Kion Group AG

XETRA:KGX

Earnings Call Transcript 2021-Q4

[Operator]

Ladies

and

gentlemen,

thank

you

for

standing

by.

I'm

Stuart,

your

Chorus

Call

operator.

Welcome

and

thank

you

for

joining

KION

Group's

Full-Year

2021

Update

Call.

Today's

presenters

will

be

Rob

Smith,

CEO

of

KION

Group;

and

Anke

Groth,

CFO

of

KION

Group.

Throughout

today's

recorded

presentation,

all

participants

will

be

in

a

listen-only

mode.

Presentation

will

be

followed

by

a

question-and-answer

session.

[Operator Instructions]

I

would

now

like

to

turn

the

conference

over

to

Rob

Smith,

CEO

of

KION

Group.

Please

go

ahead,

sir.

[Richard Robinson Smith, Chief Executive Officer, KION GROUP AG]

Thank

you,

Stuart.

Good

afternoon,

ladies

and

gentlemen.

Anke

and

I

welcome

you

to

our

full-year

2021

results

update

call.

Let me

start

by

saying

just

how

concerned

we

are

about

the

situation

in

Eastern

Europe;

in

the

Ukraine

and

Russia

conflict.

We're

deeply

concerned

about

this,

and

our

thoughts

are

not

only

with

the

people

in

the

Ukraine

that

are

enduring

so

much

suffering,

but

also

with

our

employees

and

their

families

in

Russia.

And

KION

wants

to

help,

and

that's

why

we're

donating

€1

million

to

the

German

Red

Cross

for

people

that

–

refugees

and

people

that

need

help

in

the

region.

And

also,

we're

providing

forklifts

for

the

German

Red

Cross

who's

establishing

logistic

centers

to

provide

humanitarian

aid

in

the

region;

and

we

hope

very

much

for

a

better

time

soon.

Some

of

you,

we've

had

a

chance

to

meet.

For

those

of you

that

don't

know

me,

maybe

I'd

take

a

minute

to

introduce

myself.

I

started

as

the

CEO

at

KION

at the

beginning

of

this

year.

To

get

a

rolling

start,

I've

done

what

I

call

my

meet,

greet,

listen and

learn.

I'm

still

in

that

phase.

I've

met

easily

300

employees

around

the

company; many,

many

of

those

in

person.

I've

spent

time

with

external

views

and

a

lot

of

time

with

our

customers,

and

I'm

really

impressed

with

what

I

see.

I'm

excited

about

what

I

see.

KION's

in

a

very

good

position

today,

and

has

enormous

potential

for

the

future.

So,

although

I

met

many

of

you,

I'm

really

happy

to

present

our

strong

results

today

and

looking

forward

to meeting

you in

person

in

the

coming

days

when

we

have

a

chance

to

see

one

another in

person.

For

today's

call,

please

refer

to

the

2021

presentation

that

you

can

find

on

our

Investor

Relations

website.

I'll

be

talking

you

through

the

2021

financials,

the

key

financials

and

some

strategic

highlights,

and

then

a

bit

on

the

market

development.

And

Anke

is

going

to

take

you

through

the

financials

in

detail,

and

we'll

close

the

call

with

an

outlook

for 2020 (sic) [2022] (00:02:51)

and

some

key

takeaways

for

you.

Let's

start

with

the

top

line

figures

on

page

3.

We

published

very

strong

earnings

this

morning,

and

many

of

our KPIs

are

well

above

pre-pandemic

targets.

This

lays

a

very

solid

foundation

towards

our

2023

medium-term

goals.

I

really

want

to

thank

and

recognize

employees

and

customers

all

around

the

world

for

delivering

extraordinary

results

in

extraordinary

times

last

year,

and

delivering

on

every

one

of

our

guidance

metrics.

Extremely

well

done.

I

admired

that,

and

our

team

is

very

proud

of

that

and

really

hats

off

there.

So

let's

talk

about

that.

Order

intake

was

up

32%

year-on-year,

finished

at

a

record

level

of

€12.5

billion.

And

for

the

first

time

our

sales

at

€10.3

billion

broke

the

€10 billion

mark

and

finished

up

23%

year-on-year.

Our

adjusted

EBIT

was

€842

million,

up

54%

year-on-year

and

finished

with

a

margin

of

8.2%,

up

160

basis

points

from

the

previous

year.

