with a wider range of Linde products – such as a vertical order picker – he can increase his sales. kiongroup.com/ opportunities K I O N G R O U P A G M O V I N G F O R WA R D S T R AT E GY 2 0 2 0 07 For instance, the vertical order picker that the KION Group is developing around the world for the North American market, where there is growing demand for a warehouse truck that can load high-bay storage racks. Seven thou- sand kilometres to the east, at KION Warehouse Systems in Reutlingen, south-west Germany, a wealth of product knowledge is being channelled into this project. And another 9,000 kilometres further east, in the Chinese city of Xiamen where around a third of our 1,000-plus developers are based, engineers are taking it from series development through to production readiness – all to increase our market share in North America. And the vertical order picker will be made available in China too. This is just one example of how the KION Group uses platforms, and more importantly an example of how we can exploit the full potential of our Strategy 2020. Globally. B R O O K F I E L D , W I U S A R E U T L I N G E N G E R M A N Y X I A M E N C H I N A R E U T L I N G E N G E R M A N Y The know-how: from Reutlingen Jürgen Greiner: “KWS is the only site in the KION Group that has the necessary knowledge and expertise to develop and manufacture very narrow aisle trucks.” X I A M E N C H I N A Concept, design and implementation: from China Udo Supp’s team in Xiamen acts as the bridge between the global sites. We keep the world moving. 08 I N D U S T R I A L R E V O LU T I O N K I O N G R O U P A G MOVING FORWARDI N D U S T R I A L R E V O LU T I O N 09 Integrating machines and processes – for intelligent systems The physical and digital worlds are merging, things are starting to communicate with other things, the personalised product on the conveyor belt is no longer the stuff of fantasy. The magic words here are flexibility and efficiency. People are talking about the fourth industrial revolution. But there could be no Industry 4.0, no Industrial Internet of Things, without Intralogistics 4.0. This all revolves around automation, systems integration and fishing for information from an ocean of data, resulting in a seamless, flexible and efficient value creation process in the movement of goods. One of the major drivers behind this is the booming online retail sector, with its returns service and the trend towards same-day delivery of orders. The KION Group is, of course, geared up for these changes. Intelligent and fully electronic control systems have long been a reality for us. We are networking machinery, products and processes, laying the foundations for Intralogistics 4.0, for intelligent supply chains in factories and warehouses. Fleet data management systems such as Linde’s ‘connect:’ or STILL’s FleetManager enable customers to make use of vast quantities of data about their trucks, including operating hours and energy consumption. The goal is higher efficiency and lower costs. We already offered award-winning automation solutions such as the iGoEasy from STILL, but since Egemin Automation became KION’s seventh brand, our portfolio now includes all-encompassing intralogistics systems. And in the huge market of North America, Egemin expanded its own automation offerings at the start of 2016 by acquiring the systems integrator Retrotech – major milestones on our journey to the very top of a highly attractive market for automated logistics and materials flow systems. We keep the world moving. MOVING FORWARD10 I N D U S T R I A L R E V O LU T I O N Fishing from an ocean of data Fleet management solutions like the ones being used at Villeroy & Boch have only one objective: getting the best out of the trucks. M E T T L A C H G E R M A N Y kiongroup.com/ industrial_ revolution K I O N G R O U P A G China’s online boom Business is booming at online retail- ers in China such as JD.com. This is presenting new logistical challenges. And so automation is the word on everybody’s lips. B E I J I N G C H I N A kiongroup.com/ industrial_ revolution MOVING FORWARDM O V I N G F O R WA R D I N D U S T R I A L R E V O LU T I O N A N T W E R P B E LG I U M 11 11 “Like a trip to the moon” Intralogistics 4.0 and automation are the focus of our interview with Yves Gazin, Global Strategic Solutions Manager at Egemin Automation. kiongroup.com/ industrial_ revolution We keep the world moving. 12 P R O D U C T S A N D P R O D U C T I O N K I O N G R O U P A G MOVING FORWARDP R O D U C T S A N D P R O D U C T I O N 13 Questioning the status quo – for optimum solutions It is not often that a company gets the chance to rethink everything, but that’s precisely what we have done with the state-of-the-art KION plant in the Czech town of Stříbro. Existing processes were scrutinised and, where necessary, redefined and, most importantly, networked and made transparent. We use computer technology to control, monitor and document processes. The local workers are well-trained, the infrastructure is excellent. These factors, combined with the local cost benefits, ensure efficient production at the site. We are also investing in our core Linde and STILL plants in Aschaffenburg and Hamburg to optimise processes and to further streamline production. By 2021 a total of €83 million will have been put into the two facilities over the course of seven years. The goal is to further improve the competitiveness and cost efficiency of the core plants and to create the capacity for medium-term growth. Besides making our production more efficient, we are always focused on using innovation to make our products more efficient and increasing the benefit for our customers. Fuel cell technology is a case in point. A truck takes just three minutes to fully refuel with hydrogen and then it’s ready to be used – for quiet, clean and efficient operation. KION’s premium brands, Linde and STILL, are also using highly promising lithium-ion battery tech- nology. What makes this technology so valuable to customers is that it gives them constant performance, high productivity and low energy consumption. Ultimately, it gives them efficiency. We keep the world moving. MOVING FORWARD14 M O V I N G F O R WA R D P R O D U C T S A N D P R O D U C T I O N S T Ř Í B R O C Z E C H R E P U B L I C As smart as they come In 2016, in the Czech Republic, the KION Group opened its most modern factory to date. Linde COO Sabine Neuß talks about challenges and perspectives. kiongroup.com/ production K I O N G R O U P A G P R O D U C T S A N D P R O D U C T I O N 15 Future technology II The Mercedes-Benz plant in Düsseldorf is trialling fuel-cell trucks. Our visit was charged with excitement. D Ü S S E L D O R F G E R M A N Y kiongroup.com/ production Future technology I The market may still be hesitant. But electric forklift trucks powered by lithium-ion batteries offer a whole host of benefits. Just ask Danone. L E M O L AY- L I T T R Y F R A N C E kiongroup.com/ production Synergy in action Weichai Power is not just the KION Group’s anchor shareholder. Its engines also power Baoli trucks. J I N G J I A N G C H I N A kiongroup.com/ production We keep the world moving. MOVING FORWARD16 O U R C U S TO M E R S K I O N G R O U P A G MOVING FORWARDO U R C U S TO M E R S 17 Understanding innovation – for a 360° view of markets and customers For the KION Group, innovation is much more than just the technology in our products and in our production. You only have to look at sales and marketing. Potential customers of any of our brands no longer have to go to the dealer for an overview of the equipment available. Whether it’s a new, pre-owned or rental truck – customers can now find what they’re looking for using an app or the online product advisor. Or the truck itself comes to the customer – as with KION North America’s Ranger project. And the KION Group does not consider innovation to be the preserve of highly developed countries like those in western Europe. Our mission to fully understand our customers’ problems and help them find the most effective and efficient solution is a mission shared by KION brands the world over – whether it’s in the tropical heat of Malaysia, in the sugarcane fields of Brazil, or in the vast warehouses of India. Innovation would not be possible without the highly motivated, highly trained employees who work for the KION Group – right across the planet. Young female apprentices in the male-dominated field of mechatronics, for example at STILL in Hamburg, are as fundamental to this progression as the development programmes for future talents in India, who aspire to escape the poverty of their villages through enthusiasm, skill and commitment at work. All this is focused on just one goal: helping to add value for KION Group customers. We keep the world moving. MOVING FORWARD18 O U R C U S TO M E R S Innovation... … does not just take place in the high-tech R&D departments of the west. In Malaysia, dealer Dato Sri Lau Koo San can offer his customers exactly what they need to make their businesses a success. K U A L A L U M P U R M A L AYS I A kiongroup.com/ customers K U A L A L U M P U R M A L AYS I A Reaching new heights in India In India, too, warehouses are getting taller and taller. KION India’s innovative, low-cost solutions help to meet customers’ ever- changing needs. A H M E D A B A D I N D I A kiongroup.com/ customers K I O N G R O U P A G MOVING FORWARDM O V I N G F O R WA R D O U R C U S T O M E R S 19 K U A L A L U M P U R M A L AYS I A ... is everywhere Customers like Syn Hee Container Services appreciate the benefits that it brings: “Baoli trucks are more manoeuvrable and cheaper to operate than the bulky container handlers,” says depot manager Tan Han Leng. kiongroup.com/ customers We keep the world moving. 20 M O V I N G F O R WA R D O U R C U S T O M E R S AT L A N TA , G A U S A Customer closeness Innovation at the KION Group means being able to go in new directions in all parts of the business – including in sales. KION North America’s ‘rangers’ help it to keep its finger on the pulse of the market. kiongroup.com/ customers K I O N G R O U P A G O U R C U S TO M E R S 21 Upwardly mobile Nurturing talent and rewarding performance are at the heart of the KION Group’s success. No matter where. Shivaji Bajad is forging an impressive career, made possible by opportunities offered by Voltas. P U N E I N D I A kiongroup.com/ customers Challenging stereotypes A traditionally male domain? Not a bit of it. For Maren Schwabe and Judith Henseler, training to become a mechatronics engineer is the most normal thing in the world. And an exciting one, too. H A M B U R G G E R M A N Y kiongroup.com/ customers We keep the world moving. MOVING FORWARDKION GROUP AG Corporate Communications Abraham-Lincoln-Strasse 21 65189 Wiesbaden | Germany Phone: +49 611 770 0 Fax: +49 611 770 269 info@kiongroup.com www.kiongroup.com TO OUR SHAREHOLDERS Contents 3 To our Shareholders 4 6 8 18 21 LETTER TO SHAREHOLDERS EXECUTIVE BOARD REPORT OF THE SUPERVISORY BOARD KION SHARES SERVICES FOR SHAREHOLDERS S R E D L O H E R A H S R U O O T A E C E N C A N N A R N E R V E O V G O G E T E A T R A O R P O R P O R C O C B B T R T O R P O E P R E T R N T E N M E E M G E A G N A A N M A P M U P O U R O G R G C C S T N S E T M N E E T M A E T T S A L T A S C L A N A C N N A F N D F I I I I D KION GROUP AG | Annual Report 2015 I I I T D D D A D A E E I I N O N O T A T M A R M O R F O N F N L A L N A O N O T I I I Letter to shareholders 4 Aktionärsbrief » We are connecting machinery, products and processes, thereby laying the foundations for Industry 4.0. « Gordon Riske Chief Executive Officer Moving Forward Innovation KION GROUP AG | Annual Report 2015 TO OUR SHAREHOLDERS Letter to shareholders 5 KION GROUP AG | Annual Report 2015 We keep the world moving.Dear shareholders, customers, partners, employees and friends of the KION Group, We are witnessing a revolution. Not one that sweeps aside governments but one that will fundamentally affect how all of us live and work. The distinction between goods and services in a digital world is becoming blurred. In factories, products and machines are starting to talk to each other. Racks determine for themselves when they need to be replenished, shipping containers place the order for their loading, forklift trucks organise themselves autonomously. I am, of course, referring to the fourth industrial revolution – known as the Industrial Internet of Things or, in Germany, Industrie 4.0. A sea change that would be inconceivable without Intralogistics 4.0. The ones who are benefiting are our customers as they can use their warehouses, production lines and distri bution structures much more efficiently than in the past. However, it is not employees who are posting their status on social media, sharing their location or describing what they are currently doing. It is our trucks. These are gen uine innovations that offer added value for our customers. 2 Intralogistics 4.0 is already a reality in the KION Group. Our trucks are controlled intelligently and completely electronically, with a broad range of assistance sys tems that mean better safety and efficiency for drivers. Sophisticated fleet data management solutions, such as ‘connect:’ from Linde and FleetManager from STILL, capture and analyse huge quantities of information, e.g. operating hours, distances covered, speeds and energy consumption, that can be used for preventive maintenance and other purposes. The overarching objective is always to optimise the deployment of trucks and reduce costs for customers. KION brand compa nies already offer award winning automation solutions, such as STILL’s iGoEasy. And since the acquisition of Egemin Automation, our portfolio has also included comprehensive intralogistics systems that combine warehouse management software with automated trucks. We are connecting machinery, products and processes, thereby laying the foundations for Industry 4.0, for intelligent supply chains in factories and ware houses. 3 Together, Egemin Automation – our seventh brand company – and the KION Group have vast potential for innovation that will enable us to provide the best possi ble solutions with which to satisfy future customer requirements around Intralogistics 4.0. The knowledge built up by our truck brands over the decades, com bined with the almost as extensive experience of the automation experts at Egemin, opens up completely new opportunities – and is a major unique selling prop osition for the KION Group. Welcoming Egemin as the new member of the KION family is a further milestone in the implementation of our Strategy 2020 and will help to secure our profitable growth in the years to come. To see Egemin’s vision for the future of logistics, please visit kiongroup.com/industrial_revolution. Focus on quality, customers and innovation We have made good progress in turning our Strategy 2020 into reality. We are revamping our plants in Europe, Asia and the Americas so that they are even better able to meet future market requirements. Between now and 2021, we will optimise the efficiency of our core plants in Aschaffenburg and Hamburg as part of a sevenyear project involving total capital 4 expenditure of €83 million. Our new plant in Stříbro, Czech Republic, took around a year to build and is what is known today as a ‘smart factory’. Manu facturing got under way at the plant in January 2016. Constructing it on a greenfield site provided a good opportunity to design the processes and structures from a completely new perspective. KION Stříbro is a factory where digitised manufacturing of the future can take place. Ultramodern IT systems, such as Extended Warehouse Management and Manufacturing Execution System, provide support for the production processes at the new site, enabling us to monitor and control assembly digitally. The first elements, such as realtime process tracking and networking of all processes, are already up and running, and there are more steps to come. About 150 people are working in Stříbro for now. We have capacity to build around 12,000 trucks per year there. The innovation section of this annual report gives you an insight into our newest, most modern KION plant. Just as important to our profitable growth is our global modular and platform strategy in which the brand companies use shared modules to build their own prod ucts for our core market of western Europe. These modules include cuttingedge drive technologies, such 5 as lithiumion batteries. In all other parts of the world, we deploy shared global platforms for the volume and economy segments. Last year, China was selected as the first market where we presented eleven new products based on these platforms. The necessary expertise is supplied by our developers in the southern Chinese city of Xiamen, where we have been represented by our Linde brand for more than 20 years. Our Chinese brand Baoli also unveiled the D Series, its first economy platform for global use. The KION Group’s global product devel opment is exemplified by our vertical order picker for the North American market, which features in the second article in the innovation section of this annual report. All of these are farreaching changes, and our own organisation too must adapt so that we can meet the needs of customers and markets even more effec tively. The regions outside Europe now have more responsibility, enabling us to respond more flexibly to our customers’ wishes. At the same time, the brand companies are collaborating even more closely. This is demonstrated by KION India: in India, we sell Baoli forklifts and build trucks for our main Indian brand, Voltas, partly using triedandtested technology from our Italian regional brand, OM STILL. 6 Specifically, the realignment of the organisational struc ture means that the Group is now managed as four operating units. Competition has become a lot tougher, especially in Europe. That is why the Linde Material Handling EMEA and STILL EMEA operating units are focusing their strengths on Europe, the Middle East and Africa. The KION APAC and KION Americas oper ating units hold crossbrand responsibility for the AsiaPacific region and the Americas respectively. These four operating units oversee marketing, sales, services and the factories in their regions. They also hold P&L responsibility. The units are supported by overarching group functions and the KION technical functions, which are now managed centrally. Synergies in product development Since summer 2015, Chief Technology Officer Dr Eike Böhm has held groupwide responsibility for all research and development activities for counterbalance trucks, warehouse technology and products destined for the global markets. He is also in charge of module and component development, innovation, product strategy, groupwide procurement, quality management and the production system. Bringing our Group’s technical functions together under one roof will play a valuable 7 part in helping to fully harness the potential of cross brand synergies in product development while we of course continue to pursue our successful multibrand strategy. The areas of technology in which we want to take the innovative strength of the KION brands to a whole new level are described in the joint interview at the start of the innovation section of this annual report. Order intake, revenue and EBIT at record levels You can see that we undertook a great deal in 2015 – and, at the same time, continued to grow profitably and strengthen our market position. We benefited from our strong position as market leader in western Europe, where the market fared well. In China, we were able to outperform the weak market because we are well placed with regard to warehouse technology and have a high proportion of service business. 8 Our global order intake rose both in terms of units (165,823 trucks, up by 7.0 per cent) and in terms of value (€5,215.6 million, up by 9.3 per cent). We increased our revenue by 9.0 per cent to €5,097.9 million while the order book was up by 13.1 per cent to €864.0 as at 31 December 2015. And our profitability reached the same very high level as 2014. Adjusted EBIT of €482.9 million gave us an adjusted EBIT margin for 2015 of 9.5 per cent – one of the best ratios in our sector. We owe this success to our around 23,500 extremely motivated, highly skilled and fully committed employ ees. I would like to take this opportunity, on behalf of the entire Executive Board, to offer them my sincere thanks for their fantastic efforts. What challenges, opportunities and potential do our employees see in our Company? This was the question that we put to around 1,800 managers in mid2015. The survey gave us a clearer picture of how we want to take our business and our corporate culture forward together. 9 KION Group turns ten The KION Group will mark its tenth anniversary this year. We have come a long way in a decade, growing from a European supplier into a global player in the material handling industry – despite a severe economic crisis. Around 1.2 million trucks are in operation in our customers’ companies around the world. These provide the basis for our profitable service business, from which we again generated approximately 45 per cent of our revenue last year. We are looking to the future – to many new opportuni ties for adding value for our customers. That is why the theme of this annual report is ‘Moving Forward – Innovation’. Always being able to take the next step means being on a firm footing, knowing which direc tion to take, always focusing on your destination. 10 After all, we do not want to simply witness the fourth industrial revolution. Through our forklift trucks, ware house technologies and services, we touch the lives of millions and millions of people around the world every day. That is why we are seizing the opportunities to help shape this revolution and ensure it creates bene fits for our customers. With best wishes, Gordon Riske Chief Executive Officer KION GROUP AG 11 6 Executive Board GORDON RISKE Chief Executive Officer (CEO) of KION GROUP AG Born in 1957 in Detroit (USA) DR EIKE BÖHM Chief Technology Officer (CTO) of KION GROUP AG Born in 1962 in Pforzheim (Germany) CHING PONG QUEK Chief Asia Pacific Officer of KION GROUP AG Born in 1967 in Batu Pahat/Johor (Malaysia) DR THOMAS TOEPFER Chief Financial Officer (CFO) and Labour Relations Director of KION GROUP AG Born in 1972 in Hamburg (Germany) » We again grew profitably in 2015 and reached record levels of order intake, revenue and EBIT.« Dr Thomas Toepfer Chief Financial Officer Moving Forward Innovation KION GROUP AG | Annual Report 2015 TO OUR SHAREHOLDERS Executive Board 7 » We are shaping Intralogistics 4.0 and have a real innovative spirit throughout the entire organisation.« Dr Eike Böhm Chief Technology Officer » Our cross-regional platforms for the volume and economy segments are enabling us to leverage valuable synergies worldwide.« Ching Pong Quek Chief Asia Pacific Officer » We are revamping our business in EMEA, Asia-Pacific and the Americas so that we are even better able to meet future market requirements.« Gordon Riske Chief Executive Officer KION GROUP AG | Annual Report 2015 We keep the world moving. 8 Report of the Supervisory Board of KION GROUP AG Dear shareholders, KION GROUP AG can once again look back on a very successful year. It made some important strategic decisions in 2015. By purchasing the logistics automation busi ness of Belgium’s Egemin Group, the KION Group strengthened its expertise going forward in the design and management of complex automation projects. In addition, it created a new Executive Board role with central responsibility for research and devel opment, procurement and quality management. It also announced that it would be comprehensively reorganising its Group structure from the beginning of 2016. The aim is to step up collaboration across all brands and regions and to make this collab oration even more efficient. In terms of business performance, the KION Group gen erated encouraging revenue and earnings growth and achieved all of its forecasts. 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 diligence. There were again many important decisions, transactions requiring approval and other matters to be dis cussed and resolved upon. Monitoring and advisory role in dialogue with the Executive Board The Supervisory Board advised the Executive Board on all significant matters relating to managing the Company and monitored the Executive Board’s running of the Company. The Supervisory Board was fully involved in all major decisions affecting the Company from an early stage. The Executive Board always notified the Super visory Board of every significant aspect of the decisions to be made promptly and in detail, providing both written and oral reports. 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 Executive Board, particularly the Chief Executive Officer and the Chief Financial Officer. There was also regular contact between the chairman of the Audit Moving Forward Innovation KION GROUP AG | Annual Report 2015 TO OUR SHAREHOLDERS Report of the Supervisory Board 9 DR JOHN FELDMANN Chairman Committee and the Company’s Chief Financial Officer. This ensured that the Super visory Board was always kept up to date on the Company’s performance and any significant transactions, even between meetings. The Supervisory Board satisfied itself at all times that the Company was being managed lawfully and diligently by the Executive Board. Giving the specified period of notice, the Executive Board presented to the Supervisory Board 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 so that it could adopt reso lutions. The Supervisory Board examined closely the resolutions proposed by the Executive Board and deliberated on them before adopting them. Main focus areas discussed by the Supervisory Board The deliberations of the Supervisory Board focused on the continued implementation of the Strategy 2020, which the Executive Board and Supervisory Board adopted in 2013. Particular attention was paid to generating growth and increasing efficiency in the reporting year. KION GROUP AG | Annual Report 2015 We keep the world moving. 10 The trends embodied by the Industrial Internet of Things, or Industry 4.0 – the oppor- tunities and challenges for our customers’ logistics systems and our own internal processes presented by digitisation, automation and connectivity – also featured heavily in the Supervisory Board’s discussions last year. One prominent example was the acquisition of Egemin NV, a leader in the automation of logistics processes. The Supervisory Board advised and supported the Executive Board on this project, as it did on all other projects aimed at growth by acquisition, and where necessary adopted resolutions to give its consent, having weighed up the opportunities and risks. Issues relating to the Internet of Things were also on the agenda at the Super- visory Board’s strategy meeting on 24 September 2015, where the main topics were integrated and automated logistics solutions and the importance of and prospects for 3D printing in manufacturing. Other matters examined by the Supervisory Board were increasing profitability – in particular by improving the effectiveness and efficiency of the Company’s core operating processes – and transitioning the organisational structure of the Company to a governance model that caters to changes in the requirements of customers and markets. Throughout the year, the Executive Board pushed for measures to boost efficiency, particularly at the large German sites, in its negotiations with workforce representatives. The Supervisory Board discussed the measures at every meeting in 2015. The Company is updating its organisational structure to reflect the changes resulting from the growing importance of markets outside Europe, the evolution of customer requirements and technological progress. The Executive Board discussed its ideas in this area with the Supervisory Board at the start of the year and fleshed out its plans as the year progressed. At its meeting on 24 September 2015, the Super- visory Board consented to the realignment of the organisational structure following in-depth discussions. The core elements of this new structure are four decentralised, regional operating units, each with responsibility for their own profit and loss. These operating units are supported by a central R&D function and administrative departments. The CTO organisation, which is headed up by the Chief Technology Officer Dr Eike Böhm, assumed groupwide responsibility for product strategy, R&D, innovation, production system, quality assurance and procurement on 1 January 2016. Other administrative functions will be adapted to meet the requirements of the Group’s new organisational structure during 2016, which will involve centralising and harmonising them. A Group Executive Committee (GEC) is being formed to advise the Executive Board in its decision-making and to coordinate matters at the uppermost level of management. The GEC will consist of the Presidents of the four regional operating units plus the Moving Forward Innovation KION GROUP AG | Annual Report 2015 TO OUR SHAREHOLDERS Report of the Supervisory Board 11 four members of the Executive Board. Its purpose is to ensure the Executive Board’s decisions are made on the basis of the widest possible range of technical and regional expertise and experience. There will be no changes to the Executive Board’s decisionmaking powers, however. The Group Executive Committee does not release the individual Executive Board members or the Executive Board as a whole from their statutory duties or their responsibility for the daytoday management of the Company. The Supervisory Board has safeguarded this allocation of roles by introducing a char ter for the GEC. Against this background, it was necessary to redistribute responsibility for the differ ent aspects of the business among the Executive Board members and to update the list of transactions requiring consent by removing individual transactions from the list and raising the threshold values for transactions requiring approval. The Supervisory Board emphatically welcomed the Executive Board’s prompt and proactive decision to introduce a change management process to support the changes brought about by these measures. An important element of this change management was a survey conducted among around 1,800 of the Company’s managers at the start of the summer. An Organizational Health Index (OHI) was used to gauge the current state, or ‘health’ of the organisation so that challenges and necessary action areas could be identified. The Supervisory Board encouraged the Executive Board to tackle the change issues raised by managers, and they will be targeted as part of the improve ments to be made to the Company’s management culture. The Supervisory Board firmly believes that the major changes that have been initiated and will now be imple mented over the coming months will benefit in the long term if the issues identified by the OHI are successfully addressed and the management culture at KION is improved accordingly. Corporate governance matters Besides the usual governance matters, the Supervisory Board dealt with a number of individual issues in the year under review. These included implementing the new statutory requirements on gender diversity in managerial roles, introducing a sustaina ble fast close process for preparing the consolidated financial statements, examining the efficiency of the Supervisory Board’s work and reviewing the remuneration of the Executive Board and Supervisory Board. The Supervisory Board carefully studied the requirements of Germany’s ‘Act for the equal participation of women and men in managerial positions in the private and KION GROUP AG | Annual Report 2015 We keep the world moving. 12 public sectors’. Despite its reservations about fixed quotas in this area, the Super visory Board has an open and positive stance as far as the Act’s sociopolitical objectives are concerned. The targets for the composition of the Executive Board and other management positions have been set within the realms of what is feasible and with a view to ensuring that the Company can attract the most suitable people with the right talents. The Company intends to present its annual and quarterly financial statements more quickly than in previous years. To fulfil its core task of monitoring the Company’s financial reporting systems, the Supervisory Board commissioned the Audit Committee, which in turn commissioned its chairman, to learn about the fast close process and its inherent risks. The independent auditors also got involved. The Supervisory Board was able to satisfy itself that the new structures and processes will enable the Company to continue preparing correct and reliable financial statements going forward. The examination of efficiency confirmed that the Company’s Supervisory Board has a robust structure and follows efficient processes. An external consultancy also scored the Supervisory Board and its committees highly in comparison with their industry peers. Suggestions for enhancing individual aspects of the Supervisory Board’s work were identified with regard to committee size, the timing of when information is pro vided and the discussion of strategic matters by the full Supervisory Board. The con sultants presented their report at the Supervisory Board’s meeting in December. The Supervisory Board has already acted on a number of the suggestions and introduced or initiated changes. Where necessary, the Executive Board willingly provided its input. Another area of focus was the remuneration of the Company’s Executive Board and Supervisory Board. The structure of their remuneration had been revised ahead of the IPO in 2013. In late 2015, a consultancy reviewed it again, comparing it against the benchmark. Despite changes to economic conditions and the evolution of best practice, particularly regarding supervisory board remuneration, the Supervisory Board did not consider it appropriate to make changes to the structure and level of remuneration at the current time. However, adjustments will be required in the near future, including to the structure of the Executive Board’s longterm variable remuneration and the acquisition of treasury shares by Executive Board members. The topics on which the Executive Board and individual managers in the Company regularly submitted reports were the internal control system, risk management, internal audit and compliance in the Group. The focus was on the processes in place as well as on the content of the individual reports. As a result of these reports, the Moving Forward Innovation KION GROUP AG | Annual Report 2015 TO OUR SHAREHOLDERS Report of the Supervisory Board 13 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. It concluded that the systems and mechanisms at KION GROUP AG are adequate and suitable. The Supervisory Board keeps a close eye on changes to the German Corporate Governance Code and to governance standards at international level. At its meeting on 17 December 2015, the Supervisory Board held its final discussion on the KION Group’s compliance with the recommendations of the current version of the Code and issued an updated complyorexplain statement pursuant to section 161 German Stock Corporation Act (AktG). It has been made permanently available to the public on the KION GROUP AG website. KION GROUP AG complies with all but one of the recommendations in the German Corporate Governance Code (version dated 5 May 2015) and intends to continue to do so in future. As 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 consider ably more difficult to find independent candidates, in particular candidates from out side Germany. 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 German Commercial Code (HGB) and can be found on pages 24 to 37 of this annual report and on the KION GROUP AG website at kiongroup.com/GovernanceReport. For details of the remuneration of the Executive Board and Supervisory Board for 2015, please refer to the remuneration report, which can be found on pages 38 to 51 of this annual report. Work of the committees Since the last report, there have not been any material changes to the established committees. KION GROUP AG’s Supervisory Board had four committees last year: the Mediation Committee pursuant to section 27 (3) German Codetermination Act (MitbestG), the Executive Committee, the Audit Committee and the Nomination Committee. These KION GROUP AG | Annual Report 2015 We keep the world moving. 14 committees, but primarily the Executive Committee, prepare the matters to be dis cussed at the meetings of the full Supervisory Board. In individual cases, the Super visory Board’s decisionmaking powers were delegated to committees within the scope permitted by law. The chairman of the Supervisory Board is also chairman of all committees except the Audit Committee. At the meetings of the full Supervisory Board, the committee chairmen report in detail on the discussions of the committees to ensure that the Supervisory Board as a whole is always fully informed. In 2015, the Supervisory Board and its committees dealt with the matters at hand and made the necessary decisions at a total of 21 meetings (8 full Supervisory Board meetings and 13 committee meetings). There were also several informal conference calls for the purpose of providing the members of the Supervisory Board or the rele vant committees with advance information. All members of the Supervisory Board attended the Supervisory Board meetings in 2015 apart from the exceptions below. At one meeting, five members sent their apologies, at three meetings, at each of which one member sent his apology and at two meetings, at each of which two members sent their apologies. With the exception of five commit tee meetings at each of which one member sent his apology, 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, Munich, Frankfurt am Main branch office (Deloitte & Touche), audited the Company’s separate financial statements and management report and the con solidated financial statements and group management report for the year ended 31 December 2015 following their engagement by the Annual General Meeting on 12 May 2015. The corresponding proposal to the Annual General Meeting had been prepared in meetings held between the chairman of the Audit Committee and the auditors. They concerned the suitability and independence of the auditors and the fees. The proposal was discussed at the Audit Committee’s meeting on 10 March 2015 and committee members were given the opportunity to speak to the auditors in person. The key audit issues were discussed and set out accordingly at the Audit Committee’s meeting on 10 March 2015. The auditors were appointed by the chairman of the Supervisory Board on 24 November 2015. Moving Forward Innovation KION GROUP AG | Annual Report 2015 TO OUR SHAREHOLDERS Report of the Supervisory Board 15 The auditors submitted their report and the documents relating to the financial state ments to the members of the Audit Committee on 2 March 2016 and to the members of the Supervisory Board on 9 March 2016. The report was discussed in depth at the Audit Committee meeting on 9 March 2016 and at the full Supervisory Board meeting on 16 March 2016, 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 pro vided comprehensive answers to all questions asked by members of the Audit Com mittee and Supervisory Board. The auditors issued an unqualified opinion for the sep arate financial statements, including the management report, for the year ended 31 December 2015 and the consolidated financial statements, including the group management report, for the year ended 31 December 2015 on 9 March 2016. Having itself scrutinised the Company’s separate financial statements, consolidated financial statements, management report and group management report for the year ended 31 December 2015, the Audit Committee then made a 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 and taking the auditors’ opinion into consideration, the Supervisory Board held a further discussion of its own and then approved the results of the independent audit at its meeting on 16 March 2016. Based on the final outcome of the Supervisory Board’s own review, no objections were raised. The Supervisory Board approved the Com pany’s separate financial statements and consolidated financial statements for the year ended 31 December 2015 prepared by the Executive Board, thereby adopting the annual financial statements. At its meeting on 16 March 2016, 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 €0.77 per noparvalue share. In doing so, the Supervisory Board took account of the Company’s financial situation and performance, its mediumterm financial and capitalexpenditure planning and the interests of the shareholders. The Supervisory Board believes the proposed dividend is appropriate. Review of the dependency report Until 31 March 2015, the Company was controlled jointly by Superlift S.à r.l. and Weichai Power. This joint control ended on 31 March 2015 when the remaining KION GROUP AG shares held by Superlift S.à r.l. were sold. The Executive Board was KION GROUP AG | Annual Report 2015 We keep the world moving. 16 therefore obliged to prepare a report on the Company’s relationships with affiliated entities (dependency report) for that period. The report was examined by the Super visory Board. The Company’s auditors, Deloitte & Touche, reviewed the dependency report, prepared an auditors’ report on it and issued the following unqualified opinion based on their completed audit on 9 March 2016: Auditor’s opinion Based on our audit and evaluation conducted in accordance with our professional duties, we hereby confirm that the factual information presented in the report is accurate. 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 16 March 2016. 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 on the Executive Board and Supervisory Board With effect from 15 January 2015, Theodor Maurer and BertJan Knoef stepped down as members of the KION Group’s Executive Board by mutual agreement with the Company. At its meeting on 25 June 2015, the Supervisory Board appointed Dr Eike Böhm as Chief Technology Officer and as a further ordinary member of the Executive Board of KION GROUP AG. Dr Böhm is responsible for research and development, product strategy, production system, innovation, quality assurance and procurement. There were several changes on the Supervisory Board in 2015. Mr Johannes P. Huth stepped down from the Supervisory Board on 31 July 2015. Mr Wolfgang Faden was appointed by the courts as a shareholder representative with effect from 1 August 2015 until the Company’s next Annual General Meeting. In the further course of discussions regarding succession planning, the Supervisory Board resolved in December 2015, following the recommendation of the Nomination Committee, to Moving Forward Innovation KION GROUP AG | Annual Report 2015 TO OUR SHAREHOLDERS Report of the Supervisory Board 17 propose to the Annual General Meeting on 12 May 2016 that Dr Christina Reuter be elected to the Supervisory Board as a shareholder representative to succeed Mr Faden. In addition, Mr HansPeter Weiß resigned from his position as an employee representa tive on the Company’s Supervisory Board with effect from the end of 15 November 2015. The courts appointed Mr Jörg Milla as his successor with effect from 16 November 2015. The Supervisory Board would like to thank Mr Huth and Mr Weiß for the great dedica tion with which they always carried out their work in the interests of the Company. The details of this report were discussed thoroughly at the Supervisory Board meeting on 16 March 2016 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 2015. Dr John Feldmann Chairman KION GROUP AG | Annual Report 2015 We keep the world moving. 18 KION shares Highly volatile stock market environment 9.6 per cent. The MDAX climbed by an even more impressive 22.7 per cent to reach 20,775 points, thereby significantly out The world’s stock markets were very nervous in 2015 and were performing the bluechip index. characterised by strong volatility. Equities were a popular asset class as market interest rates remained very low, and this led to share price rises, especially in the first half of the year. However, Strong growth for KION shares the pricing level reached made the markets highly susceptible to external shocks. Slower growth in Asia and Latin America, turbu KION shares finished 2015 considerably higher than where they lent capital markets in China, uncertainty about future monetary had begun. They closed at €46.02 on 30 December 2015, which policy in the United States, geopolitical tension and, not least, the was 45.0 per cent higher than their 2014 yearend closing price of Volkswagen scandal resulted in a sharp price correction in the €31.74. Having reached the lowest price of the year of €30.64 on third quarter. The DAX, Germany’s main index, ceded virtually all 14 January, the share price moved steadily upward in the first half of the gains that it had made in the first six months. In the fourth of the year. Reflecting the trend in the market, the shares fell in the quarter, however, most indices rose considerably on the back of third quarter before beginning a steep uptrend in November to persistently good growth figures from industrialised nations. The reach their highest price of the year of €48.00 on 7 December. DAX closed the year at 10,743 points, representing an increase of Among the positive influencing factors were the inclusion in the Share price performance between 30 December 2014 and 30 December 2015 KION GROUP + 45.0% + 22.7% + 9.6% MDAX DAX €48 €46 €44 €42 €40 €38 €36 €34 € 31.74 * €32 €30 DIAGRAM 001 € 46.02 * * Closing price 01 / 2015 02 / 2015 03 / 2015 04 / 2015 05 / 2015 06 / 2015 07 / 2015 08 / 2015 09 / 2015 10 / 2015 11 / 2015 12 / 2015 Moving Forward Innovation KION GROUP AG | Annual Report 2015 TO OUR SHAREHOLDERS KION shares 19 STOXX Europe 600 and the release of good growth figures and strong results. Looking at the year as a whole, the KION Group comfortably outperformed both the MDAX and the DAX. > DIAGRAM 001 The KION Group’s market capitalisation was €4.6 billion at the end of the reporting year. Of this total, 61.5 per cent or €2.8 billion was in free float. The average daily Xetra trading volume in 2015 was 206 thousand shares or €8.3 million, up considerably on the prior year. This can be attributed to KION GROUP AG’s inclusion in the MDAX from September 2014 and the further increase in the free float. > TABLE 001 Basic information on KION shares TABLE 001 ISIN WKN DE000KGX8881 KGX888 Bloomberg KGX:GR Reuters KGX.DE Share type Noparvalue shares Index MDAX, STOXX Europe 600, MSCI Germany Small Cap Further rise in free float and share repurchases Superlift Holding S.à r.l. (Superlift Holding), through which The Goldman Sachs Group Inc. (Goldman Sachs) and Kohlberg Kravis Roberts & Co. L.P. (KKR) held their shares in KION, placed their remaining KION shareholding of 18.8 per cent in February and March 2015. With this the strategic investors Goldman Sachs Shareholder structure as at 31 December 2015 DIAGRAM 002 0.2% KION GROUP AG 38.3% WEICHAI POWER 61.5% FREE FLOAT KION GROUP AG launched another share buyback programme on 10 September 2015 as part of its employee equity programme. In the period up to 30 September 2015, a total of 70,000 no parvalue shares (roughly 0.07 per cent of the share capital) had been purchased for this purpose. To do so, the KION GROUP AG used the authorisation granted at the Annual General Meeting on 13 June 2013. The purchase of treasury shares left the proportion of shares held by KION GROUP AG unchanged at 0.2 per cent as at 31 December 2015. The free float accounted for 61.5 per cent at the end of the year. > DIAGRAM 002 KION shares predominantly recommended as a buy and KKR ceased to be shareholders. As part of the final place 17 brokerage houses published regular reports on KION Group in ment, a block of shares equivalent to around 5.0 per cent was 2015. As at 31 December 2015, eleven analysts recommended sold to Weichai Power Co. Ltd. in March. Weichai Power, the big KION shares as a buy and six rated them as neutral. The median gest single shareholder of the KION Group, with its stake now at target price specified for the shares was €48.50. 38.3 per cent, has undertaken not to acquire more than 49.9 per cent of KION shares between now and 28 June 2018 (as part of a standstill agreement). KION GROUP AG | Annual Report 2015 We keep the world moving. 20 Share data TABLE 002 Closing price at the end of 2014 High for 2015 Low for 2015 Closing price at the end of 2015 Market capitalisation at the end of 2015 Performance in 2015 €31.74 €48.00 €30.64 €46.02 €4,551.4 million 45.0% Average daily trading volume in 2015 (no. of shares) 206.0 thousand Average daily trading volume in 2015 (€) Share capital Number of shares Earnings per share for 2015 Dividend per share for 2015* Dividend payout rate* Total dividend payout* Equity ratio as at 31/12/2015 * Proposed dividend for the fiscal year 2015 €8.3 million €98,900,000 98,900,000 €2.20 €0.77 35% €76.0 million 28.7% Dividend of €0.77 per share planned Refinancing and credit rating The Executive Board and Supervisory Board of KION GROUP AG The fixedrate (6.75 per cent) tranche of the bond issued in will propose a dividend of €0.77 per share to the Annual General February 2013, which has a volume of €450.0 million, was part of Meeting on 12 May 2016. This equates to a dividend payout rate the Company’s funding structure in 2015 and repaid early and to of around 35.0 per cent of net income. Earnings per share for the full extent on 15 February 2016. This bond as well as the 2015 came to €2.20. > TABLE 002 remaining preIPO credit facility have been refinanced with a €1.5 billion credit facility reflecting investmentgradestyle fea tures. The new financing significantly reduces interest expenses and strongly improves KION’s flexibility to pursue its profitable growth. Two rating agencies publish corporate credit ratings on the KION Group and improved the ratings in April 2015. Rating agency Standard & Poor’s now rates the KION Group as BB+ with a stable outlook, while the rating from Moody’s is Ba2 with a positive outlook. Moving Forward Innovation KION GROUP AG | Annual Report 2015 TO OUR SHAREHOLDERS Services for shareholders 21 Services for shareholders Active investor relations sented the steps already taken to implement the Strategy 2020 as well as the planned future milestones. In addition, the Executive The objective of investor relations is to ensure, through continu Board held update calls to report on each set of quarterly results. ous dialogue, that the capital markets value the Company The transcripts of the conference call on the 2014 financial year appropriately. The Executive Board and the KION Group’s inves and the quarterly update calls along with the presentations form tor relations team continued their active dialogue with investors part of the extensive information for investors which is available and analysts last year. Overall, the KION Group participated in on the Company’s website. 17 investor conferences in Germany and abroad, ran a multitude Detailed information on KION shares, press releases, of roadshows and held a number of oneonone meetings. reports and presentations as well as information about the On 12 November 2015, the Executive Board of the KION Annual General Meeting and corporate governance in the Group Group welcomed around 20 equity analysts to the KION Ana can be found at kiongroup.com/ir. The KION Group’s annual lyst Day, which was held at Linde Material Handling’s site in report is also available here, both as a PDF file and as an interac Basingstoke, United Kingdom. The brokerage houses, which tive online version. A printed copy of the annual report can be regularly write reports on the KION Group, took this opportunity ordered under IR Contact & Services. The contact details of the to find out at first hand about the Strategy 2020 and progress on IR team are also provided here. its implementation. Around 120 shareholders participated in the Annual General Meeting of KION GROUP AG on 12 May 2015. Those in attend ance, representing 80.4 per cent of the voting share capital, approved all the draft resolutions put forward by the Company’s management with a substantial majority, including the resolu tion to distribute a dividend of €0.55 per share. The total dividend payout of €54.3 million was equivalent to a dividend payout rate of roughly 31 per cent of net income. 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 Com pany’s website. Each of the KION Group’s financial reports was explained in detail. At publication of the 2014 annual report, the Executive Board of KION GROUP AG held a conference call where it pre kiongroup.com/ ir KION GROUP AG | Annual Report 2015 We keep the world moving. CORPORATE GOVERNANCE Contents 23 B Corporate Governance 24 24 32 33 38 38 50 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 2015 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 24 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 rigorous corporate governance in accordance laration stating that the company has complied with, and intends with the standards is essential to the Company’s long-term suc- to comply with, the recommendations of the Code or stating the cess. Compliance with these principles also promotes the trust recommendations with which it has not complied or does not that our investors, employees, business partners and the public intend to comply, and the reasons why. Detailed reasons must be have in 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 5 May 2015 (the Code) and The Executive Board and Supervisory Board submitted the the content of the corporate governance declaration required by Company’s previous comply-or-explain statement on 19 Decem- section 289a German Commercial Code (HGB). For this reason, ber 2014. the Executive Board and the Supervisory Board of KION GROUP Both decision-making bodies considered the recommenda- AG have combined the two statements. tions of the amended Code in detail and, on 14 December and DECLARATION PURSUANT TO SECTION 289A GERMAN COMMERCIAL CODE (HGB) 17 December 2015 respectively, issued the third comply-or- explain statement of KION GROUP AG as required by sec- tion 161 (1) AktG as follows: 1. Since the last comply-or-explain statement was issued in December 2014, KION GROUP AG has complied with all of the recommendations of the German Corporate Governance Code (the Code) as amended on 24 June 2014 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 German Stock Corporation Act (AktG) (see 1. of incorporation of KION GROUP AG do not provide for an below), relevant disclosures on corporate management practices excess in the D&O insurance policies for members of the 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 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. Moving Forward Innovation KION GROUP AG | Annual Report 2015 CORPORATE GOVERNANCE Corporate governance report 25 2. The Code as amended on 5 May 2015 was announced in the German Stock Corporation Act. For example, the Supervisory German Federal Gazette on 12 June 2015. 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 5 May 2015 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, 14/17 December 2015 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 the German Codetermination Act example, system-based and manual reconciliation processes, (MitbestG) 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 2015, 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 KION GROUP AG | Annual Report 2015We keep the world moving. 26 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 responsibly, menting compliance management has been delegated to the the Executive Board must use the risk management system Chief Compliance Officer, the CEOs of the STILL and LMH seg- established in the Company to regularly gather information about ments, and the heads of the KION regions. Responsibility for current risks and how they are evolving, and then report on this to monitoring of course remains with the CEO of the Group. The the Supervisory Board’s Audit Committee. The KION Group’s risk KION compliance department, the KION compliance team and management system is documented in a Group risk policy that the KION compliance committee provide operational support to defines tasks, processes and responsibilities and sets out the the aforementioned functions. The KION compliance department rules for identifying, assessing, reporting and managing risk. focuses mainly on preventing compliance violations by providing Specific individual risks are then reported by each Group entity guidance, information, advice and training. It manages the KION using an online reporting tool. Reporting on cross-segment risks compliance team, in which local and regional compliance officers and groupwide risks is carried out by Controlling and the relevant of the Group are represented. departments. The risks that have been reported are reviewed on The members of the compliance team at KION GROUP AG a quarterly basis and re-assessed until the reason for reporting a are available to advise all Group employees and answer their risk no longer exists. 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 GROUP AG, provides every employee with clear guidance on on, examines and, if relevant, punishes incidents of non- how to conduct their business in accordance with sound values compliance that are reported. While the KION compliance and ethics and in compliance with the law. The aim is for all department is responsible for preventing compliance violations, employees to receive regular training on the most important com- the internal audit unit is tasked with checking the facts of reported pliance subjects (e.g. competition law, data protection, communi- non-compliance cases. On behalf of the Executive Board, the cation and anti-corruption). Desk-based employees can use internal auditors also monitor subsidiaries for compliance with e-learning tools to complete the mandatory training. regulations. If their audits confirm cases of non-compliance, it is Compliance activities focus on anti-corruption, foreign trade / the task of HR or Legal to remedy the violations and sanction export controls, liability of senior management, directors’ and those responsible, if 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 compli- KION GROUP AG’s compliance organisation is made up of ance. The Local Compliance Representatives advise and support the following committees, functions and duties: the directors and senior managers in ensuring compliance The Executive Board of KION GROUP AG bears collective throughout the Group. responsibility for the functioning of compliance management Moving Forward Innovation KION GROUP AG | Annual Report 2015CORPORATE GOVERNANCE Corporate governance report 27 2.5 Audit-relevant processes effect from 24 June 2013, for which the Supervisory Board had previously given its consent. Appropriate precautions have been The Company’s independent auditors, Deloitte & Touche GmbH taken to ensure that this role at a major shareholder of the Com- Wirtschaftsprüfungsgesellschaft, Munich, Frankfurt am Main pany does not create a conflict of interest relating personally to branch office (“Deloitte & Touche”), audited the separate financial Mr Riske. Formal processes have been put in place to ensure statements and management report of KION GROUP AG and the that Mr Riske, in his role as a non-executive director of Weichai consolidated financial statements and group management report Power, is not involved in transactions that could give rise to a for the year under review following their engagement by the conflict with the interests of the KION Group. Nor is Mr Riske Annual General Meeting on 12 May 2015. Since the audit of the involved in transactions relating to the exercise of voting rights by 2014 separate and consolidated financial statements, the global Weichai Power or its subsidiaries at the Annual General Meeting of lead service partner at Deloitte & Touche has been Ms Kirsten KION GROUP AG. It has been ensured that Mr Riske maintains a Gräbner-Vogel. The separate financial statements and manage- strict separation between his duties as a non-executive director of ment report and the consolidated financial statements and group Weichai Power and his duties as Chief Executive Officer of KION management report are discussed by the Audit Committee and GROUP AG and that he fulfils all of his legal obligations in the then approved by the Supervisory Board. interests of the Company. The independent auditors review the condensed consoli- dated interim financial statements and the condensed interim group management report for the first half of the year. The Exec- 3. Working methods of the Executive Board utive Board discusses all interim reports with the Audit Committee before they are published. and Supervisory Board and composition of the committees of the Supervisory Board 2.6 Avoiding conflicts of interest The Executive Board and Supervisory Board of KION GROUP AG have a close and trusting working relationship. It focuses on Conflicts of interest between the governing bodies and other ensuring the sustained success of the Company. The members decision-makers in the Company or significant shareholders go of the Executive Board regularly attend Supervisory Board meet- against the principles of good corporate governance and are likely ings, unless the Supervisory Board decides to meet without the to be harmful to the Company. KION GROUP AG and its govern- Executive Board. ing bodies therefore adhere strictly to the Code’s recommenda- The Executive Board promptly, comprehensively and regu- tions on this subject. The employees of KION GROUP AG and its larly reports to the Supervisory Board on the performance of the investees are made aware of the problem of conflicts of interest KION Group. Besides the reporting obligations defined by law, as part of compliance training and are bound by rules on how to the rules of procedure for the Executive Board of KION GROUP behave in the event of actual or potential conflicts of interest. AG set out further reporting requirements and reservations of The Company attaches high priority to preventing possible approval in favour of the Supervisory Board. conflicts of interest from occurring in the first place and to dis- pelling any impression that they might exist. This is especially 3.1 Working methods of the Executive Board important given the involvement of Weichai Power, whose stake has risen to 38.3 per cent. The Company achieves these aims by Since the appointment of Dr Eike Böhm with effect from 1 August avoiding business scenarios or personnel scenarios that could give 2015, the Executive Board of KION GROUP AG has comprised the impression of a conflict of interest and by taking transparent four members. It is responsible for managing the Company in the steps that effectively prevent concerns about conflicts of interest. Company’s interest, i.e. taking account of shareholders, custom- The Company’s Chief Executive Officer, Mr Gordon Riske, ers, employees and other stakeholders with the aim of creating was appointed a non-executive director of Weichai Power with sustainable added value. The Executive Board develops the KION GROUP AG | Annual Report 2015We keep the world moving.28 Company’s strategy, discusses it with the Supervisory Board and ensures that it is implemented. Every Executive Board member is responsible for his own area of responsibility and keeps his fellow board members informed of developments on an ongoing basis. > TABLE 003 Responsibilities of Executive Board members TABLE 003 Member Responsibilities Ching Pong Quek Member of KION GROUP AG Responsibilities of Executive Board members TABLE 003 Member Responsibilities Gordon Riske CEO of KION GROUP AG CEO of STILL GmbH (since 15 January 2015) CEO of Linde Material Handling GmbH (since 15 January 2015) Strategy / Business Development Corporate Communications Corporate Office Internal Audit Compliance KION Warehouse Systems KION Synergies / Platforms (until 31 July 2015) North America Region South America Region Quality (from 15 January until 31 July 2015) Bert-Jan Knoef (until 14 January 2015) Theodor Maurer (until 14 January 2015) Executive Board / Chief Asia Pacific Officer Asia Pacific Region Member of KION GROUP AG Executive Board CEO of STILL GmbH Logistics / Urban Member of KION GROUP AG Executive Board CEO of Linde Material Handling GmbH Quality Facility Management / Health Safety Environment Every Executive Board member must disclose potential conflicts of interest to the Supervisory Board immediately and must also inform the other Executive Board members. All transactions Dr Thomas Toepfer CFO of KION GROUP AG between KION GROUP AG and Executive Board members or Accounting / Tax / Financial Services Corporate Finance / Investor Relations / M&A Controlling HR / Labour Relations Director Legal IT Purchasing (until 31 July 2015) Data Protection Logistics / Urban (since 15 January 2015) Facility Management / Health Safety Environment (since 15 January 2015) Dr Eike Böhm (since 1 August 2015) CTO of KION GROUP AG R&D Product Strategy Innovation Production System Quality & Operations Purchasing Moving Forward Innovation related parties must be concluded on an arm’s-length basis. 