Free

cash

flow

was

almost

4x

the

previous

year

at

€544

million,

and

we

should

be

proposing

at

our

Annual

General

Meeting

on

the

11th

of

May

a

dividend

per

share

of

€1.50,

which

is

a

35%

payout

ratio.

So

we

saw

strong

growth

across

all

metrics,

and

a

very

strong

continued

order

intake.

Page

4

are

some

strategic

highlights.

We're

about

halfway

through

our KION

2027

strategy

that

defines

the

way

we

intend

to

become

by

far

the

global

leader

in

intralogistics

and

Supply

Chain

Solutions

for

our

customers

worldwide.

Our

strategy

is

a

very

good

one,

and

it

has

some

flexibility

and

an

ability

to

refine

it

and

extend

to

it.

A

good

example

of

that

is

sustainability.

We've

added

sustainability

to

our

strategy

last

year

and

are

very

focused

on

that

as

a

clear

field

of

action,

and

it's

very

important

to me.

We're

very

committed

to

this.

It's

not

only

in

our

strategy;

it's

also

in

our

remuneration

and

our

focus

on –

and

20%

of

the

remuneration

on

a

variable

basis

is

dedicated

to

occupational

health

and

safety,

to

environmental

management

systems,

to

ESG

performance

and employer

attractiveness.

We

talk

about

an

intersecting

triple

bottom

line

or

the

3Ps:

the

people,

planet,

and

profitable

growth;

and

excelling

in

each

of

these

is

very

important

to

us.

Last

year,

we

continued

to

invest

strongly

in innovation.

We

invested

€273

million

or

about

2.7%,

and are

consistently

between

about

2.5%

and

3%

of

our

revenue

going

into

R&D.

And

as

our

sales

grow,

our

investments

in

R&D

is

growing.

A very

good

example

of

that

last

year

is

the

LoadRunner,

a

very

exciting

new

technology

we're

developing

with

the

Fraunhofer

Institute.

And

it's

about

swarm

robotics,

and

we've

got

some

very

exciting

videos

of

that

to

be

sharing:

swarm

robotics,

artificial

intelligence,

brand new

technology,

very

strong

investments

in

research

and

development.

We

also

worked

hard

to

extend

the

capabilities

of

full line

customer

projects

and

joint

offerings

between

ITS

and

Supply

Chain

Solutions,

and

saw

some

really

good

projects

where

Linde

or

STILL

and

Dematic

are

jointly

working

on

holistic

intralogistics

solutions

projects.

Some

examples are

with

Trelleborg,

with

Beiersdorf,

with

Siemens

or

the

BMZ

Group

are

flagship

examples

of

great

collaboration

and

joint

offerings

between

the

two.

Maybe

another

good

example

of

our

joint

offerings

and

collaboration

between

our

businesses is

an

app

that

we

put

together

that

allows

both

ITS

sales

teams

and

Supply

Chain

Solutions

sales

teams

to

offer

products

and

make

a

simple,

small-scale

automation

solution

with

very

standardized

elements

and

do

that

with

an

app

so

we

can

do

it

in

real

time

for

our customers.

In

addition,

we

executed

on

strategic

investments.

We

started

production

at

our

ITS

factory

in

Kołbaskowo

in

Poland

last

year

in

July,

and

then

we

kicked

off

production

in

the

new

segment

of

trucks

in

December

at

our

dedicated

ITS

plant

in

Jinan,

China,

built

in

record

time,

less

than

15 months

and

went

into

production.

We

also

laid

the

cornerstone

for

our

Supply

Chain

Solutions

factory

in

Jinan,

China.

Talking

about

the

ITS

plant

in

Jinan,

by

producing

in

China

we

get

a

benefit

from

local

production

costs.

We

compete

head-to-head

with

Chinese

players

there

on

a

cost

perspective. It

gives us vertical

integration

of

critical

component

suppliers,

gives us

a

better

cost

position

and

better

control of

quality

with

the

vertical

integration.

So

we'll

be

addressing

the

market

in

China

first

with

our

Jinan

factory, and

we

expect

to

extend

exports

to

Europe

and

other

places

in

the

course

of

the

year.

So

moving

quickly

to

page

6,

and

talking

about

the

Industrial

Trucks

segment

here.

Let's

start

with

the

fact

that

the

fourth

quarter in

Western

Europe

finished

up

32%

and

we

finished

up

52%

for

the

whole

year.