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 CEO 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 Executive Board provides the Supervisory Board with regular, timely and comprehensive information on all matters of relevance to the business as a whole relating to the intended operating pol- icy, strategic planning, business performance, financial position, financial performance and business risks. The Chief Executive KION GROUP AG | Annual Report 2015CORPORATE GOVERNANCE Corporate governance report 29 Officer discusses these matters regularly with the chairman of 3.3 Objectives for the composition of the Supervisory Board the Supervisory Board. The Executive Board’s rules of procedure specify that impor- The Supervisory Board strives to ensure that its composition is tant transactions are subject to approval by the Supervisory appropriate to its responsibilities and obligations. In particular, Board. Budget planning, major acquisitions or capital expendi- this means considering members’ individual qualities and skills as ture, for example, require the consent of the Supervisory Board. well as the specific requirements resulting from the global busi- The Company is represented by two members of the Execu- ness activities of KION GROUP AG and its Group companies. tive Board, by one member of the Executive Board acting con- The Supervisory Board is therefore of the opinion that the priority jointly with a Prokurist (person with full commercial power of rep- in aiming for a board composition based on diversity must be on resentation), or by two Prokurists. the expertise of the individual members and on a balanced mix of personal qualities, experience, skills, qualifications and knowl- 3.2 Working methods of the Supervisory Board edge of all members in line with the requirements of the business. Consequently, it has agreed upon guidelines for the selection of The Supervisory Board of KION GROUP AG advises and monitors Supervisory Board members in the form of a diversity statement. the Executive Board in its management of the Company and reviews This also means that the Supervisory Board’s aim is to have an its work. The Supervisory Board is fully involved from an early appropriate number of women on the Supervisory Board and to stage in all decisions that are fundamental to KION GROUP AG. comply with the new statutory requirements for the proportion of The Supervisory Board of KION GROUP AG consists of 16 female members of supervisory boards. Since the appointment members, eight of whom are employee representatives and eight of Ms Birgit A. Behrendt and Ms Xu Ping as members of the KION are shareholder representatives. The shareholder representatives GROUP AG Supervisory Board with effect from 1 January 2015, are elected by the Annual General Meeting by simple majority. there have been three female members. The Supervisory Board The Supervisory Board has drawn up rules of procedure for will also support the inclusion of other female board members its work. These apply in addition to the requirements of the arti- who meet the above criteria. cles of incorporation and also define the Supervisory Board com- mittees. According to these rules, the chairman of the Supervi- 3.4 Working methods and composition of the committees of sory Board coordinates its work and the cooperation with the the Executive Board and Supervisory Board Executive Board, chairs its meetings and represents it externally. The Supervisory Board meets in person at least twice in each half In the year under review, there were four committees at KION of a calendar year, and adopts its resolutions at these meetings. GROUP AG whose tasks, responsibilities and work processes Between these meetings, resolutions may also be adopted in comply with the provisions of the German Stock Corporation Act writing, by telephone or by other similar forms of voting, provided and the German Corporate Governance Code. The chairman of that the chairman of the Supervisory Board or, in his absence, his each committee reports regularly to the full Supervisory Board on deputy, decides on this procedure for the individual case con- the committee’s work. The committees have each drawn up rules cerned. The Supervisory Board adopts resolutions by a simple of procedure that define their tasks and working methods. majority of the votes cast unless a different procedure is pre- scribed by law. If a vote is tied, the matter will only be renegotiated Executive Committee if the majority of the Supervisory Board vote in favour of this The Executive Committee consists of four shareholder represent- option. Otherwise the Board must vote again without delay. If this atives and four employee representatives. Its chairman is always new vote on the same matter also results in an equal number of the chairman of the Supervisory Board. It prepares the meetings votes for and against, the chairman of the Supervisory Board has of the Supervisory Board and is responsible for ongoing matters a casting vote. between Supervisory Board meetings. The Executive Committee also prepares the Supervisory Board’s decisions relating to KION GROUP AG | Annual Report 2015We keep the world moving.30 corporate governance, particularly amendments to the com- Mediation Committee ply-or-explain statement pursuant to section 161 AktG reflecting The Mediation Committee comprises the chairman of the Super- changed circumstances and the checking of adherence to the visory Board, his deputy, an employee representative and a comply-or-explain statement. It also prepares documents for the shareholder representative. If the two-thirds-of-votes majority Supervisory Board when Executive Board members are to be required by section 27 (3) and section 31 (3) MitbestG is not appointed or removed and, if applicable, when a new Chief reached in a vote by the Supervisory Board on the appointment Executive Officer is to be appointed. Documents relating to any of an Executive Board member, the Mediation Committee must matters in connection with Executive Board remuneration are propose candidates for the post to the Supervisory Board within also compiled by the Executive Committee. In addition, the one month. The chairman of the Supervisory Board does not Executive Committee is responsible for resolutions concerning have a casting vote on the candidates proposed. The Mediation the conclusion, amendment and termination of Executive Board Committee did not need to be convened in 2015. employment contracts and agreements with Executive Board members governing pensions, severance packages, consultancy In 2015, the members of the Mediation Committee were: and other matters and for resolutions on any matters arising as a Dr John Feldmann (chairman) result of such contracts and agreements, unless they relate to Özcan Pancarci (deputy chairman from 1 January 2016) remuneration. The responsibilities of the Executive Committee Joachim Hartig (deputy chairman, until 31 December 2015) also include resolutions about the extension of loans to Executive Johannes P. Huth (until 31 July 2015) Board members, Supervisory Board members and parties Kay Pietsch related to them within the meaning of sections 89 and 115 AktG, Hans Peter Ring (from 1 August 2015) as well as resolutions to approve contracts with Supervisory Board members outside their Supervisory Board remit. The Audit Committee Executive Committee should – in consultation with the Executive The Audit Committee has four members, who are elected by the Board – regularly deliberate on long-term succession planning for Supervisory Board. Its purpose is to assist the Supervisory Board the Executive Board. in performing its task of monitoring accounting processes, com- The Executive Committee met five times in 2015. The main pliance matters and reporting. These responsibilities encompass topics discussed by the Executive Committee in 2015 were those monitoring the quality and integrity of the consolidated and sep- concerning the Company’s Annual General Meeting and the arate financial statements (as well as related disclosures), the efficiency and governance initiatives. The Executive Committee internal control mechanisms, risk management and the internal also discussed the expansion of the Executive Board. audit system. The Audit Committee also reviews the work car- ried out by the independent auditors and checks that the inde- In 2015, the members of the Executive Committee were: pendent auditors are qualified and independent. It is also respon- Dr John Feldmann (chairman) Joachim Hartig (deputy chairman) Dr Alexander Dibelius Denis Heljic sible for engaging the independent auditors, 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. Johannes P. Huth (until 31 July 2015) The Audit Committee met seven times in 2015. The main top- Jiang Kui Olaf Kunz Kay Pietsch ics discussed by the Audit Committee in 2015 were the 2015 annual financial statements, the quarterly financial statements, the budget and the regular subject of the key elements of corpo- Hans Peter Ring (from 1 August 2015) rate governance within the Company. Moving Forward Innovation KION GROUP AG | Annual Report 2015CORPORATE GOVERNANCE Corporate governance report 31 In 2015, the members of the Audit Committee were: 4. Targets for the proportion of women Hans Peter Ring (chairman) Kay Pietsch (deputy chairman) Dr John Feldmann Alexandra Schädler Germany’s ‘Act for the equal participation of women and men in managerial positions in the private and public sectors’ came into force on 24 April 2015. The Act requires the supervisory boards of companies that are listed or subject to equal shareholder / The chairman of the Audit Committee, Hans Peter Ring, is an employee representation to define a target for the percentage of independent member and has the required expertise in the areas female executive board members. Also under the new legislation, of accountancy or auditing specified in sections 100 (5) and executive boards must set the targets for increasing the propor- 107 (4) AktG. Nomination Committee tion of women at the two management levels immediately below the executive board. Supervisory / executive boards must set time limits within which the targets are to be achieved. The time limits The Nomination Committee has four members, all of whom are must not exceed five years. The first targets must be achieved by shareholder representatives and are elected by the shareholder 30 June 2017. representatives on the Supervisory Board. The Nomination Com- The Executive Board and Supervisory Board of KION mittee’s only task is to propose new candidates for the Supervi- GROUP AG studied the new legal requirements carefully. As the sory Board to the Company’s Annual General Meeting. Accord- Supervisory Board is not planning any changes to the compo- ingly, the committee’s activities in 2015 focused on the criteria sition of the KION GROUP AG Executive Board at present, the and the selection process for finding suitable candidates to suc- target for the proportion of female Executive Board members was ceed Mr Johannes P. Huth as a member of the Supervisory set at 0 per cent and applies until 30 June 2017. Board. To this end, the Nomination Committee held a meeting The Executive Board of KION GROUP AG has set the target and different members of the committee met potential candi- for the proportion of women at 10 per cent for the first manage- dates and then adopted resolutions at meetings or by way of writ- ment level immediately below the Executive Board and at ten resolution. In accordance with the committee’s recommenda- 30 per cent for the second level of management below the tion, Mr Wolfgang Faden was appointed to the Supervisory Board Executive Board. The targets for both levels are also to be as a new shareholder representative until the Company’s next achieved by 30 June 2017. Annual General Meeting. In December 2015, following the recom- mendation of the Nomination Committee, the Supervisory Board resolved to propose to the Company’s Annual General Meeting in May 2016 that Dr Christina Reuter be elected to succeed Mr Faden as a shareholder representative on the Company’s Super- visory Board. In 2015, the members of the Nomination Committee were: Dr John Feldmann (chairman) Dr Alexander Dibelius (deputy chairman from 1 August 2015) Dr Johannes P. Huth (deputy chairman until 31 July 2015) Birgit A. Behrendt (from 1 August 2015) Jiang Kui KION GROUP AG | Annual Report 2015We keep the world moving.32 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 2015, 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 disclosed pursuant to section 15a WpHG in 2015 Buyer / seller Gordon Riske Type of transaction Share price (€) Number of shares Sale 35.90 137,000 TABLE 004 Total value (€) 4,950,610.00 Moving Forward Innovation KION GROUP AG | Annual Report 2015CORPORATE GOVERNANCE Disclosures relevant to acquisitions 33 Disclosures relevant to acquisitions, section 315 (4) HGB The disclosures relevant to acquisitions pursuant to section 315 KION GROUP AG has no rights arising from the treasury (4) HGB together with the explanatory report form an integral part shares that it holds (section 71b AktG). of the group management report. 1. Composition of subscribed capital 3. Direct or indirect shareholdings in the Company that represent more than 10 per cent of the voting rights The subscribed capital (share capital) of KION GROUP AG amounted to €98.9 million as at 31 December 2015. It is divided As far as the Company is aware, only Weichai Power directly or into 98.9 million no-par-value bearer shares. The share capital is indirectly held more than 10 per cent of the voting rights in KION fully paid up. All of the shares in the Company give rise to the GROUP AG as at 31 December 2015 and its shareholding was same rights and obligations. Each share confers one vote and 38.3 per cent. entitlement to an equal share of the profits. The rights and obliga- tions arising out of the shares are defined by legal provisions. As at 31 December 2015, the Company held 160,050 shares in – Pursuant to the German Securities Trading Act, the share- holding held by Weichai Power is deemed to belong to the treasury. The primary intention is to offer these treasury shares to following other companies: > TABLE 005 staff as part of the KION Employee Equity Programme (KEEP). 2. Restrictions on voting rights or the transfer of shares Companies and countries to which Weichai Power is deemed to belong TABLE 005 Company Registered office There are generally no restrictions with respect to voting rights or the transfer of shares in the Company. In accordance with the Shandong Heavy Industry Group Co., Ltd. legal provisions applicable to bearer shares, all of the shares in Weichai Group Holdings Limited the Company can be traded freely. The Executive Board understands that the two major share- Weichai Power Co., Ltd. Jinan, People’s Republic of China Weifang, People’s Republic of China Weifang, People’s Republic of China holders of KION GROUP AG, Superlift Holding S.à r.l. (‘Superlift’) and Weichai Power (Luxembourg) Holding S.à r.l. (‘Weichai Power’) had entered into a shareholder agreement in which they both undertook to coordinate their voting at the Annual General Weichai Power Hong Kong Inter- national Development Co., Ltd. Hong Kong, People’s Republic of China Meeting of the Company in respect of certain resolutions. Fur- Other thermore, the Executive Board understands that Superlift and People’s Republic of China Weichai Power had come to an arrangement in the shareholder agreement to grant each other a mutual right of first offer in respect of the shares held by the other shareholder, but this Registered office Beijing, People’s Republic of China arrangement expired in the course of 2014. These agreements Since the reporting date, there may have been further changes have lapsed as Superlift sold all of its shares in the Company dur- to the aforementioned shareholdings of which the Company is ing 2015. unaware. As the shares in the Company are bearer shares, the KION GROUP AG | Annual Report 2015We keep the world moving.34 Company only learns about changes to the size of shareholdings to stipulate a larger majority than a simple majority in any other if they are notifiable pursuant to the WpHG or other regulations. cases has not been exercised in the articles of incorporation. 4. Shares with special rights that confer authority to exert control over the Company The Supervisory Board is authorised in article 10 (3) of the articles of incorporation to amend the articles of incorporation provided that such amendments relate solely to the wording. There are no shares with special rights that confer the authority to 7. Authority of the Executive Board to issue or exert control over the Company. buy back shares 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 Extraordinary General Meeting on 13 June 2013 authorised the Company, in the period up to 12 June 2016, to acquire for treasury up to 10 per cent of all the shares in issue at the time of the resolution or in issue on the date the authorisation is exer- cised, whichever is the lower. Together with other treasury shares in the possession of the Company or deemed to be in its pos- There are no cases where employees hold some of the Company’s session pursuant to section 71a et seq. AktG, the treasury shares capital and do not exercise their control rights directly themselves. bought as a result of this authorisation must not exceed 6. Appointment and removal of members of the Executive Board; amendments to the articles of incorporation 10 per cent of the Company’s share capital at any time. The Com- pany may sell the purchased treasury shares through a stock exchange or by means of an offer to all shareholders. It may also sell the shares in return for a non-cash consideration, in particular in connection with the acquisition of a business, parts of a busi- ness or equity investments. In addition, the treasury shares may Members of the Company’s Executive Board are appointed and be offered to employees of the Company or of an affiliated com- removed in accordance with the provisions of sections 84 and 85 pany as part of an employee share ownership programme. The AktG and section 31 MitbestG. Pursuant to article 6 (1) of the treasury shares can also be retired. Share buyback for trading articles of incorporation of the Company, the Executive Board purposes is prohibited. The authorisation may be exercised on must have a minimum of two members. The Supervisory Board one or more occasions, for the entire amount or for partial determines the number of Executive Board members. Pursuant amounts, in pursuit of one or more aims, by the Company, by a to section 84 AktG and section 6 (3) of the Company’s articles of Group company or by third parties for the account of the Com- incorporation, the Supervisory Board may appoint a Chief Exec- pany or the account of a Group company. At the discretion of the utive Officer and a deputy. Executive Board, the shares may be purchased through the stock Section 179 (1) sentence 1 AktG requires that amendments exchange, by way of a public purchase offer made to all share- to the articles of incorporation be passed by resolution of the holders or by way of a public invitation to shareholders to tender Annual General Meeting. In accordance with article 23 of the their shares. articles of incorporation in conjunction with section 179 (2) sen- The Company again made use of this authorisation in 2015, tence 2 AktG, resolutions at the Annual General Meeting on purchasing 70,000 shares in the period 10 September to 30 Sep- amendments to the articles of incorporation are passed by simple tember 2015. During the reporting year, 73,512 of the shares majority of the votes cast and by simple majority of the share cap- acquired that were still in treasury were used as part of the KEEP ital represented in the voting unless a greater majority is specified Employee Equity Programme for the employees of the Company as a mandatory requirement under statutory provisions. The option and certain Group companies. Moving Forward Innovation KION GROUP AG | Annual Report 2015CORPORATE GOVERNANCE Disclosures relevant to acquisitions 35 On the basis of a resolution of the Company’s Annual General In accordance with the resolutions adopted by the Com- Meeting on 19 May 2014, the Executive Board is authorised, sub- pany’s Annual General Meeting on 19 May 2014, new shares and ject to the consent of the Supervisory Board, to increase the debt instruments can be issued for cash or non-cash contri- Company’s share capital by up to €9.89 million by issuing up to butions. They must be offered for subscription to existing share- 9.89 million new no-par-value ordinary bearer shares for cash holders. Pursuant to section 186 (5) AktG, the new shares can and / or non-cash contributions on one or more occasions up to also be acquired by one or more banks provided they undertake and including 18 May 2019 (2014 Authorised Capital). to offer them to existing shareholders for subscription (indirect On the basis of a resolution of the Company’s Annual General pre-emption right). However, subject to the consent of the Super- Meeting on 19 May 2014, the Executive Board is also authorised, visory Board, the Executive Board is authorised to disapply to issue, on one or more occasions until 18 May 2019, bearer some or all of the pre-emption rights of existing shareholders in and / or registered convertible bonds, warrant-linked bonds, prof- the following cases: it-sharing rights and / or income bonds with or without conversion rights, warrants, mandatory conversion requirements or option obligations, or any combinations of these instruments, which can be perpetual and / or fixed-term (also referred to jointly as ‘debt instruments’), for a total par value of up to €800 million. To enable – in order to remove fractional amounts from shareholders’ – where new shares are issued for cash during a capital pre-emption rights; increase and the price at which the new shares are issued is shares to be allocated to the holders / beneficial owners of the not significantly lower (as defined by section 186 (3) sentence convertible bonds, warrant-linked bonds, profit-sharing rights 4 AktG) than the market price for shares in the Company with and / or income bonds with conversion rights, warrants, manda- the same rights, or if debt instruments are issued for cash tory conversion requirements or option obligations issued, on the and the Executive Board reaches a view after due examina- basis of the Executive Board’s authorisation, by KION GROUP AG tion that the issue price is not significantly lower than their or a German or non-German company in which KION GROUP AG theoretical market value determined according to recognised directly or indirectly holds the majority of voting rights and capital, principles of financial mathematics (section 186 (3) sen- the share capital was conditionally increased by up to €9.89 million tence 4 AktG states that pre-emption rights can be excluded through the issue of up to 9.89 million new, no-par-value bearer provided the capital increase is less than 10 per cent of shares in KION GROUP AG (2014 Conditional Capital). Restrictions were placed on the issuance of new shares and debt instruments in accordance with the resolutions adopted by share capital); – where necessary in order to grant the same pre-emption rights to holders / beneficial owners of conversion rights or the Company’s Annual General Meeting on 19 May 2014. warrants and / or holders / beneficial owners of mandatory Together, the proportion of the Company’s share capital attribut- convertible bonds issued or to be issued by KION GROUP AG able to the shares issued on the basis of the 2014 Authorised or a company in which it has a majority shareholding as those Capital and the total number of shares issued to service the debt to which they would be entitled after exercising conversion instruments issued on the basis of the aforementioned authorisa- tion must not exceed 10 per cent of the Company’s share capital, either on the effective date of the authorisation or the date on 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- which it is exercised. This 10 per cent limit includes shares that tion of a business, parts of a business or equity investments are issued during the term of the authorisation based on the 2014 or if debt instruments are issued in return for non-cash capi- Authorised Capital, those that are issued, are required to be tal contributions and the exclusion of pre-emption rights is in issued or may be issued from the 2014 Conditional Capital to ser- the interest of the Company. vice debt instruments, or shares that have been or will be issued on the basis of a different authorisation, or are still required to be issued to service a debt instrument or may be issued to do so. KION GROUP AG | Annual Report 2015We keep the world moving.36 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 Group companies. This exclusion of 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 pre-emption rights is limited to a maximum of 5 per cent of share In the event of a change of control resulting from a takeover bid, capital, both on the effective date of this authorisation and at certain consequences are set out in the following contracts con- the time it is exercised. cluded between Group companies of KION GROUP AG and third When profit-sharing rights and / or income bonds with no parties (effective through 31 December 2015): 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 – Covenant agreement dated 14 February 2013 in connection with the €450,000,000, 6.75 per cent senior secured notes consent of the Supervisory Board, to exclude all pre-emption maturing in 2020 issued by KION Finance S.A., concluded rights of shareholders, provided these profit-sharing rights and / or between Deutsche Trustee Company Limited as trustee, income bonds have a debt-like structure and do not give rise to KION Finance S.A. and KION Group GmbH (now KION Mate- rights to membership of the Company or entitle the holder to a rial Handling GmbH). share of the proceeds of any liquidation and the coupon rate is not based on levels of net income, distributable profit or divi- In the event that a third party (with the exception of KKR and dends. In this case, the coupon rate and issue price of the prof- Goldman Sachs, companies affiliated with them or funds or it-sharing rights and / or income bonds must also correspond to limited partnerships / partnerships owned by them or that are the market terms and conditions for comparable forms of finance advised or managed by them) acquires beneficial ownership of prevailing at the time they are issued. more than 50 per cent of all shares in KION GROUP AG, KION Subject to the consent of the Supervisory Board, the Execu- GROUP AG will be obliged to submit an offer to acquire the tive Board is authorised to determine the further details of the aforementioned debt instruments at a price of 101 per cent of capital increase relating to the 2014 Authorised Capital and its their nominal value. This offer must remain valid for a minimum of implementation, particularly the rights conferred by the shares 30 days from the date of the change of control. and their terms and conditions of issue. In relation to debt instru- ments, it is authorised to determine further details about their issuance, terms of issue and the supply of shares or to determine – Senior facility agreement dated 23 December 2006 (and amended on several occasions thereafter), concluded them by mutual consent with the governing bodies of any major- between KION Group GmbH (now named KION Material ity-held company that is issuing the debt instruments. Handling GmbH) and, among others, the London branch of UniCredit Bank AG. Moving Forward Innovation KION GROUP AG | Annual Report 2015CORPORATE GOVERNANCE Disclosures relevant to acquisitions 37 In the event that a third party (with the exception of KKR and 9. Compensation agreements that the 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 Company has signed with the Executive Board members or employees that will be triggered in the event of a takeover bid facilities drawn down would be immediately repayable and any No such agreements have been concluded between the Com- that had not been drawn down would be automatically cancelled. pany and its current Executive Board members or employees. – Senior facilities agreement dated 28 October 2015, con- cluded between KION GROUP AG and, among others, the London branch of UniCredit Bank AG. In the event that a person, companies affiliated with this person, or persons acting in concert within the meaning of section 2 (5) German Securities Acquisition and Takeover Act (WpÜG) acquire(s) control over more than 50 per cent of the Company’s voting shares, the lenders may demand that the loans drawn down be repaid and may cancel the loan facilities under the senior facilities agreement. On 15 February 2016, KION GROUP AG used funds from a syndicated loan agreement concluded on 28 October 2015 in order to repay both the corporate bond of €450.0 million and the remaining liabilities under the syndicated loan of 23 December 2006. This makes the provisions in relation to the eventuality of a change of control redundant. – KION Material Handling GmbH has entered into an agree- ment with Volkswagen AG for the supply of internal combus- tion engines. This agreement includes a provision under which either party may terminate the agreement without notice if there is a change in ownership involving more than 50 per cent of the shares in either case. KION GROUP AG | Annual Report 2015We keep the world moving.38 Remuneration report This remuneration report forms an integral part of the group man- Essential features of the Executive Board agement report for KION GROUP AG. In accordance with statu- remuneration system tory requirements and the recommendations of the German Cor- porate Governance Code as amended 5 May 2015 (DCGK), the The remuneration of the Executive Board of KION GROUP AG is report explains the main features and structure of the remunera- determined in accordance with the requirements of the German tion system used for the Executive Board and Supervisory Board Stock Corporation Act and the DCGK and is focused on the of KION GROUP AG and also discloses the remuneration of the Company’s long-term growth. It is determined so as to reflect the individual members of the Executive Board and Supervisory size and complexity of the KION Group, its business and financial Board for the work that they carried out on behalf of the Company situation, its performance and future prospects, the normal and its subsidiaries in 2015. The report also reflects the require- amount and structure of executive board remuneration in compa- ments of German accounting standard (GAS) 17. rable companies and the internal salary structure. The Supervi- KION GROUP AG considers that transparency and clarity sory Board also takes into account the relationship between the surrounding both the remuneration system itself and the remuner- Executive Board remuneration and the remuneration paid to sen- ation of the individual members of the Executive Board and Super- ior managers and the German workforce of the Company as a visory Board are fundamental to good corporate governance. whole, including changes over the course of time. To this end, the EXECUTIVE BOARD REMUNERATION Remuneration system Supervisory Board has decided how the relevant benchmarks are to be defined. Other criteria used to determine remuneration are the individual responsibilities and personal performance of each member of the Executive Board. To review the Executive Board’s remuneration, the Supervisory Board draws on remuner- ation comparisons, particularly comparisons with MDAX compa- nies, and on recommendations from an external remuneration consultant who is independent both of the Executive Board and The Supervisory Board of KION GROUP AG is responsible for set- of the KION Group. The Supervisory Board regularly reviews the ting and regularly reviewing the total pay of the individual mem- structure and appropriateness of Executive Board remuneration. bers of the Executive Board. According to the rules of procedure The total remuneration of the Executive Board comprises a for the Supervisory Board, the Executive Committee prepares all non-performance-related salary and non-performance-related Supervisory Board resolutions pertaining to remuneration. non-cash benefits, performance-related (variable) remuneration The remuneration system described below has applied to the and pension entitlements. When setting the variable remunera- members of the KION GROUP AG Executive Board since 29 June tion, the emphasis is on creating a measurement basis covering a 2013, the day after KION GROUP AG’s successful IPO and listing number of years, thus providing the members of the Executive on the Frankfurt Stock Exchange. It was approved by the Annual Board with an incentive to contribute to the sustained and long- General Meeting of KION GROUP AG on 19 May 2014 with a term growth of the Company. The system specifically allows for majority of 98.77 per cent. The Supervisory Board of the former possible positive and negative developments. KION Holding 1 GmbH had approved this system by adopting a The regular cash remuneration for a particular year, consisting of resolution at its meeting on 25 April 2013 in connection with the a non-performance-related fixed annual salary and performance-re- Company’s conversion into a public limited company. This reso- lated (variable) remuneration, has a heavy emphasis on performance. lution was based on the recommendation of what was then the If the targets set by the Supervisory Board are completely missed, Human Resources Committee. only the fixed salary is paid. Taking account of the cap on one-year and multiple-year variable remuneration, the cash remuneration con- sists of the following components in the event that the targets are significantly exceeded and the share price goes up sufficiently: Moving Forward Innovation KION GROUP AG | Annual Report 2015CORPORATE GOVERNANCE Remuneration report 39 – 15 per cent fixed annual salary, – 24 to 27 per cent one-year variable remuneration, – 58 to 61 per cent multiple-year variable remuneration. Quek’s designated place of work is Xiamen or until his service contract with KION GROUP AG ends. Performance-related remuneration The variable components of the cash remuneration make up no The performance-related remuneration components consist of a more than 85 per cent, of which approximately two-thirds are variable remuneration component measured over one year multiple-year components. Both the one-year and the multi- (short-term incentive) and a variable remuneration component ple-year components are linked to key performance indicators measured over several years in the form of a rolling performance used by the KION Group to measure its success. The remunera- share plan with a three-year term (long-term incentive). tion system is thus closely tied to the success of the Company and, with a high proportion of multiple-year variable remuneration, has a One-year variable remuneration long-term focus aimed at promoting the KION Group’s growth. The pension entitlements consist of entitlements in respect of The one-year variable remuneration is a remuneration compo- retirement, invalidity and surviving dependants’ benefits. nent linked to the business profitability and productivity of the KION Group in the relevant financial year. Its amount is deter- Non-performance-related remuneration mined by the achievement of the following targets: 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 in which the Executive Board service contract ends. The Super- visory Board reviews the basic remuneration at regular intervals weighting of 30 per cent, – earnings before interest, tax and amortisation (EBITA), – return on capital employed (ROCE), weighting of 30 per cent, – revenue, weighting of 20 per cent and – net debt, weighting of 20 per cent. and makes adjustments if appropriate. The target values for the financial components are derived from The additional benefits essentially comprise use of a com- the annual budget and specified by the Supervisory Board. pany car and the payment of premiums for accident insurance No bonus is paid if target achievement is 75 per cent or less with benefits at a typical market level. (lower target limit). In cases where the targets are significantly Additional special benefits have been agreed for Mr Quek exceeded, the bonus can be doubled at most (capped at because he has been sent from Singapore to China on foreign 200 per cent). If the targets derived from the annual budget are assignment. achieved in full, target achievement is 100 per cent. The target Under this arrangement, Mr Quek’s remuneration is struc- achievement levels for the weighted targets (EBITA, ROCE, reve- tured as if he were liable for taxes and social security contribu- nue and net debt) are added together to give the total target tions in Singapore. KION GROUP AG pays the taxes and social achievement. security contributions that Mr Quek incurs in China and Germany The individual performance of the Executive Board members is over and above the taxes that would theoretically apply in Singa- assessed by the Supervisory Board, which applies a discretionary pore. In 2015, this additional amount totalled €1,167 thousand performance multiple with a factor of between 0.8 and 1.2. When (2014: €404 thousand). The additional benefits also agreed with deciding what factor to apply, the Supervisory Board looks at the Mr Quek include the cost of trips home to Singapore for him and extent to which the Executive Board members have achieved the his family, a company car, rental payments in Xiamen, China, and individual targets set by the Supervisory Board at the start of the private health insurance. In 2015, the additional benefits for Mr year. This factor enables the Supervisory Board to increase or Quek amounted to a total of €158 thousand (2014: €108 thou- reduce the bonus, calculated on the basis of the total target sand). These additional benefits will be granted for as long as Mr achievement for the financial targets derived from the budget, by KION GROUP AG | Annual Report 2015We keep the world moving.40 a maximum of 20 per cent depending on the assessment of indi- shares (average price over the preceding 60 trading days) at the vidual performance. The one-year variable remuneration is capped end of the performance period. at 200 per cent of the contractual target bonus and is paid after Executive Board members’ individual performance is also the Annual General Meeting relating to the year in question. taken into account in the multiple-year variable remuneration. At In the event that an Executive Board member is not entitled the start of the performance period, the Supervisory Board to remuneration for the entire year on which the calculation is defines individual targets for the three-year period. Depending on based, the remuneration is reduced pro rata temporis. achievement of these targets, the Supervisory Board can apply a discretionary factor to make a final adjustment to the calculation Multiple-year variable remuneration of the amount to be paid out at the end of the performance period by plus or minus 20 per cent, although the maximum payment For the members of the Executive Board, multiple-year variable may not exceed 200 per cent of the allocation value. remuneration has been agreed in the form of a performance share The plan is a cash-settled long-term incentive plan that does plan. A very similar plan is offered to the Group’s senior managers. not include the right to receive any actual shares. Under the The basis of measurement has been defined as the total share- requirements of German accounting standard (GAS) 17 and IFRS 2, holder return (TSR) for KION shares compared with the STOXX® the total expense arising from share-based payments and the fair Europe Total Market Index (TMI) Industrial Engineering Index and value of the performance share plan on the date of granting must return on capital employed (ROCE). Each has a weighting of be disclosed. > TABLE 006 50 per cent. The annual tranches granted under the plan have a term (performance period) of three years and are paid at the end The total expense in 2015 amounted to €11,203 thousand (2014: of the term, provided the defined targets have been achieved. €4,782 thousand). This does not include an amount of €531 thou- At the start of a performance period, a conditional entitle- sand already recognised as an expense in 2014 in connection ment to a certain target number of performance shares is granted. with the termination agreements of Mr Knoef and Mr Maurer. This preliminary number is calculated by dividing the allocation value set out (in euros) in the service contract for the particular Upper limits on remuneration Executive Board member by the fair value of one performance share at the time of grant. At the end of the performance period, In accordance with the DCGK, remuneration is subject to upper the preliminary number of performance shares is adjusted limits on the amounts payable, both overall and also in terms of depending on achievement of the two targets (relative TSR and the variable components. The upper limit on the total cash remu- ROCE) to give the final number of performance shares. neration to be paid, consisting of the fixed annual salary plus In respect of the ROCE target, there is no entitlement if target the one-year and multiple-year variable remuneration, equals achievement is 75 per cent or less. If the target is significantly 1.7 times the target remuneration (2014: 1.7 times) – excluding the exceeded (target achievement of 135 per cent or more), the enti- non-performance-related non-cash remuneration and other ben- tlement is capped at 150 per cent. Regarding the relative TSR efits paid in that financial year. Both the one-year and multiple- target, there is no entitlement if KION shares do not outperform year variable remuneration are capped at 200 per cent of the the STOXX® Europe TMI Industrial Engineering Index. If the KION target value. shares outperform this index by 15 per cent or more, the entitle- ment is capped at 150 per cent. If KION shares outperform the Pension entitlements STOXX® Europe TMI Industrial Engineering index by 10 per cent and the ROCE targets defined each year on the basis of the KION GROUP AG grants its Executive Board members direct budget are achieved, total target achievement will be 100 per cent. entitlement to a company pension plan consisting of retirement, The amount paid for each tranche is determined by the final invalidity and surviving dependants’ benefits. number of performance shares multiplied by the price of KION Moving Forward Innovation KION GROUP AG | Annual Report 2015CORPORATE GOVERNANCE Remuneration report 41 Performance Share Plan 2013 TABLE 006 Fair value of the performance share plan on the date of grant (in thousand €) Number of performance shares granted 1 Fair value per performance share on date of grant (in €) Expense for share-based remuneration in 2014 (in thousand €) Expense for share-based remuneration in 2015 2 (in thousand €) 1,500 1,000 1,000 830 1,000 5,330 73,710 49,140 49,140 40,786 49,140 261,916 20.35 20.35 20.35 20.35 20.35 860 573 573 476 573 3,055 1,790 613 613 1,821 1,194 6,031 Gordon Riske Bert-Jan Knoef 3 Theodor Maurer 3 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. 2 The amount shown for Mr Quek includes a flat-rate allowance of 50 per cent as part of a tax equalisation agreement. The amounts for Mr Knoef and Mr Maurer include the expenses recognised in the 2014 figure in connection with their departure. 3 Resigned from office on 14 January 2015; Executive Board service contract ended on 31 March 2015 Performance Share Plan 2014 Fair value of the performance share plan on the date of grant (in thousand €) Number of performance shares granted 1 Fair value per performance share on date of grant (in €) Expense for share-based remuneration in 2014 (in thousand €) Expense for share-based remuneration in 2015 2 (in thousand €) 1,500 1,000 1,000 830 1,000 5,330 54,427 36,284 36,284 30,116 36,284 193,395 27.56 27.56 27.56 27.56 27.56 486 324 324 269 324 1,727 1,095 335 335 1,044 730 3,539 Gordon Riske Bert-Jan Knoef 3 Theodor Maurer 3 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. 2 The amount shown for Mr Quek includes a flat-rate allowance of 50 per cent as part of a tax equalisation agreement. The amounts for Mr Knoef and Mr Maurer include the expenses recognised in the 2014 figure in connection with their departure. 3 Resigned from office on 14 January 2015; Executive Board service contract ended on 31 March 2015 KION GROUP AG | Annual Report 2015We keep the world moving.42 Performance Share Plan 2015 TABLE 006 Fair value of the performance share plan on the date of grant (in thousand €) Number of performance shares granted 1 Fair value per performance share on date of grant (in €) Expense for share- based remuneration in 2015 2 (in thousand €) 1,500 806 83 83 830 1,000 4,302 53,210 28,576 2,956 2,956 29,443 35,474 152,615 28.19 28.19 28.19 28.19 28.19 28.19 696 193 116 116 578 464 2,164 Gordon Riske Dr Eike Böhm Bert-Jan Knoef 3 Theodor Maurer 3 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. 2 The amount shown for Mr Quek includes a flat-rate allowance of 50 per cent as part of a tax equalisation agreement. The amounts for Mr Knoef and Mr Maurer include the expenses recognised in the 2014 figure in connection with their departure. 3 Resigned from office on 14 January 2015; Executive Board service contract ended on 31 March 2015. The fair value of the performance share plan on the date of grant was recognised pro rata temporis up to 31 March 2015. The Chief Executive Officer has a defined benefit entitlement that event occurs. If higher interest is generated by investing the pension was granted in his original service contract and was transferred to account, it will be credited to the pension account when an insured his Executive Board service contract when the Company changed event occurs (surplus). The standard retirement age for the statutory its legal form. The amount of the entitlement is dependent on the pension applies. Executive Board members are entitled to early number of years of service and amounts to a maximum of payment of the pension no earlier than their 62nd birthday. In the 50 per cent of the most recent fixed annual salary awarded in the event of invalidity or death while the Executive Board member has original service contract after the end of the tenth year of service. an active service contract, the contributions that would have been The present value of the previous defined benefit plan for the made until the age of 60 are added to the pension account, although ordinary members of the Executive Board was transferred as a only a maximum of ten annual contributions will be added. When an starting contribution for a new defined contribution pension plan insured event occurs, the pension is paid as a lump sum or, follow- when the Company changed its legal form. The new plan is struc- ing a written request, in ten annual instalments. tured as a cash balance plan and is also applied to new Executive Board members. Termination benefits For each of the other ordinary members of the Executive Board, a fixed annual contribution of €150 thousand (€124.5 thousand for In line with the DCGK, all Executive Board service contracts pro- Mr Quek) is paid into their pension accounts for the duration of the vide for a severance payment equivalent to no more than two member’s period of service on the Executive Board. Interest is paid years’ annual remuneration payable in the event of the contract on the pension account at the prevailing statutory guaranteed return being terminated prematurely without good cause. The amount rate for the life insurance industry (applicable maximum interest rate of annual remuneration is defined as fixed salary plus the variable for the calculation of the actuarial reserves of life insurers pursuant remuneration elements, assuming 100 per cent target achieve- to section 2 (1) German Regulation on the Principles Underlying the ment and excluding non-cash benefits and other additional Calculation of the Premium Reserve (DeckRV)) until an insured benefits, for the last full financial year before the end of the Exec- Moving Forward Innovation KION GROUP AG | Annual Report 2015CORPORATE GOVERNANCE Remuneration report 43 utive Board service contract. If the Executive Board service con- tract was due to end within two years, the severance payment is calculated pro rata temporis. If a service contract is terminated for Remuneration for members of the Executive Board in 2015 good cause for which the Executive Board member concerned is In accordance with the recommendations of the DCGK, as responsible, no payments are made to the Executive Board mem- amended on 5 May 2015, the remuneration of Executive Board ber in question. The Company does not have any commitments members is presented in two separate tables. Firstly, the benefits for the payment of benefits in the event of a premature termination granted for the year under review, including the additional bene- of Executive Board contracts following a change of control. fits and – in the case of variable remuneration components – the Executive Board members are subject to a post-contractual maximum and minimum remuneration achievable are shown. non-compete agreement of one year. In return, the Company > TABLE 007 pays the Executive Board member compensation for the duration of the non-compete agreement amounting to 100 per cent of his Secondly, > TABLE 008 shows the total remuneration allocated / final fixed salary. Other income of the Executive Board member is earned, comprising fixed remuneration, short-term variable remu- offset against the compensation. neration and long-term variable remuneration, broken down by In the event that Mr Riske’s appointment is not extended for reference year. reasons for which he is not responsible and he has not reached the standard retirement age for the statutory pension or in the event that Mr Riske resigns for good cause before the end of his appointment Benefits granted pursuant to the DCGK or suffers permanent incapacity after his period of service as a result of sickness, he will receive transitional benefits of €276 thousand per The total remuneration granted to Executive Board members for annum on the basis of previous contracts. During his current term of 2015 was €9,535 thousand (minimum: €3,194 thousand, maxi- office, the amount of the transitional benefits will rise by €12 thou- mum: €15,877 thousand) (2014: €11,840 thousand). Of this sand each year up to a maximum amount of €300 thousand per amount, €2,098 thousand (2014: €2,840 thousand) was attribut- annum. Severance payments in the event of early termination of his able to fixed non-performance-related remuneration compo- appointment without good cause, compensation for the post-con- nents, €6,372 thousand (minimum: €31 thousand, maximum: tractual non-compete agreement, pension benefits that Mr Riske €12,713 thousand) (2014: €7,911 thousand) to variable one-year receives due to his previous work for other employers and income and multiple-year performance-related remuneration compo- from other use of his working capacity (with the exception of remu- nents, €211 thousand (2014: €175 thousand) to non-perfor- neration for work as a member of a supervisory or advisory board or mance-related non-cash remuneration and other non-perfor- a board of directors) will be offset against these transitional benefits. mance-related benefits, and €854 thousand (2014: €914 If an Executive Board member suffers temporary incapacity, thousand) to the pension expense. The figure shown for one-year he will receive his full fixed salary for a maximum period of six variable remuneration is based on a target achievement rate of months plus the one-year variable remuneration. In the event of 100 per cent (minimum: 0 per cent for target achievement of temporary incapacity for a further six months, the Executive 75 per cent or less, maximum: 200 per cent for target achieve- Board member will receive 80 per cent of his fixed salary, but only ment of 135 per cent or more). The figure shown for multiple-year up to a point at which the service contract is terminated. variable remuneration is the fair value of the performance share If an Executive Board member ceases to be employed by the plans at the date of grant, representing full target achievement Company as a result of death, the Executive Board member’s (minimum: zero payment, maximum: 200 per cent of the contrac- family will be entitled to the fixed monthly remuneration for the tual allocation value). month in which the service contract ends and for the three sub- The additional benefits were measured at the value calcu- sequent months, but only up to the point at which the service lated for tax purposes. > TABLE 007 contract would otherwise have come to an end. KION GROUP AG | Annual Report 2015We keep the world moving.44 Benefits granted in 2015 Gordon Riske CEO of KION GROUP AG Dr Eike Böhm CTO of KION GROUP AG Since 1 August 2015 Bert-Jan Knoef Member of KION GROUP AG Executive Board Until 14 January 2015 2015 (min.) 2015 (max.) 2014 2015 (min.) 2015 (max.) 2015 2015 (min.) 2015 (max.) 800 21 821 0 0 0 821 622 1,443 800 21 821 1,400 3,000 3,000 5,221 622 5,843 in thousand € Non-perfor- mance-related components Fixed remuneration Non-cash remuneration and other benefits 1 Total Short-term incentive One-year variable remuneration 2 , 3 Performance- related components Share-based long-term incentive Multiple-year variable remuneration 2 , 4 Performance share plan (1 Jan 2014 – 31 Dec 2016) Performance share plan (1 Jan 2015 – 31 Dec 2017) Total Pension expense 5 Total remuneration Reconciliation to total remuneration as defined by section 314 (1) no. 6a HGB in conjunction with GAS 17 Minus the one-year variable remuneration granted Plus the expected one-year variable remuneration (allocation) Minus the pension expense Plus the adjustment of the one-year variable remunera- tion for the previous year Total remuneration as defined by section 314 (1) no. 6a HGB in conjunction with GAS 17 2014 800 19 819 700 2015 800 21 821 700 1,500 1,500 1,500 3,019 510 3,529 1,500 3,021 622 3,643 – 700 – 700 700 – 510 795 – 622 53 159 3,072 3,275 1 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 50 per cent (2014: 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 for target achievement of 75 per cent or less, maximum: 200 per cent for target achievement of 135 per cent or more). The value for Mr Knoef and Mr Maurer is the value defined in their termination agreements. 4 Fair value on the date of grant 5 Service cost (IAS) Moving Forward Innovation TABLE 007 19 1 20 16 26 26 61 4 65 19 1 20 16 0 0 35 4 39 – – – – – – – – – – – – – – – 2015 208 14 223 167 806 806 1,195 1,195 – 167 189 1,217 208 14 223 0 0 0 223 223 208 14 223 333 1,611 2,167 2,167 1,611 1,000 2014 500 19 519 400 1,000 1,919 102 2,021 400 – 102 71 1,990 19 1 20 16 13 13 48 4 52 16 – 4 9 57 – 400 – 16 KION GROUP AG | Annual Report 2015 CORPORATE GOVERNANCE Remuneration report 45 Benefits granted in 2015 TABLE 007 Gordon Riske CEO of KION GROUP AG Dr Eike Böhm CTO of KION GROUP AG Since 1 August 2015 Bert-Jan Knoef Member of KION GROUP AG Executive Board Until 14 January 2015 800 21 821 0 0 0 821 622 1,443 800 21 821 1,400 3,000 3,000 5,221 622 5,843 in thousand € Non-perfor- mance-related components Short-term incentive One-year variable remuneration 2 , 3 Performance- related components Share-based long-term incentive 1,500 1,500 (1 Jan 2014 – 31 Dec 2016) 1,500 Fixed remuneration Non-cash remuneration and other benefits 1 Total Multiple-year variable remuneration 2 , 4 Performance share plan Performance share plan (1 Jan 2015 – 31 Dec 2017) Total Pension expense 5 Total remuneration Minus the one-year variable remuneration granted Plus the expected one-year variable remuneration (allocation) Minus the pension expense Plus the adjustment of the one-year variable remunera- tion for the previous year Total remuneration as defined by section 314 (1) no. 6a HGB in conjunction with GAS 17 2014 800 19 819 700 3,019 510 3,529 2015 800 21 821 700 1,500 3,021 622 3,643 – 700 – 700 700 – 510 795 – 622 53 159 3,072 3,275 Reconciliation to total remuneration as defined by section 314 (1) no. 6a HGB in conjunction with GAS 17 1 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 50 per cent (2014: 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 for target achievement of 75 per cent or less, maximum: 200 per cent for target achievement of 135 per cent or more). The value for Mr Knoef and Mr Maurer is the value defined in their termination agreements. 4 Fair value on the date of grant 5 Service cost (IAS) 2015 (min.) 2015 (max.) 2014 – – – – – – – – – – – – – – – 2015 208 14 223 167 806 806 1,195 1,195 – 167 189 1,217 2015 (min.) 2015 (max.) 208 14 223 0 0 0 223 223 208 14 223 333 2014 500 19 519 400 1,611 1,000 1,000 1,919 102 2,021 1,611 2,167 2,167 2015 2015 (min.) 2015 (max.) 19 1 20 16 13 13 48 4 52 19 1 20 16 0 0 35 4 39 19 1 20 16 26 26 61 4 65 – 400 – 16 400 – 102 71 1,990 16 – 4 9 57 KION GROUP AG | Annual Report 2015We keep the world moving. 46 Benefits granted in 2015 (continued) Theodor Maurer Member of KION GROUP AG Executive Board Until 14 January 2015 Ching Pong Quek Member of KION GROUP AG Executive Board / Chief Asia Pacific Officer Dr Thomas Toepfer CFO of KION GROUP AG in thousand € Non-perfor- mance-related components Fixed remuneration Non-cash remuneration and other benefits 1 Total Short-term incentive One-year variable remuneration 2 , 3 Performance- related components Share-based long-term incentive Multiple-year variable remuneration 2 , 4 Performance share plan (1 Jan 2014 – 31 Dec 2016) Performance share plan (1 Jan 2015 – 31 Dec 2017) Total Pension expense 5 Total remuneration Reconciliation to total remuneration as defined by section 314 (1) no. 6a HGB in conjunction with GAS 17 2014 500 18 518 400 1,000 1,000 1,918 104 2,022 2015 2015 (min.) 2015 (max.) 2015 (min.) 2015 (max.) 2015 (min.) 2015 (max.) 19 1 20 16 13 13 48 4 52 19 1 20 16 0 0 35 4 39 19 1 20 16 26 26 61 4 65 Minus the one-year variable remuneration granted Plus the expected one-year variable remuneration (allocation) Minus the pension expense Plus the adjustment of the one-year variable remunera- tion for the previous year Total remuneration as defined by section 314 (1) no. 6a HGB in conjunction with GAS 17 – 400 – 16 – 432 – 498 – 400 – 400 400 – 104 53 1,970 16 – 4 9 57 432 – 97 566 – 107 400 – 101 455 – 117 109 195 32 91 2,268 2,716 1,944 2,062 1 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 50 per cent (2014: 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 for target achievement of 75 per cent or less, maximum: 200 per cent for target achievement of 135 per cent or more). The value for Mr Knoef and Mr Maurer is the value defined in their termination agreements. 4 Fair value on the date of grant 5 Service cost (IAS) Moving Forward Innovation 2014 540 108 648 432 1,079 2,158 97 2,255 2015 552 158 710 498 1,245 2,453 107 2,560 552 158 710 0 0 0 710 107 817 552 158 710 996 2,490 4,196 107 4,303 2014 500 12 512 400 1,000 1,912 101 2,013 2015 500 17 517 400 1,000 1,917 117 2,034 1,079 1,245 2,490 1,000 1,000 2,000 TABLE 007 500 17 517 800 2,000 3,317 117 3,434 500 17 517 0 0 0 517 117 634 KION GROUP AG | Annual Report 2015 CORPORATE GOVERNANCE Remuneration report 47 Benefits granted in 2015 (continued) TABLE 007 Ching Pong Quek Member of KION GROUP AG Executive Board / Chief Asia Pacific Officer Dr Thomas Toepfer CFO of KION GROUP AG 2014 540 108 648 432 2015 552 158 710 498 1,079 1,245 1,079 2,158 97 2,255 1,245 2,453 107 2,560 2015 (min.) 2015 (max.) 552 158 710 0 0 0 710 107 817 552 158 710 996 2014 500 12 512 400 2015 500 17 517 400 2,490 1,000 1,000 1,000 1,912 101 2,013 2,490 4,196 107 4,303 1,000 1,917 117 2,034 2015 (min.) 2015 (max.) 500 17 517 0 0 0 517 117 634 500 17 517 800 2,000 2,000 3,317 117 3,434 – 400 – 16 – 432 – 498 – 400 – 400 432 – 97 566 – 107 400 – 101 455 – 117 109 195 32 91 2,268 2,716 1,944 2,062 Theodor Maurer Member of KION GROUP AG Executive Board Until 14 January 2015 2015 2015 (min.) 2015 (max.) 19 1 20 16 0 0 35 4 39 19 1 20 16 26 26 61 4 65 in thousand € Non-perfor- mance-related components Short-term One-year variable incentive remuneration 2 , 3 Performance- related components Share-based long-term incentive Reconciliation to total remuneration as defined by section 314 (1) no. 6a HGB in conjunction with GAS 17 Fixed remuneration Non-cash remuneration and other benefits 1 Total Multiple-year variable remuneration 2 , 4 Performance share plan (1 Jan 2014 – 31 Dec 2016) Performance share plan (1 Jan 2015 – 31 Dec 2017) Total Pension expense 5 Total remuneration Minus the one-year variable remuneration granted Plus the expected one-year variable remuneration (allocation) Minus the pension expense Plus the adjustment of the one-year variable remunera- tion for the previous year Total remuneration as defined by section 314 (1) no. 6a HGB in conjunction with GAS 17 2014 500 18 518 400 1,000 1,000 1,918 104 2,022 400 – 104 53 1,970 19 1 20 16 13 13 48 4 52 16 – 4 9 57 1 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 50 per cent (2014: 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 for target achievement of 75 per cent or less, maximum: 200 per cent for target achievement of 135 per cent or more). The value for Mr Knoef and Mr Maurer is the value defined in their termination agreements. 4 Fair value on the date of grant 5 Service cost (IAS) KION GROUP AG | Annual Report 2015We keep the world moving. 48 Allocation pursuant to the DCGK The figure shown for one-year variable remuneration is based on a preliminary total target achievement rate of about The total remuneration allocated to / earned by Executive Board 114 per cent calculated using preliminary earnings figures at the members for 2015 was €15,199 thousand (2014: €8,156 thou- beginning of 2016. In departure from this, the value for Mr Knoef sand). Of this amount, €2,098 thousand (2014: €2,840 thou- and Mr Maurer was the value defined in their termination agree- sand) was attributable to fixed non-performance-related remu- ments. This preliminary variable remuneration for each Execu- neration com ponents, €12,036 thousand (2014: €4,227 tive Board member is also subject to adjustment by the Super- thousand) to variable one-year and multiple-year perfor- visory Board in line with the individual performance of the mance-related remuneration components, €211 thousand Executive Board member. This adjustment may vary by plus or (2014: €175 thousand) to non-performance-related non-cash minus 20 per cent of the variable remuneration. remuneration and other non-performance-related benefits, and As part of the multiple-year remuneration, the first pay- €854 thousand (2014: €914 thousand) to the pension expense. ment from the 2013 tranche of the performance share plan will Allocation in 2015 Gordon Riske Dr Eike Böhm Bert-Jan Knoef Theodor Maurer Ching Pong Quek Dr Thomas Toepfer CEO of KION GROUP AG CTO of KION GROUP AG in thousand € Non-performance- related components Fixed remuneration Non-cash remuneration and other benefits 1 Total Short-term incentive One-year variable remuneration 2 Performance- related components Share-based long-term incentive Multiple-year variable remuneration Performance share plan (29 Jun 2013 – 31 Dec 2015) IPO bonus tranche 1 (29 Jun 2013 – 29 Jun 2014) IPO bonus tranche 2 (29 Jun 2013 – 31 Dec 2014) Total Pension expense 3 Total remuneration 2014 800 19 819 859 0 1,677 510 2,187 2015 800 21 821 795 3,000 3,000 4,616 622 5,238 Since 1 August 2015 2014 – – – – – – – – – – – 2015 208 14 223 189 0 412 412 1 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 2014 is the actual amount paid out, which differs from the estimated value listed in the 2014 consolidated financial statements. 3 Service cost (IAS) Moving Forward Innovation Member of KION GROUP AG Member of KION GROUP AG Executive Board Executive Board Until 14 January 2015 Until 14 January 2015 Member of KION GROUP AG Chief Asia Pacific Officer Executive Board / CFO of KION GROUP AG 2014 500 19 519 409 0 928 102 1,029 2015 19 1 20 16 1,255 1,255 1,290 4 1,294 2014 500 18 518 409 0 926 104 1,031 2015 19 1 20 16 1,255 1,255 1,290 4 1,294 2015 552 158 710 566 2014 540 108 648 626 0 1,274 97 1,371 3,766 107 3,873 2014 500 12 512 491 755 679 2,437 101 2,538 2,490 1,434 2,000 2,490 2,000 TABLE 008 2015 500 17 517 455 2,971 117 3,088 KION GROUP AG | Annual Report 2015 CORPORATE GOVERNANCE Remuneration report 49 be made in spring 2016 on the basis of the achievement of the The total payments made to former members of the Executive long-term targets that were defined in 2013 at the start of the Board in 2015 in connection with the termination of their Executive performance period. The value shown for 2015 is also calcu- Board service contracts amounted to €8,423 thousand. An appro- lated on the basis of a preliminary total target achievement rate priate provision was recognised for these payments in 2014. of 122 per cent and is subject to the performance-based These payments consisted of a non-performance-related salary adjustment by a discretionary performance multiple made by and non-performance-related non-cash benefits, performance- the Supervisory Board for individual Executive Board mem- related remuneration and pension entitlements. bers. As is the case for the one-year variable remuneration, Mr Knoef’s total amount of €4,381 thousand breaks down this performance-based adjustment may vary by plus or minus into a non-performance-related component of €4,031 thousand, 20 per cent. a performance-related component without a long-term incentive The additional benefits were measured at the value calcu- of €84 thousand, a performance-related component with a long- lated for tax purposes. > TABLE 008 term incentive – for the 2013 tranche based on a preliminary Allocation in 2015 in thousand € Non-performance- related components Short-term incentive One-year variable remuneration 2 Performance- related components Share-based long-term incentive CEO of KION GROUP AG CTO of KION GROUP AG Since 1 August 2015 2014 Fixed remuneration Non-cash remuneration and other benefits 1 Total Multiple-year variable remuneration Performance share plan (29 Jun 2013 – 31 Dec 2015) IPO bonus tranche 1 (29 Jun 2013 – 29 Jun 2014) IPO bonus tranche 2 (29 Jun 2013 – 31 Dec 2014) Total Pension expense 3 Total remuneration 2014 800 19 819 859 0 1,677 510 2,187 2015 800 21 821 795 3,000 3,000 4,616 622 5,238 – – – – – – – – – – – 2015 208 14 223 189 0 412 412 1 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 2014 is the actual amount paid out, which differs from the estimated value listed in the 2014 consolidated financial statements. 3 Service cost (IAS) Gordon Riske Dr Eike Böhm Bert-Jan Knoef Theodor Maurer Ching Pong Quek Dr Thomas Toepfer TABLE 008 Member of KION GROUP AG Executive Board Member of KION GROUP AG Executive Board Until 14 January 2015 Until 14 January 2015 Member of KION GROUP AG Executive Board / Chief Asia Pacific Officer CFO of KION GROUP AG 2014 500 19 519 409 0 928 102 1,029 2015 19 1 20 16 1,255 1,255 1,290 4 1,294 2014 500 18 518 409 0 926 104 1,031 2015 19 1 20 16 1,255 1,255 1,290 4 1,294 2014 540 108 648 626 0 2015 552 158 710 566 2014 500 12 512 491 2015 500 17 517 455 2,490 1,434 2,000 2,490 2,000 755 679 2,437 101 2,538 2,971 117 3,088 1,274 97 1,371 3,766 107 3,873 KION GROUP AG | Annual Report 2015We keep the world moving. 50 total target achievement – of €164 thousand and pension In addition to the remuneration described above for Mr Knoef and expenses of €101 thousand. Mr Maurer, the total remuneration paid to former members of the Mr Maurer’s total amount of €4,042 thousand breaks down Executive Board amounted to €230 thousand in 2015 (2014: €210 into a non-performance-related component of €3,686 thousand, thousand). Provisions for defined benefit obligations to former a performance-related component without a long-term incentive members of the Executive Board or their surviving dependants of €84 thousand, a performance-related component with a long- amounting to €8,758 thousand (2014: €6,082 thousand) were term incentive – for the 2013 tranche based on a preliminary total recognised in accordance with IAS 19. target achievement – of €164 thousand and pension expenses of In the year under review, no advances were made to mem- €107 thousand. bers of the Executive Board, and there were no loans. The table below shows the pension contributions (additions to the plan) attributable to each individual Executive Board mem- ber and their separate present values. > TABLE 009 Pensions in thousand € Gordon Riske Dr Eike Böhm Bert-Jan Knoef 1 Theodor Maurer 1 Ching Pong Quek Dr Thomas Toepfer TABLE 009 Service cost 2015 Service cost 2014 Present value (DBO) 31 Dec 2015 Present value (DBO) 31 Dec 2014 622 4 4 107 117 510 102 104 97 101 5,308 76 317 436 4,562 1,906 638 427 523 1 Resigned from office on 14 January 2015; the present value (DBO) as at 31 December 2015 was recognised under provisions for defined benefit obligations to former members of the Executive Board or their surviving dependants in accordance with IAS 19. SUPERVISORY BOARD REMUNERATION Remuneration system Board, €75,000 for the deputy chairman of the Supervisory 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 annual remuneration for members of a committee is €8,000, The Supervisory Board’s remuneration is defined in article 18 of while the chairman of a committee receives double this amount. KION GROUP AG’s articles of incorporation. Members of the If a member of the Supervisory Board or one of its commit- Supervisory Board receive fixed remuneration plus reimburse- tees does not hold their position for a full financial year, remuner- ment of out-of-pocket expenses. The annual remuneration ation is reduced pro rata temporis. amounts to €45,000 for ordinary members of the Supervisory The members of the Supervisory Board receive an attend- ance fee of €1,250 per day for meetings of the Supervisory Board Moving Forward Innovation KION GROUP AG | Annual Report 2015CORPORATE GOVERNANCE Remuneration report 51 and its committees, although they only receive this amount once remuneration paid for committee work (including attendance if they attend more than one meeting on the same day. fees) totalled €153,017. The following table shows the breakdown The Company reimburses each member for any VAT incurred of remuneration paid to each Supervisory Board member for in connection with his or her remuneration. 2015: > TABLE 010 A D&O insurance policy without an excess has been taken out for the members of the Supervisory Board. In 2015, no company in the KION Group paid or granted any Remuneration paid to members of the Supervisory Board in 2015 The total remuneration paid to the Supervisory Board in 2015 was €1,209,342. Of this amount, €1,056,325 was attributable to remu- neration for activities carried out by the Supervisory Board. The remuneration or other benefits to members of the Supervisory Board for services provided as individuals, such as consulting or brokerage activities. Nor were any advances or loans granted to members of the Supervisory Board. Supervisory Board remuneration TABLE 010 Fixed remuneration Committee remuneration Attendance fee Total remuneration Dr John Feldmann (chairman) Joachim Hartig (deputy chairman) Birgit Behrendt Holger Brandt Dr Alexander Dibelius Wolfgang Faden Denis Heljic Johannes P. Huth Jiang Kui Olaf Kunz Jörg Milla Özcan Pancarci Kay Pietsch Hans Peter Ring Alexandra Schädler Tan Xuguang Hans-Peter Weiß Xu Ping Total €105,000 €75,000 €45,000 €45,000 €45,000 €18,863 €45,000 €38,240 €65,838 €45,000 €7,521 €45,000 €45,000 €45,000 €45,000 €65,838 €41,178 €65,838 €24,000 €8,000 – – €8,000 – €8,000 €6,798 €11,704 €2,674 – – €16,000 €19,353 €8,000 – – – €16,250 €12,500 €7,500 €13,750 €10,000 €2,500 €15,000 €7,315 €14,631 €15,000 €1,250 €13,750 €21,250 €13,750 €20,000 €1,829 €11,250 €10,973 €145,250 €95,500 €52,500 €58,750 €63,000 €21,363 €68,000 €52,353 €92,173 €62,674 €8,771 €58,750 €82,250 €78,103 €73,000 €67,666 €52,428 €76,811 €888,316 €112,529 €208,498 €1,209,342 KION GROUP AG | Annual Report 2015We keep the world moving.GROUP MANAGEMENT REPORT Contents 53 Group Management Report 54 54 61 64 66 66 69 85 94 95 95 97 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 Non-financial performance indicators EVENTS AFTER THE REPORTING DATE OUTLOOK, RISK REPORT AND OPPORTUNITY REPORT Outlook Risk report 104 Opportunity report KION GROUP AG | Annual Report 2015 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 54 Fundamentals of the KION Group PROFILE OF THE KION GROUP Organisational structure provides information about the compliance standards in the Group. The declaration on corporate governance can be viewed and downloaded on the Company’s website (kiongroup.com/ governancereport). It also forms part of this annual report. The essential features of the remuneration system are described in the remuneration report, which is part of the 2015 The KION Group is the world’s second-largest supplier of forklift group management report and can be found in the ‘Remunera- trucks, warehouse trucks and associated services and solutions tion report’ section of this annual report. The total amounts for for logistics, warehouse management and automation. It employs Executive Board remuneration and Supervisory Board remunera- around 23,500 people, operates in over 100 countries and fulfils tion are reported in the notes to the consolidated financial state- the needs of customers through some 1,400 sales and service ments (note [45]). outlets. With four international brands – Linde, STILL, Baoli and Egemin Automation – and three national brands, the KION Group Disclosures relevant to acquisitions is represented in all of the major sales markets and price seg- ments. The disclosures relevant to acquisitions (pursuant to section 315 (4) The KION Group’s strategic management holding company, HGB) together with the explanatory report form an integral part of KION GROUP AG, is listed on the Frankfurt Stock Exchange and the group management report and can be found in the ‘Disclo- is part of the MDAX and the STOXX Europe 600. sures relevant to acquisitions’ section of this annual report. The strategic anchor shareholder of KION GROUP AG is Weichai Power (Luxembourg) Holding S.à r.l., Luxembourg, a Executive Board subsidiary of Weichai Power Co. Ltd., which held 38.3 per cent of the shares at the end of 2015 as far as the Company is aware. The The Executive Board of KION GROUP AG is responsible for the free float accounted for 61.5 per cent of the shares, while the operational management of the KION Group. At the end of 2015 remaining 0.2 per cent were treasury shares. it had four members. There were a number of personnel changes Management and control Corporate governance in the year under review. With effect from 15 January 2015, Gordon Riske, in addition to his role as KION Group CEO, took over as CEO of the two brand companies Linde Material Handling GmbH and STILL GmbH from the two departing Executive Board members Bert-Jan Knoef and Theodor Maurer and also assumed responsibility for quality. At the same time, CFO Dr Thomas Toep- The KION Group follows generally accepted standards of sound, fer took charge of facility management/health, safety & environ- responsible corporate governance. The German Corporate Gov- ment and logistics/Urban. Dr Eike Böhm was appointed to the ernance Code (DCGK) provides the framework for management Executive Board with effect from 1 August 2015, where he holds and control. As required by section 289a of the German Com- the newly created post of Chief Technology Officer (CTO). mercial Code (HGB), the corporate governance standards that As at 31 December 2015 the responsibilities of the Executive the Group applies are set out in the declaration on corporate gov- Board members were as follows: ernance. This declaration also contains the comply-or-explain statement pursuant to section 161 of the German Stock Corpora- tion Act (AktG), which was issued by the Executive Board and – Gordon Riske is Chief Executive Officer (CEO) and his responsibilities include strategy/business development, cor- Supervisory Board of KION GROUP AG on 14/17 Decem- porate communications, the corporate office, internal audit, ber 2015, and the corporate governance report pursuant to sec- compliance, KION Warehouse Systems, the North America tion 3.10 of the German Corporate Governance Code, which also region and the South America region. He is also CEO of the Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Fundamentals of the KION Group 55 two brand companies Linde Material Handling GmbH and It advises the Executive Board in its handling of significant mat STILL GmbH. – Dr Thomas Toepfer is Chief Financial Officer (CFO) and his responsibilities include accounting, tax, financial services, ters and business transactions. To increase the efficiency of its work, the Supervisory Board is supported by four committees: the Nomination Committee, the Executive Committee, the Audit corporate finance, investor relations, M&A, controlling, HR / Committee and the Mediation Committee. Labour Relations Director, legal affairs, IT, data protection, With effect from 1 January 2015 Silke Scheiber and Dr Martin facility management / health, safety & environment and logis Hintze stepped down from the Supervisory Board. At the Annual tics / Urban. – Ching Pong Quek is Chief Asia Pacific Officer and heads up – Dr Eike Böhm, in his role as Chief Technology Officer (CTO), the KION Group’s entire Asia business. has groupwide responsibility for research and develop General Meeting on 12 May 2015, Birgit Behrendt and Xu Ping were elected in their place as new members of the Supervisory Board for the period up to the 2017 Annual General Meeting. Wolfgang Faden has been a shareholder representative on the Supervisory Board of KION GROUP AG since 1 August 2015. ment (R&D), product strategy, innovation, production system, Johannes Huth stepped down from the Supervisory Board with quality & operations and procurement. effect from 31 July 2015. HansPeter Weiß resigned as a member of the Company’s Supervisory Board with effect from the end of In November 2015 the KION Group announced that it would be 15 November 2015. The courts appointed Jörg Milla as his suc comprehensively reorganising its Group structure from 2016, with cessor with effect from 16 November 2015. At its meeting in the aim of doing even more to meet the specific customer and December, the Supervisory Board resolved to propose to the market requirements of the world’s key regions while at the same Annual General Meeting on 12 May 2016 that Dr Christina Reuter time sharpening its focus on crossbrand synergies. This will be elected to succeed Mr Faden on the Supervisory Board. result in changes in responsibilities at Executive Board level. CEO Gordon Riske will take charge of the Linde Material Handling EMEA, STILL EMEA and KION Americas units, while Chief Business model AsiaPacific Officer Ching Pong Quek is responsible for the KION APAC unit. Product strategy, R&D, innovation, production system, So that it can fully cater to the needs of material handling custom quality assurance and procurement have now been brought ers worldwide, the KION Group’s business model covers every together in the newly created CTO organisation headed by Chief step of the value chain: product development, manufacturing, Technology Officer Dr Eike Böhm. Dr Thomas Toepfer will con sales and logistics, spare parts business, truck rental and used tinue to be in charge of among other things accounting, financial trucks, system and software solutions, plus financial services that services, corporate finance, investor relations, M&A, controlling support the Group’s core industrial business. The KION Group and HR, IT and legal affairs. The new Group Executive Commit operates a multibrand strategy involving the four international tee (GEC) will advise the Executive Board of KION GROUP AG brands Linde, STILL, Baoli and Egemin Automation plus the three and will integrate input from the operating units. The committee national brands Fenwick, OM STILL and Voltas. comprises the Executive Board members as well as the presi The KION Group earns most of its consolidated revenue – dents of the operating units. 54.5 per cent in the year under review – from the sale of industrial The Executive Board maintains a relationship of trust with, trucks. The product portfolio includes counterbalance trucks and is monitored by, the Company’s Supervisory Board. powered by an internal combustion engine or electric drive, ware Supervisory Board The Supervisory Board, which was formed in accordance with the German Codetermination Act (MitbestG), comprises 16 people. house trucks (rideon and handoperated) and towing vehicles for industrial applications. It covers all load capacities, from one to 18 tonnes. KION GROUP AG | Annual Report 2015We keep the world moving.56 Production sites of the KION Group DIAGRAM 003 K AHL ASCHAFFENBURG WEILBACH HAMBURG STŘÍBRO ČESK Ý KRUMLOV Z WIJNDRECHT GEISA HOLL AND, MI CHÂTELLER AULT SUMMERVILLE , SC REUTLINGEN 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 Stříbro: Warehouse technology United States Summerville, SC: Counterbalance trucks with IC engine or electric drive, warehouse technology China Xiamen: Counterbalance trucks with IC engine or electric drive, heavy trucks, warehouse technology Jingjiang: Counterbalance trucks with IC engine or electric drive, warehouse technology India Pune: Counterbalance trucks with IC engine or electric drive, warehouse technology Moving Forward Innovation Indaiatuba / São Paulo: Counterbalance trucks with IC engine, warehouse technology Other (Egemin Automation) Belgium Zwijndrecht: Warehouse technology (Automated guided vehicles) United States Holland, MI: Warehouse technology (Automated guided vehicles) KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Fundamentals of the KION Group 57 Worldwide research and development activities (R&D) enable the The service business – spare parts, rental and used trucks, KION Group to consolidate and extend its technology leadership. system and software solutions, and financial services – helps to The Company plays a pioneering role in hydrostatic and diesel- smooth out fluctuations in consolidated revenue and reduces electric drive systems and in innovative energy-efficient and dependency on market cycles. In the reporting year, it contrib- low-emission drive technologies. As at the end of 2015, the KION uted 45.5 per cent of consolidated revenue. This business also Group employed a total of 1,056 developers, of whom 299 strengthens customer relationships, thereby helping to generate worked in Asia. Details of the Group’s R&D activities can be found sales of new trucks. Extensive supplementary services are mainly in the ‘Research and development’ section. offered for premium products. However, the proportion of service The KION Group operates a total of 17 production facilities business is continually increasing in the other price segments too. for industrial trucks and components in nine countries. These Financial services support new truck business in many mar- include the new plant in Stříbro (near Plzeň in the Czech Repub- kets, forming another pillar of the service business within the inte- lic), where production commenced in January 2016, and the two grated business model. Approximately 50 per cent of new trucks Egemin Automation production sites in Belgium and the USA. are financed via the KION Group itself or via external banks and Owing to the particular requirements of its business, the KION dealers. Offering financial services is therefore part of the truck Group manufactures major components itself – notably lift masts, sales process, and end customer finance is generally linked to axles, counterweights and safety equipment – in order to ensure a service contract throughout the term of the finance agreement. security of supply and the availability of spare parts for important In the main sales markets with a high volume of financing and components. Other components – such as hydraulic compo- leasing, financial activities are handled by legally independent nents, electronic components, rechargeable batteries, engine financial services companies. These activities include long-term components and industrial tyres – are purchased through the leasing to customers and internal financing of the brand compa- KION Group’s global procurement organisation. > DIAGRAM 003 nies’ short-term rental fleets. The KION Group offers customers tailor-made solutions and 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 of ware to monitor the trucks in the fleets and to enable customers ownership (TCO) underpin the Linde and STILL brands’ premium to efficiently manage their fleets. positioning. The trucks’ hallmarks are cost-efficiency, high pro- The brand companies also have extensive used truck and ductivity, comparatively low maintenance and high residual values. rental truck businesses, allowing peaks in capacity requirements The KION brand companies have an extensive sales and to be met and customers to be supported after their leases have service network comprising around 1,400 outlets staffed by expired. Once a lease has expired, the used truck is serviced at a approximately 14,000 service employees in over 100 countries. reconditioning centre and can then be rented on a flexible, short- Approximately half of them are employed by the KION Group. In term basis, for example. The used and rental truck business is other cases, the Company relies on external dealers. The sales integrated into the Linde Material Handling (LMH) and STILL seg- network in western Europe consists of exclusive dealers and ments in terms of its operations, and its fleet of well in excess of Company-owned dealerships. In China, Linde has built up a 50,000 trucks is financed internally by Financial Services. broad network of more than 100 proprietary sales and service outlets. By contrast, distribution partners in Asia and South America usually offer more than one brand of truck. Market and influencing factors The worldwide vehicle fleet, which comprised around 1.2 mil- lion industrial trucks at the end of 2015 and continues to grow, Industrial trucks are deployed for a wide variety of applications. provides a stable basis for the spare parts, maintenance and Material handling products are used for tasks such as loading repair business within the KION Group’s integrated business model. and unloading, linking production steps and moving pallets in KION GROUP AG | Annual Report 2015We keep the world moving.58 logistics centres or in retail/wholesale operations. They therefore sumer spending is being fuelled by expansion of industrial and form part of the production processes and supply chains of many public infrastructure as well as rising living standards. In mature different industries around the world. markets, where supply chains are highly sophisticated, the large Measured in terms of unit sales of new trucks, the growth of number of trucks in use provides a strong base for replacement the market for industrial trucks has exceeded global economic business. The KION Group estimates that the majority of sales in growth over the past ten years (2005–2015), rising at an average of western Europe are currently accounted for by replacement 3.9 per cent per year. However, it should be noted that these sta- investments. tistics do not include price effects or the contribution from the ser- In the long term, due to rising customer expectations in terms vice business. Nevertheless, the industry is subject to cylical fluc- of quality, efficiency and eco-friendliness of industrial trucks, the tuations. Economic conditions in the different regions and the rates middle (volume) price segment is likely to become increasingly of growth in global trade are therefore key influencing factors for important for the growth markets in particular. At the same time, the KION Group, whose financial situation is also affected by com- there is mounting competitive pressure as some manufacturers in petition levels, exchange rates and changes in commodity prices. the economy segment based in emerging markets are pursuing The main growth driver across all regions is the advancing an international expansion strategy. In the premium segment, interconnectivity of the global economy, which requires additional customers are much more focused than before on optimising transport services between what are becoming increasingly frag- total cost of ownership and on the integration of fully automated mented value chains and supply chains. In addition, the increasing intralogistics solutions. In 2015, according to the KION Group’s specialisation of companies is making logistics processes more estimates, the premium price segment and the economy price segmented and more complex. The growth of e-commerce is also segment each accounted for between 25 and 30 per cent of units having an ever greater impact. Independent market analyses indi- ordered. The remainder was attributable to the volume price seg- cate that in western Europe alone revenue generated by e-com- ment, making it the largest in terms of units sold. merce companies will double in the next five years. This will bring Regulatory frameworks, which include mandatory emissions a need for new warehouse and logistics capacity and thereby limits for trucks, have a major impact on the business model. raise demand for industrial trucks and automation solutions. The products and services of companies in the KION Group Measured in terms of units ordered, 39.7 per cent of the have to comply with the specific legal requirements in their global market was attributable to diesel trucks in 2015, while elec- respective markets. Compliance with the different requirements tric forklift trucks accounted for 17.5 per cent and warehouse has to be verified or certified. Many of the legal requirements trucks for 42.8 per cent. Due to increasingly stringent emissions are enshrined in product-specific standards and other norms regulations and the continued march of e-commerce, the KION (e.g. EN, ISO and DIN). Group expects the segmentation of the market to shift towards Legal requirements also apply to the construction and oper- electric forklift trucks and warehouse trucks, partly because ation of production facilities, including in relation to air pollution these are suitable for use in buildings. This trend benefits the avoidance, noise reduction, waste production & disposal and KION Group with its particularly strong position in these two health & safety. Furthermore, the KION Group fulfils all of the legal product categories. In the developed economies, electric forklift requirements pertaining to exports and financing business. trucks and warehouse trucks already account for the bulk of the market volume, whereas in growth regions simple counterbal- ance trucks with an internal combustion engine (diesel trucks) still make up a comparatively high proportion of the total volume. In regional terms, emerging markets such as China, eastern Europe, Central America and South America are – despite a tem- porary slump in 2015 – the major sources of market growth. Demand for logistics services on the back of increasing con- Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Fundamentals of the KION Group 59 Market position The segments and their products and services Last year, in terms of unit sales, the KION Group increased its The KION Group is represented in the market by four international global market share from 14.2 per cent to 15.0 per cent, thereby brands – Linde, STILL, Baoli and Egemin Automation – and three consolidating its position as the world’s second-largest manufac- national brands, Fenwick (France), OM STILL (Italy) and Voltas turer of industrial trucks. Moreover, the Group is the world’s (India). While the brand companies have full operational and com- leading producer of electric forklift trucks. It also maintained its mercial responsibility within their markets, KION GROUP AG is leading position in western Europe across all product categories. the strategic management holding company and is responsible In eastern Europe, too, the KION Group is the top manufacturer, for the groupwide strategy and groupwide business standards. while in Brazil it is no. 1 for electric forklift trucks and warehouse > TABLE 011 technology systems. The KION Group is also one of the leading players in India, where more than one in four trucks sold now bears the name of a KION brand. In China, it is the leading for- eign manufacturer and number three overall. In the USA, the KION Group is looking to move from being a niche provider to a major market player as part of its Strategy 2020. Segments 2015 in € million LMH STILL Financial Services Other Revenue Adjusted EBIT ¹ Employees ² 2015 3,429.8 1,950.2 740.3 252.8 2014 3,077.2 1,850.7 620.9 235.7 2015 383.9 144.0 – 1.8 155.3 – 198.5 482.9 2014 339.6 133.6 2.1 135.5 – 167.9 442.9 2015 14,486 8,103 59 858 – 23,506 22,669 TABLE 011 2014 13,945 7,976 60 688 – Consolidation / reconciliation – 1,275.2 – 1,106.6 Total 5,097.9 4,677.9 1 Adjusted for KION acquisition items and non-recurring items 2 Number of employees (full-time equivalents) as at balance sheet date 31/12/ KION GROUP AG | Annual Report 2015We keep the world moving.60 For internal management purposes, the KION Group has divided The segment’s portfolio consists of forklift trucks and ware- its business into operating segments that correspond to the house trucks plus associated services. STILL has also positioned reportable segments, as required by international financial itself as a leading provider of intelligent intralogistics solutions, reporting standards (IFRS 8). offering trucks and fully integrated warehouse systems, including Linde Material Handling (LMH) segment automation and fleet management solutions. Financial Services (FS) segment The Linde Material Handling (LMH) segment encompasses the Linde, Fenwick, Baoli and Voltas brands. The Financial Services (FS) segment is an internal funding partner Linde is an international premium brand and a technology for LMH and STILL, providing finance solutions that promote leader. Among its other selling points, it has decades of experi- sales. Its activities comprise the financing of long-term leasing ence with hydrostatic drive technology and meets customers’ business for external customers of the KION Group, the internal highest requirements regarding technology, efficiency, functional- financing of the short-term rental business of the LMH and STILL ity and design. The product portfolio ranges from warehouse operating segments, and the related risk management. In the trucks to heavy trucks and caters to all of the major application large sales markets with a high volume of financing and leasing, areas. Linde has been developing and manufacturing electric legally independent FS companies handle this business. drive systems for decades and uses the resulting expertise in a When long-term leasing business is being conducted, FS variety of applications. In France, Linde products are sold under itself acts as the contractual partner to external customers and the Fenwick brand. offers various leasing models. Baoli is the international brand for the economy segment. Operational responsibility for the short-term rental business Building on its base in China and other growth markets in Asia, it (short-term rental fleet) lies with the LMH and STILL brand seg- has established sales structures in Europe as well as in Central ments. FS acts as the contractual partner to the brand segments, America and South America. Since the fourth quarter of 2015, providing the internal financing for this short-term rental fleet. Baoli has also been represented in North America with a small FS refinances both long-term leasing with end customers but growing product portfolio. and the short-term rental fleet, mostly on the basis of sale and Voltas is the national brand company for the Indian market leaseback agreements. through which the KION India Pvt. Ltd. subsidiary sells electric In addition, a substantial portion of sales financing for exter- and IC forklift trucks and warehouse trucks. The company was nal customers is offered indirectly, with an external leasing com- integrated into the LMH segment with effect from 1 January 2015. pany to which the business is referred by the KION Group acting Previously the entity was in the Other segment. as lessor rather than the KION Group. The financial services pro- STILL segment vider purchases the truck from the KION Group and provides the finance to the end customer. The KION Group carries out the majority of the servicing for the truck and, once the financing has The STILL and OM STILL brands are grouped in the STILL seg- expired, may also take on its reconditioning and remarketing. ment. STILL is predominantly an international premium provider of trucks with electric and diesel-electric drives. It mainly focuses on the European and Latin American markets, with the national brand OM STILL serving the Italian market. Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Fundamentals of the KION Group 61 Other segment Besides increasing earnings, the focus here is on how assets The Other segment comprises holding companies and service companies that provide services such as IT and logistics across and finance are to be managed going forward. – Resilience: The KION Group aims to improve its ability to cope with economic downturns. It is therefore also diversi- all segments. Also in this segment is Egemin NV, the subsidiary fying its business in terms of regions and customer sectors acquired in August 2015. Based in Zwijndrecht, Belgium, Egemin alongside its efforts to optimise the production network and NV is a leading provider of automation solutions that specialises expand the service business. in optimising intralogistics processes in warehouses, production facilities and distribution centres. As well as turnkey project solu- tions using proprietary software, its portfolio also includes auto- Strategic focus areas of the Strategy 2020 matic guided vehicle systems and in-floor chain conveyors. Egemin Automation has sites in Europe, the USA and China. In The Strategy 2020 essentially encompasses six closely related 2014, the Other segment had also included the KION India sub- areas of focus. sidiary, which since the beginning of 2015 has been part of the LMH segment. Multi-brand strategy STRATEGY OF THE KION GROUP Objectives of the Strategy 2020 The starting point is the further development of the successful multi-brand strategy. The premium brands, Linde and STILL, are consolidating their presence at the upper end of the volume seg- ment on the basis of the platform strategy (see below), particularly in North America and Asia as well as South America. This means that Linde, after successful market launches, now covers all product categories in the middle price segment as well. As the international brand for the economy segment, Baoli will gain a The KION Group has clearly outlined its objectives for the next foothold at the lower end of the volume segment with a product few years in its Strategy 2020. and sales strategy that is tailored to regional requirements. The – Growth: The KION Group wants to accelerate its growth and close the gap on the global market leader by 2020. To this KION Group will therefore be represented in all these regions and in all price segments through its four international brands – Linde, STILL, Baoli and Egemin Automation. Especially in the premium end, it is strengthening its leading position in Europe and segment and at the upper end of the volume segment, the seam- Brazil so that it can go on to capture additional market share less integration of material handling products and solutions in growth markets, particularly those in Asia and North America. into customer processes is playing an increasingly important This growth is to be accompanied by a far greater presence role. IT-based assistance systems, such as fleet data manage- in the largest price segment (volume). – Profitability: The KION Group aims to further improve its EBIT margin in order to entrench its position as the most profitable ment and truck control systems, look set to bolster sales of trucks in the premium segment in particular. The wide-ranging offering of the new international brand company Egemin Automation and supplier in the market. In doing so, it aims to improve its the Linde Robotics and STILL iGo products give the KION Group EBIT margin so it is permanently in the double digits range – a solid base of expertise in automated industrial trucks and a target that remains unchanged in communications since warehouse logistics. As such, it is able to offer its customers the IPO. This requires not only an increase in the gross mar- along the entire supply chain solutions that are compatible gin but also strict control of fixed costs. – Efficient use of capital: The KION Group is working stead- fastly to optimise the return on capital employed (ROCE). with Industry 4.0, or the fourth industrial revolution. The KION Group is aiming to lever this expertise to become a leading pro- vider of material handling solutions. KION GROUP AG | Annual Report 2015We keep the world moving.62 Global modular and platform strategy warehouse trucks that had previously been made in Aschaffen- Further development of the multi-brand strategy requires the burg. Capital expenditure on this undertaking amounted to product portfolio to be managed end to end on the basis of a approximately €12 million. The Aschaffenburg plant is now able to global modular and platform strategy. For this reason, a Product & focus on making electric and diesel trucks and structuring its pro- Module Committee was formed in 2014 as a cross-brand steering duction processes more efficiently. Again in response to growth unit. In 2015 the Company also stepped up the level of cross- in regional sales markets, capacity is being significantly increased brand collaboration in procurement and coordination with the and processes optimised at sites in China (Xiamen and Jingjiang), research and development centres. From 2016 the KION Group the USA (Summerville) and Brazil (Indaiatuba / São Paulo). will then be bringing together the technology functions that are critical for the Company’s success going forward into a central Regional growth strategies KION organisation under the new CTO Executive Board role, held Having enhanced its multi-brand strategy and its modular and by Dr Eike Böhm. platform strategy, as well as increasing integration between the In the volume and economy segments outside western sites in its production network, the KION Group has put everything Europe, the KION Group is working with cross-brand, cost- in place to increase its market share in strategically important efficient platforms for product development and production that regions. The main focus is on China and North America. are also allowing a strong degree of regional differentiation in the In North America, one of the largest markets for industrial industrial trucks. The new diesel truck with mature converter trucks, the KION Group aims to move from being a niche provider technology, for example, which was launched in the fourth quar- to a major market player offering a full portfolio of products by ter of 2015 on the basis of the Baoli platform in China, is being 2020. This will enable it to capture an increasing share of this localised for use in numerous other markets. There were also new growing market. In order to achieve this goal, the KION Group is platforms created and products brought to market for electric pursuing a multi-brand approach. A Baoli diesel truck was forklift trucks and warehouse trucks. In western Europe, the launched in North America in 2015 – the brand’s debut in this premium brands, Linde and STILL, will continue to use different market, where it will cater to the lower price segment; other prod- platforms in order to maintain the defining characteristics of their ucts will follow in the second half of 2016. In addition, the KION brands, but will increasingly deploy shared modules. Innovation North America plant in Summerville is being expanded for the underpins the premium positioning of the two brands. production of IC and electric forklift trucks as well as warehouse trucks in order to close gaps in the portfolio; the various platforms Global production network are being adapted specially for the American market. The KION Group wants to build its industrial trucks close to the As well as expanding the range of products, KION North markets in which they will be sold. To this end, production facili- America is also strengthening its sales and service network, ties worldwide are being efficiently integrated – harnessing econ- which encompasses over 70 partners at almost 150 sites. In omies of scale and ensuring a high level of capacity utilisation. 2015, for example, a new sales app was introduced and collabo- A programme of capital expenditure is aimed not only at updat- ration with sales partners was intensified. The KION Group is also ing and expanding existing plants but also at establishing facto- looking to gain additional market share in the high-growth mar- ries in new locations. kets of Asia, including through new products for the volume seg- The core element in western Europe is the modernisation of ment that have been developed on the basis of Baoli’s economy the plants in Aschaffenburg (Linde) and Hamburg (STILL), with a platform. China’s fast-growing e-commerce sector is driving clear focus on increasing capacity, improving processes and demand for electric forklift trucks and warehouse trucks such as containing costs. A total of around €83 million has been allocated LMH’s newly developed pallet stacker. for this between 2014 and 2021. Both sites are also working closely with the new plant in Stříbro (near Plzeň in the Czech Republic). In January 2016 the plant commenced production of Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Fundamentals of the KION Group 63 Aftersales and service business Reorganisation of the Group structure The strategy for the aftersales business is designed to unlock In November 2015 the KION Group announced that it would be more of the potential offered by the installed base, which is comprehensively reorganising its Group structure from the begin- expanding worldwide. This will help to boost revenue. To this end, ning of 2016. The aim is to step up collaboration across all brands the KION Group is continually extending its portfolio of services and regions and make this collaboration even more efficient. The and improving their quality at every stage of the product lifecycle. creation of four operating units will sharpen focus on the specific For example, the KION Group is progressively extending its com- customer and market requirements of the world’s key regions and prehensive service offering to also cover the volume and economy on cross-brand synergies, enabling the Strategy 2020 to be segments in high-growth markets. As part of this, the rental fleet implemented in a more rigorous way. The Linde Material Handling in China was substantially enlarged in 2015, turning the KION EMEA and STILL EMEA operating units will concentrate on Group into the country’s biggest provider of rental trucks. Europe, the Middle East and Africa, while KION APAC and KION Financial services are also a key component of the service Americas will hold cross-brand responsibility for the Asia-Pacific portfolio as they support the KION Group’s core industrial busi- region and the Americas respectively. In the new organisation, the ness. The Company intends to further increase its market share operating units will oversee marketing, sales and service and the by opening additional service outlets in attractive growth markets production plants in their regions and will have individual profit and stepping up the short-term rental business. and loss responsibility. Back-office functions In addition, the KION Group is aligning its groupwide back-office services to the growing requirements of the global organisation in order to leverage economies of scale and synergies. For example, KION Group IT – a global shared services organisation with four functions: IT governance, key account management, application services and infrastructure services – is focusing even more on increasing its contribution to the success of the Company and on providing cost-efficient and reliable IT ser- vices. In order to keep the costs of the expanded service offer- ing low, the KION brand companies will be integrating their administrative tasks more closely. KION GROUP AG | Annual Report 2015We keep the world moving.64 MANAGEMENT SYSTEM KPIs related to business volume Core key performance indicators Order intake and revenue Order intake and revenue are broken down by segment, region and product category in the KION Group’s management report- ing so that growth drivers and pertinent trends can be identified The KION Group’s strategy, which centres on value and growth, and analysed at an early stage. Order intake is a leading indicator is reflected in how the Company is managed. It uses five core key for revenue. The length of time between receipt and invoicing of performance indicators (KPIs) to continuously monitor market an order varies between business units and product groups. success, profitability, financial strength and liquidity. The perfor- mance targets of the Group and the segments are based on Earnings-related KPI selected financial KPIs, as is the performance-based remunera- tion paid to managers. In principle, each month, the KPIs are Adjusted EBIT measured and made available to the Executive Board in a com- The key figure used for operational management and analysis of prehensive report. This enables the management team to take the KION Group’s financial performance is adjusted earnings prompt corrective action in the event of variances compared with before interest and tax (EBIT). It is calculated in the same way as target figures. > TABLE 012 EBIT, except that it does not take account of the KION Group pur- chase price allocation or any non-recurring items. Key performance indicators in € million Order intake ¹ Revenue Adjusted EBIT ² Free cash flow 2015 2014 2013 5,215.6 4,771.2 4,489.1 5,097.9 4,677.9 4,494.6 482.9 442.9 416.5 332.7 305.9 195.6 1 Prior-year figures restated to reflect the change in the order intake calculation introduced in 2015 2 Adjusted for KION acquisition items and non-recurring items TABLE 012 ROCE 11.9% 11.4% – Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Fundamentals of the KION Group 65 Liquidity-related KPI Other key performance indicators Free cash flow Besides the aforementioned core KPIs, the KION Group uses a Free cash flow is the main KPI for managing leverage and liquidity. variety of additional financial KPIs. The main ones are net debt, It is determined by the KION Group’s operating activities and which is used to manage the capital structure, and the EBIT investing activities. Free cash flow does not include interest aris- margin, which together with ROCE is relevant as a component ing from financing activities. Carefully targeted management of of remuneration and as a target in the Strategy 2020. There are working capital and detailed planning of capital expenditure are also non-financial KPIs, which primarily relate to customers, used to help in controlling the level of free cash flow. employees, sustainability and technology. Some of them are Profitability-related KPI ROCE used operationally as leading indicators for the financial KPIs. The KPIs used to manage the brand segments are order intake, revenue and adjusted EBIT. Earnings before tax (EBT) and return on equity (ROE) are the KPIs used to manage the Financial Return on capital employed (ROCE) has been used since 2015 as Services segment. an additional core KPI. It is the ratio of adjusted EBIT to capital employed. ROCE is measured annually and reported to the Exec- utive Board. > TABLE 013 ROCE in € million Total assets – less selected assets ¹ – less selected liabilities ² Capital employed Adjusted EBIT ROCE TABLE 013 2014 6,128.5 – 1,034.3 – 1,218.2 3,876.0 442.9 11.4% 2015 6,440.2 – 1,126.7 – 1,261.9 4,051.6 482.9 11.9% 1 Lease receivables, income tax receivables, cash and cash equivalents, KION acquisition effects and several items of other financial assets respectively other assets 2 Sundry other provisions, trade payables, a major part of other liabilities as well as several items of other financial liabilities KION GROUP AG | Annual Report 2015We keep the world moving.66 Report on the economic position MACROECONOMIC AND SECTOR-SPECIFIC CONDITIONS Macroeconomic conditions one that is driven by consumption and services, it has been accompanied by a further slowdown in growth. The pace of growth also tailed off in the other Asian countries. An exception was India, where the economy continued to rally. Both consumer spending and industrial output increased visibly here. Growth in Brazil and Russia continued to be strongly nega- tive in 2015, in line with expectations, with domestic economic In 2015 the global economy expanded at a slower rate than in the problems and low commodity prices having a negative impact. previous year. This was mainly due to weak growth in key emerg- The eastern European EU states, however, recorded healthy ing markets such as China, Russia and Brazil. By contrast, the growth. The region benefited from low oil prices and high levels of developed countries generally bolstered the global economy. consumer spending and from the ongoing recovery in western Besides GDP growth demand for industrial trucks is driven Europe. by industry’s investment confidence and world trade volumes. Alongside the USA, western and central Europe proved to be Here, too, there was a marked slowdown in global growth in a pillar of the global economy. A solid performance from Germany 2015. The main factors in the cooling of global trade were the and the recovery in southern Europe were the main drivers of greatly reduced demand for imports in China and the resulting growth in the eurozone. Most of the momentum came from con- decline in commodity prices. In particular China’s major trading sumer spending; global uncertainties meant that companies partners and the commodity-exporting countries were negatively remained cautious in their investment decisions. affected. An increase in consumer spending and growth in the The USA benefited from an upturn in the labour and housing service sector had a positive effect, however, particularly on market. After a weak first quarter, its economy substantially e-commerce and the demand for additional warehouse space. picked up the pace as the year progressed. > DIAGRAM 004 In 2015, the Chinese economy saw its weakest growth in a quarter of a century. As the economy in China is transformed into Gross domestic product in 2015 – real year-on-year change INDIA CHINA WORLD UNITED STATES EU GERMANY JAPAN BRAZIL – 3.7% RUSSIA – 3.8% 2.5% 2.4% 1.8% 1.5% 0.7% DIAGRAM 004 7.3% 6.9% – 4.0% – 3.0% – 2.0% – 1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% Source: Oxford Economics (as at 15 January 2016) Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Report on the economic position 67 Sectoral conditions Sales markets global unit sales. In western Europe, there was another substan- tial release of pent-up demand in the southern European coun- tries in 2015. Growth in the United Kingdom (up by 14.5 per cent), Spain (up by 26.4 per cent) and Italy (up by 21.1 per cent) was In 2015 the global market for industrial trucks grew visibly slower above the market average, while Germany lagged behind the than in the prior year, expanding by 1.0 per cent (2014: market with a growth rate of 8.4 per cent. France expanded by 7.8 per cent). A total of 1.1 million trucks were ordered across all 12.3 per cent. regions and product types. Orders in eastern Europe (excluding Russia) rose by In line with the long-term trends identified by the KION Group, 9.7 per cent. Higher sales figures were recorded in Poland, the sales in the overall market were easily outstripped by sales of Czech Republic and Hungary in particular but also in the smaller warehouse trucks (up by 11.0 per cent) and electric forklift trucks markets of Romania and Slovakia. The Russian market continued (up by 6.0 per cent). Demand for these, in combination with auto- on its steep downward trajectory from 2014, contracting by mation solutions, is being driven by the growing e-commerce 39.3 per cent. sector. Electric forklift trucks are also benefiting from increasingly In China there was a significant decline in orders in 2015 strict emissions regulations across all regions as well as major (down by 12.8 per cent), after the market had grown by a double- advances in battery-charging technology. Unit sales of IC trucks digit percentage amount in the prior year. Only growth in ware- fell by 9.6 per cent, however, which was primarily due to the sharp house trucks was on a par with 2014. Brazil, the largest single decline in unit sales in China. market in South America, contracted by 44.2 per cent, with sales Western Europe (up by 11.3 per cent) and North America (up falling heavily in all product categories, while Chile and Argentina by 7.1 per cent) were the main contributors to the moderate rise in posted increases. > TABLE 014 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 2015 321.9 53.5 235.2 42.5 331.0 118.2 2014 289.2 57.6 219.5 48.5 357.5 119.0 1,102.4 1,091.3 TABLE 014 Change 11.3% – 7.0% 7.1% – 12.3% – 7.4% – 0.7% 1.0% KION GROUP AG | Annual Report 2015We keep the world moving.68 Procurement markets Financial markets Commodity prices continue to have a direct impact on approxi- The KION Group bills the bulk of its revenue in euros. In 2015 mately one quarter of the cost of the materials needed to manu- the proportion was 62.1 per cent, which was slightly below the facture an industrial truck in the KION Group. prior-year level (2014: 62.8 per cent). The remaining 37.9 per cent The average price over the year for steel, the most important of revenue was billed in foreign currencies, most notably China’s commodity, fell compared with 2014 owing to the slowdown in renminbi and pound sterling in the year under review. growth, particularly in China. Manufacturing costs are also influ- The currency markets were characterised by strong fluctua- enced – albeit it to a lesser extent – by the prices for copper and tions. The value of the euro generally remained at a low level, rubber, which were also down year on year. The price of oil, a which impacted positively on the KION Group’s order intake and useful price indicator for plastic products, was well below the revenue but also pushed up costs. Against the Chinese renminbi, 2014 average. the euro was approximately 15 per cent lower on average than in On the other hand, however, higher payroll and ancillary 2014. Pound sterling appreciated by 10 per cent on average wage costs had an adverse impact on unit costs. In overall terms, against the euro, whereas the Brazilian real fell by 19 per cent. and with the euro weakening even further, producer prices for > TABLE 015 input goods in the eurozone fell by only a negligible amount. TABLE 015 2014 1.47 3.12 1.21 8.19 0.81 50.92 1.33 2015 1.48 3.70 1.07 6.98 0.73 68.02 1.11 Currencies Average rate per Euro Australia (AUD) Brazil (BRL) Switzerland (CHF) China (CNY) United Kingdom (GBP) Russia (RUB) U.S.A. (USD) Source: Reuters / Bloomberg Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Report on the economic position 69 Business performance The KION Group expanded its global market share thanks to gains in Europe and Asia. The service business also made a sig- In 2015 the KION Group further strengthened its market posi- nificant contribution to the growth in revenue. tion in the automation sector by acquiring companies and enter- Higher demand for electric forklift trucks and warehouse ing into partnerships. On 7 August 2015 the KION Group paid trucks resulting from ever more sophisticated intralogistics solu- €72.5 million to acquire all the shares in Egemin NV, based in tions and the growing requirements of the e-commerce sector Zwijndrecht (Belgium), which is the logistics automation division helped to push up revenue. Revenue also improved because of of the Belgian automation specialist Agidens International NV positive exchange rate effects and the first-time consolidation of (formerly the Egemin Group). Egemin Automation has become Egemin Automation in August 2015. the seventh brand in the KION Group and is included in the Other The rise in order intake by 9.3 per cent, like the increase segment. With a strong customer focus, it works together with its in revenue, was due primarily to a continuation of the favourable sister companies on complex automation projects. Since the situation in the core European markets. This was also the main beginning of August 2015, Egemin Automation has been included driver for the 13.1 per cent rise in the order book, which was in the consolidated financial statements of the KION Group. valued at €864.0 million at the end of the year and thereby pro- Back in February 2015, LMH acquired 10.0 per cent of the vides a solid basis for 2016. shares in robotics specialist Balyo and entered into a strategic EBIT, adjusted for non-recurring items, came to €482.9 mil- partnership with the company. STILL built on its leading market lion, a year-on-year increase of 9.0 per cent. The strong growth in position in lean logistics by taking over LR Intralogistik GmbH in earnings was helped by the fact that commodity costs only October 2015. LR Intralogistik specialises in intralogistics con- increased slightly. At 9.5 per cent, the adjusted EBIT margin cepts that eschew forklift trucks in favour of tugger trains, which remained at the same high level as in 2014. can also be used in automated material flow concepts. In total, the KION Group generated net income for the year of On 20 July 2015, the KION Group exercised the put option €221.1 million. The earnings per share attributable to the share- vis-à-vis Weichai Power that it holds via Linde Material Hand- holders in the KION Group amounted to €2.20. KION GROUP AG ling GmbH on 20.0 per cent of the shares in Linde Hydraulics. will propose a dividend of €0.77 per share to the Annual General This has reduced LMH’s stake in Linde Hydraulics to 10.0 per cent Meeting, €0.22 per share more than in 2014. and resulted in a cash inflow of €77.4 million on 16 Decem- In the coming years, as the Strategy 2020 continues to be implemented as planned, the KION Group will be well placed to take advantage of opportunities in the market. In key growth areas, such as automation and intralogistics solutions, the Group once again substantially improved its position last year. ber 2015. FINANCIAL POSITION AND FINANCIAL PERFORMANCE Overall assessment of the economic situation In 2015 the KION Group achieved encouraging growth in revenue and earnings. Consolidated revenue rose above the €5 billion mark for the first time, climbing by 9.0 per cent year on year to reach €5,097.9 million. A strong increase in new truck business meant that the KION Group and its brand companies largely avoided the effects of the general slowdown in the global market. KION GROUP AG | Annual Report 2015We keep the world moving.70 Comparison between actual and forecast growth Factors contributing to the rise in the value of the order intake included, in addition to higher truck sales, the further slight increase in the proportion of customised equipment and In the past year, the KION Group was consistently able to fulfil the the expansion of the service business. Over the course of 2015, forecasts for 2015 specified in the outlook section of the 2014 the order book swelled by 13.1 per cent to €864.0 million (2014: group management report. Order intake, for example, did not rise €764.1 million). moderately as forecast, but climbed by 9.3 per cent, partly because of positive exchange rate effects. At 9.0 per cent, the Revenue increase in consolidated revenue was also higher than antici- pated, again due in part to currency effects. The slight rise in Revenue in the KION Group amounted to €5,097.9 million, an adjusted EBIT expected for the year was exceeded. Contrary to increase of 9.0 per cent on the 2014 figure of €4,677.9 million. the prediction of a slight decline in free cash flow, a high level of Positive currency effects amounting to €108.7 million were con- incoming payments at the end of the year resulted in an increase tributory factors in addition to higher unit sales and moderate in free cash flow. Free cash flow actually improved by 8.8 per cent price effects. compared with the previous year. The funds generated from free cash flow were used, as announced, to further bring down bor- Revenue by product category rowing, enabling the Group to markedly reduce its net debt in the year under review. Business situation and financial performance of the KION Group Level of orders Revenue from new trucks increased by 9.7 per cent to €2,779.9 mil- lion (2014: €2,533.0 million). There were year-on-year gains in all product categories – even the revenue from diesel trucks was higher than in 2014. The growth in revenue from electric forklift trucks and warehouse trucks was particularly strong. Revenue from the service business advanced by 8.1 per cent to reach €2,318.0 million (2014: €2,144.9 million). This growth was attributable both to the rising volume of servicing and mainte- Order intake totalled €5,215.6 million, up by 9.3 per cent on the nance work under service agreements and to an increase in the prior-year level (2014: €4,771.2 million). The KION Group’s growth amount of ad-hoc work. Revenue from the rental and used truck thus significantly outstripped that of the global market as a whole. business was also up year on year. Revenue from other business The two operating segments LMH and STILL contributed equally areas rose by 23.6 per cent, mainly because of the first-time to this growth. In addition, positive currency effects raised the consolidation of Egemin Automation in August 2015. In total, the value of the order volume by €114.1 million. service business contributed 45.5 per cent (2014: 45.9 per cent) Orders for new trucks received by the KION Group brand of the KION Group’s total revenue. > TABLE 016 companies rose by 7.0 per cent to 165.8 thousand units, exceed- ing the previous record level achieved in 2007. The brand compa- nies benefited here from the growing demand for electric forklift trucks and warehouse trucks. Orders for diesel trucks only just fell short of the previous year’s level and as such performed much better than the market as a whole, which was badly affected by falling sales in China and Brazil. In the reporting year, high-growth markets accounted for around 33.5 per cent of new truck orders (2014: 34.7 per cent). Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Report on the economic position 71 Revenue by product category in € million New business Service business – Aftersales – Rental business – Used trucks – Other Total revenue 2015 2,779.9 2,318.0 1,347.0 524.1 270.4 176.4 2014 2,533.0 2,144.9 1,250.4 486.9 264.9 142.7 5,097.9 4,677.9 TABLE 016 Change 9.7% 8.1% 7.7% 7.7% 2.1% 23.6% 9.0% Revenue by customer location growth in eastern Europe, too, despite the current weakness of the market. Overall revenue was also up in the Americas. The The LMH and STILL brand segments increased their revenue decline in revenue in South America was offset by revenue gains compared with 2014 in virtually all of the KION Group’s core mar- in North America. kets. Western Europe was the main contributor: in addition to an The growth markets outside western Europe together encouraging level of growth in Germany, there were particularly accounted for 24.7 per cent of consolidated revenue (2014: strong increases in the volume of business in France, Italy, Spain 24.8 per cent). The proportion of revenue generated outside and the United Kingdom. The KION Group generated strong Germany rose to 75.0 per cent (2014: 73.9 per cent). > TABLE 017 Revenue by customer location in € million Western Europe Eastern Europe Americas Asia Rest of world Total revenue 2015 3,724.1 432.5 263.0 524.6 153.7 2014 3,411.0 403.3 245.3 470.7 147.5 5,097.9 4,677.9 TABLE 017 Change 9.2% 7.2% 7.2% 11.4% 4.2% 9.0% KION GROUP AG | Annual Report 2015We keep the world moving. 72 Earnings and profitability EBIT, EBITDA and ROCE Earnings before interest and tax, adjusted for non-recur- ring items and KION acquisition items (adjusted EBIT), rose to €482.9 million, an increase of 9.0 per cent compared with the Earnings before interest and tax (EBIT) advanced by 21.8 per cent previous year (2014: €442.9 million) and the highest ever figure in to €422.8 million. The prior-year figure of €347.0 million had the history of the Company. The adjusted EBIT margin was included an impairment loss of €13.5 million relating to the equity unchanged year on year at 9.5 per cent. Most of the significant investment in Linde Hydraulics. This had led to a substantial improvement in gross profit (up by 11.6 per cent) was offset by increase in non-recurring items, which amounted to a net expense higher expenses in the individual functional divisions resulting of €57.0 million in 2014, compared with a net expense of only from currency effects, changes to collective bargaining agree- €33.0 million in 2015. This mainly comprised expenses and ments and other factors. impairment losses in connection with the efficiency measures ini- At 11.9 per cent, return on capital employed (ROCE) was tiated under the Strategy 2020. slightly above the prior-year figure (2014: 11.4 per cent). The increase in adjusted EBIT was partly offset by a moderate rise in the capital employed. > TABLE 018 EBIT in € million Net income Income taxes Net financial expenses EBIT + Non-recurring items + KION acquisition items Adjusted EBIT EBITDA in € million EBIT Amortisation and depreciation EBITDA + Non-recurring items + KION acquisition items Adjusted EBITDA Moving Forward Innovation TABLE 018 Change 24.0% – 36.4% – 4.3% 21.8% – 42.1% – 30.4% 9.0% TABLE 019 Change 21.8% 9.3% 15.4% – 53.6% – 99.7% 8.9% 2014 178.2 – 80.0 – 88.8 347.0 57.0 38.9 442.9 2014 347.0 367.2 714.2 55.6 10.7 780.4 2015 221.1 – 109.2 – 92.6 422.8 33.0 27.0 482.9 2015 422.8 401.4 824.2 25.8 0.0 850.0 KION GROUP AG | Annual Report 2015 GROUP MANAGEMENT REPORT Report on the economic position 73 Earnings before interest, tax, depreciation and amortisation The higher personnel expenses and other administrative expenses (EBITDA) reached €824.2 million, compared with €714.2 million in for innovations in drive technology and the further development of the prior year. Adjusted EBITDA rose to €850.0 million (2014: the global product platforms were partly offset by savings that €780.4 million). This equates to an adjusted EBITDA margin of have already been generated through measures to increase 16.7 per cent, the same as it had been in 2014. > TABLE 019 efficiency. General administrative expenses, which went up by 10.0 per cent to €355.9 million in 2015 (2014: €323.6 million), were Key influencing factors for earnings also affected by implementation of the Strategy 2020. Further- Compared with the rise in revenue, there was a disproportionately more, currency effects and changes to collective bargaining low increase of 7.9 per cent in the cost of sales to €3,601.7 million agreements pushed up costs across all functional divisions. (2014: €3,337.4 million). Gross profit therefore climbed by 11.6 per The ‘other’ item of €43.6 million was higher than the previous cent to €1,496.2 million (2014: €1,340.5 million) and the gross year’s figure of €26.4 million. This increase was mainly due to the margin improved from 28.7 per cent to 29.3 per cent. One of total net income from equity investments of €20.3 million, which is the factors in this improvement was the higher margin in the recognised under this item. This includes a share of profit of equity- new truck business, which resulted in part from a relatively low accounted investments amounting to €10.6 million. In 2014, the increase in the cost of materials and higher proportion of custom- total loss of €33.9 million from the equity-accounted Linde ised equipment. Hydraulics resulted in an overall net loss from equity investments Selling expenses grew by 8.3 per cent to €618.0 million (2014: of €23.4 million. In addition to net income (loss) from equity invest- €570.5 million) and thus rose at a slightly lower rate than revenue. ments and other income and expenses, the ‘other’ item also con- The increase in research and development costs to €143.0 million tains income and expenses resulting from exchange differences. (2014: €125.7 million) was attributable, among other factors, to The net figure was down by €14.5 million compared with 2014. expenses in connection with implementing the Strategy 2020. > TABLE 020 (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 2015 5,097.9 2014 4,677.9 – 3,601.7 – 3,337.4 1,496.2 – 618.0 – 143.0 – 355.9 43.6 422.8 – 92.6 330.2 – 109.2 221.1 1,340.5 – 570.5 – 125.7 – 323.6 26.4 347.0 – 88.8 258.3 – 80.0 178.2 TABLE 020 Change 9.0% – 7.9% 11.6% – 8.3% – 13.8% – 10.0% 65.5% 21.8% – 4.3% 27.9% – 36.4% 24.0% KION GROUP AG | Annual Report 2015We keep the world moving. 74 Net financial income/expenses There was a significant improvement in the balance of financial income and financial expenses, leading to net financial expenses Business situation and financial performance of the segments of €92.6 million compared with a prior-year figure (adjusted for LMH segment non-recurring items) of €108.8 million. The main factor here was the optimisation of the funding structure in 2014 resulting from the Business performance and order intake early repayment of two tranches of the corporate bonds. This The LMH segment reported a significant increase in orders and resulted in one-off financial expenses of €23.2 million, which were revenue, strengthening its position as one of the leading global also included in the financial expenses of €88.8 million reported in manufacturers of industrial trucks and the market leader in 2014 as well as financial income from the remeasurement of Europe. Order intake went up by 12.4 per cent to €3,516.3 mil- options in connection with Linde Hydraulics (€43.2 million). lion (2014: €3,128.4 million). There were particularly strong Income taxes increases in the number of orders in western Europe and the eastern European EU states. In China, LMH benefited from the Income tax expenses amounted to €109.2 million (2014: demand for electric forklift trucks and warehouse trucks and €80.0 million). This increase of €29.2 million was mainly attributa- bucked the market trend with an increase in total unit sales that ble to the rise in earnings in 2015 and to current tax expenses for was partly due to strong sales of Baoli diesel trucks in the econ- previous years. It was partly offset by deferred tax income that omy segment. Currency effects of €124.7 million also had a pos- resulted mainly from the recognition of deferred tax assets related itive impact on order intake. to loss carryforwards and interest carryforwards. The tax rate In connection with the Strategy 2020, LMH pressed ahead was 33.1 per cent (2014: 31.0 per cent). with the construction of the new plant in the Czech Republic, Net income and appropriation of profit also a continued drive to strengthen the sales and service Net income amounted to €221.1 million, exceeding the 2014 network in North America. In India, LMH is building awareness figure of €178.2 million by 24.0 per cent. Net income of €217.1 mil- of its brand, which is being targeted at the premium segment. It lion (2014: €176.7 million) was attributable to the shareholders of is utilising the existing infrastructure of the Voltas brand (KION KION GROUP AG. Basic and diluted earnings per share came to India), whose own new truck business expanded in the year which went into operation at the beginning of 2016. There was €2.20 (2014: €1.79) based on an average number of no-par-value under review. shares in the year of 98.7 million (2014: 98.7 million). This did not include 160,050 no-par-value treasury shares that had been Revenue repurchased by KION GROUP AG as part of a buy-back to sup- Revenue went up by 11.5 per cent to €3,429.8 million (2014: port the KION Employee Equity Programme. €3,077.2 million). The main influencing factor was the increase in The Executive Board and Supervisory Board of KION new truck business, a trend that was primarily attributable to the GROUP AG will propose a dividend of €0.77 per share to the growing demand for warehouse trucks and electric forklift trucks Annual General Meeting on 12 May 2016. As there were in western Europe. There was also growth across all areas of the 98,739,950 dividend-bearing shares as at 31 December 2015, service business, with particularly sharp rises in after-sales and this equates to a total dividend payout of €76.0 million. A total of rental business. Positive currency effects contributed €125.2 mil- around 35.0 per cent of the net income accruing to the lion to the increase in revenue. KION GROUP AG shareholders will therefore be distributed in dividends. Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Report on the economic position 75 2015 3,516.3 3,429.8 545.8 543.2 363.4 383.9 15.8% 11.2% 2014 3,128.4 3,077.2 441.2 486.6 270.3 339.6 15.8% 11.0% TABLE 021 Change 12.4% 11.5% 23.7% 11.6% 34.4% 13.0% – – Key figures – LMH – in € million Order intake * Revenue EBITDA Adjusted EBITDA EBIT Adjusted EBIT Adjusted EBITDA margin Adjusted EBIT margin * Prior-year figures restated to reflect the change in the order intake calculation introduced in 2015 Earnings Revenue As a result of the increase in revenue, adjusted EBIT advanced by Revenue in the STILL segment amounted to €1,950.2 million, 13.0 per cent to reach €383.9 million (2014: €339.6 million). The exceeding the 2014 figure of €1,850.7 million by 5.4 per cent. The adjusted EBIT margin stood at 11.2 per cent, slightly higher than increase was attributable to the buoyant new truck business, the margin of 11.0 per cent in 2014. EBIT including non-recurring which expanded by 5.1 per cent, and to the service business items improved to €363.4 million (2014: €270.3 million). (servicing, spare parts, rentals and used trucks), where revenue Adjusted EBITDA stood at €543.2 million (2014: €486.6 mil- was up by 5.6 per cent. lion). This equates to an adjusted EBITDA margin of 15.8 per cent, the same as in 2014. > TABLE 021 Earnings STILL segment Adjusted EBIT for the segment rose to €144.0 million (2014: €133.6 million). The adjusted EBIT margin stood at 7.4 per cent, slightly higher than the margin of 7.2 per cent in 2014. Business performance and order intake With the inclusion of non-recurring items, EBIT fell year on year STILL saw its order intake go up by 4.5 per cent to €1,980.0 mil- to €117.5 million (2014: €118.4 million). This was because of lion in 2015 (2014: €1,895.1 million) and it consolidated its strong expenses in connection with the efficiency measures initiated position in the key sales markets. Once again in 2015, electric under the Strategy 2020. forklift trucks and warehouse trucks accounted for a higher share Adjusted EBITDA rose to €258.3 million (2014: €240.4 mil- of new truck orders than before, while unit sales of diesel trucks lion). The adjusted EBITDA margin was 13.2 per cent (2014: declined slightly. Whereas some major western and eastern Euro- 13.0 per cent). > TABLE 022 pean markets generated significant growth, orders fell in Russia and Brazil. KION GROUP AG | Annual Report 2015We keep the world moving.76 Key figures – STILL – in € million Order intake Revenue EBITDA Adjusted EBITDA EBIT Adjusted EBIT Adjusted EBITDA margin Adjusted EBIT margin 2015 1,980.0 1,950.2 242.1 258.3 117.5 144.0 13.2% 7.4% 2014 1,895.1 1,850.7 231.1 240.4 118.4 133.6 13.0% 7.2% TABLE 022 Change 4.5% 5.4% 4.8% 7.4% – 0.8% 7.8% – – Financial Services (FS) segment rental fleets. The LMH and STILL brand segments manage this Business performance business, which is recognised as intra-group revenue. This brought the total segment revenue up to €740.3 million (2014: The Financial Services (FS) segment is the central financing part- €620.9 million). Net financial income in the form of net interest ner in the KION Group. The FS segment benefited from an income is a key element of the segment’s earnings and rose to increase in business in the LMH and STILL brand segments, €7.1 million (2014: €3.1 million). Earnings before tax came to enjoying growth in the financing of short-term rental business €5.3 million, improving only marginally on the figure of €5.2 million (which is the operational responsibility of the brand segments) in 2014. The return on equity (ROE) was 13.1 per cent (2014: and in the long-term leasing business with external end custom- 13.0 per cent). ers. As in 2014, a large proportion of the financing portfolio was As at 31 December 2015, total segment assets amounted to focused on business in western Europe. Outside western Europe, €1,603.4 million (2014: €1,361.3 million). Of this total, €627.6 mil- FS recorded its strongest gains in Brazil and China, where long- lion was accounted for by lease receivables due from external term financing solutions were offered for the first time. customers (31 December 2014: €521.9 million), while €549.2 mil- Funding for the leasing business was secured at all times in lion (31 December 2014: €473.0 million) related to the financing of 2015 by sufficient lines of credit from our financing partners. the short-term rental fleet in the LMH and STILL segments. Because of the good financing conditions, the KION Group was Leased assets under operating leases relating to external cus- able to establish new lines of credit with favourable terms and tomer contracts amounted to €316.1 million (31 December 2014: renegotiate existing lines. Smaller regional partners were also €267.4 million). brought on board. The funding of leases with external end customers gave rise to leasing liabilities with external funding partners amounting to Financial position and financial performance €853.1 million (31 December 2014: €702.9 million). The funding of Revenue in the long-term leasing business with external end cus- the intra-group long-term leases (finance leases) with LMH and tomers went up to €417.3 million (2014: €350.1 million). Financing STILL resulted in lease liabilities of €400.6 million (2014: for short-term rental business grew by 19.3 per cent to €322.9 mil- €334.5 million). Net financial debt attributable to this segment lion (2014: €270.7 million) because of the expansion of short-term came to €185.6 million (2014: €155.1 million). > TABLE 023 Moving Forward Innovation KION GROUP AG | Annual Report 2015 GROUP MANAGEMENT REPORT Report on the economic position 77 Key figures – Financial Services – in € million Revenue Adjusted EBITDA Adjusted EBIT Earnings before taxes (EBT) Total segment assets Leased 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 divided by average equity employed excluding net income (loss) for the current period 2015 740.3 88.7 – 1.8 5.3 2014 620.9 82.6 2.1 5.2 TABLE 023 Change 19.2% 7.5% <– 100% 1.4% 1,603.4 1,361.3 17.8% 316.1 1,176.8 627.6 549.2 1,253.7 853.1 400.6 185.6 47.5 267.4 994.9 521.9 473.0 1,037.5 702.9 334.5 155.1 46.5 18.2% 18.3% 20.2% 16.1% 20.8% 21.4% 19.8% 19.6% 2.2% 13.1% 13.0% – Other segment Revenue and earnings Business performance At €252.8 million, total revenue for this segment was higher than the 2014 figure of €235.7 million. This resulted mainly from inter- Group head office functions that do not come under any other nal IT and logistics services and from Egemin Automation, which segment, plus Egemin NV along with its eight subsidiaries and has been consolidated since August 2015. Because of this acqui- its Egemin Automation brand, are reported in the Other segment. sition, the revenue generated outside the KION Group increased In 2015 KION India was transferred from the Other segment to the to €53.5 million (2014: €47.6 million) in spite of the transfer of KION LMH segment. India to the LMH segment. Egemin Automation contributed pro rata revenue of €33.0 million. KION GROUP AG | Annual Report 2015We keep the world moving.78 Key figures – Other – in € million Order intake Revenue EBITDA Adjusted EBITDA EBIT Adjusted EBIT 2015 268.6 252.8 160.6 187.7 127.3 155.3 2014 236.5 235.7 141.1 152.5 124.1 135.5 TABLE 024 Change 13.6% 7.3% 13.8% 23.1% 2.5% 14.6% The Other segment reported adjusted EBIT, including intra-group collects liquidity surpluses of the Group companies in central or dividend income, of €155.3 million (2014: €135.5 million). Adjusted regional cash pools and, where possible, covers subsidiaries’ EBITDA came to €187.7 million (2014: €152.5 million). > TABLE 024 funding requirements with intercompany loans. This funding enables the KION Group to present a united front in the capital Consolidation/reconciliation markets and strengthens its hand in negotiations with banks and other market participants. Besides the intra-group supply relationships between the brand As a listed group of companies that was funded in the year segments and with Financial Services, the main factor in the EBIT under review using a corporate bond and loan facilities, the effect of minus €198.5 million (2014: minus €167.9 million) across KION Group considers the interests of shareholders, bond hold- all segments was the intra-group dividend income. ers and banks in its financial management. For the sake of all Financial position stakeholders, the KION Group makes sure that it maintains an appropriate ratio of internal funding to borrowing. The KION Group’s borrowing is based on a long-term approach. The core components of this borrowing will become due for repayment in Principles and objectives of financial management the years 2018 to 2020. The Group occasionally arranges addi- tional credit lines for KION Group companies with local banks or By pursuing an appropriate financial management strategy, the leasing companies in order to comply with legal, tax and other KION Group makes sufficient cash and cash equivalents availa- regulations. ble at all times to meet the Group companies’ operational and Among other things, the loan facility and the contractual con- strategic funding requirements. In addition, the KION Group opti- ditions relating to the issuance of the corporate bond require mises its financial relationships with customers and suppliers, compliance with loan conditions (‘covenants’). The loan facility manages any collateral security offered and mitigates the finan- also requires compliance with specific financial covenants during cial risk to its enterprise value and profitability, notably currency the term of the agreement. Non-compliance with the covenants risk, interest-rate risk, price risk, counterparty risk and country may, for example, give lenders the right to terminate the loan or risk. In this way, the KION Group creates a stable funding position permit bondholders to put the corporate bonds back to the issuer from which to maintain profitable growth. prior to their maturity date. All covenants and restrictions were The financial resources within the KION Group are provided comfortably complied with in the past financial year. on the basis of an internal funding approach. The KION Group Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Report on the economic position 79 Depending on requirements and the market situation, the Analysis of capital structure KION Group will also avail itself of the funding facilities offered by the public capital markets in future. The KION Group therefore Financial debt seeks to maintain a strong credit profile in the capital and funding Long-term borrowing fell by €89.5 million from its level at markets by rigorously pursuing a value-based strategy, imple- 31 December 2014 to reach €557.2 million at the end of 2015. menting proactive risk management and ensuring a solid funding As at 31 December 2015, the main components of long-term structure. In April 2015 the KION Group’s credit rating was raised. borrowing were the corporate bond (€450.0 million), which was Rating agency Standard & Poor’s now classifies the KION Group due to mature in 2020 but was paid back in February 2016, and as BB+ with a stable outlook, while the rating from Moody’s is the amounts drawn down from the revolving credit facility Ba2 with a positive outlook. (€90.0 million). The KION Group maintains a liquidity reserve in the form of As at 31 December 2015, the unused, unrestricted loan unrestricted, bindingly committed credit lines and cash in order to facility had risen to €1,090.8 million or – including cash and cash ensure long-term financial flexibility and solvency. equivalents – to €1,193.6 million. In 2015, the KION Group used derivative financial instru- Because of the free cash flow generated in 2015, the ments in the form of cash flow hedges and a net investment improved funding structure and the payment received from the hedge in order to hedge currency risks. sale of 20 per cent of Linde Hydraulics (€77.4 million) the financial debt recognised fell significantly to €676.5 million in comparison Main capital market activities in the reporting period with 31 December 2014 (€909.6 million). After deduction of cash and cash equivalents of €103.1 million, net financial debt fell to a In September 2015, KION GROUP AG carried out another share historical low of €573.5 million, compared with €810.7 million at buyback to support its KION Employee Equity Programme the end of 2014. Net debt as at 31 December 2015 was therefore (KEEP), purchasing a total of 70,000 of its own no-par-value only 0.7 times adjusted EBITDA, compared with 1.0 times in the shares (around 0.07 per cent of the share capital). To do so, the prior year. > TABLE 025 KION Group used the authorisation granted at the Annual Gen- eral Meeting on 13 June 2013. In October 2015, the KION Group employees entitled to participate in KEEP were given the oppor- tunity to buy more KION shares. By 31 December 2015, a total of 73,512 shares had been purchased by staff (2014: 87,438 shares). This increased the number of shares held in treasury to 160,050 as at the reporting date. KION GROUP AG | Annual Report 2015We keep the world moving.80 Net financial debt in € million Corporate bond (2013 / 2020) – fixed rate (gross) Liabilities to banks (gross) Liabilities to non-banks (gross) ./. Capitalized borrowing costs Financial debt ./. Cash and cash equivalents Net financial debt 2015 450.0 225.9 6.2 – 5.5 676.5 – 103.1 573.5 2014 450.0 459.9 6.6 – 6.9 909.6 – 98.9 810.7 TABLE 025 Change 0.0% – 50.9% – 6.1% 19.5% – 25.6% – 4.2% – 29.3% On 25 January 2016, the Executive Board of KION GROUP AG ments to pension plan participants. These contributions are decided to implement the new funding structure of the determined by factors such as the funded status, legal and tax KION Group by redeeming the existing syndicated loan dated considerations, and local practice. The payments made by the 23 December 2006 comprising a revolving credit facility of KION Group under retirement pension obligations in 2015 €1,243.0 million and the KION Group corporate bond of totalled €24.2 million, comprising €15.6 million for direct pension €450.0 million that was issued in 2013 and is due to mature payments and €8.5 million for employer contributions to plan in 2020. The associated repayment was made on 15 February assets. Transfers to external pension funds resulted in payments 2016 using funds drawn down under the new senior facilities of €0.1 million. agreement. Further details about the retirement benefit obligation are provided in note [29] in the notes to the consolidated financial Retirement benefit obligation statements. The KION Group supports pension plans in many countries. These plans comply with legal requirements, standard local prac- Lease liabilities tice and the situation in the country in question. They are either Continuing growth in the leasing business with end customers defined benefit pension plans, defined contribution pension plans in 2015 led to a correspondingly higher funding requirement. or multi-employer benefit plans. As at 31 December 2015, the Lease liabilities under sale-and-leaseback arrangements rose to retirement benefit obligation under defined benefit pension €855.6 million (31 December 2014: €707.7 million). Of this total, plans amounted to a total of €798.0 million and therefore remained €617.7 million was accounted for by non-current lease liabilities at almost the same level as at the end of the previous year (31 December 2014: €461.7 million) and €237.9 million by current (31 December 2014: €787.5 million). Most of this obligation related lease liabilities (31 December 2014: €246.0 million). to pension plans in Germany. After deduction of the pension plan The liabilities from the short-term rental fleet and from pro- assets amounting to €30.2 million, the remaining net obligation curement leases are reported under other financial liabilities (see came to €767.8 million (31 December 2014: €765.8 million). note [34] in the notes to the consolidated financial statements). As Contributions to pension plans that are entirely or partly at 31 December 2015, other financial liabilities included liabilities funded via funds are paid in as necessary to ensure sufficient of €403.2 million (31 December 2014: €339.1 million) arising from assets are available and to be able to make future pension pay- sale-and-leaseback transactions used to finance the short-term Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Report on the economic position 81 rental fleet. The item also included liabilities from residual value Funding vehicles not reported on the statement of financial position guarantees amounting to €17.8 million (31 December 2014: The KION Group also makes use of funding vehicles not €18.5 million). The residual-value liabilities relate to residual-value reported in the statement of financial position. As part of its guarantees provided in connection with the sale of assets to leas- financing activities, the KION Group has entered into leases ing companies, where the guaranteed amount is more than both for its own use and for transfer to customers. In accord- 10.0 per cent of the fair value of the asset in question. ance with the relevant IFRS requirements, such leases are not Equity reported as either an asset or a liability on the statement of financial position. The nominal amount of the contractual obliga- Equity increased to €1,848.7 million (31 December 2014: tions arising from such leases not reported in the statement of €1,647.1 million) as a result of the strong net income. The dividend financial position was €272.7 million as at 31 December 2015 payment of €54.3 million for the 2014 financial year had only a (31 December 2014: €250.8 million; see note [36] in the notes minor impact on equity because of the overall gain of €38.9 mil- to the consolidated financial statements). In addition, the KION lion recognised in other comprehensive income. The equity ratio Group sold trade receivables with a total value of €75.1 million increased to 28.7 per cent (31 December 2014: 26.9 per cent). (2014: €74.4 million) through factoring transactions and derecog- > TABLE 026 nised those receivables in full. (Condensed) statement of financial position – 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 2015 1,848.7 in % 28.7% 2014 1,647.1 in % 26.9% Change 12.2% 2,860.0 44.4% 2,688.3 43.9% 6.4% 798.0 557.2 302.7 617.7 12.4% 8.7% 4.7% 9.6% 787.5 646.8 320.9 461.7 12.8% 10.6% 5.2% 7.5% 1.3% – 13.8% – 5.7% 33.8% 1,731.5 26.9% 1,793.0 29.3% – 3.4% 119.3 574.6 237.9 6,440.2 1.9% 8.9% 3.7% – 262.9 564.6 246.0 6,128.5 4.3% 9.2% 4.0% – – 54.6% 1.8% – 3.3% 5.1% KION GROUP AG | Annual Report 2015We keep the world moving.82 Analysis of capital expenditure The KION Group’s net cash provided by operating activities totalled €677.9 million, which was significantly higher than the Capital expenditure (excluding leased and rental assets) was prior-year figure (2014: €603.8 million). This increase, which fully again funded using cash flow from operating activities in the offset the increase in working capital, the rise in the volume of reporting year. Capital expenditure rose by 7.1 per cent year on leasing, and higher tax payments, was attributable to higher year to reach €142.6 million (2014: €133.1 million). Whereas capi- contributions to operating profit and to one-off incoming pay- talised development costs in the LMH and STILL brand segments ments in the year under review. were a little lower, there was an increase in capital expenditure at The net cash used for investing activities rose to €345.2 mil- the Group’s production and technology sites, the bulk of which lion (2014: €297.8 million). Cash payments, particularly for capital was attributable to the LMH segment. The main capital expendi- expenditure on research and development (R&D) and property, ture activities were the modernisation of production facilities in plant and equipment, totalled €142.6 million in 2015 (2014: Germany and Asia, the construction of a new factory in the Czech €133.1 million). Owing to the increase in demand for rental trucks, Republic and the ongoing optimisation of the IT infrastructure. the KION Group also continued to expand its short-term rental Analysis of liquidity fleet business (net) with a volume of spending of €222.9 mil- lion (2014: €183.4 million). The €84.9 million in total net cash used for equity investments, in particular the acquisition of Egemin Liquidity management is an important aspect of central financial Automation, was almost completely matched by the €77.4 mil- management. The sources of liquidity are cash and cash equiva- lion inflow of funds from the sale of 20.0 per cent of the shares in lents, cash flow from operating activities and amounts available Linde Hydraulics to Weichai Power. under credit facilities. Cash and cash equivalents went up slightly Free cash flow – the sum of cash flow from operating activi- over the course of 2015 to reach €103.1 million (2014: €98.9 mil- ties and investing activities – was up by €26.8 million year on year lion); €0.3 million of this was restricted. Taking into account the at €332.7 million (2014: €305.9 million). credit facilities that were still available, the unrestricted cash and At minus €329.1 million, cash flow from financing activities cash equivalents available to the KION Group as at 31 Decem- improved significantly on the prior-year figure (2014: minus ber 2015 amounted to €1,193.6 million (2014: 939.7 million). €428.1 million), which had been affected by the repayment of the (Condensed) statement of cash flows in € million EBIT Cash flow from operating activities Cash flow from investing activities Free cash flow Cash flow from financing activities Effect of foreign exchange rate changes on cash Change in cash and cash equivalents Moving Forward Innovation 2015 422.8 677.9 – 345.2 332.7 – 329.1 0.5 4.1 2014 347.0 603.8 – 297.8 305.9 – 428.1 1.8 – 120.4 TABLE 027 Change 21.8% 12.3% – 15.9% 8.8% 23.1% – 71.3% > 100% KION GROUP AG | Annual Report 2015 GROUP MANAGEMENT REPORT Report on the economic position 83 corporate bonds and other factors. The financial debt taken up, Due to the overall growth in business, leased assets for which came to €911.0 million and was mainly used for the ongo- leases with end customers that are classified as operating leases ing funding of the working capital and for the funding of acquisi- increased to €334.4 million (31 December 2014: 279.0 million). tions, was offset by repayments totalling €1,134.9 million as at Long-term lease receivables arising from leases with end cus- 31 December 2015. Net cash of €43.3 million was used for tomers that are classified as finance leases advanced to regular interest payments (2014: €82.5 million). The distribution of €472.0 million (31 December 2014: €345.3 million). a dividend of €0.55 per share resulted in an outflow of funds of The amount of deferred tax assets recognised on the bal- €54.3 million (2014: €34.5 million). The acquisition of employee ance sheet fell by €8.9 million to reach €349.0 million at the end shares caused a cash outflow of €2.7 million (2014: €1.5 million). of 2015. Further details regarding the change in deferred tax > TABLE 027 assets are provided in note [14] in the notes to the consolidated Net assets Non-current assets financial statements. Current assets Overall, current assets increased by €26.2 million to €1,629.9 mil- lion (31 December 2014: €1,603.7 million). While trade receivables Non-current assets increased to €4,810.3 million (31 Decem- in particular increased significantly, other current financial assets ber 2014: €4,524.8 million), primarily due to the expanding leasing declined, mainly because the put option vis-à-vis Weichai Power business. Intangible assets accounted for €2,452.5 million on 20.0 per cent of the shares in Linde Hydraulics was exercised. (31 December 2014: €2,412.5 million). Within that amount, By contrast, short-term lease receivables from end custom- goodwill and the KION Group’s brand names rose to €2,152.2 mil- ers decreased to €181.7 million at the end of the reporting period lion owing to currency effects and, in particular, the first-time (31 December 2014: €202.5 million). consolidation of Egemin Automation (31 December 2014: Cash and cash equivalents stood at €103.1 million (31 Decem- €2,092.4 million). ber 2014: €98.9 million). Taking into account the unused credit Rental assets increased to €544.0 million due to the expan- facility, the cash and cash equivalents available to the KION Group sion of the rental fleet business in the brand segments (31 Decem- at 31 December 2015 amounted to €1,193.6 million. > TABLE 028 ber 2014: €487.1 million). Inventories in € million Materials and supplies Work in progress Finished goods and merchandise Advances paid Total inventories 2015 115.9 75.0 359.5 3.1 553.5 2014 122.2 71.5 330.8 4.7 529.2 TABLE 028 Change – 5.1% 4.9% 8.7% – 35.0% 4.6% KION GROUP AG | Annual Report 2015We keep the world moving. 84 Working capital (inventories and trade receivables less trade pay- ables) was €649.3 million as at the reporting date (31 Decem- ber 2014: €562.8 million). > TABLE 029 (Condensed) statement of financial position – 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 financial assets Cash and cash equivalents 2015 4,810.3 in % 74.7% 2014 4,524.8 in % 73.8% Change 6.3% 1,548.1 24.0% 1,497.1 24.4% 604.1 349.0 544.0 334.4 472.0 9.4% 5.4% 8.4% 5.2% 7.3% 595.4 357.9 487.1 279.0 345.3 9.7% 5.8% 7.9% 4.6% 5.6% 3.4% 1.5% – 2.5% 11.7% 19.9% 36.7% 1,629.9 25.3% 1,603.7 26.2% 1.6% 553.5 670.5 181.7 58.4 103.1 8.6% 10.4% 2.8% 0.9% 1.6% 529.2 598.2 202.5 118.3 98.9 8.6% 9.8% 3.3% 1.9% 1.6% 4.6% 12.1% – 10.3% – 50.6% 4.2% Total assets 6,440.2 – 6,128.5 – 5.1% Moving Forward Innovation KION GROUP AG | Annual Report 2015 GROUP MANAGEMENT REPORT Report on the economic position 85 NON-FINANCIAL PERFORMANCE INDICATORS Employees HR strategy The KION Group’s success is founded on the capabilities and The KION Group’s enterprise value is determined not only by commitment of its employees. The ultimate objective of the KION financial KPIs but also by non-financial influencing factors. The Group’s HR strategy is to provide the best possible support to the non-financial influencing factors are based on the Company’s targeted implementation of the KION Group Strategy 2020. To relations with its customers and employees and on its technolog- this end, the KION Group draws on a wide range of measures to ical position and on environmental considerations – and they also ensure that there is always a sufficient number of highly qualified have an impact on the success of the Strategy 2020. The overar- and committed employees at all levels of its operations. Attractive ching objective of establishing the KION Group as the global mar- working conditions and the opportunities for career progression ket leader with above-average profitability, efficiency and resil- afforded by working for an international group of companies play ience by 2020 can only be achieved if the Group succeeds in: an important role in this and provide a solid basis for meeting the 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 manifold challenges presented by demographic change. The KION Group has continually strengthened its employer brands, particularly those of LMH and STILL, at a high level. In 2015, STILL was recognised as one of Germany’s best employers by the Top Employers Institute, an international certification organisation, for the fourth time in a row. It also received a ‘Ger- many’s Top Employers’ award from the CRF Institute. in such a way that resources are conserved and emissions are avoided as far as possible. Headcount The KION Group firmly believes that these aspects are important The average number of employees (full-time equivalents (FTEs), to its positioning as a pioneering company in a highly competitive including trainees and apprentices) in the KION Group was environment. 23,129 in 2015 (2014: 22,438 FTEs). As at 31 December 2015, the KION Group companies employed 23,506 FTEs, 837 more than a year earlier. This increase resulted mainly from the acquisition of the Belgium-based Egemin Automation and growth in the Czech Republic. > TABLE 030 KION GROUP AG | Annual Report 2015We keep the world moving. 86 Employees (full-time equivalents)* TABLE 030 31/12/2015 Western Europe Eastern Europe Americas Asia Rest of world Total 31/12/2014 Western Europe Eastern Europe Americas Asia Rest of world Total LMH 8,728 1,234 154 3,805 565 STILL 6,931 687 485 0 0 14,486 8,103 8,607 1,096 138 3,560 544 6,792 671 513 0 0 13,945 7,976 FS 59 0 0 0 0 59 60 0 0 0 0 60 Other 797 0 54 7 0 858 526 0 0 162 0 688 Total 16,515 1,921 693 3,812 565 23,506 15,985 1,767 651 3,722 544 22,669 * Number of employees (full-time equivalents) as at balance sheet date; allocation according to the contractual relationship Personnel expenses amounted to €1,351.7 million. The main rea- son for this increase of 9.7 per cent compared with 2014 was the raise in average headcount for 2015 and changes to collective bargaining agreements. > TABLE 031 Personnel expenses in € million Wages and salaries Social security contributions Post-employment benefit costs and other benefits Total Moving Forward Innovation 2015 1,058.1 237.8 55.9 1,351.7 2014 966.4 215.7 49.7 1,231.9 TABLE 031 Change 9.5% 10.2% 12.3% 9.7% KION GROUP AG | Annual Report 2015 GROUP MANAGEMENT REPORT Report on the economic position 87 Diversity such as talent management and training & development pro- grammes. This helps to systematically identify and support staff The KION Group sees itself as a global manufacturer with strong with potential, high performers and experts in key functions. intercultural awareness: as at 31 December 2015, people from Organised in cooperation with the European School of Manage- 69 different countries were employed across the KION Group. ment and Technology (ESMT) and continued from 2014, KION One of the ways in which the Company promotes interna- Campus is an international, cross-brand executive development tional collaboration between employees is the KION expat pro- programme aimed at the Group’s around 300 top executives. In gramme, which gives employees the opportunity to transfer to addition, new managers at STILL continue to receive support different countries where the KION Group is represented. under the First Leading programme during their first few years. The KION Group tackles the challenges of demographic Prospective managers can enhance their skills through STILL’s change by providing working conditions that are suited to employ- Young Professional programme, while highly talented staff around ees’ age-related requirements and organising healthy-living pro- the world can participate in the International Junior Circle. The grammes so that it can continue to benefit from older employees’ STILL Academy offers subject-specific and interdisciplinary train- experience. As at 31 December 2015, 25.1 per cent of employees ing courses. Opportunities at Linde Material Handling include a were over the age of 50 (31 December 2014: 24.2 per cent). A virtual assessment centre for future managers. total of 258 employees were participating in partial retirement models as at the reporting date (31 December 2014: 192). Training and professional development Compared with the previous year, the proportion of the KION Group’s total workforce made up of women remained stable in The companies in the KION Group currently offer training for 2015, at 16.1 per cent. To help increase the proportion of man- 21 professions in Germany. They employed a total of 571 trainees agement positions occupied by women, the Executive Board set and apprentices as at 31 December 2015 (31 December 2014: targets that are published in the corporate governance report. 577). The ratio of trainees and apprentices to other employees Going forward, the KION Group intends to fill more management therefore remains at a steady, high level. Besides providing dual positions with employees from outside Germany in order to better vocational training schemes, KION Group companies offer work 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 ‘tele- Sharing in the Company’s success working / home office’, which stipulates the terms on which employees can work at home on a mutually agreed and volun- Having successfully floated on the stock exchange, the KION tary basis. Group launched the KION Employee Equity Programme (KEEP) in 2014. Initially limited to Germany, the programme was rolled out Development of specialist workers and executives to France, the UK, Italy and China last year. Around 1,700 employ- ees across the five countries participated in this share matching Finding highly qualified people to fill specialist and executive posi- programme in 2015, roughly 11 per cent of the total number who tions is crucial to the KION Group’s success. As a result, one of are eligible to do so. The programme was especially well received the focuses of HR work across the Group in 2015 was, as in the in China, resulting in a participation rate that greatly exceeded the previous years, the recruitment and development of suitable original expectation. young talent. The total participation rate for KEEP since its inception is now The KION Group endeavours to offer its employees interest- around 17 per cent. ing career opportunities and flexible, family-friendly working-time models. The Group companies also collaborate closely on areas KION GROUP AG | Annual Report 2015We keep the world moving.88 The plan for 2016 is to give employees in other countries the made good progress with regard to HSE. Last year 14 audits opportunity to share in the company’s success by participating were carried out within the KION Group. All audits in the reporting in KEEP. year showed a clear improvement in the individual units com- In 2015 the remuneration of the Group’s around 300 top pared with 2014. executives was updated by continuing the long-term remunera- In 2015 KION also introduced a global system for reporting tion components that had been introduced in 2014, thereby align- accidents and incidents. The system requires accidents involv- ing it with the remuneration of the Executive Board. A second ing serious injuries, for example that hospitalise the affected allocation of the KION Long Term Incentive Plan for Top Manage- individual, to be reported directly to the Executive Board within ment (LIFT) was issued in the reporting year. 24 hours. Information must also be provided as to whether Employee commitment measures to improve safety in the workplace were introduced as a result of the accident and, if so, what these measures entailed. The programme thereby serves as a global forum for The KION Group’s products and services destined for its custom- health and safety practices. ers are produced by committed and motivated employees. That The KION Safety Championship was introduced in 2014 as is why all KION companies aim to ensure a high level of employee a way of providing additional impetus and motivation for employ- commitment. In 2015 the KION Group surveyed around 1,800 ees to engage with HSE matters. All production facilities take managers on different aspects of employee and corporate man- part. Based on regular reporting from the individual units, a agement. The participation rate of approximately 88 per cent panel of judges decides which units deserve to be rewarded for was exceptionally high. The results of the survey were presented special dedication or considerable progress in an area of HSE. and discussed in various management committees, enabling The first winner of the competition, the team from KION North improvement measures to then be identified. The focus here is on America Corporation, received the Safety Championship award clarity in the implementation of the organisational changes in May 2015. announced in summer 2015 and on further enhancement of The assessment takes account of the units’ different eco- management skills. nomic and cultural situations. Safety experts at the KION Group’s various production Health and safety in the workplace facilities began to collaborate more closely last year. The HSE managers at all production sites and sales and service outlets In the reporting year, the KION Group continued to expand meet annually for an international summit at which they discuss its activities relating to health, safety & environment (HSE). The current topics and share best practice. KION Group’s obligations, in accordance with a corporate policy, The health rate for 2015 stood at the high level of 96.4 per cent include taking comprehensive precautions to create a safe work- (2014: 96.5 per cent). In 2015 the accident rate fell in both pro- ing environment and ensuring employees know how to avoid duction and sales and service. A target based on HSE key per- risks and accidents. In 2015 work began on developing an HSE formance indicators is one of the factors used to determine the code of conduct for KION with the aim of establishing groupwide variable remuneration of the Executive Board members. minimum standards. HSE activities centre on an internal audit programme, which covers all of the Group’s production facilities as well as Group sales and service. The aim of the regular audits is to systemati- cally document existing HSE measures and processes and pro- vide specific ideas for how they can be developed further (more details can be found in the ‘Sustainability’ section). The audit conducted as part of this programme shows that the Group has Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Report on the economic position 89 Research and development with environmental targets and regulatory requirements in order to create highly efficient and competitive products for customers. To Strategic focus of research and development this end, and to secure the Company’s position as a leading tech- nology provider, the product portfolio of the KION Group is contin- The focus of research and development (R&D) is determined by ually being enhanced. Another aim is to integrate the KION Group’s the Strategy 2020. The KION Group pursues the primary objective logistics solutions into customers’ value chains and open up new of increasing the customer benefits in all price segments and application areas for them. In the volume and economy segments, sales regions and, by adhering to modular and platform strate- the KION Group is establishing shared, cross-brand and cost-effi- gies, offering high quality, high-performance products at com- cient platforms that enable low-cost production yet allow a strong petitive prices. To this end, R&D is designed to be cost- effective, degree of regional differentiation in the industrial trucks. to reduce the complexity and diversity of products and to shorten development times for new products. R&D essentially works on a Key R&D figures cross-brand and cross-region basis, which ensures that research findings and technological know-how are shared across the In 2015, the KION Group’s total spending on research and Group. In addition, special product development teams working development amounted to €130.5 million. This constituted a year- for the individual brand companies and in the regions are able to on-year rise of 9.1 per cent (2014: €119.7 million). Total R&D deliver customer-specific solutions. expenditure included €40.9 million in capitalised development An example that is helping to raise efficiency is the ‘hardware costs (2014: €43.7 million). These expenses were offset by depre- in the loop’ (HIL) procedure introduced in 2015, with which com- ciation and amortisation of €53.3 million (2014: €49.7 million) (see plex electronic control units and systems can be examined using note [17] in the notes to the consolidated financial statements). virtual truck models so that improvements can be made based on The number of full-time jobs in R&D teams grew by the findings. This enables innovations to be brought to production 3.2 per cent to reach 1,056. Within the R&D organisation, the readiness much faster and more cost-effectively. development centre in the southern Chinese city of Xiamen car- In the premium segment, the focus for the KION Group’s ries out cross-brand development work, focusing mainly on the products remains on total cost of ownership for customers. The economy and volume price segments in emerging markets. It is objective is to minimise these costs, which include purchase price, playing a crucial role in bringing the groupwide platform strategy maintenance and repair costs and energy use, while complying to fruition. > TABLE 032 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 2015 143.0 – 53.3 40.9 130.5 2.6% 2014 125.7 – 49.7 43.7 119.7 2.6% TABLE 032 Change 13.8% – 7.3% – 6.6% 9.1% – KION GROUP AG | Annual Report 2015We keep the world moving. 90 The KION Group takes comprehensive measures to protect the and on the design of a common electrics/electronics architecture products it develops against imitations and pursues a specific for all future trucks made by Linde and STILL. patent strategy. In 2015, the KION companies were granted a Since last year, the KION brand companies have also been total of 70 patents (2014: 140 patents). As at 31 December 2015, using a cross-brand, cross-platform development software pro- the companies of the KION Group held a total of 1,641 patent gramme as a means of shortening product development times applications and issued patents (31 December 2014: 1,689 pat- and efficiently managing the module strategy. The software ent applications and issued patents). allows the brand companies to work together to optimise compo- Focus of R&D in 2015 nents that are used at multiple sites. In the long term, procure- ment, sales and marketing are to be brought on board in addition to the development teams so that the entire product lifecycle is Modular and platform strategy represented in a single, standardised software system. The KION Group is establishing shared, cross-brand platforms for product development and production that are geared to the volume Automation and connectivity and economy segments. This means the industrial trucks can be By acquiring Egemin Automation, the KION Group has strength- adapted to different regions cost-efficiently. Development for the vol- ened its expertise and opportunities in the design and manage- ume and economy segments is managed from China, where around ment of complex logistics automation projects and has devel- one third of the R&D staff are based. In 2015, eleven trucks and three oped into one of the leading providers of automation and new Chinese platforms were brought to market that not only replace connectivity concepts for intralogistics in the Industry 4.0 era. As old products of various platforms but also target new customer seg- well as Egemin Automation’s system solutions for intralogistics ments. For example, a heavy truck was developed that can be sold and automation, these concepts include the STILL iGo automa- worldwide for the first time, having been optimised with regard to tion solution, the STILL FleetManager and Linde connect: data maintenance and transportability. A diesel truck with improved solutions and the geo-navigation solutions from Linde Robotics. torque converter technology and extended equipment options is to In 2015, Linde Robotics partnered with Balyo, in which Linde be localised in China for use in other markets. In addition, the electric holds a stake, to launch onto the market the first self-driving forklift truck fleet was completely overhauled and given new features. trucks that can guide themselves around a warehouse using laser The premium brands, Linde and STILL, have shared plat- sensors to detect structures such as walls, racking and pillars. forms for the Asia-Pacific and Americas regions, whereas their Linde’s fleet management solution connect: came onto the products for western Europe are developed using different plat- market in March 2015 after a successful test phase. The connect: forms in order to maintain the defining characteristics of the system provides fleet managers with transparent data on drivers, brands. In 2015, Linde and STILL established a new platform for trucks, their use and their location. It therefore contributes to warehouse trucks that is tailored specifically to e-commerce improved driving safety, better availability and greater produc- and logistics. tivity. In 2015, Linde worked on a special app that helps drivers to All platforms are part of a global module strategy that enables check the condition of their truck before beginning their shift and products to be developed more cost-effectively and at a higher on a Wi-Fi connection as a second alternative for transmitting quality because of the growing number of common parts. The data. In China, connect: was presented at the Storage and Trans- Group is therefore able to achieve high levels of synergy even in port Forum in Wuxi under the name Connected Solutions. Linde western Europe with its different platforms. This is supported by MH has already successfully implemented the solution at several a centralised procurement function. Wherever possible, local major Chinese online retailers. suppliers are used for regional product features. In 2015, key STILL extended its FleetManager 4.x system with a function projects in connection with the module strategy focused on the called OptiTruck, which automatically allocates trucks to drivers lithium-ion batteries and drive axles used in electric forklift trucks and thereby makes better use of a fleet’s capacity. A central ter- minal is used to collect and return the trucks, meaning the drivers Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Report on the economic position 91 can quickly access vacant trucks. For the iGo system, which Sustainability enables industrial trucks to be controlled remotely, STILL also developed an app-based solution last year that should be Acting responsibly has always been one of the principles by appearing on the market soon. STILL strengthened its leading which the KION Group – and its brand companies – operate. position as a provider of tugger trains and process-oriented They strive for a balance between environmental, economic and material flow concepts by acquiring LR Intralogistik GmbH. LR social considerations in their business activities. This focus on Intralogistik specialises in the development of bespoke tugger sustainability is reflected in the Group’s eco-friendly and safe train systems, including the accompanying trolleys, with a focus products that help customers to conserve energy, reduce emis- on process optimisation, cost-efficiency, safety and ergonomics. sions and comply with strict workplace safety standards (see the Drive technology ‘Research and development’ section). Furthermore, the KION Group ensures that its production processes have as minimal an The development of new drive technologies is focused on lithium- impact on the environment as possible and that it offers safe and ion batteries. STILL and Linde are working together to establish a discrimination-free working conditions. lithium-ion standard for various electric forklift trucks and ware- In 2015, the KION Group began to set up a groupwide sys- house trucks and to gain a competitive edge in this important tem with which it will manage all sustainability matters across all future market. brand companies and regions in future. To start with, a sustain- After the first warehouse trucks fitted with lithium-ion batter- ability reporting procedure and system were introduced as a pilot ies had been incorporated into the product ranges of both brand project at LMH, incorporating its existing system for analysing companies in 2014, further trucks with larger lithium-ion batteries environmental impact using lifecycle assessments. were added to the product portfolios in 2015. The first step was to conduct a materiality assessment in Customers which the relevant aspects of sustainability were identified. One of the main tasks was to evaluate the aspects that are particularly relevant to the most important stakeholders. LMH’s first sustain- ability report, which was published in December 2015, provides a Last year, the KION brand companies again regularly exhibited at detailed explanation of the brand company’s understanding of the leading trade fairs for their sector in order to strengthen their sustainability, its strategy in this area and the underlying manage- relationships with customers and partners. Contact with custom- ment approach. The sustainability report is available on the LMH ers at trade fairs also makes it possible to gauge interest in the website at report.linde-mh.com. product innovations on show among new and existing customers. The findings from the pilot project will be used as the basis for In 2015, the KION brands exhibited at events such as progressively rolling out sustainability management and reporting LogiMAT, CeMAT South America, CeMAT Russia and CeMAT throughout the KION Group. Existing groupwide standards and Asia. Attracting a great deal of interest from customers, STILL rules of conduct will also apply. presented its new pallet stackers at a roadshow that visited The KION Group Code of Compliance, which was updated eight towns and cities in Germany. STILL won the prestigious in April 2015, defines clear rules on various matters, including on IFOY Award in the ‘Intralogistics Solutions’ and ‘Counter Bal- the correct way for employees to interact with colleagues, cus- anced Truck from 3.5t’ categories. Baoli showcased its tomers, partners and the public. All other standards and initia- expanded product range at the first countrywide roadshow in tives relating to health, safety & environment (HSE) are derived China. Linde Material Handling received two accolades from the from this code. It is available to the public on the KION Group Fork Lift Truck Association (FLTA), including one in the safety website. category for the Linde Safety Pilot. The corporate policy on workplace safety, health and the environment defines a number of requirements for the KION Group companies, including: as a minimum, complying with all KION GROUP AG | Annual Report 2015We keep the world moving.92 relevant national laws, codes of conduct and industry standards; Aspects of sustainability have been enshrined in the KION ensuring safe working conditions and providing employees with Group’s purchasing terms since 2015. This ensures that the the necessary training; avoiding the release of pollutants, dis- Group’s suppliers also strive for sustainability in their conduct. charge and emissions into the environment as far as possible; Information on the development of the health rate and major reducing the volume of waste by making better use of raw mate- projects in the area of health and safety in the KION Group can be rials and using recyclable materials; using materials, products found in the ‘Employees’ section (page 88). and processes that comply with best environmental practice; and All KION Group plants capture data about their energy con- using resources, energy and raw materials efficiently. sumption, volumes of waste and recycling, water consumption Minimum standards for employment apply at Group level that and emissions of greenhouse gases and volatile organic com- are based on the fundamental conventions drawn up by the Inter- pounds (VOC). Software was implemented in the year under national Labour Organization (ILO). These include freedom of review that is gradually being rolled out to all sites and is making association, the right to collective bargaining, elimination of forced reporting more efficient. and child labour, and a ban on discrimination in respect of The annual internal environmental report contains the infor- employment and occupation. Furthermore, the KION Group is mation that is available on consumption and emissions. Data for committed to ensuring health and safety standards in the work- 2015 was not available at the time this group management report place and to paying its employees remuneration that is appropri- was compiled, so the key data from the 2014 environmental ate to the industry in the particular country and, at the very least, report is presented below. > TABLE 033 provides a living wage. Environmental aspects of KION Group production sites TABLE 033 Volume of waste Recycling rate Water consumption Energy consumption Emissions of CO2 related to energy consumption (Scope 1,2,3) Emissions of volatile organic compounds (VOC) 2014 Unit 40.3 1,000 tonnes 92.9 % 314.1 1,000 m³ 270.6 GWh 113.0 1,000 tonnes CO2 equ. 154.3 tonnes Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Report on the economic position 93 All of the environmental KPIs are displaying a positive trend. Due use of a hydrogen drive system in this area is marketable and to changes to the basis of consolidation, the absolute figures for each year only have limited comparability with the figures in pre- vious reports. financially viable. – An efficient yet ergonomic solution for transporting large, awkward loads is provided by LMH’s new forklift truck with The KION Group’s objective is to gradually establish a certi- an optional elevating cabin. At the press of a button, the fied system for quality, environmental and occupational health driver’s cab glides to a height of up to 5.5 metres in less than and safety management at all sites. As at 31 December 2015, ten seconds. From there, the driver can survey the load and KION sites had been certified in accordance with the following carry out the loading process from an ergonomically com- international standards (or comparable national standards), or were in the process of completing the certification process: service units – ISO 9001 (quality management): 15 production sites, 21 sales & – ISO 14001 (environmental management): 11 production sites, – ISO 50001 (energy management): 7 production sites – OHSAS 18001 (occupational health and safety): 9 production 16 sales & service units sites, 12 sales & service units This represents a significant increase in the number of certified sites compared with the previous year. Already certified in accord- ance with ISO 50001 and OHSAS 18001, LMH’s Aschaffen burg site is going through the certification process for the updated 2015 version of the ISO 14001 standard, making it one of the first sites worldwide to do so. STILL’s Hamburg site became a member of Hamburg’s environmental partnership in 2015, having undertaken various voluntary measures to reduce its environ- mental impact. Sustainability – particularly protection of the environment, conservation of resources and workplace safety – is an important consideration when developing new products and enhancing existing ones. Here are some examples of the successes and improvements achieved in this regard during 2015: – In 2015, Linde’s entire product range in China was added to the – In November 2015, LMH, the BMW Group and the Institute Chinese directory of green travel and transport technologies. for Materials Handling, Material Flow and Logistics (fml) at Munich University of Technology (TUM) presented the results of a joint project to trial a hydrogen drive system for industrial trucks. The study, which is supported by the German Federal Ministry of Transport and Digital Infrastructure, proves that fortable position. – STILL has launched its initiative for ‘Zero Emission’: Powered by efficient diesel-electric drives, STILL trucks emit such few pollutants that their emissions do not have to be filtered sub- sequently. Furthermore, the KION Group acknowledges its corporate social responsibility. This is demonstrated by the fact that executives and employees personally support a variety of environmental and charitable projects in different countries: – STILL GmbH has donated an RX 50-10 electric forklift truck – Around 340 employees from Fenwick-Linde supported the to the German Red Cross. national donation campaign of the organisation Les Restau- rants du Coeur – Les Relais du Coeur. – Egemin Automation supported the To Walk Again organisa- tion, which arranges sports activities to help children and adults with disabilities. – KION North America supported the Dorchester Children’s Center, a charitable organisation that helps victims of abuse and their families. – At its site in Pune, KION India carried out a range of environ- mental initiatives with the aim of fostering individuals’ sense of responsibility for green issues. – The association ‘Stapler Cup hilft e.V.’, which was set up by LMH employees, donated to various charities in Aschaffen- burg and supported the German Bone Marrow Donor Centre (DKMS) during the 2015 StaplerCup, a competition for forklift truck drivers. KION GROUP AG | Annual Report 2015We keep the world moving.94 Events after the reporting date Due to current market conditions and the KION Group’s significant Among other stipulations, the contractual terms of the senior repayment of debt as a result of and since its IPO, the KION Group facilities agreement require compliance with certain covenants. can currently obtain finance on far more favourable terms than has They also contain a financial covenant that requires adherence been possible in the past. KION GROUP AG therefore signed a to a maximum level of gearing (the ratio of financial liabilities to new syndicated loan agreement (senior facilities agreement) totalling EBITDA). Non-compliance with the covenants may, for example, €1,500.0 million with a syndicate of international banks on 28 Octo- give lenders the right to terminate the new syndicated loan ber 2015. On 25 January 2016, the Executive Board of KION agreement. GROUP AG decided to implement the new funding structure of The KION Group took over Retrotech Inc., a systems integra- the KION Group by redeeming the existing syndicated loan dated tor of automated warehouse and distribution solutions headquar- 23 December 2006 comprising a revolving credit facility of tered in Rochester, New York State, with effect from 1 March 2016 €1,243.0 million and the KION Group corporate bond of €450.0 mil- by acquiring 100.0 per cent of the capital and voting shares. The lion that was issued in 2013 and was due to mature in 2020. The provisional purchase price for the net assets acquired is around associated repayment was made on 15 February 2016 using €26.0 million. In 2015, Retrotech Inc. employed over 150 highly funds drawn down under the new senior facilities agreement. specialised employees and generated revenue of roughly An amount of €5.4 million representing the proportion of the €62.0 million. deferred borrowing costs relating to the corporate bond at the time of early repayment and a cash payment of €15.2 million rep- resenting early repayment charges were recognised as financial expenses in February 2016 along with an amount of €5.1 million representing the proportion of the deferred borrowing costs relat- ing to the previous syndicated loan at the time of early redemption of that previous syndicated loan. The new senior facilities agreement comprises a revolving credit facility of €1,150.0 million maturing in February 2021 and a fixed-term tranche B of €350.0 million maturing in February 2019. KION GROUP AG has issued guarantees to the banks for all of the payment obligations under the new senior facilities agreement. Unlike the previous syndicated loan and the repaid corporate bond, the new syndicated loan agreement is not collateralised. Following repayment after the reporting date of the syndicated loan from 23 December 2006, all collateral furnished under the previous loan agreement has now been released. Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Events after the reporting date Outlook, risk report and opportunity report 95 Outlook, risk report and opportunity report OUTLOOK Assumptions Forward-looking statements The forecasts in this section are derived from the KION Group’s multiple-year market, business and financial plan, which is based on certain assumptions. Market planning takes into account macroeconomic and industry-specific performance, which is The forward-looking statements and information given below are described below. Business planning and financial planning are based on the Company’s current expectations and assessments. based on expected market performance, but also draw on other Consequently, they involve a number of risks and uncertainties. assumptions, such as those relating to changes in the cost of Many factors, several of which are beyond the control of the KION materials, the KION Group’s ability to command higher prices Group, affect the Group’s business activities and profitability. Any from customers and movements in exchange rates. unexpected developments in the global economy would result in the KION Group’s performance and profits differing significantly Expected macroeconomic conditions from those forecast below. The KION Group does not undertake to update forward-looking statements to reflect subsequently According to the January outlook of the International Monetary occurring events or circumstances. Furthermore, the KION Group Fund (IMF), the pace of global economic growth will gradually cannot guarantee that future performance and actual profits accelerate in 2016, both in the developed economies (growth of generated will be consistent with the stated assumptions and 2.1 per cent) and in the emerging markets (growth of 4.3 per cent). estimates and can accept no liability in this regard. The IMF believes that China’s contribution to worldwide growth is Actual business performance may deviate from our forecasts likely to fall further in view of its economic restructuring. Overall, due, among other factors, to the opportunities and risks described the IMF expects the global economy to grow at a rate of here. Performance particularly depends on macroeconomic and 3.4 per cent and the eurozone at 1.7 per cent in 2016. The IMF industry-specific conditions and may be negatively affected by also predicts comparatively low growth in global trade. increasing uncertainty or a worsening of the economic and polit- The outlook for macroeconomic conditions is based on the ical situation. Forecast for 2015 assumption that monetary policy in the eurozone will remain expansionary, interest rates will rise slightly in the United States and the oil price will stay low, which will boost consumption. Expected sectoral conditions The overall assessment of the financial situation compares the forecasts included in the 2014 group management report and The overall market for industrial trucks will continue to depend subsequent interim reports with actual performance in 2015. heavily on economic conditions in key sales markets, with the level of capital investment and the growth in global trade being particularly crucial. Given the overall economic prospects, the KION Group expects a slower rate of global market growth this year. The 2015 trend is likely to continue, with a sustained rise in the number of trucks ordered in Europe and North America along with further contraction of the Russian and Brazilian mar- kets. Following a sharp decline last year, KION expects China to stabilise although conditions will remain challenging. Market expectations remain positive over the longer-term perspective. Over the coming years, the KION Group expects the KION GROUP AG | Annual Report 2015We keep the world moving.96 average growth of the global market to be higher than that of above the margin of 9.5 per cent that was generated in 2015. This global gross economic growth (GDP), with above-average growth improvement will stem from significant positive effects, such as a in demand for electric forklift trucks and warehouse trucks. More- further increase in the efficiency of the production network. Free over, the increasing number of trucks in the field – around nine cash flow is expected to be in a range between €280 million and million new trucks sold worldwide over the past ten years alone, €320 million after taking account of the acquisition of Retrotech spurs additional demand for spare parts and other aftersales ser- Inc. ROCE is expected to go up slightly. The forecast is based on vices. Further potential for the future is also offered by increasing the assumption that material prices will hold steady and the cur- connectivity and automation, not only in terms of products but rent exchange rate environment will remain as it is. also in relation to services and end-to-end system solutions. Expected business situation and financial performance Expected financial position The fixed-rate (6.75 per cent) tranche of the bond issued in Feb- ruary 2013, which has a volume of €450.0 million, formed part of In 2016, the KION Group aims to build on its successful perfor- the Company’s funding structure during 2015 and was repaid in mance in 2015 and, based on the forecasts for market growth, full ahead of schedule on 15 February 2016. This bond, together achieve further increases in order intake, revenue and adjusted with amounts drawn down from a credit facility that, like the bond, EBIT. The order intake of the KION Group is expected to be dates from before the IPO, were repaid using funds from the new between €5,350 million and €5,500 million. The target figure for syndicated loan agreement totalling €1.5 billion, which has been consolidated revenue is in the range of €5,200 million to €5,350 taken out on terms with investment-grade characteristics. The million. The KION Group predicts higher volumes of revenue and new funding significantly reduces interest costs and provides orders, particularly in western Europe. KION with considerable flexibility for continuing with its strategy of The targeted range for adjusted EBIT is €510 million to profitable growth. In 2016, the KION Group plans to use free cash €535 million. The adjusted EBIT margin is predicted to increase flow to lower its net debt still further. > TABLE 034 TABLE 034 2016 5,350 – 5,500 5,200 – 5,350 510 – 535 280 – 320 2015 5,215.6 5,097.9 482.9 332.7 11.9% slightly above previous year Outlook in € million Order intake Revenue Adjusted EBIT Free cash flow ROCE Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Outlook, risk report and opportunity report 97 Overall statement on expected performance Principles of risk management The basis for the long-term success of the KION Group will con- The procedures governing the KION Group’s risk management tinue to be the strong position occupied by its international and activities are laid down in an internal risk guideline. For certain national brands in western Europe and the emerging markets. types of risk, such as financial risk or risks arising from financial The international brands Linde Material Handling and STILL, in services, the relevant departments also have guidelines that are particular, safeguard their technology leadership and underline specifically geared to these matters and describe how to deal their status as premium brands by maintaining high levels of cap- with inherent risks. Risk management is organised in such a way ital expenditure and R&D spending. that it directly reflects the structure of the Group itself. Conse- By pursuing its Strategy 2020 and other measures, the KION quently, risk officers supported by risk managers have been Group believes it will continue along its path of profitable growth appointed for each company and each division. A central Group and aims to achieve a further improvement in its market position risk manager is responsible for the implementation of risk man- worldwide in 2016. RISK REPORT Risk strategy agement processes in line with procedures throughout the 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 of this risk occurring exceed a defined limit, the KION Group’s Executive Board and its Accounting & Finance function are noti- The business activities of the KION Group necessarily involve fied immediately. Each risk is documented in an internet-based risk. Dealing responsibly with risk and managing it in a compre- reporting system designed specifically for the requirements of hensive manner is an important element of corporate manage- risk management. Risks affecting more than one Group com- ment. The overarching aim is to fully harness business oppor- pany, such as market risks, competition risks, financial risks and tunities while ensuring that risk always remains under control. risks arising from financial services, are not recorded individually Using its groupwide risk management system, the KION Group but are instead evaluated at Group level. Consequently, such contains all identified risks by implementing suitable measures risks are not quantified. and takes appropriate precautions. This ensures that the losses The scope of consolidation for risk management purposes is expected if these risks arise will be largely covered and therefore the same as the scope of consolidation for the consolidated will not jeopardise the Company’s continuation as a going concern. financial statements. The risks reported by the individual compa- At the KION Group, risk management has always been nies are combined to form divisional risk reports as part of a rig- embedded in the Accounting & Finance function and plays an orous reporting process. To this end, minuted risk management active and wide-ranging role due to the strategic focus of meetings are held once a quarter. Moreover, material risks are Accounting & Finance. The operational units’ business models, discussed with the segments at the business review meetings. strategic perspectives and specific plans of action are examined The divisional risk reports are then used to compile an aggregate systematically. This ensures that the risk management is fully risk portfolio for the KION Group as a whole. To support this, the integrated into the KION Group’s overall financial planning and relevant departments of the holding company are consulted each reporting process. quarter in order to identify and assess risk – particularly Company- wide, cross-brand risk affecting areas such as treasury, purchas- ing, tax, human resources and financial services. The Executive Board of KION GROUP AG and the Supervisory Board’s Audit KION GROUP AG | Annual Report 2015We keep the world moving.98 Committee are informed of the Group’s risk position once a quar- automated and manual reconciliation processes, separation of ter. The Internal Audit department audits the risk management functions, the four eyes principle and adherence to policies system at regular intervals. and instructions. 