In

North

America,

we

finished

the

fourth

quarter

at 17%

increase

and

finished

the

year

59%

with

the

market

in

growth.

In

South

America,

18%

in

the

quarter

and

plus

71%

growth

in

the

year.

In

China,

0.8%

in

the

fourth

quarter

and

a

strong

28%

growth

for

the

year.

And

worldwide,

we

finished

at

a

record

level

of

2.3-plus

million

units

per

year,

up

42%

year-on-year;

a

huge

significant

growth

for

the

year.

Page

7

shows

how

KION's

unit

growth

by

product

and

region

finished. And

we're

very

proud

to

say

we

clearly

gained

market

share

on

a

global

level,

not

only

in

the

fourth

quarter,

but

also

for

the

full

year.

With

our

unit

intake

almost

300,000

trucks,

it

was

a

historical

record

for

us.

The

fourth

quarter

had

81,000

trucks,

up

33%

year-on-year,

almost

twice

the

market,

despite

a

real

high

comparison

based

in

Q4

2020. Worldwide,

we

finished

up

51%

for

the

year

and

43%

for

the

–

33%

for

the

quarter

and

51%

for

the

year.

So

in

summary,

KION

saw

a

very

strong

fourth

quarter

and

full

year

and

gained

market

share

globally

in

our

ITS

business.

Let's

talk

about

Supply

Chain

Solutions

on

page

8.

Our

full-year

2021

benefited

from

ongoing

very

solid

market

fundamentals for

Supply

Chain

Solutions.

Demand

was

supported

by

the

general

need

for

faster

fulfillment

and

delivery,

as

a

lot

of

customers

returning

more

and more

towards

online

purchasing.

Also,

urbanization

and

demographic

changes

supported

demand.

The

Interact

Analysis,

according

to

them,

the

market

for

warehouse

automation

and

revenues

expected

to

have

grown

about

21%

in

2021.

EMEA

and

the

Americas

contributed

very

strongly

to

the

growth

of

the

warehouse

automation

market.

And

in

terms

of

verticals,

the

general

merchandise

market,

the

food

industry

vertical

stood

out

with

sharp

increases

in

sales

volume.

So

market

growth

in

the

past

year

was

driven

by

execution

of

very

high

order

backlogs

at

the

end

of

2020,

and

KION

was

able

to

increase

its

Supply

Chain

Solutions

revenue

by

45%

versus

a

market

of

21%;

a

very,

very

strong

performance.

So

with

this,

let

me

hand

it

to

Anke,

and

she'll

take

you

through

our

financials,

please.

Anke?

[Anke Groth]

Thank

you

very

much,

Rob; and

hello

to

all

of

you

from

my

side.

Turning

to

page

10,

you

will

see

the

key

financials

for

the

IT&S

segment.

As

just

pointed

out

by

Rob,

the

ongoing

strong

demand

for

Industrial

Trucks

was

beneficial

for

us

of

course,

supporting

a

43%

growth

in

order

intake.

At

year-end,

the

order

book

more

than

doubled

to

almost

€2.9

billion,

which

covers

approximately

three-quarters

of

new

equipment

sales

provided,

of

course,

parts

are

available.

We

managed

the

ongoing

challenges

of

tight

supply

chains

fairly

well

during

the

fourth

quarter,

resulting

into

revenue

growing

10%

to

€1.8

billion.

The

service

business

continued

on

its

strong

path

also

during

the

fourth

quarter,

while

new

business,

as

just

mentioned,

was

negatively

impacted

by

supply

chain

issues.

The

Q4

adjusted

EBIT

improved

by

11%

to

€130

million.

However,

despite

increasing

revenue,

the

margin

remained

stable

at

last

year's

level,

mainly

due

to

the

higher

material

costs,

supply

chain

interruptions

and

component

shortages

that

were

more

pronounced

in

the

fourth

quarter.

In

the

fourth

quarter

alone,

we

saw

more

than

5,000

trucks

that

could

not

be

shipped

to

our

customers,

ending

up

to

a

large

extent

as

unfinished

trucks

and

inventories.

These

trucks

stand

for

around

€130

million

of

unrealized

revenues

and

a

significant

contribution

margin

uplift

in

the

mid double-digit

million

euro

range,

if

we

had

been

able

to

ship

them.