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 pro- cess, the local companies are supported by central points of con- tact. The consolidated accounts are drawn up centrally using data from the consolidated subsidiaries. A consolidation department with specially trained employees carries out the consolidation activities, reconciliations and monitoring of the stipulated deadlines and processes. Monthly checklists have been drawn up for the The main objectives of the accounting-related internal control consolidation process and are worked through in a standardised system are to avoid the risk of material misstatements in financial manner. All postings are managed centrally and documented. This reporting, to identify material mismeasurement and to ensure team also monitors the system-based controls and supplements compliance with the applicable regulations and internal instruc- them with manual checks. The entire accounting process contains tions. This includes verifying that the consolidated financial state- a number of specific approval stages, for which extensive plausi- ments and group management report comply with the relevant bility checks have been set up. Employees with the relevant exper- accounting standards. There can, however, be no absolute cer- tise provide support on specialist questions and complex issues. tainty that these objectives are achieved in full and at all times. The central Internal Audit department also checks, among other things, the reliability of the accounting work by the subsidiaries in Material processes and controls in the Germany and abroad. It focuses primarily on the following aspects: (Group) accounting process For its (Group) accounting process, the KION Group has 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. 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 busi- – correctness of the accounting and of the financial reporting that avoiding financial losses; ness principles; is based on the accounting in terms of form and substance. All consolidated entities must follow the KION GROUP IFRS Internal control mechanisms and ongoing analysis of the regulatory Accounting Manual when preparing their IFRS reporting pack- framework enable any risks that might jeopardise compliance of ages. This manual contains the recognition, measurement and the consolidated financial statements and group management disclosure rules to be applied in the KION Group’s accounting in report with accounting standards to be identified as soon as pos- accordance with IFRS. The accounting guidelines primarily sible so that appropriate countermeasures can be taken. Such explain the financial reporting principles specific to the KION risks form part of the KION Group’s aggregate risk profile and are Group’s business. In addition, all companies must adhere to the classified as operational risk. schedule defined by head office for preparing the consolidated financial statements and group management report. The accounting-based internal control and risk manage- ment system encompasses defined control mechanisms, Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Outlook, risk report and opportunity report 99 Risk Aggregate risk In 2015, the aggregate risk position was largely unchanged com- pared with the previous year. With regard to 2016, the risks in the risk matrix below will be continually observed and evaluated in terms of their extent and probability of occurrence. For example, the KION Group considers the probability of market risk material- ising as low because of the fairly positive market expectations. However, the possible impact of market risk continues to be rated at a medium risk level because of the importance of the market for the KION Group’s business situation and financial perfor- mance. As things stand at present, there are no indications of any risks that could jeopardise the Company’s continuation as a going concern. > DIAGRAM 005 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 segment, while financial risks would predominantly impact on the Other segment. Market risks and competition risks Risk matrix DIAGRAM 005 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 LOW MEDIUM HIGH PROBABILITY OF OCCURRENCE HIGH RISK MEDIUM RISK LOW RISK Market risks it earns in the eurozone remains high. As a result, the market con- Market risk can arise when the economy as a whole or a particu- ditions that prevail there impact significantly on the KION Group’s lar sector does not perform as it had been anticipated in the out- financial performance. In view of the increasing stabilisation of look. Cyclical fluctuations in macroeconomic activity affect the economic growth at a low level, the direct market risk arising market for industrial trucks. Customers’ decisions on whether to from unfavourable economic trends has reduced for the euro- invest, particularly in new trucks, depend to a large degree on zone. However, unfavourable trends affecting major trading the macroeconomic situation and conditions in their particular partners, e.g. China, might reduce eurozone customers’ willing- sector. During an economic downturn, customers tend to post- ness to invest and consequently the demand for the KION pone their purchases of new trucks. Although demand for ser- Group’s products. vices is less cyclical, it correlates with the degree of utilisation in Lower forecasts for growth in the emerging markets resulting the truck fleet – which usually declines during difficult economic from recent economic developments have already been reflected periods. As the KION Group can only adjust its fixed costs to fluc- in the planning. A further weakening of growth could, however, tuations in demand to a limited extent, reductions in revenue have a negative effect on global trade volumes and thus on impact on earnings. growth in the material handling market. The market risks referred Despite the KION Group’s strong growth in emerging mar- to could be heightened by geopolitical risk, possible currency kets and, prospectively, North America, the proportion of revenue crises and deflationary tendencies. KION GROUP AG | Annual Report 2015We keep the world moving. 100 Various measures aimed at making cost structures more flexible – Group’s sales opportunities. Moreover, predictions of higher vol- such as the consolidation of production facilities and the platform umes and margins may lead to overcapacity, which would put strategy – help to contain the earnings risk arising from reduc- increased pressure on prices. tions in revenue caused by economic conditions. Diversification Although the KION Group’s strengths in the premium seg- of the customer base in terms of industry and region as well as ment have enabled it to charge appropriate prices until now, it is expansion of service activities also play a role in mitigating risk. taking a variety of steps to contain competition risk. Alliances, Moreover, the KION Group closely monitors the market and its partnerships, acquisitions and other measures are playing an competitors so that it can identify market risks at an early stage increasing role in improving the KION Group’s competitiveness in and adjust its production capacities in good time. Besides global terms of resources, market access and product range. The steps economic growth and other data, the KION Group also analyses that the KION Group is taking to mitigate its competition risk also exchange rates, price stability, the consumer and investment cli- include making its plants more efficient and securing low-cost mate, foreign trade activity and political stability in its key sales sources of supply. markets, constantly monitoring the possible impact on its finan- The KION Group also continually evaluates its options for cial performance and financial position. strengthening and consolidating its position in emerging markets, Other risks arise as a result of constant changes in the Com- in particular through strategic partnerships, the creation of joint pany’s political, legal and social environment. Because it oper- ventures or acquisition of local manufacturers. One of the risks of ates in countries in which the political or legal situation is uncer- such alliances and acquisitions is that the expected benefits will tain, the KION Group is exposed to the consequent risk of materialise only partly or not at all. For example, the organisa- government regulation, capital controls and expropriations. The tional integration of new units can harm financial performance for KION Group mitigates such strategic risks by, for example, carry- a variety of reasons. It is also possible that a partner will collabo- ing out in-depth market research, conducting thorough evalua- rate with competitors if exclusivity agreements are not in place. tion procedures to assess political and economic conditions and drafting contracts appropriately. Risks along the value chain Competition risks Research and development risks Competition risk describes the risk that growing competitive The KION Group’s market position and business performance pressure will prevent the KION Group from achieving its predicted depend to a large extent on its ability to remain a leading provider margins and market share. The markets in which the KION Group of technology. This requires the Group to continually develop operates are characterised by strong competition, often price- products that meet customer expectations and comply with driven. Price competition is compounded by some manufacturers changing regulatory and technological requirements. To this end, having cost advantages in production, sometimes due to the cur- the KION Group must anticipate customers’ needs and changing rency situation and sometimes because local labour costs are market conditions and has to quickly bring new products to lower. Competition is therefore fierce, particularly in the economy market. If the Company does not succeed in doing this, its tech- and volume price segments, and the impact is especially strong nological and competitive position could be compromised in the in emerging markets. Building on their local competitive strength, long term. manufacturers in emerging markets are also looking for opportu- The innovations developed by the KION Group are compre- nities to expand. Although the high quality expectations and ser- hensively protected by intellectual property rights, in particular vice needs of customers in developed markets present a barrier patents. Nevertheless, there is always the possibility that prod- to growth for many of these manufacturers, this situation is likely ucts or product components will be imitated. There is also a risk to intensify competitive pressures in future. that patent applications will not be successful. It is also conceivable that competitors will join forces and The KION Group mitigates research and development risk by their resulting stronger position will be detrimental to the KION focusing firmly on customer benefit in its development of products Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Outlook, risk report and opportunity report 101 on the basis of overarching modular and platform strategies. Cus- in the price segments and sales markets that it serves and, as a tomer needs are incorporated into the development process on result, could harm its financial situation. an ongoing basis by ensuring close collaboration between sales To mitigate these risks, the KION Group carries out preven- and development units and taking account of all region-specific tive maintenance, implements fire protection measures, trains its requirements. Procurement risks staff and builds a pool of external suppliers. The Company has taken out a commercially appropriate level of insurance coverage against loss. Quality assurance is a high priority throughout the Procurement activities constitute a potential risk for the KION value chain and reduces possible quality-related risks arising Group in terms of the lack of availability of parts and components from the products and services provided. The KION Group miti- for logistical or quality reasons and the rising cost of raw materi- gates its quality-related risks significantly by applying rigorous als, energy, base products and intermediate products. As a quality standards to its development activities, conducting strin- result, there is always the possibility that the KION Group will face gent controls throughout the process chain and maintaining backlogs in the supply of individual raw materials and compo- close contact with customers and suppliers. nents. KION obtains some of its key components, such as com- bustion engines, tyres and high-performance forged and elec- Sales risks tronic parts, from a limited number of core suppliers. The main sales risks – besides a drop in revenue caused by market The risk of supply bottlenecks – for example in the event of a conditions – result from dependence on individual customers and shortage of raw materials or financial difficulties at core suppliers – sectors. For example, it is possible that customers would postpone cannot be ruled out in future. The KION Group mitigates this risk or cancel orders during a period of economic difficulty. There have through appropriate diversification of its supplier structure in the not been any significant cancellations in previous years, however. It context of a global procurement organisation. In addition, the is also conceivable that customers would face a liquidity shortfall supplier development department, which focuses on improving and therefore be unable to fulfil their payment obligations immedi- suppliers’ production processes, helps suppliers to ensure that ately or even at all. Currently, there is little dependence on individual their processes are cost-efficient and offer excellent quality. sectors in the KION Group’s customer portfolio. The KION Group’s Price changes present another procurement-related risk. In reliance on individual customers also remains low. Its business is 2015, around 25.8 per cent (2014: 26.5 per cent) of the cost of also highly diversified from a regional perspective. In addition, the materials for new trucks was directly influenced by changes in KION Group supplies companies of all sizes. Experience has commodity prices. Moreover, conditions in the commodity mar- shown that the KION Group’s exposure to the risk of possible pay- kets typically affect component prices after a delay of three to six ment defaults is low, but this risk can be further mitigated by recov- months. The KION Group endeavours to pass on price increases ering any collateral. to customers but cannot always do so entirely due to market pressures. Production risks IT risks A high degree of interconnectedness between sites and with cus- tomers and other companies means that the KION Group also Production risks are largely caused by quality problems, possible relies on its IT systems working flawlessly. The KION Group under- operational disruptions or production downtime at individual takes ongoing further development of a reliable, extendable and sites. In such cases, the KION Group’s closely integrated manu- flexible IT system environment with the aim of countering any IT- facturing network presents a heightened risk to its ability to deliver related risks that may arise from the failure of IT systems and IT goods on time. There is also a risk that structural measures and infrastructure. Internal IT resources are pooled in KION Information reorganisation projects will not be implemented owing to disrup- Management Services GmbH, which has well-established pro- tion of production or strikes. Delays in delivery or a rise in the cesses for portfolio management and project planning and control. number of complaints could harm the KION Group’s positioning Independent external audits are conducted to provide additional KION GROUP AG | Annual Report 2015We keep the world moving.102 quality assurance. Various technical and organisational measures Group Treasury rigorously complies with and monitors the protect the data of the KION Group and its Group companies against strict separation of functions between the front, middle and back unauthorised access, misuse and loss. These measures include offices. Each Group company’s liquidity planning is broken down procedures to validate and log access to the Group’s infrastructure. by currency and incorporated into the KION Group’s financial Financial risks planning and reporting process. Group Treasury checks the liquidity planning and uses it to determine the funding require- ments of each company. Group Treasury is responsible for ensuring that sufficient financial The funding terms and conditions faced by the lenders them- resources are always available for the KION Group’s international selves (manifested, for example, in the payment of liquidity premi- growth. The main types of financial risk managed by Group Treas- ums on interbank lending) may result in a future shortage of lines ury, including risks arising from funding instruments, are liquidity of credit and / or increased financing costs for companies. How- risk, currency risk, interest-rate risk and counterparty risk. Coun- ever, the Group currently does not expect any further changes in terparty risk consists solely of credit risks attaching to financial its lines of credit or any excessive increases in margins. institutions. Risk management procedures issued by Group Treas- Goodwill and the brands represented 33.4 per cent of ury stipulate how to deal with the aforementioned risks. total assets as at 31 December 2015 (31 December 2014: Long-term borrowing fell by €89.5 million from its level at 34.2 per cent). Pursuant to IFRS, these assets are not amortised 31 December 2014 to reach €557.2 million at the end of 2015. As and their measurement depends, above all, on future expecta- at 31 December 2015, the main components of long-term bor- tions. If these future expectations are not fulfilled, there is a risk rowing were the corporate bond (€450.0 million), which was due that impairment losses will have to be recognised on these assets. to mature in 2020 but was paid back in February 2016, and the The individual Group companies directly manage counter- amounts drawn down from the revolving credit facility (€90.0 mil- party risks involving customers. These counterparty risks have lion). The unused, unrestricted loan facility stood at €1,090.8 mil- not changed significantly, despite the financial crisis. Each indi- lion as at 31 December 2015. The risk position has not changed vidual Group company has established a credit management significantly as a result of the adjustments to the funding structure system for identifying customer-related counterparty risks at an after the reporting date (see the ‘Events after the reporting date’ early stage and initiating the necessary countermeasures. Analy- section). Risk arising out of the lending conditions that have been sis of the maturity structure of receivables is an integral element agreed was not regarded as material as at 31 December 2015. It of monthly reporting. relates in particular to the restrictions in respect of compliance with financial covenants and upper limits for certain transactions Risks arising from financial services and in respect of the obligation to submit special regular reports. The KION Group complied with all the lending covenants in the The KION Group’s leasing activities mean that it may be exposed 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 and financial transactions; they are not used for spec- KION Group regularly assesses its aggregate risk position arising ulative purposes. It is exposed to currency risk because of the from financial services. high proportion of its business conducted in currencies other The risks identified are immediately taken into account by the than the euro. Normally, at least 50 per cent of the currency risk Company in the costing of new leases by recognising writedowns related to the planned operating cash flows based on liquidity or valuation allowances and adjusting the residual values. planning is hedged by currency forwards in accordance with the Risk-mitigating factors include the demand for used trucks, which relevant guideline. stabilises the residual values of the KION Group’s industrial Moving Forward Innovation KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Outlook, risk report and opportunity report 103 trucks. The majority of the residual values have underlying enable it to make strategic additions to its portfolio of existing remarketing agreements that transfer any residual-value risk to staff and, in this way, avert the risk of possibly losing expertise the leasing company. This had a positive impact on the financial and thereby becoming less competitive. results in 2015. Groupwide standards to ensure that residual val- Any restructuring measures may result in a risk of strikes and ues are calculated conservatively, combined with an IT system for reactions of other kinds by the workforce. As demonstrated sev- residual-value risk management, reduce risk and provide the eral times in the past, this risk is contained by collaborating basis on which to create the transparency required. closely with employee representatives and, if job losses are nec- The KION Group mitigates its liquidity risk and interest-rate essary, taking comprehensive steps to ensure they are achieved risk attaching to financial services by ensuring that most of its with the minimum possible social impact. transactions and funding loans have matching maturities and by The legal risks arising from the KION Group’s business are constantly updating its liquidity planning. Long-term leases are typical of those faced by any company operating in this sector. primarily based on fixed-interest agreements. The credit facilities The Group companies are a party in a number of pending law- provided by various banks and an effective dunning process suits in various countries. The individual companies cannot ensure that the Group has sufficient liquidity. assume with any degree of certainty that they will win any of the In order to exclude currency risk, the KION Group generally lawsuits or that the existing risk provision in the form of insurance funds its leasing business in the local currency used in each 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 2014 and 2015. 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, receiva- third parties because, for example, the Company’s products were bles 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 2015. 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- 3 per cent (2014: 5 per cent) of cases. putes with third parties have been insignificant both currently and in the past, the Company has a centralised reporting system to Human resources risks and legal risks record and assist pending lawsuits. In addition to the high quality and safety standards applicable to all users of the Company’s The KION Group relies on having highly qualified managers and products, with which it complies when it develops and manu- experts in key roles. If they left, it could have a long-term adverse factures the products, it has also taken out the usual types of impact on the Group’s prospects. insurance to cover any third-party claims. These issues are That is why the KION Group actively engages in HR work also tackled by teams whose members come from a variety of aimed at identifying and developing young professionals with functions. The aim of the teams is to identify and avoid risks. A high potential who already work for the Company and retaining further objective of this cooperation across functions is to ensure them over the long term, thereby enabling succession planning compliance with mandatory laws, regulations and contractual for key roles across the Group. The KION Group also positions arrangements at all times. itself in the external market as an employer of choice. This will KION GROUP AG | Annual Report 2015We keep the world moving.104 Owing to the KION Group’s export focus, legal risk and reputational risk arise due to the numerous international and local export con- trols that apply. The Company mitigates these risks with a variety of measures. Consequently, export controls are an important part of the compliance activities carried out by the Group companies. OPPORTUNITY REPORT – Strategic opportunities are based on implementation of the Group’s strategy. They may lead to positive effects that exceed planning assumptions. – Business-performance opportunities arise in connection with operational activities along the value chain, such as restructuring or cost-cutting measures. Opportunity situation Market opportunities Principles of opportunity management The economy as a whole may perform better than expected in Opportunity management, like risk management, forms a central 2016. In addition, circumstances may occur in the wider market part of the Company’s day-to-day management. In 2015, the at any time – such as quality problems at competitors or the aggregate opportunity position was largely unchanged com- effects of consolidation – that boost demand for products from pared with the previous year. Individual areas of opportunity are the KION Group brands. New, unforeseen regulatory initiatives identified within the framework of the strategy process. Opportu- could be launched, for example the tightening of health and safety nities are determined and managed on a decentralised basis in regulations or emissions standards, that would push up demand line with the Group strategy. for premium products offered by the KION Group brands. Aver- There are monthly reports on the opportunity situation as age prices for procuring commodities over the year may be part of the regular Group reporting process. As a result, the KION 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 expec- tations set out in the outlook relating to the economic situation and the KION Group’s position. Opportunities are divided into three categories: – Market opportunities describe the potential resulting from trends in the market and competitive environment and from the regulatory situation. Moving Forward Innovation – 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 electric trucks and warehouse trucks – which count among the KION Group’s particular strengths – partly in connection with the expanding e-commerce sector; – growing demand for automation solutions and fleet manage- ment solutions. KION GROUP AG | Annual Report 2015GROUP MANAGEMENT REPORT Outlook, risk report and opportunity report 105 Strategic opportunities Business-performance opportunities Strategic opportunities are presented, above all, by implementing Business-performance opportunities primarily arise from ongoing the Strategy 2020, which is described in detail on pages 61 to 63. activities to modernise and streamline the KION Group’s produc- The positive impact of strategic activities is already largely tion facilities and from the worldwide integration of the production reflected in the expectations regarding the KION Group’s financial network. By investing in new locations, products can be assem- performance in 2016. Nevertheless, the individual activities could bled nearer to the markets in which they are to be sold, econo- create positive effects that exceed expectations. There is also a mies of scale can be achieved across the Group and synergies possibility that new strategic opportunities that were not part of can be leveraged. Further development of the Group’s back - the planning may arise over the course of the year, for example in 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 implementa- – ongoing efficiency increases at production sites (partly resulting from more efficient allocation of work now that the plant in the Czech Republic has come on stream) may boost tion of the groupwide platform strategy; – strengthening of its market-leading position in core western European markets by boosting its technological expertise and making greater use of shared modules; – further consolidation of its market position in the premium segment by offering automation solutions and intralogistics sales and improve the gross margin; – effective use of global development capacities within the framework of an overarching modular and platform strategy may create synergies and economies of scale. solutions; – 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 focus on expanding the business in North America. putting suitable production and sales structures in place; KION GROUP AG | Annual Report 2015We keep the world moving.CONSOLIDATED FINANCIAL STATEMENTS Contents 107 Consolidated Financial Statements 108 CONSOLIDATED INCOME STATEMENT 109 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 110 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 112 CONSOLIDATED STATEMENT OF CASH FLOWS 114 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 116 116 134 144 178 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 220 AUDITORS’ REPORT 221 RESPONSIBILITY STATEMENT KION GROUP AG | Annual Report 2015 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 108 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 (loss) from equity-accounted 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 Diluted earnings per share Moving Forward Innovation TABLE 035 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 2015 5,097.9 – 3,601.7 1,496.2 – 618.0 – 143.0 – 355.9 99.6 – 66.6 10.6 422.8 51.4 – 144.0 – 92.6 330.2 – 109.2 – 132.5 23.3 221.1 217.1 3.9 2.20 2.20 KION GROUP AG | Annual Report 2015CONSOLIDATED FINANCIAL STATEMENTS Consolidated income statement Consolidated statement of comprehensive income 109 Consolidated statement of comprehensive income Consolidated statement of comprehensive income in € million Net income Items that will not be reclassified subsequently to profit or loss Gains / losses on defined benefit obligation thereof changes in unrealised gains and losses thereof tax effect Changes in unrealised gains and losses from equity-accounted 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 hedge reserves thereof changes in unrealised gains and losses thereof realised gains (–) and losses (+) thereof tax effect Gains / losses from equity-accounted investments thereof changes in unrealised gains and losses Note [29] [40] TABLE 036 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 2015 221.1 14.7 12.7 17.3 – 4.5 1.9 24.3 19.9 19.9 – 4.0 – 16.1 20.9 – 0.8 0.4 0.4 Other comprehensive income (loss) 38.9 – 112.7 Total comprehensive income Attributable to shareholders of KION GROUP AG Attributable to non-controlling interests 260.0 256.5 3.5 65.5 63.8 1.7 KION GROUP AG | Annual Report 2015We keep the world moving.110 Consolidated statement of financial position Consolidated statement of financial position – Assets TABLE 037 in € million Goodwill Other intangible assets Leased assets Rental assets Other property, plant and equipment Equity-accounted investments Lease receivables Other financial assets * Other assets * Deferred taxes Non-current assets Inventories Trade receivables Lease receivables Income tax receivables Other financial assets * Other assets * Cash and cash equivalents Current assets Total assets * Last year’s figures were adjusted due to a change in presentation, for details see note [23] and [34] Note [17] [17] [18] [19] [20] [21] [22] [23] [24] [14] [25] [26] [22] [14] [23] [24] [27] 2015 1,548.1 904.4 334.4 544.0 508.8 73.6 472.0 45.9 30.2 349.0 4,810.3 553.5 670.5 181.7 7.9 58.4 54.8 103.1 1,629.9 2014 1,497.1 915.5 279.0 487.1 494.1 114.6 345.3 12.7 21.6 357.9 4,524.8 529.2 598.2 202.5 6.6 118.3 49.8 98.9 1,603.7 6,440.2 6,128.5 Moving Forward Innovation KION GROUP AG | Annual Report 2015CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement of financial position 111 Consolidated statement of financial position – Equity and liabilities TABLE 038 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 financial liabilities * Other liabilities * Deferred taxes Non-current liabilities Current financial liabilities Trade payables Lease liabilities Income tax liabilities Other current provisions Other financial liabilities * Other liabilities * Current liabilities Total equity and liabilities * Last year’s figures were adjusted due to a change in presentation, for details see note [23] and [34] Note [28] [29] [30] [31] [32] [34] [35] [14] [30] [33] [31] [14] [32] [34] [35] 2015 98.7 1,996.6 11.3 – 265.5 7.7 1,848.7 798.0 557.2 617.7 83.4 315.6 185.4 302.7 2014 98.7 1,996.2 – 148.2 – 304.9 5.3 1,647.1 787.5 646.8 461.7 83.7 236.6 151.2 320.9 2,860.0 2,688.3 119.3 574.6 237.9 79.8 111.5 194.4 414.0 262.9 564.6 246.0 31.3 84.4 215.9 388.0 1,731.5 1,793.0 6,440.2 6,128.5 KION GROUP AG | Annual Report 2015We keep the world moving.112 Consolidated statement of cash flows Consolidated statement of cash flows TABLE 039 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 Acquisition of subsidiaries (net of cash acquired) and other equity investments Proceeds from disposal of shares from equity investments, net of cash Cash payments for sundry assets Cash flow from investing activities Note [15] [18], [22], [31] [25] [26], [33] [29] [32] [37] [37] [37] [19] 2015 422.8 401.4 12.9 – 2.4 – 94.9 – 22.1 – 60.9 – 24.2 23.6 106.6 – 84.8 677.9 – 142.6 14.1 – 222.9 18.2 – 84.9 77.4 – 4.5 [37] – 345.2 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 Moving Forward Innovation KION GROUP AG | Annual Report 2015CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement of cash flows 113 Consolidated statement of cash flows (continued) in € million Capital increase from issuing of employee shares Acquisition of treasury shares Dividend of KION GROUP AG Dividends paid to non-controlling interests Cash receipts / payments for changes in ownership interests in subsidiaries without change of control Financing costs paid Proceeds from borrowings Repayment of borrowings Interest received Interest paid Cash payments from 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 Note [28] [37] [37] [37] [37] [37] [37] [37] 2015 3.1 – 2.7 – 54.3 – 1.5 0.5 – 5.6 911.0 – 1,134.9 7.1 – 50.4 – 1.2 – 329.1 0.5 4.1 98.9 103.1 TABLE 039 2014 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 – 120.4 219.3 98.9 KION GROUP AG | Annual Report 2015We keep the world moving.114 Consolidated statement of changes in equity Consolidated statement of changes in equity in € million Balance as at 1/1/2014 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 from issuing of employee shares Changes from employee share option programme Effects from the acquisition / disposal of non-controlling interests Changes from application of the equity-method Other changes Balance as at 31/12/2014 Balance as at 1/1/2015 Net income for the year Other comprehensive income (loss) Comprehensive income (loss) Dividend of KION GROUP AG Dividends paid to non-controlling interests Acquisition of treasury shares Changes from employee share option programme Effects from the acquisition / disposal of non-controlling interests Changes from application of the equity-method Other changes Balance as at 31/12/2015 Moving Forward Innovation Note Subscribed capital 98.7 Capital reserves 2,223.2 [28] [28] [28] [28] [28] [28] [28] [28] [28] [28] [28] [28] [28] [28] [28] 0.0 – 0.1 0.1 98.7 98.7 0.0 – 228.1 – 1.5 2.5 0.1 1,996.2 0.0 0.0 – 0.1 0.1 – 2.6 3.0 98.7 1,996.6 Retained earnings – 524.9 176.7 176.7 228.1 – 34.5 9.7 – 3.2 – 148.2 217.1 217.1 – 54.3 – 3.2 – 0.1 11.3 1,996.2 – 148.2 – 31.7 – 264.6 Accumulated other comprehensive income (loss) Gains / losses Gains / losses Equity Cumulative translation adjustment on defined Gains / losses from equity- attributable to benefit obligation on hedge reserves accounted shareholders of investments KION GROUP AG Non- controlling interests – 66.5 – 126.3 34.8 34.8 – 138.3 – 138.3 – 31.7 – 264.6 20.3 20.3 12.7 12.7 0.5 – 4.8 – 4.8 – 4.2 – 4.2 4.0 4.0 0.3 – 4.6 – 4.6 – 4.3 – 4.3 2.3 2.3 1,605.0 176.7 – 112.9 63.8 0.0 – 34.5 0.0 – 1.5 2.6 0.1 0.0 9.7 – 3.2 1,641.8 1,641.8 217.1 39.4 256.5 – 54.3 0.0 – 2.7 3.1 0.0 – 3.2 – 0.1 Total 1,610.0 178.2 – 112.7 65.5 0.0 – 34.5 – 1.6 – 1.5 2.6 0.1 0.1 9.7 – 3.2 1,647.1 1,647.1 221.1 38.9 260.0 – 54.3 – 1.5 – 2.7 3.1 0.3 – 3.2 – 0.1 – 1.6 5.0 1.6 0.2 1.7 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 5.3 5.3 3.9 – 0.4 3.5 0.0 – 1.5 0.0 0.0 0.3 0.0 0.0 7.7 – 11.4 – 251.9 – 0.2 – 2.0 1,841.0 1,848.7 KION GROUP AG | Annual Report 2015CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement of changes in equity 115 Accumulated other comprehensive income (loss) Gains / losses on hedge reserves Gains / losses from equity- accounted investments Equity attributable to shareholders of KION GROUP AG Non- controlling interests Consolidated statement of changes in equity in € million Balance as at 1/1/2014 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 from issuing of employee shares Changes from employee share option programme Effects from the acquisition / disposal of non-controlling interests Changes from application of the equity-method Other changes Balance as at 31/12/2014 Balance as at 1/1/2015 Net income for the year Other comprehensive income (loss) Comprehensive income (loss) Dividend of KION GROUP AG Dividends paid to non-controlling interests Acquisition of treasury shares Changes from employee share option programme Effects from the acquisition / disposal of non-controlling interests Changes from application of the equity-method Other changes Balance as at 31/12/2015 Note Subscribed capital 98.7 Capital reserves 2,223.2 0.0 – 0.1 0.1 98.7 98.7 – 0.1 0.1 0.0 – 228.1 – 1.5 2.5 0.1 – 2.6 3.0 [28] [28] [28] [28] [28] [28] [28] [28] [28] [28] [28] [28] [28] [28] [28] Retained earnings – 524.9 176.7 176.7 228.1 – 34.5 9.7 – 3.2 – 148.2 217.1 217.1 – 54.3 – 3.2 – 0.1 11.3 Cumulative translation adjustment Gains / losses on defined benefit obligation – 66.5 – 126.3 34.8 34.8 – 138.3 – 138.3 1,996.2 – 148.2 – 31.7 – 264.6 1,996.2 – 31.7 – 264.6 0.0 0.0 20.3 20.3 12.7 12.7 0.5 – 4.8 – 4.8 – 4.2 – 4.2 4.0 4.0 0.3 – 4.6 – 4.6 – 4.3 – 4.3 2.3 2.3 1,605.0 176.7 – 112.9 63.8 0.0 – 34.5 0.0 – 1.5 2.6 0.1 0.0 9.7 – 3.2 1,641.8 1,641.8 217.1 39.4 256.5 – 54.3 0.0 – 2.7 3.1 0.0 – 3.2 – 0.1 98.7 1,996.6 – 11.4 – 251.9 – 0.2 – 2.0 1,841.0 TABLE 040 Total 1,610.0 178.2 – 112.7 65.5 0.0 – 34.5 – 1.6 – 1.5 2.6 0.1 0.1 9.7 – 3.2 1,647.1 1,647.1 221.1 38.9 260.0 – 54.3 – 1.5 – 2.7 3.1 0.3 – 3.2 – 0.1 1,848.7 5.0 1.6 0.2 1.7 0.0 0.0 – 1.6 0.0 0.0 0.0 0.1 0.0 0.0 5.3 5.3 3.9 – 0.4 3.5 0.0 – 1.5 0.0 0.0 0.3 0.0 0.0 7.7 KION GROUP AG | Annual Report 2015We keep the world moving.116 Notes to the consolidated financial statements Basis of presentation [1] GENERAL INFORMATION ON THE COMPANY In order to improve the clarity of presentation, certain items are aggregated in the statement of financial position and the 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 KION GROUP AG, whose registered office is at Abraham-Lincoln- IAS 1.60. The consolidated income statement is prepared in Strasse 21, 65189 Wiesbaden, Germany, is entered in the com- accordance with the cost of sales (function-of-expense) method. mercial register at the Wiesbaden local court under reference The consolidated financial statements are prepared in euros, HRB 27060. which is the Group’s functional currency and reporting currency. The KION Group is a leading global supplier of industrial All amounts are disclosed in millions of euros (€ million) unless trucks (forklift trucks and warehouse trucks). It generated revenue stated otherwise. The addition of the totals presented may of €5,097.9 million in the 2015 financial year from its Linde, result in minor rounding differences. The percentages shown Fenwick, STILL, OM STILL, Baoli, Voltas and Egemin Automation are calculated on the basis of the respective amounts, rounded to brands (2014: €4,677.9 million). the nearest thousand euros. The separate financial statements of The consolidated financial statements and the group the subsidiaries included in the consolidation were prepared as at management report were prepared by the Executive Board of the same reporting date as the annual financial statements of KION GROUP AG on 9 March 2016. KION GROUP AG. [2] BASIS OF PREPARATION Financial reporting standards to be adopted for the first time in the current financial year The following financial reporting standards were adopted for the The consolidated financial statements of the KION Group for the first time in 2015: financial year ended 31 December 2015 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 – IFRIC 21 ‘Levies’ – Annual Improvements to IFRSs (2011–2013). Board (IASB) applicable as at the reporting date as well as the The first-time adoption of these standards has had no significant associated interpretations (IFRICs) of the IFRS Interpretations effect on presentation of the financial performance, financial Committee (IFRS IC) as adopted by the European Union in position or notes to the financial statements of the KION Group. accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council concerning the application of international 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 2015 financial year have been applied Financial reporting standards released but not yet adopted in preparing the consolidated financial statements. In its consolidated financial statements for the year ended 31 December 2015 the KION Group has not applied the following Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 117 Basis of presentation standards and interpretations, which have been issued by the financial performance and financial position of the KION Group IASB but are not yet required to be adopted in 2015: resulting from the first-time adoption of IFRS 9 ‘Financial – IFRS 9 ‘Financial Instruments’ – Amendments to IFRS 10 ‘Consolidated Financial Statements’, IFRS 12 ‘Disclosure of Interests in Other Entities’ and IAS 28 Instruments’, IFRS 16 ‘Leases’ and IFRS 15 ‘Revenue from Contracts with Customers’, particularly with regard to multiple- element arrangements and contracts for indirect end customer finance, are still being analysed. The effects of the first-time ‘Investments in Associates and Joint Ventures’, clarification adoption of the other standards and interpretations on the relating to application of the exception to the consolidation presentation of the financial position and financial performance of obligation for investment entities – Amendments to IFRS 10 ‘Consolidated Financial Statements’ and IAS 28 ‘Investments in Associates and Joint Ventures’: amendments relating to the sale or contribution of assets 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 15 ‘Revenue from Contracts with Customers’ – IFRS 16 ‘Leases’ – Amendments to IAS 1 ‘Presentation of Financial Statements’: – Amendments to IAS 7 ‘Statement of Cash Flows’: amend- – Amendments to IAS 12 ‘Income Taxes’: amendments relating amendments in connection with the disclosure initiative ments in connection with the disclosure initiative to the recognition of deferred tax assets for unrealised losses on available-for-sale financial assets – Amendments to IAS 16 ‘Property, Plant and Equipment’ and 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 financial reporting for bearer plants – Amendments to IAS 19 ‘Employee Benefits’: defined benefit – Amendments to IAS 27 ‘Separate Financial Statements’: plans: employee contributions amendments relating to the application of the equity method the KION Group are expected to be insignificant. [3] PRINCIPLES OF CONSOLIDATION Acquisitions are accounted for using the acquisition method. In accordance with IFRS 3, the identifiable assets and the liabilities assumed on the acquisition date are recognised separately from goodwill, irrespective of the extent of any non-controlling interests. The identifiable assets acquired and the liabilities assumed are measured at their fair value. 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 rec- ognised 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 for subsidiaries, joint ventures and associates in separate assets attributable to them excluding goodwill. financial statements – Annual Improvements to IFRSs (2010–2012) – Annual Improvements to IFRSs (2012–2014) In the case of business combinations in stages, previously held equity interests are recognised at their fair value at the acqui- sition date. The difference between their carrying amount and fair value is recognised in the consolidated income statement. These standards and interpretations are expected to be applied For the purpose of impairment testing, goodwill is allocated to by the entities included in the KION Group only from the date on cash-generating units that are likely to benefit from the busi- which they must be adopted for the first time. The effects on the ness combination. KION GROUP AG | Annual Report 2015We keep the world moving.118 Transaction costs are immediately taken to income. Contingent consideration elements are included at fair value at the date of acquisition when determining the purchase consideration. Con- tingent consideration elements may consist of equity instruments [4] BASIS OF CONSOLIDATION or financial liabilities. Depending on the category, changes in their KION GROUP AG’s equity investments include subsidiaries, joint fair value are included in subsequent measurements. ventures, associates and financial investments. The consolidated financial statements include all of the In addition to KION GROUP AG, the consolidated financial parent company’s material subsidiaries. Intragroup balances, statements of the KION Group include, using the acquisition transactions, income and expenses, and gains and losses on method, all material subsidiaries over which KION GROUP AG intercompany transactions are eliminated in full. Deferred taxes exercises control. KION GROUP AG controls a subsidiary if it has are recognised on temporary differences arising from consoli- decision-making power over the main activities of the entity dation transactions. and can use this power to affect the amount of the variable Transactions with non-controlling interests are treated as returns to which it is exposed as a result of the equity investment. transactions with the Group’s equity providers. Differences Subsidiaries acquired in the course of the financial year are con- between the consideration paid for the acquisition of a non- solidated from the date on which control is obtained. Companies controlling interest and the relevant proportion of the carrying sold in the course of the financial year are deconsolidated from amount of the subsidiary’s net assets are recognised in equity. the date on which control is lost. Gains and losses arising from the sale of non-controlling A joint venture is an equity interest in which the entity is jointly interests are also recognised in equity, provided there is no managed by companies in the KION Group and one or more change in control. partners on the basis of a contractual agreement, and these Associates and joint ventures that are of material impor- parties have rights to the net assets of the joint venture. tance to the presentation of the financial position and financial Associates are entities in which companies in the KION Group performance of the KION Group are accounted for using the are able to exercise significant influence, either directly or indirectly, over the financial and operating policies of the entity concerned. Significant influence is assumed when KION GROUP AG holds between 20 per cent and 50 per cent of the voting rights. Equity interests over which KION GROUP AG is unable to exercise control or a significant influence, or that are not jointly controlled by KION GROUP AG, are classified as financial investments. The number of equity investments broken down by category is shown in > TABLE 041. equity method. Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 119 Basis of presentation Shareholdings by categories TABLE 041 01/01/2015 Additions Disposals 31/12/2015 Consolidated subsidiaries Domestic Foreign Equity-accounted associates and joint ventures Domestic Foreign Non-consolidated subsidiaries and other investments Domestic Foreign 96 21 75 9 5 4 52 13 39 9 1 8 – – – 7 1 6 3 – 3 – – – 4 – 4 102 22 80 9 5 4 55 14 41 A total of 22 German (2014: 21) and 80 foreign (2014: 75) sub- 100.0 per cent of the shares in the dealer Moden Diesel S.p.A. sidiaries were fully consolidated in addition to KION GROUP AG (formerly MODEN DIESEL S.R.L.), Modena, Italy, were acquired and as at 31 December 2015. The acquisition of the logistics auto- carried at fair value. At the end of October 2015, 100.0 per cent of mation division involved the acquisition of Egemin NV, Zwijndrecht, the shares in LR Intralogistik GmbH, Wörth an der Isar, Germany, Belgium, plus its eight subsidiaries (see note [5]). Three insig- a specialist in intralogistics concepts that eschew forklift trucks nificant subsidiaries were deconsolidated in October 2015 and in favour of tugger trains, were acquired and carried at fair value. will be accounted for at cost in future. The non-consolidated subsidiaries and other equity investments As had been the case a year earlier, nine joint ventures and (joint ventures and associates that are not accounted for using associates were accounted for under the equity method as at the equity method, plus financial investments) are of minor impor- 31 December 2015. In each case, measurement under the equity tance to the presentation of the financial position and financial method was performed on the basis of the last available annual performance of the KION Group, both individually and as a whole. financial statements. Where other requirements are met, the following fully con- 55 (2014: 52) companies with minimal business volumes solidated companies are exempt from the requirement to prepare or no business operations were not included in the consolidation. annual financial statements and management reports in accord- In February 2015, the KION Group acquired a 10.0 per cent ance with sections 264 (3) and 264b HGB on account of their stake in robotics specialist Balyo SA, Moissy-Cramayel, France. inclusion in the consolidated financial statements. > TABLE 042 This equity investment is carried at cost. In October 2015, KION GROUP AG | Annual Report 2015We keep the world moving. 120 German entities exempted from disclosure requirements Entities exempted KION Holding 2 GmbH Klaus Pahlke GmbH & Co. Fördertechnik KG Schrader Industriefahrzeuge GmbH & Co. KG LMH Immobilien GmbH & Co. KG LMH Immobilien Holding GmbH & Co. KG TABLE 042 Head office Wiesbaden Haan Essen Aschaffenburg Aschaffenburg A detailed overview of all the direct and indirect shareholdings of The receivables acquired as part of this transaction, which con- KION GROUP AG is shown in the list of shareholdings (note [47]). stitute trade receivables including receivables from construction [5] ACQUISITION contracts that have not yet been invoiced to the value of €5.9 mil- lion, totalled €16.6 million gross. At the acquisition date, it was assumed that trade receivables of €0.7 million, and receivables from construction contracts that have not yet been invoiced to the value of €0.4 million, were not recoverable. Consolidated revenue rose by €33.0 million as a result of the acquisition. The On 7 May 2015, the KION Group agreed to purchase the logistics net income reported for 2015 contains a profit totalling €0.8 mil- automation division of automation specialist Agidens International lion attributable to the entities acquired. If the business combina- NV (formerly the Egemin Group). The transaction was closed on tion had been completed by 1 January 2015, this would have 7 August 2015. The purchase price for the 100.0 per cent generated additional revenue of €67.7 million and additional net stake in Egemin NV, which is headquartered in Belgium, was income of €0.5 million for the KION Group in 2015. €72.5 million. Through this acquisition, the KION Group is signif- The purchase price allocation for the acquisition described icantly expanding its expertise in system solutions for intralogistics above was only provisional as at 31 December 2015 because and automation, fields that are seeing increasingly strong demand some details, particularly in the area of construction contracts, and will play a crucial role in connection with Industry 4.0. had not yet been fully evaluated. Goodwill constitutes the strategic The incidental acquisition costs incurred by this business and geographical synergies that the KION Group expects to combination amounted to €0.5 million and have been recognised derive from this business combination. The goodwill arising from as an expense for the current period and reported as administra- this acquisition is currently not tax deductible. tive expenses in the consolidated income statement. The impact The line item ‘Acquisition of subsidiaries (net of cash acquired) of this acquisition on the consolidated financial statements of and other equity investments’ in the consolidated statement of KION GROUP AG based on the provisional figures available at the cash flows contains a net cash outflow of €68.6 million for the acquisition date is shown in > TABLE 043. acquisition of Egemin Automation. Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 121 Basis of presentation Impact of the acquisition on the financial position of the KION Group in € million Goodwill Other intangible assets Trade receivables Cash and cash equivalents Other assets Total assets Trade payables Other current financial liabilities Other liabilities Total liabilities Total net assets Cash payment Consideration transferred TABLE 043 Fair value at the acquisition date 50.9 25.2 15.5 3.9 13.7 109.2 9.7 17.1 9.9 36.7 72.5 72.5 72.5 [6] CURRENCY TRANSLATION exception of income and expenses recognised as other compre- hensive income (loss), equity is recognised at historical rates. The resulting translation differences are not taken to income and are recognised in other comprehensive income (loss) until subsidiaries Financial statements in foreign currencies are translated in are disposed of. accordance with the functional currency concept (IAS 21 ‘The The financial statements of foreign equity-accounted invest- Effects of Changes in Foreign Exchange Rates’). The functional ments are also translated using the method described above. currency is the currency of the primary economic environment in Transactions of the consolidated entities in foreign currencies which an entity operates. The modified closing-rate method is are translated into the relevant company’s functional currency at used for currency translation. the rate prevailing on the transaction date. On the reporting date, The assets and liabilities of foreign subsidiaries, including monetary items are translated at the closing rate and non-monetary goodwill, are translated at the middle spot exchange rate, i.e. at items at the rate prevailing on the transaction date. Currency the average of the bid or offer rates on the reporting date. Income translation differences are taken to income and recognised in and expenses are translated at the average rate. With the other income / expenses or in net financial income / expenses. KION GROUP AG | Annual Report 2015We keep the world moving.122 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 2015 1.4784 3.7006 1.0686 6.9767 0.7264 68.0183 1.1103 2014 1.4727 3.1209 1.2147 8.1914 0.8064 50.9191 1.3294 2015 1.4876 4.3007 1.0872 7.0914 0.7375 79.8372 1.0857 TABLE 044 2014 1.4809 3.2152 1.2029 7.5085 0.7768 70.2294 1.2099 The translation rates above were used for currencies that are the entity and that it can be reliably measured. Other criteria may material to the financial statements. > TABLE 044 arise, depending on each individual transaction, such as: [7] ACCOUNTING POLICIES 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 delivers goods to a customer, the goods are accepted by the The accounting policies applied in these consolidated financial customer and the flow of benefits to the Group is considered to statements are, besides the aforementioned accounting policies be probable. If a customer is expected to accept goods but has to be adopted for the first time in 2015, fundamentally the same yet to do so, the corresponding revenue is only recognised when as those used for the year ended 31 December 2014. These the goods are accepted. Appropriate provisions are recognised consolidated financial statements are based on the financial for risks relating to the sale of goods. statements of the parent company and its consolidated sub- sidiaries prepared in accordance with the standard accounting Rendering of services policies applicable throughout the KION Group. Revenue recognition 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 proportion of the total services rendered in each period Revenue is the fair value of the consideration received for the (stage of completion). Revenue from long-term service agree- sale of products and services and rental and lease income ments is therefore recognised on the basis of the average term (excluding VAT) after deduction of trade discounts and rebates. of the service agreements and in line with progressive costs In accordance with IAS 18, revenue is recognised when it is (constant margin). sufficiently probable that a future economic benefit will accrue to Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 123 Basis of presentation Revenue from financial service transactions is recognised in Financial income and expenses the amount of the sale value of the leased asset if classified as a finance lease and in the amount of the lease payments if Financial income and expenses mainly consist of interest classified as an operating lease. As part of the financial services expenses on financial liabilities, interest income from financial provided by the Group, industrial trucks are also sold to finance receivables, interest income from leases and the interest cost on partners who then enter into leases directly with the end cus- leases, exchange rate gains and losses on financial activities and tomer (‘indirect end customer finance’). If significant risks and the net interest cost of the defined benefit obligation. rewards remain with the KION Group as a result of an agreed Interest income and expenses are recognised in profit and residual value guarantee that accounts for more than 10 per cent loss in accordance with the effective interest method. The of the asset’s value or as a result of an agreed customer default effective interest method is used for calculating the amortised guarantee (‘sale with risk’), the proceeds from the sale are cost of a financial asset or financial liability and the allocation of deferred and recognised as revenue on a straight-line basis interest income and interest expenses over the relevant periods. over the term until the residual value guarantee or the default The effective interest rate is the interest rate at which the esti- guarantee expires. Construction contracts mated future incoming and outgoing payments (including all fees that are part of the effective interest rate, transaction costs and other premiums and discounts) are discounted to the net carrying amount of the financial asset or liability over the expected term of Revenue from construction contracts is recognised according the financial instrument. to the stage of completion (percentage-of-completion method). Dividends are recognised in income when a resolution on For further details, please refer to the ‘Construction contracts’ distribution has been passed. They are reported in the consoli- section. dated income statement under other income, provided they are dividends from subsidiaries carried at cost. Interest income and royalties Interest income is recognised pro rata temporis in accordance Goodwill with the effective interest method. Income from royalties is deferred in accordance with the substance of the relevant agree- Goodwill has an indefinite useful life and is not amortised. Instead, ments and recognised pro rata temporis. it is tested for impairment in accordance with IAS 36 (‘Impairment Information on the deferral of lease income is contained in the of Assets’) at least once a year, and more frequently if there are disclosures on the accounting treatment of leases. indications that the asset might be impaired. Cost of sales Impairment testing is performed at the level of the individual cash-generating units (CGUs) or groups of CGUs. A CGU is defined as the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of The cost of sales comprises the cost of goods and services sold the cash inflows from other assets or groups of assets. CGUs are and includes directly attributable material and labour costs as generally based on the lowest level of an entity at which – for well as directly attributable overheads, including depreciation of internal management purposes – the management systematically production equipment and amortisation of certain intangible monitors and controls the contribution to earnings made by the assets, as well as write-downs of inventories. Cost of sales also assets concerned, including goodwill. However, a CGU may includes additions to warranty provisions, which are recognised not be larger than an operating segment as defined in IFRS 8 in the amount of the estimated cost at the date on which the ‘Operating Segments’. In particular, CGUs are considered to be related product is sold. clearly defined and independent if the entity’s management has KION GROUP AG | Annual Report 2015We keep the world moving.124 prepared independent forecasts relevant to decision-making for 1 November 2015 the rate was 1.5 per cent (2014: 2.0 per cent). the individual CGUs. The market risk premium derived from empirical studies of the For the purposes of internal and external reporting, the activ- capital markets was set at 7.0 per cent (2014: 6.75 per cent) ities of the KION Group are broken down into the LMH, STILL, and was at the upper end of the bandwidth recommended by Financial Services and Other segments on the basis of their the technical committee for business valuation and administra- characteristics and risk profile. The 2015 forecast, the budget tion (FAUB) of the German Institute of Auditors (IDW), which is for 2016, the medium-term planning for 2017 to 2018 and the 5.5 per cent to 7.0 per cent. The market risk premium increased KION Group’s internal projections for 2019 to 2020 were drawn by 0.25 percentage points compared with 2014 owing, among up on the basis of this segment structure. other reasons, to the decrease in the risk-free base rate from The relevant CGUs for the purposes of goodwill impairment 2.0 per cent to 1.5 per cent. The implied return on equity was testing and the CGUs to which brand names have been allocated 8.5 per cent, which was slightly lower than in the previous year are the LMH and STILL segments and the Egemin Automation (2014: 8.75 per cent). The assumed country risk was 0.22 per cent CGU, which has been assigned to the Other segment since for the LMH CGU (2014: 0.25 per cent) and 0.37 per cent for the completion of the acquisition on 7 August 2015. The subsidiary STILL CGU (2014: 0.42 per cent). A leverage ratio of 25.7 per cent KION India Pvt. Ltd. was integrated into the LMH segment with (2014: 27.8 per cent) was calculated based on the capital effect from 1 January 2015. Previously the entity was in the structure determined for the peer group. Other segment. The Financial Services segment only generates a A leveraged beta of 0.95 was used to determine the country- finance margin to cover costs and consequently has almost no specific WACC for Egemin Automation on the basis of the sector- impact on cash flow and does not earn any material excess profit. specific peer group. The risk-free interest rate for Belgium as at As a result, no goodwill from the original purchase price allocation 1 November 2015 was 1.5 per cent; the country-specific risk (PPA) was allocated to this CGU when the new segment structure premium for Belgium was set at 0.5 per cent. The WACC before was defined in 2012 in accordance with IAS 36.87. tax, which is used to discount the estimated cash flows, was The recoverable amount of a CGU is determined by calcu- calculated at 10.4 per cent for LMH (2014: 10.7 per cent), lating its value in use on the basis of the discounted cash flow 10.5 per cent for STILL (2014: 10.9 per cent) and 11.3 per cent for method. The cash flows forecast for the next five years are Egemin Automation. The WACC after tax was 7.5 per cent for included in the calculation for the impairment test in accord- LMH (2014: 7.7 per cent), 7.6 per cent for STILL (2014: 7.9 per cent) ance with IAS 36.33(b). The financial forecasts are based on and 8.3 per cent for Egemin Automation. assumptions relating to the development of the global economy, The impairment test carried out in the fourth quarter of 2015 commodity prices and exchange rates. The budget for 2016, the did not reveal any need to recognise impairment losses for the medium-term planning for 2017 / 2018 and the projections for existing goodwill of the LMH, STILL and Egemin Automation 2019 to 2020 were used to determine the cash flows. Cash flows CGUs. Sensitivity analysis has enabled us to determine that no beyond the five-year planning horizon were extrapolated for the impairment losses need to be recognised for goodwill, even if key LMH, STILL and Egemin Automation CGUs using a growth rate of assumptions vary within realistic limits, in particular a variation in 1.0 per cent (2014: 1.0 per cent). WACC of plus or minus 100 basis points. CGU cash flows are discounted using a weighted average cost of capital (WACC) that reflects current market assessments of the specific risks to individual CGUs. The underlying capital structure for the LMH and STILL CGUs is determined by com- paring peer group companies in the same sector. The beta factor derived from this peer group was 1.07 (2014: 1.09). Yield curve data from the European Central Bank (three-month average, rounded) was used to determine the risk-free interest rate; as at Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 125 Basis of presentation Other intangible assets Development costs are capitalised if the following can be demonstrated: Other purchased intangible assets with a finite useful life are carried at cost less all accumulated amortisation and all accu- mulated impairment losses. If events or market developments suggest impairment has occurred, impairment tests are carried out on the carrying amount of items classified as other intangible assets with a finite useful life. The carrying amount of an asset is compared with its recoverable amount, which is defined as the higher of its value in use and its fair value less costs to sell. If the reasons for recognising impairment losses in the past no longer apply, impairment losses not exceeding the amortised cost of the assets are reversed. Other intangible assets with an indefinite useful life are – 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. carried at cost and are mainly capitalised brand names. Brand Capitalised development costs include all costs and overheads names are not amortised because they have been established directly attributable to the development process. Once they have in the market for a number of years and there is no foreseeable been initially capitalised, these costs and internally generated end to their useful life. In accordance with IAS 36, they are tested intangible assets – particularly internally generated software – are for impairment at least once a year or whenever there are carried at cost less accumulated amortisation and accumulated indications that the asset might be impaired. The impairment impairment losses. Internally generated intangible assets are not test is performed in the same way as the impairment test for qualifying assets so finance costs are not capitalised. All goodwill. Assessments of indefinite useful life are carried out in non-qualifying development costs are expensed as incurred and every period. reported on the income statement under research and develop- The Voltas brand name at KION India, which has been ment costs together with research costs and the amortisation on allocated to the LMH segment since 1 January 2015, is subject to capitalised development costs. a usage right with a contractually limited term and it will therefore Amortisation of intangible assets with a finite useful life is be amortised over its useful life. Previously KION India and its recognised on a straight-line basis and reported under functional Voltas brand name were included in the Other segment. costs. The impairment losses on intangible assets are reported under other expenses. The following useful lives are applied in determining the carrying amounts of other intangible assets: > TABLE 045 KION GROUP AG | Annual Report 2015We keep the world moving.126 Useful life of other intangible assets Customer relationships / client base Technology Development costs Patents and licences Software TABLE 045 Years 4 – 15 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 trucks, to their customers in order to promote sales. The leases KION Group entity as the lessor under an operating lease, the may be of a short-term nature (short-term rental) or long-term assets are reported as leased assets in a separate item in the nature (leasing). statement of financial position. The leased assets are carried at Entities in the KION Group enter into leases as lessors and as cost and 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 companies. The industrial trucks are then leased back to entities incidental to ownership of the leased / rental asset are transferred in the KION Group (head lease), who sub-lease them to external to the lessee. All other rentals and leases are classified as end customers (described below as ‘sale and leaseback sub- operating 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 customer 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 leased assets. However, if substantially the risks and rewards outstanding 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. Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 127 Basis of presentation 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 portion In the case of short-term rentals, subsidiaries in the LMH and of production overheads. This includes production-related depre- STILL segments rent industrial trucks to customers directly. ciation and proportionate costs for administration and social Short-term rental agreements usually have a term of one day to insurance / employee benefits. one year. The significant risks and rewards remain with the sub- The cost of property, plant and equipment is reduced by the sidiaries in the LMH and STILL segments. The industrial trucks amount of any government grants received, provided the relevant are carried at cost and depreciated over the normal useful life of requirements are met. Expenses for maintenance and repairs are between five and seven years, depending on the product group. recognised in income to the extent that they are not required to be In an indirect end customer finance arrangement, industrial capitalised. Borrowing costs are capitalised for certain items of trucks are sold to finance partners who then enter into leases property, plant and equipment whose acquisition or production with end customers. If subsidiaries in the LMH and STILL seg- exceeds one year as soon as the definition of a qualifying asset is ments provide material residual value guarantees or a customer met. As was the case in the previous year, there were no quali- default guarantee (‘sale with risk’), these transactions, which fying assets in 2015. are classified as sale agreements under civil law, are recognised Depreciation of property, plant and equipment is recognised in accordance with the provisions relating to lessors with oper- on a straight-line basis and reported under functional costs. The ating leases in conjunction with the IFRS principles for revenue useful lives and depreciation methods are reviewed annually and recognition. In this case, the trucks are recognised as assets in adjusted to reflect changes in conditions. the statement of financial position at their cost on the date of the The useful lives below are applied in determining the carrying sale and written down to their guaranteed residual value, or zero, amounts of items of property, plant and equipment. > TABLE 046 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 046 Years 10 – 50 3 – 15 2 – 15 KION GROUP AG | Annual Report 2015We keep the world moving. 128 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 pay- impairment loss, first the goodwill and, subsequently, the assets ments is recognised at the inception of the lease. A correspond- must be written down in proportion to their relative carrying ing liability to the lessor is recognised under other financial liabili- amounts. If the reason for an impairment loss recognised in prior ties 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 equipment is depreciated and the other financial liabilities are Equity-accounted investments reversed over the useful life of the leased assets. The difference between total finance lease liabilities and the In accordance with the equity method, associates and joint 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 extended. the net assets of the investee. The KION Group’s interest in the If there are certain indications of impairment of the property, profit or loss generated after acquisition is recognised in income. plant and equipment, the assets are tested for impairment by Other changes in the equity of associates and joint ventures comparing the residual carrying amount of the assets with their are recognised in other comprehensive income (loss) in the recoverable amount, which is defined as the higher of value in use consolidated financial statements in proportion to the Group’s and fair value less costs to sell. If the residual carrying amount interest in the associate or joint venture. is greater than the recoverable amount, an impairment loss is If the Group’s interest in the losses made by an associate or recognised for an asset. The impairment losses on property, joint venture exceeds the carrying amount of the proportionate plant and equipment are reported under other expenses. equity attributable to the Group, no additional losses are recog- The KION Group calculates the recoverable amount primarily nised. Any goodwill arising from the acquisition of an associate or on the basis of value in use. In determining value in use, the joint venture is included in the carrying amount of the investment expected future cash flows are discounted using a risk-adjusted in the associate or joint venture. discount rate, taking into account the current and future level of If there is evidence that an associate or joint venture may be earnings and segment-specific, technological, economic and impaired, the carrying amount of the investment in question is general trends. tested for impairment. The carrying amount of the asset is compared with its recoverable amount. If the carrying amount is greater than the recoverable amount, an impairment loss is recognised for the equity investment. Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 129 Basis of presentation Income taxes Net realisable value is the selling price that can be realised less the estimated costs of completion and the estimated costs In the consolidated financial statements, current and deferred necessary to make the sale. taxes are recognised on the basis of the tax laws of the juris- Write-downs are recognised for inventory risks resulting dictions involved. Deferred taxes are recognised in other from duration of storage, impaired recoverability, etc. Write- comprehensive income (loss) if they relate to transactions also downs are reversed up to a maximum of cost if the reasons for recognised in other comprehensive income (loss). their recognition no longer apply. Deferred tax assets and liabilities are recognised in accord- ance with the liability method for all temporary differences between the IFRS carrying amounts and the tax base, as well as Construction contracts for temporary consolidation measures. Deferred tax assets also include tax refund claims that arise Receivables and revenue from construction contracts are rec- from the expected utilisation of existing tax loss carryforwards ognised according to the stage of completion (percentage- and interest carryforwards in subsequent years and whose of-completion method). The percentage of completion is the utilisation is reasonably certain according to current forecasts. proportion of contract costs incurred up to the reporting date On the basis of this estimate, deferred tax assets have been rec- compared to the total estimated contract costs as at the ognised on some loss carryforwards and interest carryforwards. reporting date (cost-to-cost method). Under the percentage- of- Deferred taxes are determined on the basis of the tax rates completion method, construction contracts are measured at the that will apply or have been announced at the realisation date in amount of the contract costs incurred to date plus the pro rata accordance with the current legal situation in each country con- profit earned according to the percentage of completion. If it is cerned. In accordance with the provisions in IAS 12, deferred tax probable that the total contract costs will exceed the contract assets and liabilities are not discounted. Deferred tax assets are revenue, the expected loss is immediately recognised as an offset against deferred tax liabilities to the extent that they have expense in the financial year in which the loss becomes apparent. the same maturity and relate to the same taxation authority. If the contract costs incurred and the profit and loss recognised Inventories exceed the advances received, the excess is recognised as an asset under trade receivables. If the advances received exceed the capitalised costs and recognised profit and loss, the excess is recognised as a liability under other liabilities. Inventories are carried at the lower of cost and net realisable If the outcome of a construction contract cannot be reliably value. The acquisition costs of raw materials and merchandise estimated, the likely achievable revenue is recognised up to the are calculated on the basis of an average. The cost of finished amount of the costs incurred. Contract costs are recognised as goods and work in progress includes direct costs and an an expense in the period in which they are incurred. Variations in appropriate portion of the material and production overheads the contract work, claims and incentive payments are recognised and production-related depreciation directly attributable to the if they are likely to result in revenue and their amount can be production process. Administrative costs and social insur- reliably estimated. ance / employee benefits are included to the extent that they are attributable to the production process. Borrowing costs as defined by IAS 23 are not a component of cost as they are not qualifying assets as defined by IAS 23.5. The amount recognised is an average value or a value determined in accordance with the FIFO method. KION GROUP AG | Annual Report 2015We keep the world moving.130 Trade receivables Available-for-sale financial assets (AfS) are carried at fair value. Unrealised gains and losses, including deferred taxes, are In the first period in which they are recognised, trade receivables reported in other comprehensive income (loss) until they are categorised as loans and receivables (LaR) are carried at fair realised. If they are equity investments for which no market price value including directly attributable transaction costs. In sub- is available, they are carried at cost. Reported in other non-current sequent periods they are measured at amortised cost using the financial assets, the shares in Moden Diesel S.p.A. (formerly effective interest method. Appropriate valuation allowances are MODEN DIESEL S.R.L.) and in LR Intralogistik GmbH are carried recognised for identifiable individual risks. Low-interest or non- at fair value. All other equity investments in non-consolidated interest-bearing receivables due in more than one year are subsidiaries and in other equity investments that are reported carried at their present value. in other non-current financial assets are carried at cost less Cash and cash equivalents impairment losses, as observable fair values are not available and reliable results cannot be obtained using other permitted measurement techniques. At present there is no intention to sell these financial instruments. Cash and cash equivalents comprise cash, credit balances with In the first period in which they are recognised, other financial banks and current financial assets that can be transformed into assets categorised as loans and receivables (LaR) are carried at cash at any time and are only subject to a minor level of volatility. fair value including directly attributable transaction costs. In Other financial assets subsequent periods they are measured at amortised cost using the effective interest method. Appropriate valuation allowances are recognised for identifiable individual risks. Low-interest or non- interest-bearing receivables due in more than one year are Primary financial assets are initially recognised and derecognised carried at their present value. in the financial statements on their settlement dates. Carrying amounts of financial assets are tested for impair- Under IAS 39, a distinction is made between financial assets ment on every reporting date and whenever indications of impair- held for trading and carried at fair value through profit and loss ment arise. If there is an objective indication of impairment (such (FAHfT), financial assets carried at fair value through profit or loss as a borrower being in significant financial difficulties), an impair- upon initial recognition (FAFVtPL), available-for-sale financial ment loss must be recognised directly in the income statement. assets (AfS), financial assets classified as loans and receivables If objective facts in favour of reversing impairment losses are (LaR) and held-to-maturity financial assets (HtM). present on the reporting date, reversals are carried out to an As in the previous year, the KION Group did not designate appropriate extent. Reversals do not exceed the amortised cost any financial assets as carried at fair value through profit and loss that would have arisen if the impairment loss had not been (FAFVtPL) in the reporting year. The FAHfT category contains recognised. In the case of debt instruments classified as derivative financial instruments that do not form part of a formally available- for-sale financial assets (AfS), reversals of impairment documented hedge. losses are recognised in the income statement. Held-to-maturity financial assets (HtM) are carried at amor- tised cost less impairment losses in accordance with the effective interest method. As in the previous year, the KION Group did not categorise any financial assets as HtM in the reporting year. Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 131 Basis of presentation 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 Further information on risk management and accounting reporting date. They are initially recognised and derecognised in for derivative financial instruments can be found in notes [39] the financial statements on their settlement dates. and [40]. Currently, derivative financial instruments in the KION Group mainly comprise currency forwards that are used for hedging purposes to mitigate currency risk. In addition, call option 2 on Retirement benefit obligation the remaining 10.0 per cent of the shares in Linde Hydraulics are reported as derivative financial instruments (see note [38]). The The retirement benefit obligation is calculated in accordance with KION Group did not have any interest-rate derivatives as at the projected unit credit method. Future pension obligations are 31 December 2015. In the previous year, interest-rate swaps had measured on the basis of the pro rata vested benefit entitlements been used on an insignificant scale to hedge the interest-rate risk. as at the reporting date and discounted to their present value. In accordance with IAS 39, all derivative financial instruments The calculations include assumptions about future changes in must be measured at their fair value irrespective of an entity’s certain parameters, such as expected salary and pension purpose or intention in entering into the derivative contract. increases and biometric factors affecting the amount of future Changes in the fair value of derivative financial instruments in benefits. Pension provisions are reduced by the fair value of the a formally documented hedge are reported in the income state- plan assets used to cover the Group’s benefit obligations. Plan ment (for fair value hedges) or in other comprehensive income assets are measured at fair value. (loss) (for cash flow hedges and net investment hedges). Remeasurements, including deferred taxes, are recognised The KION Group currently uses cash flow hedges for cur- in other comprehensive income (loss). It is not permitted to rency risk as well as one net investment hedge. reclassify remeasurements recognised in other comprehensive In the case of cash flow hedges, derivatives are employed to income (loss) to profit or loss in future periods. The cost of hedge future cash flow risks from planned transactions and from additions to pension provisions is allocated to functional costs. firm obligations not reported in the statement of financial position. The interest cost on pension obligations and the interest The effective portion of changes in the fair value of derivatives income from plan assets are netted and reported in net financial is initially recognised in other comprehensive income (loss), income / expenses. Further details can be found in note [29]. and is subsequently reclassified to the income statement when the revenue from the corresponding underlying transaction is realised. The ineffective portion of the changes in fair value is recognised immediately in the income statement. A derivative is used in a net investment hedge to hedge the currency risk arising on translation of a foreign subsidiary’s financial statements into the Group’s reporting currency. The effective portion of changes in the fair value of the derivative is initially recognised in other comprehensive income (loss) and will not be reclassified to the income statement until the foreign operation is disposed of. The ineffective portion of the changes in fair value is recognised immediately in the income statement. KION GROUP AG | Annual Report 2015We keep the world moving.132 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 recog- be reliably estimated. Where there is a range of possible out- nised at their fair value at the date of grant. The fair value of the comes and each individual point within the range has an equal 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 Provisions for identifiable risks and contingent liabilities are payments that is attributable to service provided up to the recognised in the amount that represents the best estimate of the valuation date is recognised as an expense under functional cost required to settle the obligations. Recourse claims are not costs and is also reported as a liability. The fair value is recal- taken into account. The settlement amount also includes cost culated on each reporting date until the end of the performance increases identifiable as at the reporting date. Provisions with a period. Any change in the fair value of the obligation must be maturity of more than twelve months are discounted using the recognised (pro 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 Under IAS 39, a distinction is made between financial liabilities estimated future claim statistics. The corresponding expense is held for trading and carried at fair value through profit and loss recognised in cost of sales at the date on which the revenue is (FLHfT), financial liabilities carried at fair value through profit or recognised. Individual provisions are recognised for claims that loss upon initial recognition (FLFVtPL) and financial liabilities are known to the Group. measured at amortised cost using the effective interest method Provisions for expected losses from onerous contracts and (FLaC). other business obligations are measured on the basis of the work As in the previous year, the KION Group did not categorise yet to be performed. any financial liabilities as FLFVtPL in the reporting year. The FLHfT A restructuring provision is recognised when a KION Group category contains derivative financial instruments that do not entity has prepared a detailed, formal restructuring plan and this form part of a formally documented hedge. These are reported plan has raised the valid expectation in those affected that the under other financial liabilities and must be carried at fair value entity will carry out the restructuring by starting to implement that through profit or loss. plan or announcing its main features to those affected by it. The All other financial liabilities reported under financial liabilities measurement of a restructuring provision only includes the direct or other financial liabilities must be categorised as FLaC. These expenditures arising from the restructuring and not associated liabilities are initially recognised at fair value at the time they are with the ongoing activities of the entity concerned. entered into. Directly attributable transaction costs are deducted. These liabilities are then measured at amortised cost. Any differ- ences between historical cost and the settlement amount are recognised in accordance with the effective interest method. Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 133 Basis of presentation Trade payables Defined benefit pension obligations are calculated on the basis of actuarial parameters. As differences due to remeasure- Trade payables are categorised as FLaC and, in the first period in ments are taken to other comprehensive income (loss), any which they are recognised, are carried at fair value net of the change in these parameters would not affect the net profit for directly attributable transaction costs. In subsequent periods, these the current period. For further details about sensitivity analysis liabilities are measured at amortised cost using the effective in relation to the impact of all significant assumptions, please interest method. Low-interest or non-interest-bearing liabilities refer to the information about the retirement benefit obligation due in more than one year are carried at their present value. in note [29]. Assumptions and estimates The recognition and measurement of other provisions is based on an estimate of the probability of the future outflow of resources, supplemented by past experience and the circum- stances known to the Group at the reporting date. Accordingly, The preparation of the IFRS consolidated financial statements the actual outflow of resources for a given event may be different requires the use of assumptions and estimates for certain line from the amount recognised in other provisions. Further details items that affect recognition and measurement in the statement can be found in note [32]. of financial position and the income statement. The actual Significant estimates are involved in calculating income amounts realised may differ from estimates. Assumptions and taxes. These estimates may change on the basis of new infor- estimates are applied in particular: mation and experience (see also note [14]). Deferred tax assets – 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 recognising and measuring defined benefit pension obliga- – in recognising and measuring current and deferred taxes. tions and other provisions; on tax loss carryforwards and interest carryforwards are recog- nised 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 carry- forwards can be utilised. The actual amount of taxable income in future periods, and hence the actual utilisation of tax loss carryforwards and interest carryforwards, may be different from the estimates made when the corresponding deferred tax assets were recognised. Where necessary, the KION Group’s accounting depart- Goodwill is tested for impairment annually at the level of the ments receive assistance from external legal advisors and tax cash-generating units to which goodwill is allocated, applying the consultants when making the estimates required. budget for 2016 and the medium-term planning for 2017 to 2018 The carrying amounts of the affected line items can be combined with the growth predicted in the market forecasts for found in the relevant notes / the consolidated statement of the projections for 2019 to 2020 and assuming division-specific financial position. growth rates for the period thereafter. Any material changes to The impact of a change to an estimate is recognised these and other factors might result in the recognition of impair- prospectively when it becomes known and assumptions are ment losses. Further information on goodwill can be found earlier adjusted accordingly. in this note and in note [17]. Information on leases can be found in the sections on leases / short-term rentals, leased assets, rental assets and other property, plant and equipment in this note. KION GROUP AG | Annual Report 2015We keep the world moving.134 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 047 Revenue by product category in € million New business Service business – Aftersales – Rental business – Used trucks – Other Total revenue The ‘Other’ line item includes revenue from construction con- tracts amounting to €33.0 million (2014: €0.0 million). Further information on revenue can be found in the segment report in note [41]. TABLE 047 2014 2,533.0 2,144.9 1,250.4 486.9 264.9 142.7 2015 2,779.9 2,318.0 1,347.0 524.1 270.4 176.4 5,097.9 4,677.9 Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated income statement 135 TABLE 048 2014 16.2 11.4 9.9 4.6 2.9 48.2 93.2 2015 25.2 5.3 9.9 4.0 1.3 53.8 99.6 [9] OTHER INCOME The breakdown of other income is as follows: > TABLE 048 Other income in € million Foreign currency exchange rate gains Income from reversal of provisions Profit from release of deferred lease profits Gains on disposal of non-current assets Rental income Sundry income Total other income The change in foreign currency exchange rate gains and losses is attributable to exchange rate movements and includes gains and losses on hedging transactions (see also note [10]). The sundry income that was reported predominantly included earnings from commission collected of €20.6 million (2014: €19.0 million), which are not reported under revenue. Sundry income also included income from non-consolidated subsidiaries and other equity investments totalling €9.7 million (2014: €1.4 million). KION GROUP AG | Annual Report 2015We keep the world moving. TABLE 049 2014 13.7 10.8 – 17.6 42.1 2015 37.2 1.7 4.1 23.6 66.6 136 [10] OTHER EXPENSES The breakdown of other expenses is as follows: > TABLE 049 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 foreign currency exchange rate gains and losses include losses amounting to €1.2 million (2014: gains of €8.5 million) on derivative financial instruments used to hedge operating currency risk. The impairment recognised on non-current assets in the reporting year of €4.1 million (2014: €0.0 million) comprised impairment losses on capitalised development costs (see also note [17]). Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated income statement 137 [11] SHARE OF PROFIT (LOSS) OF EQUITY-ACCOUNTED INVESTMENTS The interest income from leases relates to the interest portion of lease payments in financial services transactions in which KION Group entities operate as lessors (finance leases). The change in foreign currency exchange rate gains and losses (financing) is attributable to exchange rate movements The share of profit (loss) of equity-accounted investments in the and includes gains and losses on hedging transactions (see reporting year amounted to a profit of €10.6 million (2014: loss also note [13]). of €24.8 million). In the prior year, the main influences on the The line item ‘Net interest income from defined benefit plans’ share of profit (loss) of equity-accounted investments were a relates to the net interest income on the net assets of two pension downturn in business and the resultant impairment loss that had plans in the United Kingdom in which plan assets exceed pension to be recognised on the equity investment in Linde Hydraulics obligations. GmbH & Co. KG, Aschaffenburg (referred to below as Linde On 20 July 2015, the KION Group exercised the put option Hydraulics). The total non-cash impairment loss recognised in that it held via Linde Material Handling GmbH, Aschaffenburg, on 2014 was €13.5 million. 20.0 per cent of the shares in Linde Hydraulics. This eliminated Further details on equity-accounted investments can be the corresponding call option 1 held by Weichai Power. Measure- found in note [21]. [12] FINANCIAL INCOME ment of these two options up to the exercise date in July 2015 and measurement of the remaining call option 2 in 2015 resulted in total income of €2.4 million, which was recognised under other interest and similar income. In the previous year, the income arising from measurement of the options was €43.2 million. The impairment loss relating to the stake held in Linde Hydraulics was included in the share of profit (loss) of equity-accounted Financial income breaks down as follows: > TABLE 050 investments in 2014 (see also note [11]). Financial income in € million Interest income from leases Foreign currency exchange rate gains (financing) Net interest income from defined benefit plans Other interest and similar income Total financial income TABLE 050 2014 29.6 4.3 1.1 49.5 84.4 2015 34.8 5.8 0.9 10.0 51.4 KION GROUP AG | Annual Report 2015We keep the world moving. 138 [13] FINANCIAL EXPENSES Financial expenses break down as follows: > TABLE 051 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 Moving Forward Innovation TABLE 051 2014 12.5 40.5 48.1 20.4 10.3 3.5 1.8 36.2 173.2 2015 10.2 30.4 49.9 17.1 1.3 7.0 0.7 27.3 144.0 KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated income statement 139 In 2015, financial expenses decreased by a substantial €29.2 million year on year. This reduction was largely due to early repayment in 2014 of the fixed-rate tranche of the corporate bond issued in 2011, which was due to mature in 2018 and had [14] INCOME TAXES a volume of €325.0 million, and the floating-rate tranche of the The income tax expense of €109.2 million (2014: expense of corporate bond issued in 2013, which was due to mature in €80.0 million) consisted of €132.5 million in current tax expense 2020 and had a volume of €200.0 million. Early redemption of (2014: €63.5 million) and €23.3 million in deferred tax income the two bond tranches caused interest expenses arising from (2014: deferred tax expense of €16.5 million). The current tax capital market liabilities to reduce by €10.1 million year on year. expense included expenses of €24.9 million (2014: expenses of In 2014, financial expenses had also included one-off expenses €6.9 million) relating to previous financial years. of €8.4 million in connection with the amortisation of borrowing At the reporting date there were income tax assets of costs and a payment of €14.8 million representing early repay- €7.9 million receivable from tax authorities (2014: €6.6 million) and ment charges, which were reported in other interest expense and income tax liabilities of €79.8 million (2014: €31.3 million). similar charges. Deferred taxes are recognised for temporary differences The interest cost of leases relates to the interest portion of between the tax base and IFRS carrying amounts. Deferred taxes lease payments in financial services transactions in which the are determined on the basis of the tax rates that will apply or have material risks and rewards are borne by KION Group entities as been announced at the realisation date in accordance with the lessees (finance leases). Sale and finance leaseback operating current legal situation in each country concerned. The current sub-leases (SALB-FL-OL) incurred interest expenses of €27.8 mil- corporate income tax rate in Germany is 15.0 per cent plus the lion (2014: €27.2 million). The income from corresponding cus- solidarity surcharge (5.5 per cent of corporate income tax). Taking tomer agreements is, according to IAS 17, a component of the into account the average trade tax rate of 14.93 per cent (2014: rental and lease payments received and is therefore reported 14.63 per cent), the combined nominal tax rate for entities in within revenue rather than as interest income. Germany was 30.75 per cent (2014: 30.5 per cent). The income Net interest expense from defined benefit plans relates to tax rates for foreign companies used in the calculation of deferred the net interest cost of the net liability of pension plans applying taxes are between 10.0 per cent and 37.48 per cent (2014: the discount rate for plans in which pension obligations exceed between 10.0 per cent and 35.0 per cent). plan assets. No deferred taxes have been recognised on temporary The foreign currency exchange rate gains and losses (financing) differences of €164.2 million (2014: €88.8 million) between the include losses amounting to €0.3 million (2014: gains of €0.3 mil- net assets reported in the consolidated financial statements for lion) on derivative financial instruments used to hedge financial the Group companies and the tax base for the shares in these currency risk. Group companies (outside basis differences) because the KION Group is in a position to manage the timing of the reversal of temporary differences and there are no plans to dispose of investments in the foreseeable future. KION GROUP AG | Annual Report 2015We keep the world moving.140 Deferred tax assets are allocated to the following items in the statement of financial position: > TABLE 052 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 053 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 Moving Forward Innovation TABLE 052 2014 136.0 0.1 40.5 0.5 178.1 295.1 46.2 62.1 – 400.6 357.9 TABLE 053 2014 483.7 5.0 196.2 2.1 23.5 10.6 0.5 – 400.6 320.9 2015 97.6 – 41.2 0.3 163.3 324.9 36.2 73.7 – 388.3 349.0 2015 442.6 3.5 201.3 1.0 8.7 31.5 2.3 – 388.3 302.7 KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated income statement 141 The deferred tax liabilities essentially relate to the purchase price Deferred taxes are recognised on tax loss carryforwards and allocation in the acquisition of the KION Group, particularly for interest carryforwards to the extent that sufficient future taxable intangible assets and property, plant and equipment. income is expected to be generated against which the losses can In 2015, deferred taxes of minus €5.3 million were recognised be utilised. The total amount of unrecognised deferred tax in other comprehensive income (loss), resulting in a decrease assets relating to loss carryforwards was therefore €29.3 million in equity (2014: €62.5 million, resulting in an increase in equity). (2014: €34.2 million), of which €27.1 million (2014: €32.3 million) Of this amount, deferred taxes of minus €4.5 million (2014: concerns tax losses that can be carried forward indefinitely. €60.6 million) arose from the remeasurement of the defined The KION Group’s corporation-tax loss carryforwards in benefit obligation. Furthermore, deferred taxes of minus €0.8 mil- Germany as at 31 December 2015 amounted to €156.5 million lion (2014: €1.9 million) were recognised in connection with (31 December 2014: €108.2 million), while trade-tax loss carry- realised and unrealised changes in the fair value of derivatives in forwards stood at €142.1 million (31 December 2014: €59.9 mil- cash flow hedges (minus €2.2 million; 2014: €1.9 million) and net lion). There were also foreign tax loss carryforwards totalling investment hedges (€1.4 million; 2014: €0.0 million). The purchase €142.2 million (31 December 2014: €214.4 million). price allocation for Egemin Automation and the currency effects The interest that can be carried forward indefinitely in included in the currency translation adjustment resulted in a total Germany as at 31 December 2015 amounted to €296.7 million change in deferred taxes of €8.6 million, which was recognised (31 December 2014: €332.5 million). in other comprehensive income (loss). The table below shows the reconciliation of expected income In 2014, deferred taxes of €1.0 million had been reclassified tax expense to effective income tax expense. The Group recon- from accumulated other comprehensive income (loss) to retained ciliation is an aggregation of the individual company-specific earnings in connection with the deconsolidation of Linde Heavy reconciliations prepared in accordance with relevant local tax Truck Division Ltd. rates, taking into account consolidation effects recognised in In 2015, the parent company and subsidiaries that reported income. The expected tax rate applied in the reconciliation is losses for 2015 or 2014 recognised net deferred tax assets from 30.75 per cent (2014: 30.5 per cent). > TABLE 054 temporary differences and loss carryforwards totalling €85.4 mil- lion (2014: €51.6 million). These assets were considered to be unimpaired because these companies are expected to generate taxable income in future. No deferred tax assets have been recognised on tax loss carryforwards of €115.8 million (2014: €162.0 million), on interest carryforwards of €215.8 million (2014: €262.1 million) or on other temporary differences of €0.0 million (2014: €1.2 million). KION GROUP AG | Annual Report 2015We keep the world moving.142 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 Non-deductible expenses Tax-exempt income Taxes relating to other periods Deferred taxes relating to prior periods Other Effective income taxes (current and deferred taxes) TABLE 054 2014 258.3 2015 330.2 – 101.5 – 78.7 – 3.9 11.9 – 9.5 – 7.2 – 1.9 2.3 – 24.9 28.5 – 3.0 – 109.2 – 5.3 8.2 – 5.6 – 1.0 – 5.9 2.6 – 6.9 7.5 5.0 – 80.0 [15] OTHER INCOME STATEMENT DISCLOSURES expenses as a component of interest cost of the defined benefit obligation. Pension expenses essentially comprised the pension entitlements of €34.7 million vested in 2015 (2014: €23.4 million) and unrecognised past service income of €4.3 million (2014: unrecognised past service cost of €2.6 million) arising from plan The cost of materials rose by €189.5 million in the reporting year amendments and curtailments. to €2,410.2 million (2014: €2,220.7 million). Impairment losses and depreciation expenses on property, Personnel expenses went up by €119.8 million to €1,351.7 mil- plant and equipment together with impairment losses and amor- lion in 2015 (2014: €1,231.9 million). These personnel expenses tisation expenses on intangible assets amounted to €401.4 mil- included wages and salaries of €1,058.1 million (2014: €966.4 mil- lion in the reporting year (2014: €367.2 million). Inventories were lion), social security contributions of €237.8 million (2014: written down by €12.5 million (2014: €9.1 million). €215.7 million) and expenses for pensions of €55.9 million The breakdown of rental and lease payments expensed in (2014: €49.7 million). The interest cost from the unwinding of the the period and arising in connection with operating leases in discount on estimated pension obligations is not recognised which KION Group entities are lessees is as follows: > TABLE 055 under personnel expenses and is instead reported under financial Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated income statement 143 Lessee: Expenses recognised for operating lease payments in € million Procurement lease contracts Sublease contracts Total recognised expenses for lease payments TABLE 055 2014 81.0 16.2 97.1 2015 82.6 39.2 121.8 The expenses in connection with sub-leases relate to leases Diluted earnings per share are calculated by adding the and rental agreements in which KION Group entities are both potential dilutive no-par-value shares that employees can obtain lessors and lessees. These expenses were offset by income of for free under the employee share option programme to the €46.2 million in 2015 (2014: €37.6 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 98,740,662 no-par-value shares issued (2014: 98,693,221 no-par-value shares). Diluted earnings per share for the reporting period came to €2.20 (2014: €1.79). [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 (2015: 98,721,950 no-par-value shares; 2014: 98,692,041 no-par-value shares). The net income accruing to the shareholders of KION GROUP AG was €217.1 million (2014: €176.7 million); it is reported in the consolidated income state- ment. Basic earnings per share for the reporting period came to €2.20 (2014: €1.79). The 160,050 no-par-value treasury shares repurchased by KION GROUP AG were not included in this figure as at 31 December 2015 (31 December 2014: 163,562). KION GROUP AG | Annual Report 2015We keep the world moving. 144 Notes to the consolidated statement of financial position [17] GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill is allocated to the segments as follows: > TABLE 056 Goodwill broken down by segment in € million LMH STILL Other Total goodwill TABLE 056 2014 927.8 556.7 12.5 2015 941.0 556.2 50.9 1,548.1 1,497.1 The change in the amount of goodwill in 2015 mainly resulted from the Voltas brand name), of which €475.1 million (31 December 2014: the acquisition of Egemin Automation, from which goodwill arose of €474.5 million) was attributable to brand names with an indefinite €50.9 million. Currency effects also had an impact. In addition, useful life. In 2015, a value of €8.6 million was attributed to the goodwill of €12.5 million for KION India was reclassified from the Egemin Automation brand name and allocated to the Other seg- Other segment to the LMH segment. The change in the amount of ment as part of the purchase price allocation. As at 31 Decem- goodwill in 2014 had been the result of currency effects. ber 2015, the value of the brand names allocated to the Other The Group intends to retain and further strengthen the Linde, segment had therefore risen to €13.7 million (31 December 2014: STILL, OM STILL and KION brand names on a long-term basis. €5.5 million for the KION and Voltas brand names), of which A value of €1.8 million was originally attributed to the Voltas brand €13.7 million (31 December 2014: €5.1 million) was attributable to name, which was integrated into the LMH segment with effect brand names with an indefinite useful life. Brand names worth from 1 January 2015. This brand name is amortised over its useful €115.2 million were assigned to the STILL segment (31 Decem- life of five years. As at 31 December 2015, the brand names ber 2014: €115.3 million). These assets are not amortised as they allocated to the LMH segment (Linde and Voltas) had a residual have an indefinite useful life. > TABLE 057 value of €475.2 million (31 December 2014: €474.5 million without Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 145 Intangible assets in € million Goodwill Brand names Technology & development Sundry intangible assets Balance as at 01/01/2014 1,494.7 Group changes Currency translation adjustments Additions Disposals Amortisation Balance as at 31/12/2014 Gross carrying amount as at 31/12/2014 Accumulated amortisation – 2.3 – – – 1,497.1 1,497.1 – 0.0 594.7 – 1.0 – – – 0.3 595.4 596.5 – 1.1 Balance as at 01/01/2015 1,497.1 595.4 Group changes Currency translation adjustments Additions Disposals Amortisation Impairment Balance as at 31/12/2015 Gross carrying amount as at 31/12/2015 Accumulated amortisation 48.9 2.2 – – – – 1,548.1 1,548.1 – 8.6 0.4 – – – 0.3 – 604.1 605.6 – 1.5 TABLE 057 Total 2,428.7 – 0.0 6.0 60.9 – 2.5 – 80.5 216.9 – 1.5 43.7 – 2.4 – 49.7 122.4 – 0.0 1.2 17.2 – 0.1 – 30.5 210.0 110.1 2,412.5 492.5 – 282.5 210.0 – 0.9 40.9 – 0.3 – 53.3 – 4.1 270.0 – 159.9 110.1 16.3 0.7 13.0 – 0.6 – 33.2 – 2,856.0 – 443.5 2,412.5 73.7 4.2 53.8 – 0.9 – 86.9 – 4.1 194.1 106.2 2,452.5 451.3 – 257.3 297.0 – 190.8 2,902.1 – 449.6 KION GROUP AG | Annual Report 2015We keep the world moving. 146 The total carrying amount for technology and development assets Other intangible assets relate in particular to licences, as at 31 December 2015 was €194.1 million (31 December 2014: patents, software and customer relationships. €210.0 million). Development costs of €40.9 million were capital- The change to the basis of consolidation in 2015 was due ised in the reporting year (2014: €43.7 million). Total research and almost entirely to the acquisition of Egemin Automation. development costs of €143.0 million (2014: €125.7 million) were expensed. Of this amount, €53.3 million (2014: €49.7 million) related to amortisation. Impairment losses of €4.1 million were recognised on capital- ised development costs in 2015 to reflect the lack of opportunities to use them in future following the early discontinuation of pro- [18] LEASED ASSETS duction of a model series. They are reported in other expenses. The changes in leased assets in 2015 and 2014 were as follows: The impairment losses related to the STILL segment. > TABLE 058 Leased assets in € million Balance as at 01/01/ Group changes Currency translation adjustments Additions Disposals Depreciation Reclassification Balance as at 31/12/ Gross carrying amount as at 31/12/ Accumulated depreciation TABLE 058 2014 251.9 – – 1.1 172.8 – 73.9 – 69.5 – 1.3 279.0 615.4 – 336.5 2015 279.0 – 1.7 1.8 241.1 – 104.2 – 80.6 – 1.1 334.4 675.3 – 340.9 Leased assets are attributable to the Financial Services segment Leased assets include assets leased over the long term with and relate to industrial trucks in the amount of €333.6 million a residual value of €285.9 million (31 December 2014: €230.5 mil- (2014: €278.4 million) that are leased to external customers under lion) that are funded by means of sale and leaseback transactions operating leases and to office furniture and equipment in the with leasing companies and leased assets with a residual value of amount of €0.8 million (2014: €0.6 million). €48.5 million (31 December 2014: €48.5 million) that are largely funded internally or by means of bank loans. Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 147 Leased assets resulted in non-cancellable minimum lease payments from customers amounting to €325.5 million (31 December 2014: €285.6 million). The following table shows the maturity structure of these payments: > TABLE 059 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 2015 and 2014 were as follows: > TABLE 060 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 059 2014 285.6 107.8 174.9 2.9 2015 325.5 116.2 200.5 8.8 TABLE 060 2014 461.2 – 12.2 2.1 264.9 – 81.4 – 147.4 – 0.1 487.1 899.1 – 412.0 2015 487.1 – 3.1 – 4.1 294.8 – 72.0 – 159.3 0.5 544.0 954.5 – 410.5 KION GROUP AG | Annual Report 2015We keep the world moving. 148 Acquisitions amounting to €165.1 million (2014: €146.0 million) and disposals amounting to €48.2 million (2014: €50.5 million) were attributable to the LMH segment. Acquisitions amounting to €129.5 million (2014: €119.1 million) and disposals amounting to €23.7 million (2014: €30.9 million) were attributable to the STILL segment. The breakdown of rental assets by contract type is shown in the following table: > TABLE 061 Rental assets broken down by contract types TABLE 061 Operating leases as lessor Sale with risk Total in € million Industrial trucks Truck equipment Total rental assets 2015 475.8 3.4 479.2 2014 410.9 9.5 420.3 2015 64.7 0.0 64.8 2014 66.7 0.1 66.7 2015 540.6 3.4 544.0 2014 477.5 9.5 487.1 Rental assets comprises 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’). Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 149 [20] OTHER PROPERTY, PLANT AND EQUIPMENT accrued retirement benefits under partial retirement agree- ments. As in the previous year, the KION Group did not recognise any significant impairment losses in accordance with IAS 36 on other property, plant and equipment in 2015. The changes in the carrying amounts of other property, plant and Plant & machinery and office furniture & equipment include equipment are shown in > TABLE 062 below. assets from procurement leases (finance leases) amounting to €16.0 million (31 December 2014: €13.1 million). Depreciation on Land and buildings in the amount of €18.3 million (31 Decem- these assets came to €4.9 million in 2015 (2014: €5.3 million). The ber 2014: €18.3 million) were largely pledged as collateral for corresponding liabilities are reported as other financial liabilities. Other property, plant and equipment in € million 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 Balance as at 01/01/2015 Group changes Currency translation adjustments Additions Disposals Depreciation Reclassification Balance as at 31/12/2015 Gross carrying amount as at 31/12/2015 Accumulated depreciation Land and buildings Plant, machinery, and office furniture and equipment Advances paid and assets under construction 320.0 – 7.1 5.3 – 13.8 – 14.4 4.0 308.1 644.2 – 336.1 308.1 – 0.8 3.7 8.0 – 1.9 – 14.0 2.5 305.7 653.0 – 347.3 158.3 – 1.7 2.2 54.0 – 1.4 – 55.4 8.3 164.3 952.7 – 788.4 164.3 1.1 0.8 62.7 – 7.4 – 56.5 9.2 174.1 996.7 – 822.6 21.1 – 0.2 12.8 – 1.4 – – 10.9 21.7 21.7 0.0 21.7 0.1 0.1 18.4 – 0.2 – – 11.1 29.0 29.0 – 0.0 TABLE 062 Total 499.4 – 1.7 9.4 72.1 – 16.6 – 69.8 1.3 494.1 1,618.6 – 1,124.5 494.1 0.4 4.5 89.1 – 9.5 – 70.5 0.6 508.8 1,678.7 – 1,170.0 KION GROUP AG | Annual Report 2015We keep the world moving. 150 [21] EQUITY-ACCOUNTED INVESTMENTS of the shares in Linde Hydraulics of €41.0 million were legally transferred to Weichai Power for a purchase consideration of €77.4 million. The remaining 10.0 per cent of the shares in Linde Hydraulics continue to be accounted for under the equity method because the KION Group can continue to participate in financial The KION Group reported equity-accounted investments with a and operating policy decisions as there have been no changes to total carrying amount of €73.6 million as at 31 December 2015 its contractual rights relating to committee membership. (31 December 2014: €114.6 million). The residual carrying amount of the associates mainly In 2014, the KION Group had held 30.0 per cent of the shares resulted from the shares (10.0 per cent) in Linde Hydraulics and in Linde Hydraulics GmbH & Co. KG, Aschaffenburg (referred to the shares (45.0 per cent) in Linde Leasing GmbH, Wiesbaden. below as Linde Hydraulics) through Linde Material Handling The associates and joint ventures can be seen in the list of share- GmbH, Aschaffenburg. On 20 July 2015, the KION Group exer- holdings (see note [47]). Their financial information is summarised cised the put option vis-à-vis Weichai Power Co., Ltd., Weifang, below. > TABLES 063 – 064 China (referred to below as Weichai Power) that it held via Linde Material Handling GmbH, Aschaffenburg, on 20.0 per cent of the The amounts in the tables are based on the share held by the shares in Linde Hydraulics. In December 2015, the 20.0 per cent KION Group in the relevant associate or joint venture. 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 Moving Forward Innovation TABLE 063 2014 88.5 – 29.8 – 2.6 – 32.3 TABLE 064 2014 26.1 4.9 – 0.9 4.0 2015 45.6 4.1 2.1 6.1 2015 28.0 6.5 0.9 7.4 KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 151 [22] LEASE RECEIVABLES The amounts recognised as lease receivables are based on the data below. > TABLE 065 In the case of leases under which KION Group entities lease non-cancellable sub-leases amounting to €587.1 million assets directly to customers as part of the Group’s financial (31 December 2014: €488.8 million). services activities, the Group’s net investment in the lease is Lease receivables include unguaranteed residual values of reported as a lease receivable. €74.5 million (31 December 2014: €63.9 million). Gross investments include minimum lease payments from 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 TABLE 065 2014 611.8 228.7 364.6 18.5 547.8 202.5 327.5 17.8 2015 725.8 210.8 489.6 25.4 653.7 181.7 447.5 24.5 Unrealised financial income 72.0 64.0 KION GROUP AG | Annual Report 2015We keep the world moving. 152 [23] OTHER FINANCIAL ASSETS Other financial assets of €104.3 million (31 December 2014: €131.0 million) comprise the items stated below. > TABLE 066 Of the change in non-consolidated subsidiaries and other equity With effect from 31 December 2015, the presentation of other investments, an amount of €19.6 million resulted from acquisition financial assets and other financial liabilities was changed in order of the shares in the Italian dealer Moden Diesel S.p.A. (formerly to make it more consistent with the presentation of other financial MODEN DIESEL S.R.L.) and LR Intralogistik GmbH. instrument disclosures in accordance with IFRS 7. To comply with On 20 July 2015, the KION Group exercised the put option IAS 1.55, the line items ‘Other assets’ and ‘Other liabilities’ were vis-à-vis Weichai Power Co., Ltd., Weifang, China that it held via added to the statement of financial position as at 31 Decem- Linde Material Handling GmbH, Aschaffenburg, on 20.0 per cent of ber 2015. These line items contain other assets and liabilities that the shares in Linde Hydraulics. In December 2015, the 20.0 per cent are not covered by the scope of IFRS 7 and are thus shown of the shares in Linde Hydraulics were transferred to Weichai Power separately from other financial assets and other financial liabilities. and the receivable of €34.7 million arising from the exercise of the The figures for 2014 have been restated to reflect these disclosure put option was derecognised. As at 31 December 2014, this put changes. An explanation of other assets can be found in note [24]. option had been recognised under current derivative financial Other liabilities are explained in note [35]. instruments in the amount of €34.7 million. Other financial assets in € million Investments in non-consolidated subsidiaries and other investments Loans receivable Non-current securities Other non-current financial assets Derivative financial instruments Financial receivables Sundry other financial assets Other current financial assets TABLE 066 2014 11.4 0.6 0.8 12.7 43.7 12.4 62.3 118.3 2015 42.4 2.7 0.8 45.9 5.3 15.4 37.7 58.4 Total other financial assets 104.3 131.0 Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 153 [24] OTHER ASSETS Other assets of €85.0 million (31 December 2014: €71.5 mil- lion) comprise the following: > TABLE 067 Pension assets relate to asset surpluses from two defined benefit plans in the United Kingdom (31 December 2014: two) in which plan assets exceed the present value of the defined benefit obligation (see note [29]). Other assets in € million Pension assets Other non-current assets Deferred charges and prepaid expenses Sundry tax receivables Sundry other assets Other current assets Total other assets [25] INVENTORIES The reported inventories break down as follows: > TABLE 068 Inventories in € million Materials and supplies Work in progress Finished goods and merchandise Advances paid Total inventories TABLE 067 2014 21.6 21.6 28.8 21.0 0.0 49.8 71.5 TABLE 068 2014 122.2 71.5 330.8 4.7 529.2 2015 30.2 30.2 32.0 22.7 0.1 54.8 85.0 2015 115.9 75.0 359.5 3.1 553.5 KION GROUP AG | Annual Report 2015We keep the world moving. 154 The slight rise in inventories compared with 31 December 2014 was largely attributable to the increase in finished goods (up by 8.7 per cent) and work in progress (up by 4.9 per cent). By contrast, there was a decrease in materials and supplies of [26] TRADE RECEIVABLES 5.1 per cent. In 2015, impairment losses of €12.5 million were The trade receivables break down as follows: > TABLE 069 recognised on inventories (2014: €9.1 million). Reversals of impair- ment losses had to be recognised in the amount of €4.6 million (2014: €4.1 million) because the reasons for the impairment losses TABLE 069 2014 582.6 622.8 – 6.9 – 22.3 – 11.1 4.7 10.9 – 598.2 2015 631.8 670.3 – 6.5 – 22.1 – 9.9 16.2 20.9 1.5 670.5 no longer existed. 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 non-consolidated subsidiaries Trade receivables from equity-accounted investments and other investments Construction contracts with a net credit balance towards customers Total trade receivables Valuation allowances of €38.5 million (31 December 2014: €40.2 million) were recognised for trade receivables. The con- tract costs incurred and the contract profit recognised (net of recognised losses) in respect of construction contracts that had not been completed by the reporting date came to a total of €47.3 million (31 December 2014: €0.0 million). Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 155 [27] 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 [37]. > TABLE 070 Cash and cash equivalents in € million Balances with banks, cash and cheques Pledged cash Total cash and cash equivalents [28] EQUITY TABLE 070 2014 98.7 0.2 98.9 2015 102.8 0.3 103.1 The total number of shares outstanding as at 31 December 2015 was 98,739,950 no-par-value shares (31 December 2014: 98,736,438 no-par-value shares). As at 31 December 2015, KION Group employees held options Subscribed capital and capital reserves on a total of 53,220 no-par-value shares (31 December 2014: 29,116 no-par-value shares). The share options granted under the As at 31 December 2015, the Company’s share capital amounted employee share option programme are not dividend-bearing and to €98.9 million, which was unchanged on 31 December 2014, do not confer any voting rights. and was fully paid up. It was divided into 98.9 million no-par-value The Annual General Meeting on 19 May 2014 voted to create shares. authorised capital that will enable the KION Group to meet its fund- Between 10 September 2015 and 30 September 2015, a ing needs quickly and flexibly. Subject to the consent of the Super- further 70,000 treasury shares were repurchased via the stock visory Board, the Executive Board is authorised until 18 May 2019 exchange at an average price of €38.74 in order to provide the to increase the Company’s share capital by up to €9.89 million by shares for employees’ own investments and the free shares way of an issue of up to 9,890,000 new no-par-value bearer shares under the employee share option programme. The total cost was (2014 Authorised Capital). €2.7 million. Due to the issue of 73,512 no-par-value shares To safeguard the Company’s funding options, the Executive (2014: 87,438 no-par-value shares) under the programme, Board is also authorised until 18 May 2019 to issue warrant-linked KION GROUP AG held 160,050 treasury shares at the reporting bonds, convertible bonds or profit-sharing rights with a total par date (31 December 2014: 163,562). These are not dividend-bear- value of up to €800 million that contain pre-emption rights / obli- ing and do not confer any voting rights. Further details on the KEEP gations for up to 9,890,000 no-par-value shares. To this end, a employee share option programme can be found in note [44]. conditional increase was decided upon in order to increase the KION GROUP AG | Annual Report 2015We keep the world moving. 156 Company’s share capital by up to €9.89 million by way of an foreign currency of foreign subsidiaries, associates and joint issue of up to 9,890,000 new no-par-value bearer shares (2014 ventures. Conditional Capital). The gains / losses on the defined benefit obligation are the The total amount attributable to shares that was spent in result of remeasuring defined benefit pension obligations (see connection with this approved / conditional capital may not also note [29]). exceed 10 per cent of the share capital. In both cases, the The gains / losses on hedge reserves are the effective portion pre-emption right of shareholders can be excluded in certain of the changes in the fair value of the hedging instruments for circumstances. The corresponding amendments to the articles cash flow hedges and net investment hedges. The gains/losses of incorporation were entered in the commercial register on from equity investments contain the share of other comprehen- 16 June 2014. sive income (loss) from associates and joint ventures accounted Retained earnings for under the equity method. Non-controlling interests The development of retained earnings is shown in the consoli- dated statement of changes in equity in > TABLE 040. The retained Non-controlling interests in companies in the KION Group earnings comprise the net income (loss) for the financial year and amounted to €7.7 million (31 December 2014: €5.3 million). past contributions to earnings by the consolidated entities, pro- vided they have not been distributed. The distribution of a dividend of €0.55 per share (2014: €0.35 per share) to the shareholders of KION GROUP AG resulted in an outflow of funds of €54.3 million in 2015 (2014: €34.5 million). [29] RETIREMENT BENEFIT OBLIGATION Appropriation of profit The retirement benefit obligation is recognised for obligations to provide current and future post-employment benefits. Post- The Executive Board and Supervisory Board of KION GROUP AG employment benefit plans are classified as either defined benefit will propose a dividend of €0.77 per share to the Annual General plans or defined contribution plans, depending on the substance Meeting on 12 May 2016. As there were 98,739,950 dividend- of the plan as derived from its principal terms and conditions. bearing shares as at 31 December 2015, this equates to a total dividend payout of €76.0 million. Roughly 35.0 per cent of the net income accruing to the KION Group shareholders will therefore Defined contribution plans be distributed in dividends. Accumulated other comprehensive income (loss) In the case of defined contribution pension plans, the Group pays contributions to government or private pension insurance provid- ers based on statutory or contractual provisions, or on a voluntary basis. The Group does not enter into any obligations above and beyond the payment of contributions to an external pension fund. The breakdown of accumulated other comprehensive income The amount of future pension benefits is based solely on the (loss) is shown in > TABLE 040. amount of the contributions paid by the employer (and in some The currency translation adjustment contains the exchange cases the beneficiaries themselves) to the external pension fund, differences arising from the financial statements prepared in a including income from the investment of these contributions. The Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 157 total expense arising from defined contribution plans amounted to tion period. Employees receive the pension entitlement that they €64.2 million in 2015 (2014: €58.3 million). Of this total, contribu- have earned in the form of a monthly retirement pension or invalid- tions paid by employers into government-run schemes came to ity benefit or, in the event of their death, the entitlement is paid to €56.3 million (2014: €52.4 million). The defined contribution plan their surviving dependants in the form of a widow’s / widower’s pen- expense is reported within the functional costs. sion or orphans’ pension. Members of the Executive Board and Defined benefit plans other executives are predominantly covered by individual pension plans. For details of the pension entitlements of KION GROUP AG Executive Board members, please refer to the information in note [45]. The amount of the benefits paid to executives depends on the In the case of defined benefit plans, the beneficiaries are granted type of entitlement. Under the ‘old’ individual pension plans, execu- a specific benefit by the Group or an external pension fund. Due tives were entitled to a certain percentage of income as their pen- to future salary increases, the benefit entitlement at the retirement sion benefit. By contrast, the employer-funded entitlement under age of the beneficiary is likely to be higher than the amount the ‘new’ individual pension plans consists of two components: a granted as at the reporting date. Pensions are often adjusted fixed basic pension and a variable top-up pension through which after an employee reaches retirement age. The amount of the annual components are earned within a defined contribution sys- Group’s obligation, which is defined as the actuarial present value tem. Both components depend on the seniority of the executive. of the obligation to provide the level of benefits currently earned In addition, employees in Germany are able to pay part of their by each beneficiary, is expressed as the present value of the salary into a company pension plan, for which KION provides a defined benefit obligation (DBO) including adjustments for future defined minimum interest rate to enable employees to build up their salary and pension increases. personal pension provision. The pension benefits consist of retire- The KION Group currently grants pensions to almost all ment, invalidity and surviving dependants’ benefits. Each contribu- employees in Germany and a number of foreign employees. These tion made is converted into a capital component on the basis of a pensions consist of fixed benefit entitlements and are therefore guaranteed minimum interest rate of 3.0 per cent and depending reported as defined benefit plans in accordance with IFRS. As at on the age of the employee. The capital components acquired 31 December 2015, the KION Group had set up defined benefit each calendar year are added up to give the pension capital. When plans in 13 countries. For all of the significant defined benefit plans an insured event occurs, the pension capital is converted into an within the Group, the benefits granted to employees are deter- ongoing life-long pension or a one-off capital payment. mined on the basis of their individual income, i.e. either directly or In Germany, the KION Group also helps employees to build by way of intermediate benefit arrangements. The largest of the up their own pension provision with an additional matching KION Group’s defined benefit plans – accounting for 91.1 per cent contribution for those employees who pay part of their salary into of the global defined benefit obligation (31 December 2014: the KION pension plan. The additional matching contribution 91.2 per cent) – are in Germany and the United Kingdom. received by executives is 50.0 per cent of the amount they defer Germany in a calendar year, although the absolute amount of this contribu- tion is limited to a certain percentage of income (ranging from In Germany, the pension benefits granted under the 2001 pension 2.5 per cent to a maximum of 5.0 per cent). All other employees benefit conditions and 2002 pension benefit conditions depend on who participate in the company pension scheme receive up to employees’ length of service and gross annual remuneration (pen- 0.4 per cent of their gross remuneration. sion component entitlement). The pension component is calculated Some of the KION Group’s pension obligations in Germany by multiplying a certain percentage by an age-dependent annuiti- are financed by way of contractual trust arrangements (CTAs), sation factor. The contribution rate is 3.4 per cent (2001 pension which qualify as plan assets within the meaning of IAS 19. The benefit conditions) or 2.0 per cent (2002 pension benefit conditions) trustees are required to follow a defined investment strategy and of the gross remuneration that an employee earns in the computa- guidelines. There are no statutory minimum funding requirements. KION GROUP AG | Annual Report 2015We keep the world moving.158 In the event of the Company’s insolvency, the company pension Other countries scheme in Germany is to a large extent protected by law by the Furthermore, significant asset volumes are invested in external insolvency protection scheme (Pensions-Sicherungs-Verein Ver- pension funds with restricted access in Switzerland and the sicherungsverein auf Gegenseitigkeit, PSVaG). Netherlands. Decisions on additions to plan assets take into United Kingdom account the change in plan assets and pension obligations. They also take into account the statutory minimum coverage require- In the United Kingdom, defined benefit pension obligations pre- ments and the amounts deductible under local tax rules. dominantly relate to two plans. The defined benefits include not only a life-long retirement pension but also surviving dependants’ benefits. The amount of the pension depends on employees’ Measurement assumptions length of service and final salary. The two plans were closed to new employees more than ten In accordance with IAS 19 (‘Employee Benefits’), pension provi- years ago. Each plan is monitored by its own board of trustees, sions are recognised to cover obligations arising from the current which oversees the running of the plan as well as its funded and future pension entitlements of active and (after the vesting status and the investment strategy. The members of the board period has expired) former employees of the KION Group and of trustees comprise people appointed by the company involved their surviving dependants. The discount rate used to calculate and selected plan beneficiaries. the defined benefit obligation at each reporting date is deter- Under UK law, the board of trustees is obliged to have a val- mined on the basis of current capital market data and long-term uation of the plan carried out at least every three years. In con- assumptions about future salary and pension increases in nection with the 2012 valuation of the pension plans for the accordance with the best estimate principle. These assumptions employees of the KION Group’s UK companies, the Company vary depending on the economic conditions affecting the cur- and the trustees of the pension funds agreed on a calculation rency in which benefit obligations are denominated and in which method in May 2014, according to which the deficit for the two fund assets are invested, as well as capital market expectations. remaining pension plans amounted to €8.6 million as at Benefit obligations are calculated on the basis of current 1 July 2013. On this basis, the KION Group agreed with the biometric probabilities as determined in accordance with actuarial trustees that it would pay approximately the equivalent of principles. The calculations also include assumptions about €5.0 million in 2015 and €2.5 million in 2016 in order to reduce future employee turnover based on employee age and years the deficit. However, these payments are subject to the condi- of service and about the probability of retirement. The defined tion that the annual review of the pension plans’ funding position benefit obligation is calculated on the basis of the significant continues to reveal a deficit. If a payment would result in the weighted-average assumptions as at the reporting date shown in pension plans being overfunded, the KION Group would be > TABLE 071. exempt from its payment obligation in that year. The assumed discount rate is determined on the basis of the The trustees of the two plans were also granted collateral in yield as at the reporting date on AA-rated, fixed-interest senior rem in the form of charges on the real estate of Group compa- corporate bonds with maturities that match the expected maturi- nies in the UK and flexible collateral in respect of the rental fleets ties of the pension obligations. Pension obligations in foreign of UK dealers within a maximum overall limit of approximately companies are calculated on a comparable basis taking into €24.4 million (2014: €23.2 million). The term of this collateral is account any country-specific requirements. limited to five years (1 July 2018), and the overall limit will not be Future increases in salaries are estimated on an annual basis reduced by payments made by the KION Group. The likelihood taking into account factors such as inflation and the overall of the guarantee being used is deemed low in view of the posi- economic situation. tion of the individual companies with regard to their current and The biometric mortality rates used in the calculation are future financial and earnings situations. based on published country-specific statistics and empirical Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 159 values. Since 31 December 2009, the modified Heubeck 2005 G (known as remeasurements) are recognised immediately in other mortality tables have been used in Germany as the biometric comprehensive income in accordance with IAS 19. This serves basis; the modified tables include a somewhat higher life expec- to ensure that the pension liability in the statement of financial tancy for males than the unmodified tables. The S1NA CMI 2013 position is the present value of the defined benefit obligation. (standard mortality tables for self-administered pension schemes In the case of externally financed pension plans, this present (SAPS) based on normal health) with a long-term trend of value of the defined benefit obligation is reduced by the fair value 1.25 per cent p.a. is applied to the two defined benefit plans in the of the assets of the external pension fund (plan assets). If the United Kingdom. plan assets exceed the present value of the defined benefit The actuarial assumptions not listed in > TABLE 071, such as obligation (net assets), a corresponding asset is recognised in employee turnover, invalidity, etc., are determined in accordance accordance with IAS 19. IAS 19.64 in conjunction with the with recognised forecasts in each country, taking into account supplementary explanatory information in IFRIC 14 states that the circumstances and forecasts in the companies concerned. the recognition of an asset for an excess of plan assets is only The significant weighted-average assumptions shown in permitted if the company concerned, in its function as the > TABLE 072 were applied to the calculation of the net interest cost employer, gains economic benefits in the form of reductions in and the cost of benefits earned in the current year (current ser- future contributions to the plan or in the form of refunds from the vice cost). plan. If the present value of the defined benefit obligation is not Differences between the forecast and actual change in covered by the plan assets, the net obligation is reported under the defined benefit obligation and changes in related assets the retirement benefit obligation. Assumptions underlying provisions for pensions and other postemployment benefits TABLE 071 Germany UK Other Discount rate Salary increase rate Pension increase rate 2015 2.35% 2.75% 1.75% 2014 2.20% 2.75% 1.75% 2015 3.75% 4.25% 3.13% 2014 3.55% 4.25% 3.18% 2015 1.61% 2.50% 0.42% 2014 1.79% 2.49% 0.42% Assumptions underlying pensions expenses Germany UK Other Discount rate Salary increase rate Pension increase rate 2015 2.20% 2.75% 1.75% 2014 3.60% 2.75% 1.75% 2015 3.55% 4.25% 3.18% 2014 4.40% 4.16% 3.53% 2015 1.79% 2.49% 0.42% TABLE 072 2014 2.95% 2.44% 0.48% KION GROUP AG | Annual Report 2015We keep the world moving. 