This

effect

is

even

larger

in

the

full

year,

where

we

are

talking

about

more

than

12,000

trucks

that

were

not

shipped,

representing

roughly €300

million

of

unrealized

revenues.

The

missing

components

triggered

shift

changes,

overtimes

and

extra

shifts,

resulting

in

the

situation

that

we

were

impacting

our

productivity,

and

the

unfinished

trucks

led

to

higher

logistics,

storage

and

handling

costs.

On

top

of

these

headwinds

from

supply

interruptions,

we

also

had

higher

material

costs,

as

I

mentioned,

and

an

increased

need

for

spot

buys

in

order

to

keep

up

production

for

the

benefit

of

our

customers.

All

of

this

weighed

on

our

profitability

particularly

in

Q4,

almost

offsetting

the

positive

[ph]



every (00:14:07)

contribution

from

the

development

of

our

new

business,

a

higher

share of

service

and

our

achieved

cost

savings

from

our

structural

program.

In

the

full

year

2021,

the

IT&S

segment

recorded

an

order

intake

of

€8.2

billion,

revenue

of

more

than

€6.5

billion

and

an

adjusted

EBIT

margin

of

8.2%.

Turning

to

page

11,

I'll

give

you

an

update

on

our

capacity

and

structural

program.

As

already

flagged

with

our

Q2

results,

we

have

shifted

the

focus

of

the

program

towards

structural

optimization

rather

than

on

capacity

needs

based

on

the

very

high

order

intake.

We

achieved

€41

million

cumulated

savings

last

year,

targeting

additional

€20 million

to €30

million

in

this

year.

All

in

all,

we

are

very

well

on

track

and

confirm

the

targeted

€80 million

to

€100

million

cumulated

cost

savings

by

2023;

and

on

top

of

that,

at

significantly

lower

costs

than

initially

anticipated.

Page

12

summarizes

the

key

financials

for

the

segment,

Supply

Chain

Solutions.

SCS

order

intake

was

again

above

the

€1

billion

mark

with

a

very

solid

order

pipeline

ahead

of

us,

even

higher

than

a

year

ago.

Regionally,

demand

increased

substantially

in

Europe

and

North

America,

but

was

slightly

down

in

APAC,

mainly

as

last

year

was

supported

by

two

larger

projects

which

could

not

be

compensated

by

the

higher

number

of

smaller

projects

this

year.

Looking

at

our

verticals.

We

saw

strong

demand,

particularly

driven

by

general

merchandise,

grocery

as

well

as

food

and

beverage.

The

order

backlog

at

the

end

of

December

was

up

by

24%,

reaching

roughly

€3.8

billion.

70%

of

this

is

anticipated

to

be

converted

into

revenue

this

year;

in

other

words,

more

than

55%

of

our

mid-point

revenue

outlook

for

full

year

2022.

Despite

the

difficult

supply

chain

environment,

revenue

grew

significantly

in

Q4 2021,

surpassing

a

level

of

€1

billion

for

the

first

time,

while

business

solutions

grew

by

36%,

customer

services

grew

with

a

rate

of

around

28%.

Looking

at

adjusted

EBIT,

we

saw

a

margin

of

only

7.3%

in

Q4.

We

focused

on

the

benefit

of

our

customer,

thus

our

priority

was

to

protect

our

customers'

schedules.

We

therefore

incurred

higher

costs

in

the

spot

markets

to

secure

material,

while

simultaneously

keeping

our

labor

forces

ready

to

install

equipment

at

the

moment

of

arrival.

At

times,

this

required

demobilizing

and

remobilizing

of

our

staff

as

well

as

the

use

of

short

term

and

higher

cost

labor

out

of

sequence

installation,

rework

and

overtime

premiums

have

added

up

to

higher

costs.

All

this,

as

I

said,

resulted

into

increased

costs

of

roughly

more

than

€60

million,

more

than

half

of

the

full

year

impact

which

was

more

than

offset

– which

has

more

than

offset

the

positive

effects

of

our

top line

growth.

And

in

addition,

we

faced

higher

personnel

expenses

as

we

positioned

ourselves

for

future

growth.

For

the

full-year

period,

SCS

saw

a

record

top line

with

order

intake

of

around

€4.3

billion,

up

19%;

and

revenues

of

€3.8

billion,

even

up

45%;

as

well

as

record

levels

for

adjusted

EBIT

of

€410

million;

and

a

margin

of

10.8%,

and

all

of

this

despite

the

challenging

environment.

Page

13

summarizes

the

key

financials

for

the

group.

So

overall,

we

saw

strong

growth

rates

for

both

order

intake

and

revenue

in

Q4.

The

order

book

grew

around

50%

to

€6.7

billion

by

the

end

of

December

2021,

driven

by

both

segments

and

providing

a

good

basis

for

this

year's

revenue

generation.

In

Q4,

the

adjusted

EBIT

for

the

group

dropped

to

€151

million,

a

margin

of

5.5%.

I've

already

commented

on

the

effects

that

affected

our

operating

segments,

and

rest

assured

that

we

will

address

these

very

actively

this

year.

In

addition,

higher

personnel

expenses

due

to

higher

variable

remuneration

compared

to

the

low

level

of

the

prior

year.

We

also

saw

an

impact

from our

ongoing

digitalization

initiatives,

mainly

driven

by

the

implementation

of

SAP

S/4HANA.

For

full

year

2021, KION saw

order

intake

of

around

€12.5

billion,

revenues

of

€10.3

billion,

both

by

the

way record

levels

for

KION

and

an

adjusted

EBIT

margin

of

8.2%.

Page

14

shows

the

reconciliation

from

adjusted

EBITDA

to

the

net

income

for

the

group.

Reported

EBIT

included

positive

non-recurring

items

of

€42

million

in

the

past

quarter.

These

were

mainly

driven

by

a

pension

plan

amendment

to

allow

employees

to

choose

their

form

of

payout

at

the

time

of

retirement,

and

we

also

recorded

releases

of

provisions

in

relation

to

the

capacity

and

structure (sic) [structural] (00:19:52)

program.

Net

financial

expenses

decreased

substantially

to

minus

€10

million,

driven

by

lower

refinancing

costs

due

to

reduced

financial

liabilities

and

an

improved

net

interest

result

from

our

lease

business.

Taxes

increased

nominally,

reaching

minus

€24

million

in

Q4

based

on

higher

tax

deductibles

and

additional

tax

credits.

Impacted

by

the

lower

rate

in

Q4,

the

tax

rate

for

the

full

year

was

standing

at

25%.

Overall,

we

ended

the

fourth

quarter

with

a

net

income

of

€137

million

and

earnings

per

share

of

€1.08,

while

we

saw

a

net

income

of

€568

million and

earnings

per

share

of

€4.34

for

the

full

year.

Let's

move to

the

free

cash

flow

statement

on

page

15.

Full

year

2021

free

cash

flow

amounted

to

€544

million.

Main

driver,

of

course,

for

the

free

cash

flow was

our

strong

operating

performance.

On

the

negative

side,

we

saw

an

increase

in

net

working

capital,

driven

by

higher

inventory

levels

mainly

caused

by

the

semi-finished

trucks

I

mentioned,

partly

compensated

by

a

favorable

development

of

trade

payables.

Operating

CapEx

was

lower

than

originally

planned

since

we

saw

some

investments

spilling

over

into

this

year.

In

Q4,

we

recorded

a

free

cash

flow

of

€409

million,

following

our

usual

seasonal

pattern

with

Q4

which

is,

as

you

know,

the

strongest

cash generating

quarter

for

us.

Overall,

we

ended

the

year

with

a

strong

cash

generation.

Page

16

shows

the

net

debt

as

well

as

the

corresponding

leverage

ratios

of

our

business.

At

the

end

of

December

2021,

net

financial

debt

decreased

by

€312

million

to

€568

million

at

year-end

2021,

mainly

driven

by

the

significant

free

cash

flow

generation.

The

leverage

ratio

based

on

net

financial

debt

improved

to

0.3

versus

0.6

at

the

end

of

2020. Our

net

pension

liabilities

decreased

to

around

€1.2

billion

end

of

December,

mainly

due

to

higher

discount

rates;

and

leverage

on

industrial

net

debt

decreased

substantially

to

2.0,

significantly

down

from

3.1

at

December

2020. You know,

we

have

two

investment-grade

ratings

right

now;

and

with

that,

no

covenant

testing

for

our

new

ESG-linked

revolving

credit

facility.

Yes.

And

with

this,

back

to

you,

Rob,

for

the

outlook

for

full

year

2022.

[Richard Robinson Smith, Chief Executive Officer, KION GROUP AG]

Thanks,

Anke.