160 In two defined benefit plans in the United Kingdom, plan assets The plan curtailments in the reporting year are the result of exceed the present value of the defined benefit obligation. Stipu- income in the Netherlands arising in connection with an agree- lations limiting the asset to be recognised in the statement of ment reached with the employee representatives. The employees financial position do not apply. in the Netherlands switched to a defined contribution plan on 1 January 2016. The components of the remeasurements are listed in Statement of financial position > TABLE 078. The change in the present value of the defined benefit obligation > TABLE 074. (DBO) is shown in > TABLE 073. Employees in Germany paid a total of €2.9 million (2014: The DBO in the other countries was predominantly attribut able €3.2 million) into the KION pension plan in 2015. The change in the fair value of plan assets is shown in to subsidiaries in Switzerland (2015: €57.2 million; 2014: €48.7 mil- lion) and the Netherlands (2015: €33.1 million; 2014: €38.4 million). Changes in defined benefit obligation TABLE 073 in € million 2015 2014 2015 2014 2015 2014 2015 2014 Germany UK Other Total Present value of defined benefit obligation as at 01/01/ 809.6 588.1 438.4 Group changes Exchange differences Current service cost Past service cost (+) and income (–) from plan amendments Past service cost (+) and income (–) from curtailments Interest expense on defined benefit obligation Employee contributions – – – – 29.0 19.1 – – 17.7 2.9 3.4 – 21.3 3.2 Pension benefits directly paid by company – 14.0 – 12.9 – 23.7 1.1 – – Pension benefits paid by funds Liability transfer out to third parties – 0.5 – 0.2 – 0.2 – 0.4 – 19.0 – 18.9 – – Remeasurements – 14.9 188.0 – 19.9 38.0 422.1 – 53.2 30.5 1.1 120.8 95.7 1,368.8 1,106.0 – 5.2 4.7 – 1.0 3.1 – – 53.2 28.9 34.7 31.5 23.4 0.1 – 0.1 – 0.9 – 0.1 2.6 16.3 18.7 – – – – – – 4.2 – 2.8 0.9 – 1.6 – 2.2 – 0.0 22.0 – 4.2 36.2 3.9 – 15.6 – 23.8 – 0.2 – 34.6 – 42.7 4.1 – 14.4 – 21.4 – 0.5 247.9 2.2 1.0 – 1.6 – 4.3 – 0.2 Present value of defined benefit obligation as at 31/12/ thereof unfunded thereof funded 829.7 342.6 487.0 809.6 334.4 475.2 440.5 438.4 124.0 120.8 1,394.2 1,368.8 0.0 – 440.5 438.4 33.4 90.5 33.6 376.1 368.1 87.2 1,018.1 1,000.7 Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 161 Changes in plan assets TABLE 074 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 2015 73.6 – – 1.7 2.9 1.1 – 0.5 – 0.1 1.1 79.8 2014 65.0 – – 2.1 3.2 1.0 – 0.2 – 0.1 2.6 73.6 2015 455.5 – 24.5 17.1 – 5.1 2014 441.6 – 56.5 31.8 19.6 – 2.4 2015 73.8 2014 61.7 – 4.4 1.3 1.0 2.3 – 0.8 1.7 0.9 2.2 2015 603.0 – 28.8 20.1 3.9 8.5 2014 568.3 – 56.5 32.6 23.4 4.1 5.6 – 19.0 – 18.9 – 4.3 – 2.2 – 23.8 – 21.4 – – 15.9 467.2 – 35.5 455.5 – 0.8 – 8.8 79.4 73.8 – 0.1 – 14.0 626.4 – 0.1 46.9 603.0 In 2015, employer contributions in the United Kingdom, which As a result, the funding ratio (ratio of plan assets to the amounted to €5.1 million, included one-off payments of €5.0 mil- present value of the defined benefit obligation) in the KION Group lion (2014: €1.4 million) into pension funds on the basis of contrac- was 44.9 per cent (2014: 44.0 per cent). tual agreements. In Germany, one-off payments of €0.6 million The change in the retirement benefit obligation reported in (2014: €0.6 million) were also made to a German CTA for the other the statement of financial position is shown in > TABLE 076. members of the KION GROUP AG Executive Board. The payments expected for 2016 amount to €23.2 million (2015: €22.6 million), which includes expected employer contribu- Statement of cash flows tions of €6.9 million to plan assets (2015: €7.3 million) and expected direct payments of pension benefits amounting to In the case of obligations not covered by external assets, €16.3 million (2015: €15.3 million) that are not covered by payments to beneficiaries are made directly by the Company and corresponding reimbursements from plan assets. According to therefore have an impact on cash flow from operating activities. local valuation rules, there continue to be gaps in the coverage of If the benefit obligations are backed by external assets, the two defined benefit pension plans in the United Kingdom, as a payments are made from existing plan assets and have no effect result of which the expected employer contributions for 2016 on the Company’s cash flow. Instead, any contributions made to include one-off payments amounting to €2.5 million in line with the external pension fund by the Company result in a cash outflow the agreements reached with the trustees. for operating activities. The reconciliation of funded status and net defined benefit obligation to the amounts reported in the consolidated statement of financial position as at 31 December is shown in > TABLE 075. KION GROUP AG | Annual Report 2015We keep the world moving. 162 Funded status and net defined benefit obligation TABLE 075 Germany UK Other Total in € million 2015 2014 2015 2014 2015 2014 2015 2014 Present value of the partially or fully funded defined benefit obligation Fair value of plan assets Surplus (+) / deficit (–) – 487.0 – 475.2 – 440.5 – 438.4 – 90.5 – 87.2 – 1,018.1 – 1,000.7 79.8 73.6 467.2 455.5 79.4 73.8 626.4 603.0 – 407.2 – 401.6 26.7 17.2 – 11.2 – 13.3 – 391.7 – 397.8 Present value of the unfunded defined benefit obligation – 342.6 – 334.4 Net liability (–) / net asset (+) as at 31/12/ – 749.9 – 736.0 Reported as ‘retirement benefit obligation’ – 749.9 – 736.0 Reported as ‘Other non-current assets’ – – – 0.0 26.7 – 3.6 30.2 – 17.2 – 4.5 21.6 – 33.4 – 44.6 – 44.6 – – 33.6 – 376.1 – 368.1 – 47.0 – 767.8 – 765.8 – 47.0 – 798.0 – 787.5 – 30.2 21.6 Changes in retirement benefit obligation TABLE 076 Germany UK Other Total 2014 2015 34.1 787.5 2014 560.1 0.4 24.7 20.4 1.1 29.4 17.1 – 15.6 – 14.4 – 3.7 – 0.1 – 17.6 798.0 – 3.4 – 0.4 200.0 787.5 0.2 2.2 1.1 – 1.6 – 2.2 – 0.0 13.2 47.0 in € million Balance as at 01/01/ Exchange differences Total service cost Net interest expense 2015 736.0 – 29.0 16.0 2014 523.1 – 22.5 19.2 Pension benefits directly paid by company – 14.0 – 12.9 2015 2014 4.5 0.3 0.0 0.2 – 2.9 0.3 – 0.1 – Employer contributions to plan assets Liability transfer out to third parties Remeasurements Balance as at 31/12/ – 1.1 – 0.1 – 16.0 749.9 – 1.0 – 0.3 185.4 736.0 – 0.3 – 0.2 – – 1.0 3.6 – 1.4 4.5 2015 47.0 0.8 0.5 0.9 – 1.6 – 2.3 – – 0.6 44.6 Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 163 During the reporting year, pension benefits of €39.4 million (2014: defined benefit obligation when the pension is paid attributable to €35.8 million) were paid in connection with the main pension entitle- the year under review on the basis of the maximum length of ments in the KION Group, of which €15.6 million (2014: €14.4 mil- service achievable by each employee. lion) was paid directly by the Company and €23.8 million (2014: Past service cost arises if there is a change to the pension €21.4 million) was paid from plan assets. Cash contributions to entitlement and it is recognised immediately in full. plan assets in 2015 amounted to €8.5 million (2014: €5.6 million). The net interest cost / income, which is calculated by multiply- Furthermore, pension benefit payments totalling €0.1 million (2014: ing the net liability (present value of the defined benefit obligation €0.4 million) were transferred to external pension funds. minus plan assets) or the net assets (if the plan assets exceed the present value of the defined benefit obligation) by the discount rate at the start of the year, is also recognised in the income Income statement statement. The breakdown of the net cost of the defined benefit obliga- In accordance with IAS 19, actuarial computations are performed tion (expenses less income) recognised in the income statement for benefit obligations in order to determine the amount to be for 2015 is shown in > TABLE 077. expensed in each period in accordance with fixed rules. The The KION Group’s net financial income / expenses includes a expenses recognised in the income statement for pensions and net interest cost of €16.2 million (2014: €19.3 million). All other similar obligations consist of a number of components that must components of pension expenses are recognised under func- be calculated and disclosed separately. tional costs. The service cost is the new pension entitlement arising in the The actual total return on plan assets in 2015 was €6.1 million financial year and is recognised in the income statement. It is (2014: €70.3 million). calculated as the present value of that proportion of the expected Cost of defined benefit obligation TABLE 077 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 2015 29.0 2014 19.1 – – 29.0 17.7 – 1.7 16.0 45.0 3.4 – 22.5 21.3 – 2.1 19.2 41.7 2015 1.1 – – 1.1 16.3 2014 1.1 2015 4.7 2014 3.1 2015 34.7 2014 23.4 0.1 – 0.1 – 0.9 – 0.1 2.6 – 1.2 18.7 – 4.2 0.5 2.2 – 2.2 2.8 – 4.2 30.5 36.2 – 26.0 42.7 – 17.1 – 19.6 – 1.3 – 1.7 – 20.1 – 23.4 – 0.8 0.3 – 1.0 0.3 0.9 1.4 1.1 3.3 16.2 46.7 19.3 45.3 KION GROUP AG | Annual Report 2015We keep the world moving. 164 Other comprehensive income (loss) The gains and losses on the remeasurement of plan assets are attributable entirely to experience adjustments. The changes in The breakdown of the remeasurement of the defined benefit estimates relating to defined benefit pension entitlements obligation recognised in the statement of comprehensive income resulted in a €12.7 million increase in equity as at 31 Decem- in 2015 is as follows: > TABLE 078 ber 2015 after deduction of deferred taxes (31 December 2014: decrease of €138.3 million). Accumulated other comprehensive income (loss) TABLE 078 Germany UK Other Total in € million 2015 2014 2015 2014 2015 2014 2015 2014 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/ – 300.1 – 114.8 – 44.4 – 44.1 – 27.8 – 14.4 – 372.3 – 173.3 – – – – – – 2.4 5.3 – 3.1 – – – – 0.9 – 0.1 – 3.3 5.3 – 3.2 14.9 – 188.0 19.9 – 38.0 – 0.2 – 22.0 34.6 – 247.9 – – – – 0.2 0.0 – 0.2 0.0 – 0.4 25.3 – 194.4 – 10.5 6.4 14.4 5.5 – 37.8 0.1 – 1.6 1.4 – 21.8 – 0.0 38.1 – 3.6 – 254.0 6.4 1.1 2.6 – 15.9 35.5 0.8 8.8 – 14.0 46.9 – 284.2 – 300.1 – 42.8 – 44.4 – 28.0 – 27.8 – 355.0 – 372.3 Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 165 Composition of plan assets The plan assets of the main pension plans consist of the following components: > TABLE 079 Fair value of plan assets TABLE 079 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 2015 22.7 23.9 5.3 – 27.8 79.8 9.0 – 9.0 2014 25.7 28.4 4.8 – 14.6 73.6 9.0 – 9.0 2015 87.9 2014 83.8 376.8 368.3 – – – – 2.5 3.4 467.2 455.5 – – – – – – 2015 2014 8.7 15.6 4.4 44.0 6.6 79.4 47.9 44.0 3.8 10.1 12.0 4.3 43.9 3.6 73.8 44.7 43.9 0.9 2015 119.3 416.4 9.7 44.0 36.9 2014 119.7 408.7 9.1 43.9 21.6 626.4 603.0 56.9 44.0 12.8 53.7 43.9 9.9 The plan assets do not include any real estate or other assets obligation recognised in the consolidated statement of financial used by the KION Group itself. position as at 31 December 2015. Sensitivity analysis Future pension benefit payments The present value of the defined benefit obligation is based on The pension benefit payments shown in > TABLE 081 are forecast the significant assumptions detailed in > TABLE 071 above. If one for the next ten years for the defined benefit pension entitle- assumption were to vary and the other assumptions remained ments in existence as at 31 December 2015. The expected pen- unchanged, the impact on the present value of the defined ben- sion benefits break down into future benefits to be paid directly efit obligation would be as shown in > TABLE 080. by the employer (for 2016: €16.3 million) and future benefits to be The sensitivity analysis shown in > TABLE 080 is not representa- paid from existing plan assets (for 2016: €23.0 million). tive of an actual change in the present value of the defined benefit As at the reporting date, the average duration of the defined obligation because variations in the significant assumptions are benefit obligation, weighted on the basis of the present value of unlikely to occur in isolation as, to some extent, the assumptions the defined benefit obligation, was 22.2 years in Germany (2014: are interrelated. Sensitivity is determined using the same methods 21.7 years), 14.5 years in the United Kingdom (2014: 13.6 years) (projected unit credit method) as for the measurement of the and 16.8 years in the other countries (2014: 17.1 years). KION GROUP AG | Annual Report 2015We keep the world moving. 166 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 TABLE 080 2014 – 218.3 290.6 17.2 – 17.9 39.5 – 35.7 44.7 TABLE 081 Total 39.3 41.5 42.9 45.3 47.0 263.4 2015 – 220.8 294.6 16.2 – 17.4 38.7 – 37.1 47.8 Other 3.7 4.4 4.1 5.0 5.1 26.1 in € million 2016 2017 2018 2019 2020 2021 to 2025 Risks Germany 15.8 16.6 17.6 18.8 20.4 UK 19.9 20.6 21.3 21.4 21.5 127.6 109.7 the United Kingdom. The market risk attaching to plan assets – above all in the case of equities – is mitigated by defining an The funding ratio, the defined benefit obligation and the associ- investment strategy and investment guidelines and constantly ated costs depend on the performance of financial markets. The monitoring the assets’ performance. Moreover, a downward trend return on plan assets is assumed to equal the discount rate, on financial markets could have a significant effect on minimum which is determined on the basis of the yield earned on AA-rated, funding requirements, some of which apply outside Germany. fixed-interest senior corporate bonds. If the actual return on plan The KION Group also bears the full risk of possible future assets falls below the discount rates applied, the net obligation pension adjustments resulting from changes in longevity and arising out of the pension plans increases. The amount of the net inflation. obligation is also particularly affected by the discount rates, and Payroll-based contributions to the KION pension plan made the current low level of interest rates – especially in the euro- by employees in Germany are invested in fund units. If the actual zone – is resulting in a comparatively large net obligation. returns on these fund units fall below the interest rate of The plan assets are predominantly invested in corporate 3.0 per cent that has been guaranteed to participating employ- bonds and inflation-linked UK government bonds, particularly in ees, the KION Group’s personnel expenses rise. Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 167 [30] FINANCIAL LIABILITIES The financial liabilities reported by the KION Group as at 31 December 2015 essentially comprised interest-bearing liabilities to banks and capital market liabilities in connection with the corporate bond that was issued. The liabilities to banks stemmed largely from the revolving credit facility. > TABLE 082 shows the contractual maturity structure of the financial liabilities. Maturity structure of financial liabilities TABLE 082 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 financial liabilities to non-banks due within one year due in one to five years due in more than five years Total current financial liabilities Total non-current financial liabilities 2015 225.9 113.8 112.1 – 444.5 – 444.5 – 6.2 5.5 0.7 – 119.3 557.2 2014 459.9 257.7 202.2 – 443.1 – – 443.1 6.6 5.1 1.2 0.2 262.9 646.8 KION GROUP AG | Annual Report 2015We keep the world moving. 168 Liabilities to banks Capital market liabilities In connection with its acquisition of Linde AG’s material handling As at 31 December 2015, capital market liabilities consisted business, the KION Group signed a loan agreement (a senior entirely – as they had a year earlier – of the fixed-rate tranche of facilities agreement and a subordinated facility agreement, the bond issued in 2013, which has a volume of €450.0 million referred to below as ‘SFA’) for a total original amount of and a maturity date of 2020. The fixed-rate tranche of the €3,300.0 million with the lead banks Barclays Bank PLC, Bayer- corporate bond issued in 2011, which was due to mature in 2018 ische Hypo- und Vereinsbank AG, Credit Suisse (London branch), and had a volume of €325.0 million, and the floating-rate tranche Goldman Sachs International Bank, Lehman Commercial Paper of the corporate bond issued in 2013, which was due to mature in Inc. (UK branch) and Mizuho Corporate Bank Ltd. on 23 Decem- 2020 and had a volume of €200.0 million, had been repaid early ber 2006. This loan agreement has been amended to reflect the in full in 2014. Most (€523.0 million) of the funds used for the KION Group’s changed financial circumstances on a number of repayment were drawn down from the revolving credit facility. occasions, particularly in connection with KION GROUP AG’s This credit facility has far lower interest rates than the two corpo- IPO in June 2013. rate bonds. An amount of €8.4 million representing the proportion The liabilities to banks stem largely from the revolving credit of the related deferred borrowing costs relating to these bonds facility agreed with a group of banks under the SFA. The revolving and a payment of €14.8 million representing early repayment credit facility, originally for €1,045.0 million, has a variable interest charges had been recognised as financial expenses in 2014. rate and will mature in mid-2018. In connection with the repay- ment of two corporate bonds, the credit facility was increased by €198.0 million to a total of €1,243.0 million in 2014. This was Changes in net financial debt achieved through bilateral lending agreements with a group of banks. These additional loans mature in April 2019 and have a The KION Group uses its net financial debt as a key internal figure variable interest rate. The transaction costs directly attributable to for analysing the changes in its financial liabilities. Net financial the increase in the revolving credit facility, which were incurred in debt is defined as the difference between financial liabilities 2014, came to €1.0 million. The transaction costs are recognised (excluding lease liabilities) and cash and cash equivalents. as prepaid expenses under current financial assets and expensed over the term of the credit facility. As at 31 December 2015, an amount of €152.2 million had actually been drawn down from the revolving credit facility, which includes other loan liabilities and contingent liabilities (31 Decem- ber 2014: €402.0 million). Of this total, €62.2 million had been drawn down on a short-term basis (31 December 2014: €204.0 million). In 2014, drawdowns from the credit facility amounting to €198.0 million had been used to repay the float- ing-rate tranche of the corporate bond issued in 2013, which was due to mature in 2020 and had a volume of €200.0 million, and were classified as long term. These drawdowns were reduced to €90.0 million in the reporting year. There were also liabilities to banks of €83.2 million (31 Decem- ber 2014: €63.9 million) that had been agreed with local banks for Group companies and are therefore not part of the SFA. Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 169 2015 450.0 225.9 6.2 – 5.5 676.5 103.1 573.5 TABLE 083 2014 450.0 459.9 6.6 – 6.9 909.6 98.9 810.7 TABLE 084 The table below gives a breakdown of the KION Group’s net financial debt as at 31 December 2015: > TABLE 083 Net financial debt in € million Corporate bond – fixed rate (2013/2020) – gross Liabilities to banks Other financial liabilities to non-banks ./. Capitalised borrowing costs Financial debt ./. Cash and cash equivalents Net financial debt The table below gives details of the changes in financial debt and lists the applicable terms and conditions: > TABLE 084 Credit terms in € million Interest rate Notional amount Maturity Term Loan Facility H2a (Corporate bond – fixed rate) Fixed rate Multicurrency Revolving Credit Facility 3 EURIBOR + Margin Other liabilities to banks Other financial liabilities to non-banks ./. Capitalised borrowing costs Total financial debt Various currencies and interest terms 2020 2018 2015 450.0 142.7 83.2 6.2 – 5.5 676.5 2014 450.0 373.0 86.9 6.6 – 6.9 909.6 KION GROUP AG | Annual Report 2015We keep the world moving. 170 Financial covenants The carrying amounts of the financial assets pledged as collateral amounted to €279.7 million as at the reporting date The SFA and the contractual terms and conditions governing the (31 December 2014: €340.8 million). issuance of the corporate bond require compliance with certain As had been the case at the end of 2014, no material liabilities undertakings and covenants. The SFA also requires compliance to banks were secured by mortgage charges at the end of 2015. with specific financial covenants during the term of the agree- On 15 February 2016, the KION Group redeemed the corpo- ment. The financial covenants specify required ratios for the rate bond of €450.0 million that was still outstanding and all other financial position and financial performance of the KION Group. remaining liabilities under the existing syndicated loan of Only the financial covenant for gearing (the ratio of net financial 23 December 2006. The restructuring of the KION Group’s fund- debt to EBITDA) currently applies to the KION Group. If undertak- ing was decided upon in a resolution of the Executive Board of ings or financial covenants are breached, this may, for example, KION GROUP AG on 25 January 2016. The repayment resulting give lenders the right to terminate the SFA or permit bondholders from this restructuring of the funding was made from funds drawn to call the corporate bond prior to its maturity date. down under a new senior facilities agreement concluded on The financial covenants are reviewed every quarter. All the 28 October 2015 (see also note [50]). undertakings and financial covenants were complied with in the past financial year, as had been the case in 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 2014: 25) KION Group companies (guarantors) in five countries – Germany, the UK, France, Spain and Italy – had provided the necessary collateral. The collateral includes guarantees, the assignment of shares in the guarantors (with the exception of shares in KION Material Handling GmbH), the assignment of certain bank accounts and certain guarantor receivables, the assignment of claims arising from and in connection with the share purchase agreement between Linde Material Handling GmbH and Linde AG dated 5 November 2006 relating to the shares in the former KION GROUP GmbH, the assignment of shares in KION Information Management Services GmbH and assignments and transfers of title to intellectual property rights by guarantors in Germany. The statutory provisions in the United Kingdom and the agreements entered into mean that all the assets of the UK guarantors are pledged as security. Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 171 [31] LEASE LIABILITIES Whereas lease liabilities stood at €855.6 million (31 Decem- ber 2014: €707.7 million), lease receivables arising from sale and leaseback transactions amounted to €592.0 million (31 Decem- ber 2014: €490.6 million) and leased assets under sale and lease- Lease liabilities relate solely to finance lease obligations arising back transactions totalled €285.9 million (31 December 2014: from sale and leaseback transactions for the funding of long- €230.5 million). 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 085 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 085 2014 768.2 271.9 475.9 20.5 707.7 246.0 442.0 19.7 2015 922.1 266.0 625.6 30.5 855.6 237.9 587.9 29.7 Interest included in minimum lease payments 66.5 60.5 KION GROUP AG | Annual Report 2015We keep the world moving. 172 [32] OTHER PROVISIONS Other provisions relate to the following items: > TABLE 086 Other provisions TABLE 086 in € million Balance as at 01/01/2015 thereof non-current thereof current Group changes Additions Utilisations Reversals Additions to accrued interest Currency translation adjustments Other adjustments Balance as at 31/12/2015 thereof non-current thereof current Provisions for product warranties Provisions for personnel Other obligations Total other provisions 53.3 53.3 – 0.2 29.0 – 21.5 – 4.6 0.1 0.9 0.2 57.6 23.5 34.2 65.5 24.1 41.4 – 39.4 – 14.4 – 0.3 0.6 – 0.0 – 90.8 43.1 47.7 49.3 6.3 43.0 0.4 13.0 – 10.8 – 6.0 – 0.0 0.9 – 0.3 46.4 16.9 29.6 168.1 83.7 84.4 0.6 81.5 – 46.7 – 10.9 0.7 1.8 – 0.0 194.9 83.4 111.5 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 contracts. spare parts. It is expected that the bulk of the costs will be Total restructuring provisions (including obligations under social incurred within the next two years after the reporting date. plans and termination benefits) came to €33.2 million as at The provisions for personnel comprise provisions for partial 31 December 2015 (31 December 2014: €26.7 million). retirement obligations, long-service awards, annual bonuses, sever- ance pay, obligations under social plans and obligations under the employee equity programmes. The provisions for partial retirement obligations are recognised on the basis of individual contractual arrangements and agreements under collective bargaining law. Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 173 [33] TRADE PAYABLES to make it more consistent with the presentation of other financial instrument disclosures in accordance with IFRS 7. To comply with IAS 1.55, the line items ‘Other assets’ and ‘Other liabilities’ were added to the statement of financial position as at 31 December As at 31 December 2015, trade payables of €574.6 million 2015. These line items contain other assets and liabilities that are (31 December 2014: €564.6 million) included liabilities to non- not covered by the scope of IFRS 7 and are thus shown sepa- consolidated subsidiaries of €6.5 million (31 December 2014: rately from other financial assets and other financial liabilities. The €3.8 million) and liabilities to equity-accounted investments and figures for 2014 have been restated to reflect these disclosure other equity investments of €11.7 million (31 December 2014: changes. An explanation of other assets can be found in note [24]. €4.4 million). Other liabilities are explained in note [35]. Other financial liabilities comprise the following items: > TABLE 087 [34] OTHER FINANCIAL LIABILITIES With effect from 31 December 2015, the presentation of other financial assets and other financial liabilities was changed in order Other financial liabilities TABLE 087 in € million Liabilities from finance leases Derivative financial instruments Sundry other financial liabilities Other non-current financial liabilities Liabilities from finance leases Derivative financial instruments Liabilities from accrued interest Sundry other financial liabilities Other current financial liabilities 2015 311.6 – 4.0 315.6 127.4 12.4 19.8 34.7 194.4 2014 231.6 2.4 2.6 236.6 141.5 10.9 12.2 51.3 215.9 Total other financial liabilities 510.1 452.5 KION GROUP AG | Annual Report 2015We keep the world moving.174 On 20 July 2015, the KION Group exercised the put option that it The finance lease obligations comprise liabilities arising from held via Linde Material Handling GmbH, Aschaffenburg, on the financing of industrial trucks for short-term rental of €403.2 mil- 20.0 per cent of the shares in Linde Hydraulics. This eliminated lion (2014: €339.1 million) and residual value obligations of €17.8 mil- the corresponding call option 1 held by Weichai Power. lion (2014: €18.5 million). The KION Group has also recognised As at 31 December 2014, this call option had been recognised other financial liabilities amounting to €18.1 million (31 December under non-current derivative financial instruments in the amount of 2014: €15.6 million) arising from procurement leases, which are €2.4 million. The current derivative financial instruments include a classified as finance leases due to their terms and conditions. further call option on the remaining 10.0 per cent of the shares in The finance lease obligations are based on the following future Linde Hydraulics amounting to €0.6 million (2014: €0.6 million). minimum lease payments: > TABLE 088 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 088 2014 405.0 155.1 239.7 10.2 373.1 141.5 221.8 9.8 2015 473.2 141.8 318.8 12.6 439.0 127.4 299.4 12.2 Interest included in minimum lease payments 34.1 31.9 Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 175 TABLE 089 2014 151.2 151.2 84.5 167.3 36.6 60.3 39.2 – 388.0 2015 185.4 185.4 77.4 186.5 36.3 64.7 39.2 9.9 414.0 599.4 539.2 [35] OTHER LIABILITIES Other liabilities comprise the following items: > TABLE 089 Other liabilities in € million Deferred income Other non-current liabilities Deferred income Personnel liabilities Social security liabilities Tax liabilities Advances received Construction contracts with a net debit balance towards customers Other current liabilities Total other liabilities The contract costs incurred and the contract profit recognised in respect of construction contracts that had not been completed by the reporting date came to a total of €24.5 million (31 Decem- ber 2014: €0.0 million). KION GROUP AG | Annual Report 2015We keep the world moving.176 [36] CONTINGENT LIABILITIES AND OTHER FINANCIAL COMMITMENTS Contingent liabilities 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 insur- ance or provisions will be sufficient in each individual case. However, the KION Group believes it is unlikely that these on- going lawsuits will require funds to be utilised that exceed the Of the total guarantees, €2.5 million related to contingent liabilities provisions recognised. assumed jointly with another shareholder of a joint venture (2014: €0.9 million). > TABLE 090 Litigation Other financial commitments Sundry other financial commitments included future payment obligations to an associate amounting to €2.0 million (2014: The legal risks arising from the KION Group’s business are €21.0 million). > TABLE 091 typical of those faced by any company operating in this sector. Contingent liabilities in € million Liabilities on bills of exchange Liabilities on guarantees Total contingent liabilities 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 Moving Forward Innovation TABLE 090 2014 5.6 21.0 26.7 TABLE 091 2014 250.8 10.3 1.9 65.0 327.9 2015 6.8 23.5 30.3 2015 272.7 11.5 2.2 71.3 357.8 KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated statement of financial position 177 The maturity structure of the total future minimum lease payments The future minimum lease payments for sale and leaseback under non-cancellable operating leases is shown in > TABLE 092 transactions not recognised in the statement of financial position below. amounting to €63.4 million (2014: €45.3 million) are partially off- The minimum lease payments relate to payments for leased set by payments received under non-cancellable sub-leases buildings, machinery, office furniture and equipment (procure- amounting to €6.3 million (2014: €4.1 million). The future pay- ment leases) as well as payments for industrial trucks refinanced ments also include obligations arising from the refinancing of with a sale and leaseback and sub-leased to end customers (sale industrial trucks for which there are no offsetting receipts under and leaseback sub-leases). > TABLE 093 short-term sub-leases. 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 092 2014 250.8 61.4 114.8 74.5 2015 272.7 66.9 135.4 70.4 Minimum lease payments broken down into procurement leases & sale and leaseback sub-leases TABLE 093 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 2015 209.3 43.3 95.8 70.2 – – – – 2014 205.4 44.1 87.4 73.9 – – – – 2015 63.4 23.7 39.6 0.2 6.3 2.0 4.3 0.0 2014 45.3 17.3 27.4 0.6 4.1 1.6 2.5 0.0 KION GROUP AG | Annual Report 2015We keep the world moving. 178 Other disclosures [37] CONSOLIDATED STATEMENT OF CASH FLOWS At minus €329.1 million, cash flow from financing activi- ties was down significantly on the prior-year figure (2014: minus €428.1 million), which had been affected by the repayment of the corporate bonds and other factors. The net repayment of finan- cial debt in the year under review totalled €224.0 million (2014: The consolidated statement of cash flows shows the changes in €301.2 million). The financial debt taken up during the year, which cash and cash equivalents in the KION Group resulting from cash came to €911.0 million, was more than offset by repayments total- inflows and outflows in the year under review, broken down into ling €1,134.9 million. The repayments in 2014 had included cash flow from operating, investing and financing activities. The €525.0 million in respect of the early redemption of the bond effects on cash from changes in exchange rates are shown sep- tranches plus early repayment charges of €14.8 million. Net cash arately. Cash flow from operating activities is presented using the of €43.3 million was also used for regular interest payments indirect method in which the profit or loss for the year is adjusted (2014: €82.5 million). The distribution of a dividend of €0.55 for non-cash operating items. per share (2014: €0.35 per share) resulted in an outflow of funds The KION Group’s net cash provided by operating activities of €54.3 million (2014: €34.5 million), while the acquisition of totalled €677.9 million, which was significantly higher than the pri- 70,000 treasury shares generated an outflow of €2.7 million. or-year figure (2014: €603.8 million). This increase was attribut- Supported by favourable currency effects of €0.5 million able to contributions from operating profit and other incoming (2014: €1.8 million), this resulted overall in a small rise in cash and payments. The higher working capital, the rise in the volume of cash equivalents, which advanced from €98.9 million as at the leasing and higher tax payments were fully offset as a result. end of 2014 to €103.1 million as at 31 December 2015. Net cash used for investing activities amounted to €345.2 mil- lion (2014: net cash used of €297.8 million). Capital expenditure on developments (R&D), property, plant and equipment, and the rental fleet business (net) rose by €48.9 million year on year. Total expenditure on the acquisition of equity investments amounted to €84.9 million. The acquisition of Egemin Automation resulted in a net outflow of funds of €68.6 million; the three other acquisitions [38] INFORMATION ON FINANCIAL INSTRUMENTS led to cash payments of €16.3 million. The acquisitions of equity The KION Group uses both primary and derivative financial instru- investments were partly offset by the sale of the 20.0 per cent of ments. The following section summarises the relevance of these the shares in Linde Hydraulics to Weichai Power, which resulted financial instruments for the KION Group. in a relatively high inflow of funds of €77.4 million. The following table shows the measurement categories Free cash flow – the sum of cash flow from operating activities defined by IAS 39. In line with IFRS 7, the table shows the carrying and investing activities – increased by €26.8 million to €332.7 mil- amounts and fair values of financial assets and liabilities: lion in the reporting period (2014: €305.9 million). As in 2014, a > TABLES 094 – 095 large part of this was used for repayments. Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 179 Other disclosures Carrying amounts broken down by class and category 2015 TABLE 094 Classes in € million Financial assets Investments in non-consolidated subsidiaries and other investments Loans receivable Financial receivables Non-current securities Lease receivables ¹ Trade receivables thereof construction contracts with a net credit balance towards customers ² Other financial receivables thereof non-derivative receivables thereof derivative financial instruments Cash and cash equivalents Financial liabilities Liabilities to banks Corporate bond Other financial liabilities to non-banks Lease liabilities ¹ Trade payables Other financial liabilities thereof non-derivative liabilities thereof liabilities from finance leases ¹ thereof derivative financial instruments 1 as defined by IAS 17 2 as defined by IAS 11 Carrying amount FAHfT AfS LaR FLaC FLHfT Fair value Categories 42.4 2.7 15.4 0.8 653.7 670.5 1.5 43.0 37.7 5.3 103.1 225.9 444.5 6.2 855.6 574.6 510.1 58.6 439.0 12.4 42.4 0.8 2.7 15.4 669.0 37.7 103.1 2.3 42.4 2.7 15.4 0.8 658.4 670.5 1.5 43.0 37.7 5.3 103.1 225.9 469.5 6.2 860.0 574.6 512.2 58.6 441.2 12.4 225.9 444.5 6.2 574.6 58.6 6.0 KION GROUP AG | Annual Report 2015We keep the world moving.180 Carrying amounts broken down by class and category 2014 TABLE 095 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 6.6 707.7 564.6 452.5 66.1 373.1 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 6.6 711.2 564.6 454.3 66.1 374.9 13.3 459.9 443.1 6.6 564.6 66.1 5.4 Classes in € million Financial assets Investments in non-consolidated subsidiaries and other investments Loans receivable Financial receivables Non-current securities Lease receivables ¹ Trade receivables Other financial receivables thereof non-derivative receivables thereof derivative financial instruments Cash and cash equivalents Financial liabilities Liabilities to banks Corporate bond Other financial liabilities to non-banks Lease liabilities ¹ Trade payables Other financial liabilities thereof non-derivative liabilities thereof liabilities from finance leases ¹ thereof derivative financial instruments 1 as defined by IAS 17 Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 181 Other disclosures The change in valuation allowances for trade receivables was as follows: > TABLE 096 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 097 Net gains and losses on financial instruments broken down by category in € million Loans and receivables (LaR) Available-for-sale investments (AfS) 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 €20.9 million (2014: €7.5 million), because these losses form part of a documented hedge. Gains / losses arising on hedging transactions forming part of a documented hedge are predominantly included in other income and other expenses. TABLE 096 2014 42.4 – 7.1 – 4.6 – 5.1 0.3 40.2 TABLE 097 2014 – 4.8 1.4 54.6 – 103.5 2015 40.2 – 1.8 11.7 – 3.7 – 7.4 – 0.5 38.5 2015 – 9.1 9.7 18.2 – 89.6 KION GROUP AG | Annual Report 2015We keep the world moving. 182 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 098 – 101 Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements TABLE 098 Potential offsetting 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 670.6 5.3 675.9 – 0.1 – – 0.1 31/12/2015 670.5 5.3 675.8 – 0.0 – 2.7 – 2.7 – – – 670.5 2.6 673.1 Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 183 Other disclosures Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements TABLE 099 Potential offsetting 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 Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements TABLE 100 Potential offsetting 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 676.5 574.7 12.4 1,263.7 – – 0.1 – – 0.1 31/12/2015 676.5 574.6 12.4 1,263.6 – – 0.0 – 2.7 – 2.7 – 279.7 – – – 279.7 396.9 574.6 9.7 981.2 KION GROUP AG | Annual Report 2015We keep the world moving. 184 Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements TABLE 101 Potential offsetting 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 Fair value measurement The fair value of receivables and liabilities from finance leases corresponds to the present value of the net lease payments, taking The majority of the cash and cash equivalents, loans, financial account of the current market interest rate for similar leases. receivables, other non-derivative receivables and liabilities, trade With the exception of derivative financial instruments, long- receivables and trade payables held by the Group have short term securities and shares in non-consolidated subsidiaries rec- remaining terms to maturity. The carrying amounts of these finan- ognised at fair value, all financial assets and liabilities are meas- cial instruments are roughly equal to their fair values. The fair ured at amortised cost. value of liabilities to banks corresponds to the present value of the The following tables show the assignment of fair values to the outstanding payments, taking account of the current interest-rate individual classification levels as defined by IFRS 7 for financial curve and the Group’s own default risk. This fair value, calculated instruments measured at fair value. > TABLES 102 – 103 for the purposes of disclosure in the notes to the financial state- ments, is classified as Level 2 of the fair value hierarchy. The fair value of the corporate bond 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. Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 185 Other disclosures Financial instruments measured at fair value TABLE 102 in € million Financial assets thereof investments in non-consolidated subsidiaries and other investments thereof non-current securities thereof derivative instruments Financial liabilities thereof derivative instruments Fair Value Hierarchy Level 1 Level 2 Level 3 0.8 5.3 19.6 11.9 0.6 2015 25.7 19.6 0.8 5.3 12.4 12.4 Financial instruments measured at fair value TABLE 103 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 KION GROUP AG | Annual Report 2015We keep the world moving. 186 Level 1 comprises long-term securities for which the fair value is The derivative financial liabilities allocated to Level 3 relate to calculated using prices quoted in an active market. a call option of Weichai Power on the 10.0 per cent of the shares All currency forwards are classified as Level 2. In the previous in Linde Hydraulics remaining as at 31 December 2015. The year, Level 2 had also included interest-rate swaps on an insignif- Black-Scholes model and probability-weighted scenario analysis icant scale. The fair value of derivative financial instruments is are used to calculate the fair value of the call option. The meas- determined using appropriate valuation methods on the basis of urement is based on the following significant, unobservable input the observable market information at the reporting date. The parameters as at 31 December 2015. An amount of €21.4 million default risk for the Group and for the counterparty is taken into has been recognised as the fair value of the underlying portion of account on the basis of gross figures. The fair value of currency the shares in Linde Hydraulics (31 December 2014: €21.4 million). forwards is calculated by the system using the discounting A base exercise price of €38.7 million (31 December 2014: method based on forward rates on the reporting date. The fair €38.7 million) and a term to maturity of 2.54 years (31 December value of interest-rate swaps is calculated as the present value of 2014: 0.49–2.99 years) have been assumed for call option 2. the estimated future cash flows. Both contractually agreed pay- In the prior year, a put option held by Linde Material Handling ments and forward interest rates are used to estimate the future GmbH, Aschaffenburg, and Weichai Power’s call option 1 on cash flows, which are then discounted on the basis of a yield some of the shares in Linde Hydraulics had also been allocated to curve that is observable in the market. Level 3. On 20 July 2015, the KION Group exercised the put The shares in non-consolidated subsidiaries allocated to option that it held via Linde Material Handling GmbH, Aschaffen- Level 3 relate to the shares in Moden Diesel S.p.A. (formerly burg, on 20.0 per cent of the shares in Linde Hydraulics. This MODEN DIESEL S.R.L.), which were acquired in October 2015, eliminated the corresponding call option 1 held by Weichai Power. and the shares in LR Intralogistik GmbH, which were acquired at The following table shows the material changes in fair value and the end of October 2015. Because the acquisitions took place the impact on the income statement. > TABLE 104 shortly before the reporting date, the purchase consideration reflects the fair value. Development of financial assets / liabilities classified as level 3 TABLE 104 in € million Value as at 01/01/ Gains recognised in net financial expenses Disposals Value as at 31/12/ Gains for the period relating to financial assets / liabilities classified as Level 3 Change in unrealised gains for the period relating to financial assets / liabilities held as at 31/12/ 2015 31.7 2.4 – 34.7 – 0.6 2.4 0.1 2014 – 11.5 43.2 – 31.7 43.2 43.2 Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 187 Other disclosures As at 31 December 2015, the fair value calculated for call option 2 on the shares in Linde Hydraulics came to minus €0.6 million (31 December 2014: net value arising from the options of €31.7 million). If the fair value of the shares had been 10.0 per cent [39] FINANCIAL RISK REPORTING lower on the reporting date, the fair value of call option 2 Capital management (31 December 2014: net value arising from the options) would have increased by €0.2 million (31 December 2014: by €5.3 mil- One of the prime objectives of capital management is to ensure lion) to minus €0.3 million (31 December 2014: €37.1 million) and liquidity at all times. Measures aimed at achieving these objec- led to an additional gain of €0.2 million (31 December 2014: gain tives include the optimisation of the capital structure, the reduc- of €5.3 million). A 10.0 per cent rise in the fair value of the shares tion of liabilities and ongoing Group cash flow planning and man- in Linde Hydraulics would have reduced the fair value of call agement. Close cooperation between local units and the Group option 2 (31 December 2014: net value arising from the options) head office ensures that the local legal and regulatory require- by minus €0.3 million (31 December 2014: by €5.6 million) to ments faced by foreign group companies are taken into account minus €0.9 million (31 December 2014: €26.2 million) and led to in capital management. an expense of €0.3 million (31 December 2014: €5.6 million). Net financial debt – defined as the difference between finan- In order to eliminate default risk to the greatest possible cial liabilities (excluding lease liabilities) and cash and cash equiv- extent, the KION Group only enters into derivatives with invest- alents – is the key performance measure used in liquidity planning ment-grade counterparties. at Group level (see note [30]) and amounted to €573.5 million at If events or changes in circumstances make it necessary to 31 December 2015 (31 December 2014: €810.7 million). reclassify financial instruments as a different level, they are reclas- The KION Group had made further improvements to its fund- sified at the end of a reporting period. As had been the case ing structure and funding conditions in 2014 by repaying two cor- in 2014, no financial instruments were transferred between Lev- porate bonds ahead of schedule. The funds used for the repay- els 1, 2 or 3 in 2015. ment mainly originated from a revolving credit facility, which has far lower interest rates than the two corporate bonds. On 15 February 2016, the KION Group redeemed the cor- porate bond of €450.0 million that was still outstanding and all other remaining liabilities under the existing syndicated loan of 23 December 2006. The restructuring of the KION Group’s fund- ing was decided upon in a resolution of the Executive Board of KION GROUP AG on 25 January 2016. The repayment resulting from this restructuring of the funding was made from funds drawn down under a new senior facilities agreement concluded on 28 October 2015 (see note [50]). KION GROUP AG | Annual Report 2015We keep the world moving.188 Credit risk The > TABLE 105 shows the age structure of receivables as at the reporting date. In certain finance and operating activities, the KION Group is sub- Impairment losses are based on the credit risk associated ject to credit risk, i.e. the risk that partners will fail to meet their with the receivables, the risk being assessed mainly using factors contractual obligations. This risk is limited by diversifying busi- such as customer credit rating and failure to adhere to payment ness partners based on certain credit ratings. The Group only 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 105 Thereof: Not impaired at the reporting date and overdue in the following timebands Thereof: Neither overdue nor impaired at the reporting date Carrying amount Thereof: Impaired at the reporting date up to and including 90 days overdue more than 90 days overdue 15.4 653.7 670.5 37.7 12.4 547.8 598.2 62.3 15.4 653.7 537.6 34.2 12.4 547.8 501.7 61.6 – – 6.1 0.5 – – 4.0 0.0 – – 117.6 3.0 – – 87.5 0.6 – – 9.1 – – – 5.0 0.0 2015 2014 in € million Financial receivables Lease receivables Trade receivables Other non-derivative receivables / assets in € million Financial receivables Lease receivables Trade receivables Other non-derivative receivables / assets Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 189 Other disclosures Liquidity risk April 2015, Moody’s upgraded its corporate family rating for the KION Group from Ba2 with a stable outlook to Ba2 with a positive Based on IFRS 7, a liquidity risk arises if an entity is unable to outlook, while Standard & Poor’s also improved its rating, from meet its financial liabilities. The KION Group maintains a liquidity BB / positive to BB + / stable. reserve in the form of lines of credit and cash in order to ensure The following tables show all of the contractually agreed pay- financial flexibility and solvency. The age structure of financial lia- ments under recognised financial liabilities as at 31 Decem- bilities is reviewed continually. The KION Group’s credit rating ber 2015 and 2014, including derivative financial instruments with maintained its positive trajectory in the year under review. In negative fair values. > TABLES 106 – 107 Liquidity analysis of financial liabilities and derivatives 2015 TABLE 106 in € million Primary financial liabilities Liabilities to banks Corporate bond Other financial liabilities to non-banks Trade payables Lease liabilities Other financial liabilities Derivative financial liabilities Derivatives with negative fair value + Cash in – Cash out Carrying amount 2015 Cash flow 2016 Cash flow 2017 – 2020 Cash flow from 2021 225.9 444.5 6.2 574.6 855.6 497.6 11.9 – 117.2 – 30.4 – 5.5 – 574.6 – 266.0 – 200.4 – 120.3 – 556.3 – 0.7 – – 625.6 – 318.8 345.7 – 352.7 60.5 – 65.5 – – – – – 30.5 – 12.6 – – KION GROUP AG | Annual Report 2015We keep the world moving. 190 Liquidity analysis of financial liabilities and derivatives 2014 TABLE 107 in € million Primary financial liabilities Liabilities to banks Corporate bond Other financial liabilities to non-banks 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 459.9 443.1 6.6 564.6 707.7 439.2 10.3 – 262.4 – 30.5 – 5.1 – 564.6 – 271.9 – 221.2 – 214.1 – 121.3 – 1.3 – – 475.9 – 239.7 – – 465.2 – 0.2 – – 20.5 – 10.2 270.2 – 280.0 4.2 – 4.2 – – The calculation of future cash flows for derivative financial liabili- with fully derecognised financial assets, primarily the provision ties includes all currency forwards that have negative fair values of limited reserves for defaults. The recognised assets that serve as at the reporting date. as reserves for defaults and are reported under other current Bank guarantee lines (e.g. sureties, performance bonds) had financial assets, stood at €1.0 million as at 31 December 2015 been issued under the ancillary facility agreements for a total (31 December 2014: €1.0 million). However, the short residual amount in the single-digit millions as at 31 December 2015 maturity of these financial assets meant their carrying amount (31 December 2014: single-digit millions). They included guaran- was almost the same as their fair value. The maximum downside tees payable ‘on first demand’. As was the case in the previous risk arising on the transferred and fully derecognised financial year, no guarantees were utilised in 2015. In some cases, the assets amounted to €5.0 million as at 31 December 2015 KION Group retains insignificant rights and duties in connection (31 December 2014: €5.0 million). Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 191 Other disclosures Default risk primarily based on fixed-interest agreements. The credit facilities provided by various banks and an effective dunning process For financial assets, default risk is defined as the risk that a coun- ensure that the Group has sufficient liquidity. terparty will default, and hence is limited to a maximum of the car- In order to exclude currency risk, the KION Group generally rying amount of the assets relating to the counterparty involved. funds its leasing business in the local currency used in each market. The potential default risk attaching to financial assets is mitigated Because of low default rates, counterparty risk has not been by secured forms of lending such as reservation of title, credit significant to date in the Group. The KION Group has not identi- insurance and guarantees, and potential netting agreements. fied any material changes between 2014 and 2015. The Group Specific valuation allowances for defaults are recognised to also mitigates any losses from defaults by its receipt of the pro- reflect the risk arising from primary financial instruments. Financial ceeds from the sale of repossessed trucks. In addition, receiva- transactions are only entered into with selected partners holding bles management has been improved by enhancing the dunning good credit ratings. Investments in interest-bearing securities are process. The credit portfolio management system was updated limited to securities with an investment-grade credit rating. during 2015. Besides the design of the business processes, it Risks arising from financial services also encompassed the risk management and control processes. Moreover, the KION Group offers the majority of financial ser- vices indirectly via selected financing partners that bear the risks of the finance transaction. As far as these financial services are The KION Group’s leasing activities mean that it may be exposed concerned, the KION Group bore the counterparty risk in under to residual value risks from the marketing of trucks that are 3 per cent of cases (2014: 5 per cent). returned by the lessee at the end of a long-term lease and subse- quently sold or re-leased. Residual values in the markets for used trucks are therefore constantly monitored and forecast. The KION Currency risk Group regularly assesses its overall risk position arising from financial services. In accordance with its treasury risk policy, the KION Group The risks identified are immediately taken into account by the hedges currency risks both locally at the level of the individual Company in the costing of new leases by recognising writedowns companies and centrally via KION Material Handling GmbH in or valuation allowances and adjusting the residual values. order to meet the prescribed minimum hedging ratios. Risk-mitigating factors include the demand for used trucks, which The main hedging instruments employed are foreign-cur- stabilises the residual values of the KION Group’s industrial rency forwards, provided that there are no country-specific trucks. The majority of the residual values have underlying remar- restrictions on their use. keting agreements that transfer any residual-value risk to the At company level, hedges are entered into for highly probable leasing company. This had a positive impact on the financial future transactions on the basis of rolling 15-month forecasts, as well results in 2015. Groupwide standards to ensure that residual val- as for firm obligations not reported in the statement of financial posi- ues are calculated conservatively, combined with an IT system for tion. In accordance with IAS 39, these hedges are generally classi- residual-value risk management, reduce risk and provide the fied as cash flow hedges for accounting purposes (see note [40]). basis on which to create the transparency required. The currency risk arising on translation of a foreign subsidiary’s The KION Group mitigates its liquidity risk and interest-rate financial statements into the Group’s reporting currency is also risk attaching to financial services by ensuring that most of its eliminated using a foreign-currency forward. In accordance with transactions and funding loans have matching maturities and by IAS 39, this hedge is classified as a net investment hedge for constantly updating its liquidity planning. Long-term leases are accounting purposes (see note [40]). KION GROUP AG | Annual Report 2015We keep the world moving.192 Foreign-currency forwards are also employed to hedge the cur- the reporting entity concerned. This means that currency risks rency risks arising in the course of internal financing. resulting from the translation of the separate financial statements The > TABLE 108 shows an overview of the foreign-currency of subsidiaries into the Group reporting currency, i.e. currency forwards entered into by the KION Group. translation risks, are not included. > TABLE 109 Significant currency risks from financial instruments are measured on the basis of value at risk (VaR). VaR figures are cal- The value at risk in respect of currency risk as at 31 December culated using a historical variance-covariance matrix. Currency 2015 was €28.8 million (31 December 2014: €19.7 million). Value risks from financial instruments as defined by IFRS 7 are only at risk is the loss that is not expected to be exceeded over a hold- included in calculating value at risk if the financial instruments are ing period of one year with a confidence level of 97.7 per cent denominated in a currency other than the functional currency of (2014: 97.7 per cent). TABLE 108 2014 44.4 213.3 204.3 70.2 TABLE 109 2014 19.7 Foreign-currency forwards Fair value Notional amount 2015 142.5 153.3 181.1 269.7 2015 28.8 in € million Foreign-currency forwards (assets) Foreign-currency forwards (liabilities) 2015 2014 Hedge Trading Hedge Trading 3.1 2.3 6.4 5.5 0.9 8.1 7.7 2.3 Value-at-Risk in € million Currency risk Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 193 Other disclosures Interest-rate risk In the previous year, interest-rate derivatives (mainly interest-rate swaps) had been used on an insignificant scale to hedge the Interest-rate risk within the KION Group is managed centrally. The interest-rate risk. The interest-rate swaps expired in 2015, which basis for decision-making includes sensitivity analyses of inter- meant the KION Group no longer had any interest-rate hedging est-rate risk positions in key currencies. instruments as at 31 December 2015. At the end of 2014, the fair The cumulative effect of a rise or fall of 100 basis points (bps) value of the interest-rate swaps was €0.2 million, while their in the relevant interest-rate curves results from floating-rate posi- notional amount totalled €11.0 million. tions and is shown in the following table: > TABLE 110 Interest-rate sensitivity TABLE 110 in € million Other comprehensive income (loss) Net income (loss) + 100 bps – 100 bps + 100 bps – 100 bps 2015 – – 0.9 2015 – 0.9 2014 – – 3.3 2014 – 3.3 [40] HEDGE ACCOUNTING Hedging currency risk On account of the short-term nature of the Group’s payment terms, reclassifications to the income statement and the recogni- tion of the corresponding cash flows generally take place in the same reporting period. A foreign-currency receivable or liability is recognised when goods are despatched or received. Until the corresponding payment is received, changes in the fair value of In accordance with its treasury risk policy, the KION Group the derivative are recognised in the income statement such that applies cash flow hedge accounting in hedging the currency they largely offset the effect of the measurement of the for- risks arising from highly probable future transactions and firm eign-currency receivable or liability at the reporting date. obligations not reported in the statement of financial position in The changes in fair value recognised and reclassified in various currencies. Foreign-currency forwards with settlement other comprehensive income in 2015 are shown in the consoli- dates in the same month as the expected cash flows from the dated statement of comprehensive income. There were no sig- Group’s operating activities are used as hedges. nificant ineffective portions in 2015, as had been the case in the The effectiveness of the Group’s hedging transactions is previous year. assessed on the basis of forward rates using the hypothetical In total, foreign-currency cash flows of €323.6 million (2014: derivative approach under the cumulative dollar-offset method. €248.7 million) were hedged and designated as hedged items, of The effective portion of the changes in the fair value of foreign- which €188.0 million is expected by 30 September 2016 (2014: currency forwards is recognised in accumulated other compre- €184.0 million by 30 September 2015). The remaining cash flows hensive income (loss) and only reversed when the correspond- designated as hedged items essentially fall due in the period up ing hedged item is recognised in income. to 31 December 2016. KION GROUP AG | Annual Report 2015We keep the world moving. 