Let's

move

to

page

18 [Technical Difficulty] (00:22:45-00:22:5).

Thanks,

Anke.

Let's

go

to

our

outlook

on

Page

18

for

2022.

After a

strong

performance

in

2021,

KION

expects

to

show

further

profitable

growth

in

2022.

We

expect

an

increase

in

sales,

we

expect

an

increase

in

adjusted

EBIT,

and

we

expect

an

increase

in

profitability.

Although

I

do

must

highlight

here

that

there

are

still

some

significant

uncertainties

in

the

global

supply

chain

around

the

material

availability

and

also

around

material

pricing

and

inflation.

So,

let's

go

to

that

outlook

and

let's

walk

you

through

it.

Order

intake

we

expect

to

come

in

between

€11.6

billion

and

€12.8

billion.

We

expect

to

finish

revenue

this

year

between

€11 billion

and

€12

billion

in

revenue.

We

expect

to

be

better

than

€1

billion

of

adjusted

EBIT

between

€1.010

billion

and

€1.15

billion

of

EBIT.

Our

free

cash

flow

we

expect

to

come

in

between

€520

million

and €640

million.

And

our

ROCE

for

the

year,

we

expect

to

finish

between

11%

and

12%.

On

page

19,

you

can

see

my

key

takeaways.

KION

is

very

well-positioned

in

a

dynamic

and

growing

market,

and

reached

record

levels

last

year

in

order

intake

and

revenue.

And

I

am

very

excited

about

leading

KION

into

its

promising

and

profitable

future

here.

We

expect

very

solid

financial

performance

this

year

despite

raw

material

inflation

and

supply

chain

interruptions.

Those

particularly

affected

the

fourth

quarter, and

we

expect

to

address

these

going

forward

through

agile

pricing

actions

and

efficiency

and

productivity

improvements

across

the

company.

And

with

our

full-year

2022

outlook,

you

see

we're

very

well

on

the

path

to

achieving

our

medium-term

targets

in

2023

to

which

I

am

fully

committed.

So

Anke

and

I'd be

delighted

to

answer

questions

now,

and

let's

open

the

line,

operator,

please.

[Operator]

Ladies

and

gentlemen,

at

this

time

we will

begin

the

question-and-answer

session.

[Operator Instructions]



First

question

is

from

the

line

of

George

Featherstone

with

Bank

of

America.

Please

go

ahead.

[George Featherstone, Analyst, Bank of America Merrill Lynch]

Hi.

Good

afternoon, everyone,

and

thanks

for taking

my

questions.

I'll

go

one at

a

time.

And first

one would be

for you,

Rob.

Just

wanted

to

know

what

you

learned

in

the

first

few

months

of

being

with

the

business?

Is

there

anything

you particularly

like,

anything

you'd

like

to

change?

And

do

you

think

there's

a

need

to

change

[indiscernible]



(00:25:57)

medium-term

strategic

aims

of

the

business?

[Richard Robinson Smith, Chief Executive Officer, KION GROUP AG]

Thanks

for

diving

in

right

there,

George.

As

I

said,

I've been

working

real

hard

to

get

to

know

the

business

and

get

to

know

our

customers'

views

and

get

to

know

an

external

outside

in-view,

as

well

as

the

inside

out-view.

I've

met

over

300

colleagues

across

the

company.

I'm

very

motivated

with

what

I

see.

I

must

say,

also

I've

been

following

KION

for

many,

many

years.

The

Industrial

Truck & Service (sic) [Industrial Trucks &

Services] (00:26:27)

business

has

played

an

instrumental

role

in

all

of my

industrial

companies

over the

last

30.

I've

been

following

the

company

itself

since

the

IPO

in

2013.

So

basically

what

I'm

seeing

really

confirms

the

excitement

and

the

motivation

to

come

here,

and

really

underpins

we're

in

a

good

position

now

and

we've

got

very

exciting

growth

potential

going

forward.

You

asked

where

my

–

I

also

talked

about

the

KION

2027

strategy.

I

think

it's

a

very

strong

strategy,

and

it

does

give

us

some

opportunities

for

refinement

and

extension.

A

great

example

of

that

is

adding

sustainability

right

in

the

middle

of

our

strategy

last

year.

That's

going to

be

an important

part

of

our

focus

going

forward.

I

expect

we

do

some

work

on

the

multi-brand

strategy.

It's

a

very

important

element

to

focus

on

performance

and

agility.

I

talked

about

agile

pricing.

I

think

that

the

entire

commercial

and operations

need

to

be

very

agile

in

the

environment

that

we're

in,

and

I

expect

that's

an

important

part

of

our

work

going

forward.

KION's

got

some

exciting

core

values

that

underpin

our

performance and

underpin

our

company.

And

with

their

focus

on

sustainability

and

the

intersecting

three

bottom

lines

of

people,

profitability

– or

people,

planet

and

profitable

growth,

there's

a

very

strong

focus

in

KION

on

people

and

leadership.

So

I

see

these

as

refinements

and

extensions

to

a

great

strategy

that's

already

underway.

We've

been

implementing

it

for

about

the

last

five

years,

and

I

expect

it

puts

us

very

well

on

track

to

be

that,

by

far,

a

global

leader

in

logistics

and

Supply

Chain

Solutions.

What's

your

second

question,

George?

[George Featherstone, Analyst, Bank of America Merrill Lynch]

Thank

you

very

much,

Rob.

Yes.

And

my

second

question

would

be on SCS.

I

just

wanted

to talk

a

little

bit

about

or

ask

you

rather

about

the

contracts

that

you

have

in

SCS

in

terms

of

the

structure

and

the

pricing

within

them.

Are

they

typically

fixed

pricing?

Or

do

you

have

any

inflation

linkage

in

there?

And

also,

in

terms

of

the

new

contracts

that you

signed

today,

have

you

got

any

form

of

mitigation

for

what

is

ultimately

quite

volatile

raw

material

and

supply

chain

environment?

[Anke Groth]

And maybe

I'll

pick

that

up,

George.

Hi,

it's

Anke.

I

would

say,

we

have

both

types

of

contracts,

so

we

have

fixed

contracts,

but

we

have

also

contracts

with

pass-on

clauses.

It

depends

on

the

project,

it

depends

on

the

customer, it

depends

on

the

competition,

and

finally,

the

negotiations

we

are

conducting.

But

we

have

definitely

learned

from

the

year

2021,

as

we

have

said.

So

one

of

the

tasks

is,

of

course,

to

increase

the

share

of

contracts

with

pass-through

clauses.

But

again,

currently

we

do

have

a

variety

of

contracts

and

that

is

because

we have

a

competitive

environment.

[George Featherstone, Analyst, Bank of America Merrill Lynch]

Okay.

Then

one

final

question

for

me,

if

I

may

able

to

squeeze

in.

I

noticed

that

you'd

had

quite

a

significant

increase

in

the

number

of

employees.

I

think

it was

9%

year-on-year

in

2021.

Just

wondered

where

you've

been

deploying

those

extra

employees,

where

particularly

in

the

business?

And

is

there

a

need

for

you

to

invest

in

more

capacity

given

the

strong

end

to

the

year

for 2022?

[Anke Groth]

Yeah.

We

have

a

strong

increase

in SCS,

of

course,

as

you

can

imagine.

You

have

seen

the

increase

in

order

intake.

You

have

seen

the

increase

in

revenues

we

have

achieved,

so

that's

only

possible

with

adding

to

the workforce.

And

that

will

also

go

on

in

the

year

2022,

so

it's

a

strongly

growing

business.

And

on

the

ITS

side,

we

do

have

new

production

facilities.

So

we

have

added

a

couple

of

employees

in

Jinan,

in

our

new

facility

as

well

as

in

Poland.

So

also

on

the

ITS,

we

see

growth

of

our

employee

base

based

on

the

new

production

facilities.

And

additionally,

we

have

a

strongly

growing

service

business,

so

that

is

not

to

underestimate.

Also,

that

depends

on

service

technicians,

but

still

the

majority

was

growth

in

our SCS business.

[George Featherstone, Analyst, Bank of America Merrill Lynch]

Okay.

Thank

you

very

much.

[Richard Robinson Smith, Chief Executive Officer, KION GROUP AG]

Hey

George,

we don't

want

to miss

putting

a

plug

in

for

adding

quite

a

few

software

capabilities

and

engineers

along

the

way

as

well;

real

important

part

of

our

growth

here.

[Operator]

Next

question is

from

the line

of

Sven

Weier

from

UBS.

Please

go

ahead.

[Sven Weier, Analyst, UBS]

Yes.

Thanks

for

taking

my

questions.