194 In addition, the KION Group hedges currency risk arising on has been included in the LMH brand segment. This change has translation of a foreign subsidiary’s financial statements into the not been reflected in the prior-year figures in the segment Group’s reporting currency using a foreign-currency forward. For reporting because it only had a minor effect on the key financials this purpose, it applies net investment hedge accounting, in for the LMH and Other segments. Egemin Automation became which only the spot rate element of the foreign-currency forward the seventh brand in the KION Group upon completion of the is designated as the hedging instrument. The effectiveness of the acquisition on 7 August 2015 and has been included in the Group’s hedging transaction is determined on the basis of for- Other segment since then. ward rates using the hypothetical derivative approach under the cumulative dollar-offset method. The effective portion of the changes in the fair value of the foreign-currency forward is recog- Description of the segments nised in accumulated other comprehensive income (loss) and is not reversed and recognised in the income statement until the The Linde Material Handling (LMH) segment encompasses the foreign operation is sold. Linde, Fenwick, Baoli and Voltas brands. The 10.0 per cent stake The spot rate element of the foreign-currency forward desig- held in Linde Hydraulics is allocated to the LMH segment and nated as the hedging instrument had a fair value of minus €4.5 mil- accounted for using the equity method. lion as at 31 December 2015 (31 December 2014: €0.0 million) The STILL segment comprises the STILL and OM STILL and, in the reporting year, resulted in an unrealised loss of €4.5 mil- brands. lion (2014: €0.0 million) that was recognised in other comprehen- FS activities include the financing of long-term leasing busi- sive income (loss). There were no ineffective portions of the net ness with external customers of the KION Group and short-term investment hedge in 2015. In 2015, an expense of €0.3 million rental business of the LMH and STILL operating segments as well (2014: €0.0 million) arising in connection with the interest element as risk management. When long-term leasing business is being of the foreign-currency forward was recognised under financial conducted, FS operates as a contractual partner to external cus- expenses. Hedging of interest-rate risk tomers and provides the necessary funding in conjunction with external financial partners. Besides management of residual - value risk, risk management also includes the management of credit risk. In addition, FS provides the financing for short-term rental fleets on behalf of the LMH and STILL brand segments, The KION Group did not have any interest-rate derivatives as at which operate and maintain such fleets as part of their opera- 31 December 2015. In the previous year, interest-rate swaps had tional business. been used on an insignificant scale to hedge the interest-rate risk. The Other segment comprises the subsidiary Egemin NV and its eight subsidiaries as well as holding companies and service companies in the KION Group. Egemin Automation is a leading logistics automation specialist. The service companies provide services for all segments in the KION Group. The bulk of the total revenue in this segment is generated by internal IT and logistics services. [41] SEGMENT REPORT The Executive Board divides the KION Group into financial ser- vices (FS) activities and the Linde Material Handling (LMH) and STILL brands for management purposes. Segment reporting follows the same breakdown, taking into account the relevant organisational structures and corporate strategy of the KION Group. Since the start of 2015, KION India Pvt. Ltd., Pune, India, Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 195 Other disclosures Segment management Assets and liabilities associated with the long-term leasing business, including related income and expenses, are assigned The KPIs used to manage the brand segments are order intake, to the FS segment. revenue and adjusted EBIT. Segment reporting therefore includes Whereas the main feature of long-term leasing business is a reconciliation of externally reported consolidated earnings the provision of a financial service for the external lessee, the before interest and tax (EBIT) – including KION acquisition items focus in short-term rental business is on the service function. and non-recurring items – to the adjusted EBIT for the segments External customers are offered rental trucks from a rental pool – (‘adjusted EBIT’). including associated services – for short-term use. Unlike the sit- Earnings before tax (EBT) and return on equity (ROE) are the uation in long-term leasing, financial performance in the short- KPIs used to manage the Financial Services segment. ROE is cal- term business is largely dependent on the achieved level of culated on the basis of average equity employed excluding net utilisation of the rental fleet, management of which lies entirely income (loss) for the current period. As at 31 December 2015, within the responsibility of the brand segments. Given this struc- ROE – earnings before tax as a percentage of average equity – ture, the assets associated with the short-term rental business was 13.1 per cent (31 December 2014: 13.0 per cent). remain on the brand segments’ statements of financial position Intra-group transactions are generally conducted on an and the related income and expenses remain on the brand seg- arm’s-length basis. The regular (interest) margin income that FS ments’ income statements. generates from its business activities reflects prevailing market In an indirect end customer finance arrangement, the other- conditions. Surpluses from leasing that exceed this interest mar- wise typical financing function of the FS segment as a lender for gin are reflected in the producer margin within the operating profit the leasing transaction no longer applies. As a result of the sale of generated by the LMH and STILL brand segments. the leased asset to the external finance provider in such transac- Segment reports are prepared in accordance with the same tions, the brand segments view the transactions in the same way accounting policies as the consolidated financial statements, as as a sale to an end-user. Consequently, these transactions and all described in note [7]. Contrary to these policies, however, the the revenue that they generate are recognised in the LMH and LMH and STILL brands’ intersegment sales to FS are always STILL brand segments. treated as revenue for the brand segments, irrespective of which entity might retain any opportunities and risks. KION GROUP AG | Annual Report 2015We keep the world moving.196 The following tables show information on the KION Group’s operating segments for 2015 and 2014: > TABLES 111 – 112 Segment report 2015 TABLE 111 in € million Revenue from external customers Intersegment revenue Total revenue Earnings before taxes Financial income Financial expenses = Net financial expenses / income EBIT + Non-recurring items + KION acquisition items = Adjusted EBIT Segment assets Segment liabilities Carrying amount of equity- accounted investments Profit from equity-accounted investments Capital expenditure ¹ Amortisation and depreciation ² Order intake Number of employees ³ LMH 3,058.1 371.7 3,429.8 345.7 12.7 – 30.4 – 17.8 363.4 – 0.3 20.8 383.9 5,120.9 1,819.7 49.9 5.9 73.6 92.8 STILL 1,569.0 381.2 1,950.2 83.7 2.0 – 35.8 – 33.8 117.5 20.3 6.2 144.0 2,296.9 1,435.4 4.2 1.8 52.4 46.2 3,516.3 14,486 1,980.0 8,103 Financial Services 417.3 322.9 740.3 5.3 65.7 – 58.6 7.1 – 1.8 0.0 0.0 – 1.8 1,603.4 1,555.9 Other 53.5 199.3 252.8 77.1 19.8 – 70.0 – 50.2 127.3 27.9 0.1 155.3 722.1 3,103.2 19.5 0.0 2.9 0.0 0.0 740.4 59 0.0 16.6 18.4 268.6 858 Consolidation / Reconciliation – – 1,275.2 – 1,275.2 – 181.5 – 48.8 50.8 2.0 – 183.5 – 15.0 – – 198.5 – 3,303.1 – 3,322.6 – – – – – 1,289.7 – Total 5,097.9 – 5,097.9 330.2 51.4 – 144.0 – 92.6 422.8 33.0 27.0 482.9 6,440.2 4,591.5 73.6 10.6 142.6 157.4 5,215.6 23,506 1 Capital expenditure including capitalised development costs, excluding leased and rental assets 2 On intangible assets and property, plant and equipment excluding leased and rental assets 3 Number of employees (full-time equivalents) as at balance sheet date 31/12/; allocation according to the contractual relationship Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 197 Other disclosures Segment report 2014 TABLE 112 in € million Revenue from external customers Intersegment revenue Total revenue Earnings before taxes Financial income Financial expenses = Net financial expenses / income EBIT + Non-recurring items + KION acquisition items = Adjusted EBIT Segment assets Segment liabilities Carrying amount of equity- accounted investments Profit / loss from equity- accounted investments Capital expenditure ¹ Amortisation and depreciation ² Order intake ³ Number of employees 4 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 3,128.4 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 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 17.5 0.0 2.7 0.0 0.0 622.7 60 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 4,771.2 22,669 1 Capital expenditure including capitalised development costs, excluding leased and rental assets 2 On intangible assets and property, plant and equipment excl. leased and rental assets 3 Prior-year figures restated to reflect the change in the order intake calculation introduced in 2015 4 Number of employees (full-time equivalents) as at balance sheet date 31/12/; allocation according to the contractual relationship KION GROUP AG | Annual Report 2015We keep the world moving.198 The following table gives a breakdown of the revenue from external customers by location: > TABLE 113 Segment revenue broken down by customer location in € million Western Europe Eastern Europe Americas Asia Rest of world TABLE 113 2014 3,411.0 403.3 245.3 470.7 147.5 2015 3,724.1 432.5 263.0 524.6 153.7 Total segment revenue 5,097.9 4,677.9 Revenue in Germany came to €1,276.3 million in 2015 (2014: assets or lease receivables, depending on the type of lease. As €1,221.8 million). There are no relationships with individual cus- at the reporting date, lease receivables due from unrelated tomers that generate revenue deemed to be significant as a pro- third parties amounted to €627.6 million (31 December 2014: portion of total consolidated revenue. €521.9 million). There were also intra-group lease receivables of Financial income and expenses including all interest income €549.2 million (31 December 2014: €473.0 million), which primar- and expenses are described in notes [12] and [13]. ily resulted from the funding of the short-term rental business of The non-recurring items mainly comprise expenses for effi- LMH and STILL. The leased assets of the Financial Services seg- ciency measures initiated under the Strategy 2020, consultancy ment amounted to €316.1 million at the reporting date (31 Decem- costs and expenses in connection with severance payments. ber 2014: €267.4 million). They totalled €33.0 million in 2015 (2014: €57.0 million). In 2015, The liabilities attributable to the Financial Services segment these items also included components of the share of profit (loss) largely comprised liabilities to leasing companies of €1,253.7 mil- of the equity-accounted Linde Hydraulics amounting to an lion (31 December 2014: €1,037.5 million) relating to sale-and- expense of €2.8 million (2014: expense of €14.7 million) and leaseback transactions that resulted from the funding of long-term income from the deconsolidation of the 20.0 per cent of the leases with external third parties and intra-group customers. In the shares in Linde Hydraulics of €2.5 million. In 2014, non-recurring reporting year, €853.1 million (2014: €702.9 million) of this amount items had also included the impairment charge recognised on was attributable to the funding of leases with external customers the equity-accounted investment in Linde Hydraulics totalling and €400.6 million (2014: €334.5 million) related to the funding of €13.5 million, which related to the LMH segment. intra-group leases with the subsidiaries in the LMH and STILL seg- The KION acquisition items relate to the acquisition of the ments as lessees that had, in turn, entered into short-term leases KION Group, which was formed at the end of 2006 when it was with external third parties. Moreover, the liabilities include net spun off from Linde AG, Munich. These items comprise net write- financial debt of €185.6 million (2014: €155.1 million) arising from downs and other expenses in relation to the hidden reserves general corporate 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 Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 199 Other disclosures Capital expenditure by the Financial Services segment includes The regional breakdown of non-current assets excluding additions to intangible assets and property, plant and equipment. financial assets, financial instruments, deferred tax assets and Leased assets are described in note [18]. > TABLE 114 post-employment benefits is shown in > TABLE 115 below. Capital expenditure in Germany came to €88.2 million in 2015 Non-current assets attributable to Germany amounted to (2014: €88.2 million). €2,606.0 million as at 31 December 2015 (31 December 2014: Depreciation/amortisation relates to intangible assets with €2,618.7 million). finite useful lives and property, plant and equipment. Capital expenditures broken down by company location (excl. leased and rental assets) TABLE 114 in € million Western Europe Eastern Europe Americas Asia Rest of world Total capital expenditures Non-current assets broken down by company location in € million Western Europe Eastern Europe Americas Asia Rest of world 2015 113.1 7.5 3.1 18.1 0.8 142.6 2015 3,432.7 129.4 48.2 178.5 50.7 2014 111.9 2.6 2.1 15.6 0.9 133.1 TABLE 115 2014 3,303.7 112.5 51.5 156.9 48.2 Total non-current assets (IFRS 8) 3,839.6 3,672.7 KION GROUP AG | Annual Report 2015We keep the world moving. 200 [42] EMPLOYEES The KION Group employed an average of 23,129 full-time equiva- lents (including trainees and apprentices) in the reporting year (2014: 22,438). The number of employees (including part-time employees expressed in terms of full-time equivalents) is broken down by region as follows: > TABLE 116 Employees (average) Germany France UK Italy Rest of Europe Asia Rest of world Total employees TABLE 116 2014 8,139 3,157 1,758 805 3,730 3,643 1,206 2015 8,395 3,181 1,782 811 3,939 3,796 1,225 23,129 22,438 The KION Group employed an average of 524 trainees and (parent) if it holds more than 50 per cent of the shares in apprentices in 2015 (2014: 536). The number of employees another entity. Significant influence generally exists if an entity increased by 323 following the acquisition of Egemin Automation. holds between 20 per cent and 50 per cent of the shares in [43] RELATED PARTY DISCLOSURES another entity. 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 2015 (see note [47]). Another related party is Weichai Power Co. Ltd., Weifang, China, which indirectly holds a 38.3 per cent stake in In addition to the subsidiaries included in the consolidated KION GROUP AG (31 December 2014: 33.3 per cent) and is thus financial statements, the KION Group has direct or indirect the largest single shareholder. Because Superlift Holding S.à r.l., business relationships with a number of non-consolidated Luxembourg, sold its entire remaining stake of 13.9 per cent of subsidiaries, joint ventures and associates in the course of its KION shares in March 2015, Superlift Holding S.à r.l., Luxem- ordinary business activities. According to IAS 24, related par- bourg, Kohlberg Kravis Roberts & Co L.P., New York, USA, and ties include entities that have control or significant influence over Goldman, Sachs & Co., New York, USA, were no longer related KION GROUP AG. An entity is usually assumed to have control parties as at 31 December 2015. Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 201 Other disclosures The revenue that the KION Group generated in 2015 and 2014 Group of €1.0 million as at 31 December 2015 (31 Decem- from selling goods and services to related parties, and vice ber 2014: €0.0 million); it has a variable interest rate. No valuation versa, is shown in > TABLES 117 – 118 along with the outstanding allowances for trade receivables had been recognised as at the receivables and liabilities. The receivables include a loan that reporting date, a situation that was unchanged on the end of 2014. the KION Group has granted to Linde Hydraulics GmbH & Co. The members of the Executive Board and Supervisory Board KG, Aschaffenburg. The original commitment was €21.0 million, of KION GROUP AG are also related parties. Details of the remu- which was reduced to €7.0 million on a pro rata basis upon neration of the Executive Board and Supervisory Board can be transfer of the 20.0 per cent of the shares in Linde Hydraulics in found in note [45]. December 2015. This resulted in a loan receivable for the KION Related party disclosures 2015 in € million Non-consolidated subsidiaries Associates (equity-accounted) Joint ventures (equity-accounted) Other related parties * Total Receivables Liabilities Sales of goods and services 24.9 19.3 1.3 4.3 49.8 13.6 8.2 53.7 0.2 75.7 19.4 152.8 48.1 12.7 232.9 * ‘Other related parties’ include, among others, transactions with Weichai Power and its affiliated companies Related party disclosures 2014 in € million Non-consolidated subsidiaries Associates (equity-accounted) Joint ventures (equity-accounted) 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 Power and its affiliated companies TABLE 117 Purchases of goods and services 34.0 126.4 57.2 12.5 230.1 TABLE 118 Purchases of goods and services 11.1 111.2 52.9 13.5 188.7 KION GROUP AG | Annual Report 2015We keep the world moving. 202 [44] VARIABLE REMUNERATION poses. Each set of three KION shares represents a block of shares. Once the three-year holding period has expired, employ- ees are entitled to one free matching share (bonus share) for each block. However, KION GROUP AG has the right to satisfy each KEEP employee share option programme programme participant’s entitlement by paying a cash settlement instead of granting a bonus share. For employees taking part for Following the introduction of the employee share option pro- the first time, the KION Group offers a special incentive in the gramme in Germany in 2014 (KEEP 2014), the Executive Board form of starter blocks. Under KEEP 2015, the KION Group will decided to launch a further share option programme for employ- bear the cost of one KION share (free share) in each of the first ees in Germany, China, the United Kingdom, France and Italy on nine blocks of shares that an employee takes up. 1 October 2015 (KEEP 2015). The period during which eligible The right to obtain a bonus share lapses if participants sell employees could take up this offer by making a declaration of their own investment in KION shares or cease to work for the acceptance ran from 2 to 31 October 2015. To be eligible to par- KION Group. The change in the number of bonus shares to be ticipate in KEEP 2015, employees needed, at the start of the offer granted is shown in > TABLE 119. phase, to have had a permanent, uninterrupted employment con- In 2015, 8,740 free shares were issued to employees as part of tract with a participating KION Group company for at least one their starter blocks (2014: 20,856 free shares). year. Currently, KION GROUP AG plus twelve German and 34 for- The free shares to be issued are measured at their fair value eign subsidiaries are taking part in KEEP. The Company is con- on the day on which employees obtain the right to acquire shares sidering whether to extend the employee share option pro- as their own investment. The fair value on the grant date is deter- gramme to other countries over the coming years. mined on the basis of Monte Carlo simulation. The measurement The KEEP programme is a share matching plan. Participating parameters used are shown in > TABLE 120. employees acquire KION shares for their own investment pur- 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 119 2014 0 29,146 – 30 29,116 2015 29,116 24,504 – 400 53,220 Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 203 Other disclosures Significant measurement parameters for the KION GROUP AG employee share option programme TABLE 120 Measurement parameters Expected dividend yield Price of the KION share as at grant date KEEP 2015 KEEP 2014 €0.88 €41.01 €0.88 €29.02 For the 2015 programme, the fair value of a bonus share was cated a total of 0.2 million virtual shares for this tranche (2014 €38.57 (2014 programme: €26.59). tranche: 0.2 million virtual shares). The allocation was based on a The fair value of the bonus shares to be granted is recognised particular percentage of each manager’s individual gross annual as an expense and paid into capital reserves over the three-year remuneration at the time of grant. At the end of the performance holding period. period, the number of the virtual shares is amended depending In 2015, an expense totalling €0.6 million was recognised on the degree to which the relevant targets are achieved. The under functional costs for free shares and bonus shares in con- resulting final number of virtual shares multiplied by the smoothed nection with the employee share option programme (2014: price of KION GROUP AG shares at the end of the performance €0.7 million). Of this amount, €0.2 million was attributable to period determines the amount of cash actually paid. The KION KEEP 2014. Group has the right to adjust the amount payable at the end of the Each year, the Executive Board of KION GROUP AG decides performance period in the event of exceptional occurrences or whether there will be an offer made under the share option pro- developments. The maximum amount payable is limited to gramme that year and which companies will participate. 200 per cent of the value of the shares allotted to an individual at KION performance share plan (PSP) for managers 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 Monte Carlo simulation. The measurement parameters shown in > TABLE 121 were used to value the virtual shares on the In March 2015, the 2015 tranche of the long-term, variable remu- reporting date. neration component (the KION Long-Term Incentive Plan for Top Taking account of the remaining term of two years (2015 Management 2015) with a defined period (three years) was intro- tranche) and one year (2014 tranche), the historic volatility of KION duced retrospectively from 1 January 2015 for the managers in shares was used to determine the volatility on which the valuation the KION Group. The remuneration component measured over is based. As at 31 December 2015, the fair value of one virtual the long term is based in equal parts on the total shareholder share was €45.41 for the 2014 tranche (31 December 2014: €27.23) return (TSR) of KION GROUP AG shares compared with the and €39.80 for the 2015 tranche. On that date, the total fair value STOXX® Europe TMI Industrial Engineering index as a measure of based on 0.2 million virtual shares was €8.6 million (2014 tranche; market performance, and with return on capital employed (ROCE) 31 December 2014: €4.9 million) and €8.2 million (2015 tranche). as an internal measure. It also depends on the performance of The total carrying amount for liabilities in connection with KION GROUP AG shares during the relevant period. share-based remuneration was €8.5 million as at 31 Decem- The performance period for the 2015 tranche ends on ber 2015 (31 December 2014: €1.6 million). Of this amount, €5.7 mil- 31 December 2017 (2014 tranche: 31 December 2016). At the lion related to the 2014 tranche (31 December 2014: €1.6 million) beginning of the performance period, the managers were allo- and €2.7 million to the 2015 tranche. In 2015, a pro-rata expense KION GROUP AG | Annual Report 2015We keep the world moving. 204 Significant measurement parameters of the PSP for Executive Employees TABLE 121 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 at valuation date Price of the STOXX® Europe TMI Industrial Engineering Index at valuation date Initial value of the KION share (60 days average) Initial value of the STOXX® Europe TMI Industrial Engineering Index (60 days average) Valuation date 31/12/2015 Tranche 2015 Tranche 2014 30.0% 20.0% – 0.36% €0.88 €43.24 €208.65 €29.06 €200.94 30.0% 20.0% – 0.39% €0.88 €43.24 €208.65 €29.49 €208.87 of €4.1 million in respect of the 2014 tranche (2014: €1.6 million) 0.2 million virtual shares; 2013 tranche: 0.3 million virtual shares) and a pro-rata expense of €2.7 million for the 2015 tranche were with a specific fair value. The shares were allocated on the basis recognised for twelve months under functional costs. of an allocation value in euros specified in each Executive Board KION performance share plan (PSP) for the Executive Board member’s service contract. At the end of the performance period, the number of the vir- tual 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 As part of the KION GROUP AG performance share plan, the shares at the end of the performance period determines the Executive Board members are allocated virtual shares over a fixed amount of cash actually paid. The Supervisory Board can also period (two-and-a-half years for the 2013 tranche and three years use a discretionary personal performance factor to adjust the final for all subsequent tranches). The remuneration component meas- payment at the end of the performance period by + / – 20 per cent. ured over the long term is based in equal parts on the total share- The maximum amount payable is limited to 200 per cent of the holder return (TSR) of KION GROUP AG shares compared with value of the shares allotted to an individual at the grant date. the STOXX® Europe TMI Industrial Engineering index as a meas- The pro-rata expense calculation based on the fair value of ure of market performance, and with return on capital employed the virtual shares on each valuation date is carried out using (ROCE) as an internal measure. It also depends on the perfor- Monte Carlo simulation. The measurement parameters shown mance of KION GROUP AG shares during the relevant period. in > TABLE 122 were used to value the virtual shares on the The performance period for the 2015 tranche ends on reporting date. 31 December 2017 (2014 tranche: 31 December 2016). The 2013 tranche expired on 31 December 2015 and will be paid out in the first quarter of 2016. At the beginning of the performance period on 1 January 2015 (2014 tranche: 1 January 2014; 2013 tranche: 29 June 2013), the Executive Board members were allocated a total of 0.2 million virtual shares for this tranche (2014 tranche: Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 205 Other disclosures Significant measurement parameters for the KION GROUP AG performance share plan TABLE 122 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 at valuation date Price of the STOXX® Europe TMI Industrial Engineering Index at valuation date Initial value of the KION share (60 days average) Initial value of the STOXX® Europe TMI Industrial Engineering Index (60 days average) Valuation date 31/12/2015 Tranche 2015 Tranche 2014 30.0% 20.0% – 0.36% €0.88 €43.24 €208.65 €29.06 €200.94 30.0% 20.0% – 0.39% €0.88 €43.24 €208.65 €29.49 €208.87 Taking account of the remaining term of two years (2015 tranche) and one year (2014 tranche), the historic volatility of KION shares was used to determine the volatility on which the valuation is based. As at 31 December 2015, the fair value of one virtual share was €43.58 for the 2014 tranche (31 December 2014: €26.79) and €39.25 for the 2015 tranche. On that date, the total fair value [45] REMUNERATION OF THE EXECUTIVE BOARD AND SUPERVISORY BOARD based on 0.2 million virtual shares was €6.6 million (2014 tranche; Executive Board 31 December 2014: €7.3 million) and €6.0 million (2015 tranche). The amount that is expected to be paid of €10.3 million for the Responsibilities 2013 tranche is calculated on the basis of a preliminary total tar- Gordon Riske is Chief Executive Officer (CEO) and his responsibil- get achievement rate and is subject to the performance-based ities include strategy/business development, corporate communi- adjustment (+ / – 20 per cent) made by the Supervisory Board for cations, corporate office, internal audit, compliance, KION Ware- individual Executive Board members. house Systems, KION synergies/platforms (until 31 July 2015), the The total carrying amount for liabilities in connection with North America region and the South America region. On 15 Jan- share-based remuneration was €17.8 million as at 31 December uary 2015, he also became CEO of both the Linde Material Han- 2015 (31 December 2014: €6.1 million). Of this amount, €10.3 mil- dling GmbH and the STILL GmbH brand companies. He also lion related to the 2013 tranche (31 December 2014: €4.4 million), assumed responsible for quality (until 31 July 2015). €5.3 million to the 2014 tranche (31 December 2014: €1.7 million) Dr Eike Böhm was appointed to the Executive Board in the and €2.2 million to the 2015 tranche. In 2015, a pro-rata expense newly created role of Chief Technology Officer (CTO) with effect of €5.7 million in respect of the 2013 tranche (2014: €3.1 million), from 1 August 2015. In this function, he holds groupwide respon- a pro-rata expense of €3.4 million for the 2014 tranche (31 Decem- sibility for research and development (R&D), product strategy, ber 2014: €1.7 million) and a pro-rata expense of €2.0 million for innovation, production system, assurance and procurement. By the 2015 tranche were recognised for twelve months under func- comprehensively restructuring R&D in this way, the KION Group tional costs. aims to harness the full potential of cross-brand synergies in product development. KION GROUP AG | Annual Report 2015We keep the world moving. 206 Bert-Jan Knoef stepped down from the Executive Board of KION Remuneration GROUP AG on 15 January 2015. He was CEO and Labour Rela- The remuneration paid to the Executive Board comprises a fixed tions Director of the brand company STILL GmbH. He oversaw all salary and non-cash benefits, pension entitlements and perfor- cross-brand logistics activities and managed the intra-group mance-related components. The variable performance-related logistics service provider, Urban. components are paid each year on the basis of the Group’s per- Theodor Maurer was CEO and Labour Relations Director of formance. In addition, there are performance-related compo- the brand company Linde Material Handling GmbH until his nents in the form of the KION performance share plan for all Exec- departure from the KION GROUP AG Executive Board on 15 Jan- utive Board members. The pension entitlements consist of uary 2015. He was also responsible for quality, facility manage- retirement, invalidity and surviving dependants’ benefits. ment and health, safety & environment (HSE). An expense of €16.7 million was recognised for the total Ching Pong Quek is Chief Asia Pacific Officer and heads up remuneration for members of the Executive Board in 2015 (2014: the KION Group’s entire Asia business. €21.0 million). This consisted of short-term remuneration amount- Dr Thomas Toepfer is Chief Financial Officer (CFO) and his ing to €4.8 million (2014: €5.7 million), post-employment benefits responsibilities include accounting, tax, financial services, corpo- totalling €0.9 million (2014: €0.9 million), termination benefits of rate finance, investor relations, M&A, controlling, HR/Labour €1.5 million (2014: €8.8 million) and share-based payments of Relations Director, legal affairs, IT, purchasing (until 31 July 2015) €9.6 million (2014: €5.6 million). The short-term remuneration and data protection. On 15 January 2015, he also assumed comprised non-performance-related components amounting to responsibility for facility management/HSE and logistics/Urban. €2.3 million (2014: €3.0 million) and performance-related compo- In November 2015, the Supervisory Board of KION GROUP AG nents amounting to €2.5 million (2014: €2.7 million). The current decided to redefine the organisational structure of the KION service cost resulting from pension provisions for the Executive Group. In future, the KION Group’s business with customers will Board is reported under post-employment benefits. The long- be organised into four operating units: Linde Material Handling term incentive components take the form of a performance share EMEA, STILL EMEA, KION APAC and KION Americas. EMEA plan (see also note [44]). In addition, one Executive Board mem- comprises the Europe, Middle East and Africa regions. APAC is ber was promised a special bonus, to be paid in two tranches, the Asia-Pacific region. The Americas region covers both North that would be awarded in the event of a successful IPO; this America and South America. The responsibilities of the members bonus was also counted as a long-term incentive in 2014. of the KION GROUP AG Executive Board changed accordingly Under section 314 HGB, disclosure of the expense for share- with effect from 1 January 2016 and are described below. based payments is not required. Rather, the payments must be Gordon Riske is responsible for the Linde Material Handling included in the Executive Board members’ remuneration for the EMEA, STILL EMEA and KION Americas operating units and for year in which they are paid on the basis of the fair value at the indi- the independent brand Egemin Automation. He also remains in vidual grant dates. The fair value of the share-based payments at charge of the following group functions: communications, the their individual grant dates amounted to €4.6 million (2014: corporate office and compliance, internal audit and strategy & €5.6 million). Furthermore, disclosure of post-employment bene- business development. fits (expense of €0.9 million; 2014: expense of €0.9 million) and of Product strategy, R&D, innovation, production system, quality termination benefits (expense of €1.5 million; 2014: expense of assurance and procurement have now been brought together in €8.8 million) is not required. In 2014, differences between variable the newly created CTO organisation headed by Chief Technology remuneration calculated on the basis of preliminary total target Officer Dr Eike Böhm. achievement (benefits granted) and the one-year variable remu- Ching Pong Quek is head of the KION APAC operating unit. neration actually paid in the next year on the basis of the indi- Dr Thomas Toepfer continues to be in charge of accounting, vidual performance of each Executive Board member, which financial services, corporate finance, investor relations, M&A, amounted to an expense of €0.3 million (allocation), were also not controlling, HR, IT and legal affairs. disclosed. On this basis, the total remuneration of the members Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 207 Other disclosures of the Executive Board pursuant to section 314 HGB came to Supervisory Board €9.4 million (2014: €10.9 million). As in the previous year, no loans or advances were made to The total remuneration paid to the members of the Supervisory members of the Executive Board in 2015. The present value of the Board for the performance of their tasks at the parent company defined benefit obligation in respect of Executive Board members and subsidiaries in 2015 amounted to €1.2 million (2014: €1.2 mil- as at 31 December 2015 was €6.1 million (31 December 2014: lion). There were no loans or advances to members of the Super- €8.1 million). visory Board in 2015. Furthermore, the members of the Supervi- The total remuneration paid to former members of the Exec- sory Board did not receive any remuneration or benefits for utive Board in 2015 amounted to €0.2 million (2014: €0.2 million). services provided as individuals, such as consulting or brokerage Defined benefit obligations to former members of the Executive activities. Board or their surviving dependants amounting to €8.8 million Members of the Supervisory Board also received short-term (2014: €6.1 million) were recognised in accordance with IAS 19. employee benefits of €0.8 million for employee services (2014: Further details of Executive Board remuneration, including €0.7 million). the individual amounts for each member, can be found in the remuneration report on pages 38 to 50 of this annual report. KION GROUP AG | Annual Report 2015We keep the world moving.208 [46] MEMBERS OF THE EXECUTIVE BOARD AND SUPERVISORY BOARD Executive Board Gordon Riske Chief Executive Officer Member of the Board of Directors of KION North America Corp., Summerville, USA (until 14 January 2015) Member of the Board of Directors of Linde (China) Forklift Truck Co. Ltd., Xiamen, People’s Republic of China (until 14 January 2015) Member of the Supervisory Board of Schöler Fördertechnik AG, Rheinfelden (until 14 January 2015) Ching Pong Quek Member of the Executive Board / Chief Asia Pacific Officer Chairman of the Supervisory Board of Linde Material Member of the Board of KION South Asia Pte Ltd., Singapore, Handling GmbH, Aschaffenburg (until 14 January 2015) Singapore Chairman of the Board of Directors of Linde (China) President and CEO of KION Asia Ltd., Hong Kong, Forklift Truck Co., Ltd., Xiamen, People’s Republic of China People’s Republic of China Chairman of the Supervisory Board of STILL GmbH, Hamburg Chairman of KION Baoli Forklift Co., Ltd., Jiangsu, (until 14 January 2015) People’s Republic of China Chairman of the Board of Directors of Egemin NV, Zwijndrecht, Member of the Board of Directors of KION India Pvte. Ltd., Belgium (since 22 September 2015) Pune, India Non-Executive Director of Weichai Power Co., Ltd., Member of the Board of Directors of Linde Material Weifang, People’s Republic of China Handling Asia Pacific Pte., Ltd., Singapore, Singapore Dr Eike Böhm Chairman of the Board of Directors of Linde Material Handling Hong Kong Ltd., Hong Kong, Member of the Executive Board / CTO People’s Republic of China (since 1 August 2015) Dr Thomas Toepfer Member of the Supervisory Board of e.GO Mobile AG, Aachen Member of the Executive Board / CFO (since 3 December 2015) Bert-Jan Knoef Member of the Executive Board (until 14 January 2015) Theodor Maurer Member of the Executive Board (until 14 January 2015) Member of the Supervisory Board of STILL GmbH, Hamburg (until 14 January 2015) Chairman of the Supervisory Board of STILL GmbH, Hamburg (since 15 January 2015) Member of the Supervisory Board of Linde Material Handling GmbH, Aschaffenburg (until 14 January 2015) Chairman of the Supervisory Board of Linde Material Handling GmbH, Aschaffenburg (since 15 January 2015) Chairman of the Board of Directors of KION North Chairman of the Board of Directors of Linde Material America Corp., Summerville, USA Handling (UK) Ltd., Basingstoke, United Kingdom Member of the Board of Directors of Superlift UK Ltd., (until 14 January 2015) Basingstoke, United Kingdom Chairman of the Board of Directors of Linde Heavy Truck Divi- sion Ltd., Merthyr Tydfil, United Kingdom (until 14 January 2015) Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 209 Other disclosures Supervisory Board Dr Alexander Dibelius Dr John Feldmann Managing Partner at CVC Capital Partners (Deutschland) Chairman of the Supervisory Board GmbH, Frankfurt am Main (since 1 September 2015) Member of the European Management Committee of Goldman Former member of the Board of Executive Directors of BASF SE, Sachs International, London, United Kingdom (until 30 June 2015) Ludwigshafen Member of the Board of Directors of OOO Goldman Sachs, Member of the Supervisory Board of Bilfinger SE, Mannheim Moscow, Russia (until 30 June 2015) Member of the Supervisory Board of HORNBACH Baumarkt AG, Member of the Board of Directors of OOO Goldman Sachs Bornheim Bank, Moscow, Russia (until 30 June 2015) Member of the Supervisory Board of HORNBACH Holding AG & Member of the Shareholder Committee of Xella Co. KGaA, Neustadt (until 9 October 2015: International S.à r.l., Luxembourg (until 30 June 2015) HORNBACH HOLDING AG) Chairman of the Supervisory Board of Wincor Nixdorf AG, Member of the Supervisory Board of HORNBACH Management Paderborn (until 30 June 2015) AG, Annweiler am Trifels (since 9 October 2015) Member of the Supervisory Board of Wincor Nixdorf Interna- Özcan Pancarci 1 Deputy Chairman of the Supervisory Board (since 1 January 2016) Wolfgang Faden (since 1 August 2015) tional GmbH, Paderborn (until 30 June 2015) Former Managing Director for Germany and Central Europe at Chairman of the Plants I & II Works Council of Linde Material Allianz Global Corporate & Specialty AG, Munich Handling GmbH, Aschaffenburg Member of the Supervisory Board of Albatros Chairman of the Group Works Council of the KION Group Versicherungsdienste GmbH, Cologne Deputy Chairman of the Supervisory Board of Linde Material Handling GmbH, Aschaffenburg (since 1 January 2016) Denis Heljic 1 Joachim Hartig 1 Spokesperson for the STILL branches, Chairman of the European Works Council and Deputy Chairman of the Works Council Deputy Chairman of the Supervisory Board of STILL GmbH, Dortmund plant (until 31 December 2015) Head of Learning and Development at Linde Material Johannes P. Huth (until 31 July 2015) Handling GmbH, Aschaffenburg Partner at and member of the Executive Committee of Kohlberg Deputy Chairman of the Supervisory Board of Kravis Roberts & Co. Partners LLP, London, United Kingdom Linde Material Handling GmbH, Aschaffenburg Member of the Supervisory Board of Cognita Schools, Milton (until 31 December 2015) Keynes, United Kingdom Member of the Supervisory Board of German Estate Group AG Birgit A. Behrendt (GEG), Frankfurt am Main Vice President and Corporate Officer, Global Programs Deputy Chairman of the Supervisory Board of NXP BV, and Purchasing Operations at the Ford Motor Company, Eindhoven, Netherlands Dearborn, Michigan, USA Member of the Board of Directors of SoftwareOne AG, Holger Brandt 2 Chairman of the Supervisory Board of WMF AG, Head of Sales Germany at STILL GmbH, Hamburg Geislingen an der Steige Member of the Supervisory Board of STILL GmbH, Hamburg Wallisellen, Switzerland KION GROUP AG | Annual Report 2015We keep the world moving.210 Jiang Kui Alexandra Schädler 1 President and Director of Shandong Heavy Industry Trade Union Secretary on the National Executive of IG Metall, Group Co., Ltd., Jinan, People’s Republic of China Frankfurt am Main Member of the Board of Directors of Ferretti International Member of the Supervisory Board of Fujitsu Technology Holding S.p.A., Milan, Italy Solutions GmbH, Munich Member of the Executive Board of Hydraulics Drive Technology Beteiligungs GmbH, Aschaffenburg Tan Xuguang Member of the Supervisory Board of Linde Hydraulics Chairman of the Board of Directors of Shandong Heavy Industry Verwaltungs GmbH, Aschaffenburg Group Co., Ltd., Jinan, People’s Republic of China Director of Shandong Heavy Industry India Chairman of the Board of Directors of Ferretti International Private Ltd., Pune, India Holding S.p.A., Milan, Italy Olaf Kunz 1 Chairman of the Board of Directors of Ferretti S.p.A., Forli, Italy Chairman of the Board of Directors of Weichai Group Holding Co., District Secretary / Lawyer at IG Metall, District Office Ltd., Weifang, People’s Republic of China for the Coast, Hamburg Chairman of the Board of Directors and Chief Executive Officer Member of the Supervisory Board of STILL GmbH, Hamburg of Weichai Power Co. Ltd., Weifang, Jörg Milla 1 (since 16 November 2015) Chairman of the Works Council of STILL GmbH, Hamburg Hans-Peter Weiß1 (until 15 November 2015) People’s Republic of China Kay Pietsch 1 Chairman of the Plant III Works Council of Linde Material Handling GmbH, Kahl a. Main Member of the Works Council of STILL GmbH, Hamburg Deputy Chairman of the Supervisory Board of STILL GmbH, Xu Ping Hamburg Hans Peter Ring Management Consultant, Munich Partner and Member of the Management Committee at King & Wood Mallesons, Beijing, People’s Republic of China Member of the Board of Directors of Ferretti S.p.A., Forli, Italy Member of the Supervisory Board of Airbus Defense und Space GmbH, Ottobrunn Member of the Supervisory Board of Bilfinger SE, Mannheim 1 Employee representatives 2 Executive representatives (since 7 May 2015) Member of the Supervisory Board of Elbe Flugzeugwerke GmbH, Dresden Member of the Supervisory Board of Fokker Technologies Holding B.V., Papendrecht, Netherlands Member of the Supervisory Board of MAG IAS GmbH, Göppingen (until 5 June 2015) Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 211 Other disclosures [47] LIST OF THE SHAREHOLDINGS OF KION GROUP AG, WIESBADEN The shareholdings of the KION Group as at 31 December 2015 are listed below. > TABLE 123 List of shareholdings as of 31 December 2015 (continued) TABLE 123 No. Name Registered office Country Parent company Share- holding 2015 Share- holding 2014 Note 1 KION GROUP AG Wiesbaden Germany Consolidated subsidiaries Domestic 2 BlackForxx GmbH 3 Egemin GmbH 4 Eisenwerk Weilbach GmbH 5 Fahrzeugbau GmbH Geisa 6 KION Financial Services GmbH 7 KION Holding 2 GmbH Stuhr Bremen Wiesbaden Geisa Wiesbaden Wiesbaden 8 KION Information Management Services GmbH Wiesbaden 9 KION Material Handling GmbH 10 KION Warehouse Systems GmbH Wiesbaden Reutlingen 11 Klaus Pahlke GmbH & Co. Fördertechnik KG Haan Germany Germany Germany Germany Germany Germany Germany Germany Germany Germany 12 Linde Material Handling GmbH Aschaffenburg Germany 19 100.00% 100.00% 25 100.00% – [1] 12 100.00% 100.00% 19 100.00% 100.00% 12 100.00% 100.00% 1 100.00% 100.00% 9 100.00% 100.00% 7 100.00% 100.00% 19 100.00% 100.00% 12 100.00% 100.00% 9 100.00% 100.00% 13 LMH Immobilien GmbH & Co. KG Aschaffenburg Germany 12 & 14 99.64% 99.64% 14 LMH Immobilien Holding GmbH & Co. KG Aschaffenburg Germany 15 LMH Immobilien Holding Verwaltungs-GmbH Aschaffenburg Germany 16 LMH Immobilien Verwaltungs-GmbH Aschaffenburg Germany 17 Schrader Industriefahrzeuge GmbH & Co. KG Essen 18 STILL Financial Services GmbH Hamburg 19 STILL Gesellschaft mit beschränkter Haftung Hamburg Germany Germany Germany 12 94.00% 94.00% 12 100.00% 100.00% 12 100.00% 100.00% 12 100.00% 100.00% 6 100.00% 100.00% 12 100.00% 100.00% 20 Urban-Transporte Gesellschaft mit beschränkter Unterschleißheim Germany 12 100.00% 100.00% Haftung 21 Willenbrock Fördertechnik GmbH & Co. KG Bremen 22 Willenbrock Fördertechnik GmbH & Co. KG Hannover 23 Willenbrock Fördertechnik Holding GmbH Bremen Germany Germany Germany 23 23 12 74.00% 74.00% 74.00% 74.00% 74.00% 74.00% KION GROUP AG | Annual Report 2015We keep the world moving.212 List of shareholdings as of 31 December 2015 (continued) TABLE 123 No. Name Foreign Registered office Country Parent company Share- holding 2015 Share- holding 2014 Note 24 Linde Material Handling Pty. Ltd. Huntingwood Australia 12 100.00% 100.00% 25 Egemin NV 26 STILL NV 27 KION South America Fabricação de Equipamentos para Armazenagem Ltda. 28 STILL DANMARK A/S 29 BARTHELEMY MANUTENTION SAS 30 Bastide Manutention SAS 31 Bretagne Manutention S.A. 32 Egemin SAS 33 FENWICK FINANCIAL SERVICES SAS 34 FENWICK-LINDE S.A.R.L. 35 KION France SERVICES SAS Zwijndrecht Wijnegem Indaiatuba / São Paulo Kolding Vitrolles Bruguières Pacé Heillecourt Elancourt Elancourt Elancourt Belgium Belgium Brazil Denmark France France France France France France France 36 LOIRE OCEAN MANUTENTION SAS Saint-Herblain France 39 Société Angoumoisine de Manutention (SAMA) Champniers 37 Manuchar S.A. 38 MANUSOM SAS SAS 40 SM Rental SAS 41 STILL Location Services SAS 42 STILL SAS 43 Egemin UK Ltd. 44 KION FINANCIAL SERVICES Ltd. 45 Linde Castle Ltd. 46 Linde Creighton Ltd. 47 Linde Holdings Ltd. 48 Linde Jewsbury’s Ltd. 49 Linde Material Handling (UK) Ltd. 50 Linde Material Handling East Ltd. 51 Linde Material Handling Scotland Ltd. 52 Linde Material Handling South East Ltd. 53 Linde Severnside Ltd. 54 Linde Sterling Ltd. Moving Forward Innovation Gond Pontouvre France Rivery France France France Roissy Charles de Gaulle Marne-la-Vallée France Marne-la-Vallée France Huntingdon 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. 9 100.00% – [1] 19 & 68 100.00% 100.00% 19 100.00% 100.00% 19 100.00% 100.00% 34 83.50% 87.00% 34 100.00% 100.00% 34 100.00% 100.00% 25 100.00% – [1] 35 100.00% 100.00% 35 & 12 100.00% 100.00% 12 100.00% 100.00% 34 79.99% 83.43% 34 100.00% 100.00% 42 100.00% 100.00% 42 100.00% 100.00% 34 100.00% 100.00% 35 100.00% 100.00% 35 100.00% 100.00% 25 100.00% – [1] 56 100.00% 100.00% 49 100.00% 100.00% 49 100.00% 100.00% 56 100.00% 100.00% 49 100.00% 100.00% 47 100.00% 100.00% 49 100.00% 100.00% 49 100.00% 100.00% 49 100.00% 100.00% 49 100.00% 100.00% 49 100.00% 100.00% KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 213 Other disclosures List of shareholdings as of 31 December 2015 (continued) TABLE 123 No. Name 55 STILL Materials Handling Ltd. 56 Superlift UK Ltd. Registered office Exeter Basingstoke Country U.K. U.K. Parent company Share- holding 2015 Share- holding 2014 Note 56 100.00% 100.00% 12 100.00% 100.00% 57 Egemin Asia Pacific Automation Ltd. Causeway Bay Hong Kong 25 100.00% – [1] 58 KION ASIA (HONG KONG) Ltd. Kwai Chung Hong Kong 12 100.00% 100.00% 59 Linde Material Handling Hong Kong Ltd. Kwai Chung Hong Kong 12 100.00% 100.00% 60 KION India Pvt. Ltd. Pune India 61 Linde Material Handling (Ireland) Ltd. Walkinstown Ireland 62 KION Rental Services S.p.A. 63 Linde Material Handling Italia S.p.A. 64 OM Carrelli Elevatori S.p.A. 65 STILL ITALIA S.p.A. 66 KION Finance S.A. Milan Buguggiate Lainate Lainate Italy Italy Italy Italy Luxembourg Luxembourg 67 Egemin Handling Automation B.V. Gorinchem Netherlands 82 100.00% 100.00% 47 100.00% 100.00% 63 & 64 & 65 100.00% 100.00% 12 100.00% 100.00% 12 & 65 100.00% 100.00% 19 100.00% 100.00% – – 25 100.00% – – [2] [1] 68 STILL Intern Transport B.V. 69 AUSTRO OM PIMESPO Fördertechnik GmbH 70 Linde Fördertechnik GmbH Hendrik Ido Ambacht Linz Linz Netherlands 19 100.00% 100.00% Austria Austria 64 100.00% 100.00% 12 & 69 100.00% 100.00% 71 STILL Gesellschaft m.b.H. Wiener Neudorf Austria 72 Linde Material Handling Polska Sp. z o.o. 73 STILL POLSKA Sp. z o.o. 74 OOO “Linde Material Handling Rus” 75 OOO “STILL Forklifttrucks” 76 STILL MOTOSTIVUITOARE S.R.L. 77 Linde Material Handling AB 78 STILL Sverige AB 79 Linde Material Handling Schweiz AG 80 STILL AG 81 KION South Asia Pte. Ltd. Warsaw Gadki Moscow Moscow Giurgiu Örebro Malmö Dietlikon Otelfingen Singapore 82 Linde Material Handling Asia Pacific Pte. Ltd. Singapore 83 Linde Material Handling Slovenská republika s.r.o. Trenčin 84 STILL SR, spol. s r.o. 85 Linde Viličar d.o.o. 86 Islavista Spain S.A.U. Nitra Celje L’Hospitalet de Llobregat Poland Poland Russia Russia Romania Sweden Sweden Switzerland Switzerland Singapore Singapore Slovakia Slovakia Slovenia Spain 19 100.00% 100.00% 12 100.00% 100.00% 19 100.00% 100.00% 12 & 4 100.00% 100.00% 12 & 19 100.00% 100.00% 12 & 19 100.00% 100.00% 12 100.00% 100.00% 19 100.00% 100.00% 12 100.00% 100.00% 19 100.00% 100.00% 12 100.00% 100.00% 12 100.00% 100.00% 12 & 92 100.00% 100.00% 19 & 94 100.00% 100.00% 12 100.00% 100.00% 12 100.00% 100.00% 87 KION Rental Services S.A.U. Barcelona Spain 86 100.00% 100.00% KION GROUP AG | Annual Report 2015We keep the world moving.214 List of shareholdings as of 31 December 2015 (continued) TABLE 123 No. Name 88 Linde Holding de Inversiones, S.R.L. 89 Linde Material Handling Ibérica, S.A.U. 90 STILL, S.A.U. Registered office Pallejá Pallejá L’Hospitalet de Llobregat Country Spain Spain Spain Parent company Share- holding 2015 Share- holding 2014 Note 86 100.00% 100.00% 88 100.00% 100.00% 86 100.00% 100.00% 91 Linde Material Handling (Pty) Ltd. Linbro Park South Africa 12 100.00% 100.00% 92 Linde Material Handling Česká republika s r.o. Prague Czech Republic 12 & 19 100.00% 100.00% 93 Linde Pohony s r.o. 94 STILL ČR spol. s r.o. Český Krumlov Czech Republic 12 100.00% 100.00% Prague Czech Republic 12 & 19 100.00% 100.00% 95 STILL ARSER Iş Makineleri Servis ve Ticaret A.Ş. Izmir Turkey 19 51.00% 51.00% 96 Linde Magyarország Anyagmozgatási Kft. Dunaharaszti Hungary 12 100.00% 100.00% 97 STILL Kft. 98 Egemin Automation Inc. 99 Egemin Group, Inc. Környe Holland Hungary United States Bingham Farms United States 19 100.00% 100.00% 99 100.00% 25 100.00% – – 100 KION North America Corp. Summerville United States 12 100.00% 100.00% 101 Egemin (Shanghai) Trading Company Ltd. Shanghai 102 KION Baoli (Jiangsu) Forklift Co., Ltd. Jiangjiang 103 Linde (China) Forklift Truck Corporation Ltd. Xiamen People’s Republic of China People’s Republic of China People’s Republic of China 57 100.00% – 58 100.00% 100.00% 12 100.00% 100.00% Non-consolidated subsidiaries Domestic 104 Klaus Pahlke Betriebsführungs-GmbH Haan Germany 12 100.00% 100.00% Wörth a. d. Isar Germany 19 100.00% – 105 LR Intralogistik GmbH 106 OM Deutschland GmbH Neuhausen a. d. Fildern Germany [1] [1] [1] [1] [R] 107 proplan Transport- und Lagersysteme GmbH Aschaffenburg Germany 108 Schrader Industriefahrzeuge Verwaltung GmbH Essen 109 Trainingscenter für Sicherheit und Bremen Transport GmbH 110 Willenbrock Fördertechnik Beteiligungs-GmbH Bremen 111 Willenbrock Fördertechnik Beteiligungs-GmbH Hannover Germany Germany Germany Germany Moving Forward Innovation 64 100.00% 100.00% 1 100.00% 100.00% 12 100.00% 100.00% 23 74.00% 74.00% 23 23 74.00% 74.00% 74.00% 74.00% KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 215 Other disclosures List of shareholdings as of 31 December 2015 (continued) TABLE 123 No. Name Foreign Registered office Country Parent company Share- holding 2015 Share- holding 2014 Note 112 Lansing Bagnall (Aust.) Pty. Ltd. Huntingwood Australia 49 & 12 100.00% 100.00% [R] Elancourt France Marne-la-Vallée France 35 100.00% 100.00% 64 100.00% 100.00% [R] 113 Baoli France SAS 114 OM PIMESPO FRANCE SAS 115 SCI Champ Lagarde 116 URBAN LOGISTIQUE SAS 117 Castle Lift Trucks Ltd. 118 Creighton Materials Handling Ltd. 119 D.B.S. Brand Factors Ltd. 120 Fork Truck Rentals Ltd. 121 Fork Truck Training Ltd. 122 Lancashire (Fork Truck) Services Ltd. 123 Linde Heavy Truck Division Ltd. 124 McLEMAN FORK LIFT SERVICES LTD. 125 Stephensons Enterprise Fork Trucks Ltd. 126 Sterling Mechanical Handling Ltd. 127 Trifik Services Ltd. 128 Urban Logistics (UK) Ltd. Elancourt Elancourt Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke Basingstoke 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. 129 Handling & Storage Equipment (Ireland) Ltd. Walkinstown Ireland 130 Carest SRL 131 COMMERCIALE CARRELLI S.r.l. 132 Moden Diesel S.p.A. 133 QUALIFT S.p.A. 134 URBAN LOGISTICA S.R.L. 135 WHO Real Estate UAB 136 TOO “Linde Material Handling Kazakhstan” Lainate Lainate Modena Verona Lainate Vilnius Almaty Italy Italy Italy Italy Italy Lithuania Kazakhstan 34 100.00% 100.00% 20 100.00% 100.00% 49 100.00% 100.00% 49 100.00% 100.00% 54 100.00% 100.00% 49 100.00% 100.00% 49 100.00% 100.00% 54 100.00% 100.00% 49 100.00% 100.00% 46 100.00% 100.00% 54 100.00% 100.00% 49 100.00% 100.00% 49 100.00% 100.00% 20 100.00% 100.00% 61 100.00% 100.00% 64 100.00% 100.00% 65 & 62 100.00% 100.00% 63 100.00% – 63 100.00% 100.00% 20 100.00% 100.00% 23 74.00% 74.00% 12 & 4 100.00% 100.00% [R] [R] [R] [R] [R] [R] [R] [R] [R] [R] [R] [R] [1] 137 Linde Material Handling (Malaysia) Sdn. Bhd. Petaling Jaya Malaysia 82 100.00% 100.00% 138 IBER-MICAR S.L. 139 Linde Viljuškari d.o.o. Gavà Vrčin Spain Serbia 140 Linde Material Handling (Thailand) Co., Ltd. Pathum Thani Thailand 12 100.00% 100.00% 70 100.00% 100.00% 82 100.00% 100.00% 141 Baoli Material Handling Europe s.r.o. Prague Czech Republic 102 100.00% 100.00% 142 Linde Material Handling Parts Distribution CZ Český Krumlov Czech Republic 12 100.00% – [1] s.r.o. 143 Použitý Vozík CZ, s.r.o. Prague Czech Republic 92 100.00% 100.00% 144 Urban Transporte spol. s.r.o. Moravany u Brna Czech Republic 20 100.00% 100.00% KION GROUP AG | Annual Report 2015We keep the world moving.216 List of shareholdings as of 31 December 2015 (continued) TABLE 123 No. Name Registered office 145 TOV “Linde Material Handling Ukraine” Kiev Country Ukraine Parent company Share- holding 2015 Share- holding 2014 Note 12 & 4 100.00% 100.00% Associates (equity-accounted investments) Domestic 146 Carl Beutlhauser Kommunal- und Fördertechnik Hagelstadt Germany 12 25.00% 25.00% GmbH & Co. KG (formerly: Beutlhauser-Basse- witz GmbH & Co. KG) 147 Hans Joachim Jetschke Industriefahrzeuge Hamburg Germany 12 21.00% 21.00% (GmbH & Co.) KG 148 Linde Hydraulics GmbH & Co. KG Aschaffenburg Germany 149 Pelzer Fördertechnik GmbH Kerpen Germany Foreign 150 Linde High Lift Chile S.A. 151 Labrosse Equipement S.A. 152 Normandie Manutention S.A. Santiago de Chile Chile Saint-Péray Saint-Etienne du Rouvray France France 12 12 12 34 34 10.00% 30.00% 24.96% 24.96% 45.00% 45.00% 34.00% 34.00% 34.00% 34.00% Joint ventures (equity-accounted investments) Domestic 153 Linde Leasing GmbH Wiesbaden Germany 12 45.00% 45.00% Foreign 154 JULI Motorenwerk s.r.o. Moravany u Brna Czech Republic 12 & 19 50.00% 50.00% Joint ventures (at cost) Domestic 155 Eisengießerei Dinklage GmbH Dinklage Germany 19 50.00% 50.00% Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 217 Other disclosures List of shareholdings as of 31 December 2015 (continued) TABLE 123 Registered office Country Parent company Share- holding 2015 Share- holding 2014 Note No. Name Associates (at cost) Domestic 156 JETSCHKE GmbH Hamburg Germany 157 Linde Hydraulics Verwaltungs GmbH Aschaffenburg Germany 158 MV Fördertechnik GmbH Blankenhain Germany 159 Supralift Beteiligungs- und Kommunikations- gesellschaft mbH 160 Supralift GmbH & Co. KG Hofheim am Taunus Hofheim am Taunus Germany 12 12 12 12 21.00% 21.00% 10.00% 30.00% 25.00% 25.00% 50.00% 50.00% Germany 12 50.00% 50.00% Foreign 161 Chadwick Materials Handling Ltd. 162 Bari Servizi Industriali S.C.A R.L. 163 Nordtruck AB Corsham Modugno U.K. Italy Örnsköldsvik Sweden 164 Carretillas Elevadoras Sudeste S.A. Murcia Spain 165 Motorové závody JULI CZ s r.o. Moravany u Brna Czech Republic Financial investments (at cost) Foreign 166 TPZ Linde Viličari Hrvatska d.o.o. Zagreb Croatia 167 Balyo SA Moissy-Cramayel France [1] New during 2015 [2] Consolidated in accordance with IFRS 10 due to contractual rights that give the ability to direct the relevant activities [3] No material influence [R] Dormant company 49 64 77 89 12 12 12 48.00% 48.00% 25.00% 25.00% 25.00% 25.00% 38.54% 38.54% 50.00% 50.00% 20.00% 20.00% [3] 10.00% – [1], [3] KION GROUP AG | Annual Report 2015We keep the world moving.218 [48] AUDITORS’ FEES 23 December 2006 comprising a revolving credit facility of €1,243.0 million and the KION Group corporate bond of €450.0 mil- lion that was issued in 2013 and was due to mature in 2020. The associated repayment was made on 15 February 2016 using The fees recognised as an expense and paid to the auditors of funds drawn down under the new senior facilities agreement. the consolidated financial statements in 2015 amounted to An amount of €5.4 million representing the proportion of the €1.1 million (2014: €1.0 million) for the audit of the financial state- deferred borrowing costs relating to the corporate bond at the ments, €0.6 million (2014: €0.4 million) for other attestation ser- time of early repayment and a cash payment of €15.2 million repre- vices, €0.0 million (2014: €0.1 million) for tax consultancy services senting early repayment charges were recognised as financial and €0.8 million (2014: €0.1 million) for other services. expenses in February 2016 along with an amount of €5.1 million [49] COMPLY-OR-EXPLAIN STATEMENT REGARDING THE GERMAN COR- PORATE GOVERNANCE CODE (DCGK) representing the proportion of the deferred borrowing costs relat- ing to the previous syndicated loan at the time of early redemption of that previous syndicated loan. The new senior facilities agreement comprises a revolving credit facility of €1,150.0 million maturing in February 2021 and a fixed-term tranche B of €350.0 million maturing in February 2019. KION GROUP AG has issued guarantees to the banks for all of the payment obligations under the new senior facilities agreement. Unlike the previous syndicated loan and the repaid corporate bond, In December 2015, the Executive Board and Supervisory Board the new syndicated loan agreement is not collateralised. Following of KION GROUP AG submitted their comply-or-explain statement repayment after the reporting date of the syndicated loan from for 2015 relating to the recommendations of the German Corpo- 23 December 2006, all collateral furnished under the previous loan rate Governance Code government commission pursuant to sec- agreement has now been released. tion 161 AktG. The comply-or-explain statement is permanently Among other stipulations, the contractual terms of the senior available for shareholders on the website of KION GROUP AG at facilities agreement require compliance with certain covenants. kiongroup.com/comply_statement. They also contain a financial covenant that requires adherence [50] EVENTS AFTER THE REPORTING DATE to a maximum level of gearing (the ratio of financial liabilities to EBITDA). Non-compliance with the covenants may, for example, give lenders the right to terminate the new syndicated loan agreement. The KION Group took over Retrotech Inc., a systems integra- tor of automated warehouse and distribution solutions headquar- tered in Rochester, New York State, with effect from 1 March 2016 Due to current market conditions and the KION Group’s significant by acquiring 100.0 per cent of the capital and voting shares. The repayment of debt as a result of and since its IPO, the KION Group provisional purchase price for the net assets acquired is around can currently obtain finance on far more favourable terms than has €26.0 million. In 2015, Retrotech Inc. employed over 150 highly been possible in the past. KION GROUP AG therefore signed a specialised employees and generated revenue of roughly new syndicated loan agreement (senior facilities agreement) totalling €62.0 million. €1,500.0 million with a syndicate of international banks on 28 Octo- ber 2015. On 25 January 2016, the Executive Board of KION GROUP AG decided to implement the new funding structure of the KION Group by redeeming the existing syndicated loan dated Moving Forward Innovation KION GROUP AG | Annual Report 2015NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 219 Other disclosures [51] INFORMATION ON PREPARATION AND APPROVAL The Executive Board of KION GROUP AG prepared the consoli- dated financial statements on 9 March 2016 and approved them for forwarding to the Supervisory Board. The Supervisory Board has the task of examining and deciding whether to approve the consolidated financial statements. Wiesbaden, 9 March 2016 The Executive Board Gordon Riske Dr Eike Böhm Ching Pong Quek Dr Thomas Toepfer KION GROUP AG | Annual Report 2015We keep the world moving.220 Auditors’ report 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 2015. 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, 9 March 2016 on our audit. We conducted our audit of the consolidated financial statements Wirtschaftsprüfungsgesellschaft Deloitte & Touche GmbH in accordance with Sec. 317 German Commercial Code (HGB) 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. Moving Forward Innovation KION GROUP AG | Annual Report 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 221 Auditors’ report Responsibility statement Responsibility statement To the best of our knowledge, and in accordance with the appli- cable 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 develop- ment of the Group. Wiesbaden, 9 March 2016 The Executive Board Gordon Riske Dr Eike Böhm Ching Pong Quek Dr Thomas Toepfer KION GROUP AG | Annual Report 2015We keep the world moving.ADDITIONAL INFORMATION Contents 223 Additional Information 224 QUARTERLY INFORMATION 225 MULTI-YEAR OVERVIEW 226 DISCLAIMER 227 FINANCIAL CALENDAR 227 CONTACT KION GROUP AG | Annual Report 2015 N O I T A M R O F N I L A N O I T I D D A E 224 Quarterly information KION Group overview TABLE 124 in € million Order intake * Revenue EBIT Adjusted EBIT Adjusted EBIT margin Adjusted EBITDA Adjusted EBITDA margin Q4 2015 Q3 2015 Q2 2015 Q1 2015 Q4 2014 1,397.1 1,440.7 132.6 151.8 10.5% 250.0 17.4% 1,253.3 1,236.5 108.8 121.2 9.8% 212.0 17.1% 1,317.3 1,256.0 99.4 116.4 9.3% 206.6 16.4% 1,247.9 1,164.8 82.1 93.4 8.0% 181.4 15.6% 1,283.5 1,305.6 109.4 134.2 10.3% 219.6 16.8% * Prior-year figure restated to reflect the change in the order intake calculation introduced in 2015 Moving Forward Innovation KION GROUP AG | Annual Report 2015ADDITIONAL INFORMATION Quarterly information Multi-year overview Multi-year overview KION Group multi-year overview in € million Order intake 1 Revenue Order book 1, 2 Financial performance EBITDA Adjusted EBITDA 3 Adjusted EBITDA margin 3 EBIT Adjusted EBIT 3 Adjusted EBIT margin 3 2015 5,215.6 5,097.9 864.0 824.2 850.0 16.7% 422.8 482.9 9.5% 2014 4,771.2 4,677.9 764.1 714.2 780.4 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% 225 TABLE 125 2011 4,681.9 4,368.4 953.0 569.2 665.3 15.2% 213.2 364.6 8.3% Net income (loss) 4 221.1 178.2 138.4 161.4 – 92.9 Financial position 2 Total assets Equity Net financial debt ROCE 5 Cash flow Free cash flow 6 Capital expenditure 7 6,440.2 1,848.7 573.5 11.9% 6,128.5 1,647.1 810.7 11.4% 6,026.4 1,610.0 979.3 – 6,213.2 660.7 1,790.1 – 6,066.3 – 487.6 2,631.3 – 332.7 142.6 305.9 133.1 195.6 125.8 513.6 155.1 230.8 133.0 Employees 8 23,506 22,669 22,273 21,215 21,862 * 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 Prior-year figures restated to reflect the change in the order intake calculation introduced in 2015 2 Figures as at balance sheet date 31/12/ 3 Adjusted for KION acquisition items and non-recurring items 4 Net income 2012 included a net gain from the Weichai transaction in the amount of € 154.8 million. 5 ROCE is defined as the proportion of EBIT adjusted to capital employed. 6 Free cash flow is defined as cash flow from operating activities plus cash flow from investing activities. 7 Capital expenditure including capitalised development costs, excluding leased and rental assets 8 Number of employees (full-time equivalents) as at balance sheet date 31/12/ KION GROUP AG | Annual Report 2015We keep the world moving. 226 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 2015 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 therefore be discrepancies between the actual totals of the individual amounts in the tables and the totals shown as well as between the numbers in the tables and the numbers given in the 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). Moving Forward Innovation KION GROUP AG | Annual Report 2015ADDITIONAL INFORMATION Disclaimer Financial calendar / Contact 227 FINANCIAL CALENDAR CONTACT 17 March 2016 Contacts for the media Contacts for investors Publication of 2015 annual report / Financial statements press conference Michael Hauger Frank W. Herzog and analyst call Head of Corporate Communications Head of Corporate Finance 27 April 2016 michael.hauger@kiongroup.com frank.herzog@kiongroup.com Phone: +49 611 770 655 Phone: +49 611 770 303 Interim report for the period ended 31 March 2016 (Q1 2016) and analyst call Frank Brandmaier Dr Karoline Jung-Senssfelder Head of Corporate Media Relations Head of Investor Relations and M&A 12 May 2016 Phone: +49 611 770 752 Phone: +49 611 770 450 Annual General Meeting frank.brandmaier@kiongroup.com karoline.jung-senssfelder@kiongroup.com 27 July 2016 Interim report for the period ended 30 June 2016 and analyst call 27 October 2016 Interim report for the period ended 30 September 2016 and analyst call 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: +49 611 770 0 Fax: +49 611 770 269 info@kiongroup.com www.kiongroup.com Only the content of the German version is authoritative. kiongroup.com/ ir KION GROUP AG | Annual Report 2015We keep the world moving.KION GROUP AG Corporate Communications Abraham-Lincoln-Strasse 21 65189 Wiesbaden | Germany Phone: +49 611 770 0 Fax: +49 611 770 269 info@kiongroup.com www.kiongroup.com
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