Good

afternoon,

Rob.

Good

afternoon,

Anke.

The

first

question

is

on

the

EBIT

guidance

for

2022.

When

I

take

the

midpoint

of

the

guidance,

I

obviously

get

to

a

run

rate

of

€270

million.

You

had

€150

million in

Q4. So

how should

we

think

about

the

phasing

of

that?

Should

we

already

see

a

significant

improvement

in

the

first

quarter,

given

that

some

of

the

additional

costs

you

had

in

Q4

might

have

been

also

a bit

one-off,

the

pricing

improves

of

the

backlog?

And

yeah,

I

think

that's

– I

think

the

guidance

was

probably

a

relief,

but

I

think

the

issue

some

people

still

have

is

how

do

you

– does

it

add

up

on

a

quarterly

basis

to

get

to

this

run

rate?

That's

the

first

one.

[Anke Groth]

Yeah.

Hi,

Sven.

[Sven Weier, Analyst, UBS]

Hi.

[Anke Groth]

Hello

from

my

side.

Yes,

that's,

of

course,

a

very

often

asked

question,

as

you

can

imagine, based

on

what

we

have

seen

in

Q4

and

learned

in

Q4.

Let

me

first

comment

on

the

overall

levers

which

will

support

our

margin

development.

So

the

volume

growth,

of

course,

is

the

most

important

lever

and

that

is

based

on

our order

book

and

the

additional

capacities

we

have

put

into

place.

Secondly,

we

have

higher

prices

in

our order

book

from

the

second

price

increase

last

year,

and

the

price

increase

beginning

of

2022

will

come

into

force

in

the

second

half

of

the

year.

Thirdly,

we

have

our

structural

program

savings,

as

we

have

pointed

out.

And

the

fourth

effect

is

a

very,

very

strong

service

business

which

we

also

have

seen

this

year.

Now,

let's

come

to

the

headwinds.

Yes,

we

have

seen

the

Q4

effect,

but

I

would

say

it

was

very

much

pronounced

with

the

respective

headwinds

in

Q4

[indiscernible]



(00:33:08)

order

of

magnitude

cannot

continue.

So

Q4

was

really

an

extraordinary

high

effect

on

the

ITS

side

as

well

as

on

the

SCS

side,

where

we'll

also

see

in

Q1

still

some

spillovers

from

2021

projects

with

a

higher

cost

base

going

into

2022.

So

taking

all

of

that

together,

I

would

say,

Q1

and

the

first

half

potentially

of

the

year

will

still

see

somewhat a

lower

margin

and

the

second

half

of

the

year

it's

expected

to

be

stronger.

So

that's,

in

a

nutshell,

what

we

expect

and

see

for

2022.

[Sven Weier, Analyst, UBS]

Understood,

Anke.

Thank

you.

And

I

mean

based

on

the

numbers

you've

seen

so

far

in

Q1,

I

guess

there

is

already

also

a

sequential

improvement

in

Q1,

right?

So

it's

not

a

totally

second

half-loaded

guidance.

[Anke Groth]

We

will

talk

about

Q1

once

we

are

in

Q1 and

that

is

end

of

April,

as

you

know.

But

what

we

can

say

is

that

our

order

pipeline

is

very

well

sold

on

the SCS

side.

We

have

mentioned

that

the

truck

market

is

still

in

very

healthy

conditions,

but

there

are

also

still

some

uncertainties

out

there.

So,

let's

talk

about

Q1

once

it's

over

and

finished,

and

we

can

give

you

the

number.

[Sven Weier, Analyst, UBS]

It's

fair

enough.

Thank

you,

Anke.

And

the

second

point

was

just

following

up

on

some,

let's

call

it

the

self-help

improvement

measures

you

probably

especially

have

on

the

truck

side.

And

Rob,

you

already

talked

about

agile

pricing.

I

guess,

maybe

also

– I

mean,

I

know

everybody

had

supply

chain

issues

last

year,

but

the

question

is

whether

they

may

be

even

more

pronounced

in

the

truck

business

than

at

other

companies,

your

own

cost

base.

So,

I

was

just

wondering

what

– is

there

also

a

mentality

change

needed

within

the

truck

organization?

Because

normally,

you

always

have

this

one-time

price

increase

in

the

year,

and

now

this

needs

to

become

agile.

So,

how

easy

do

you

find

to

implement

that

actually?

[Richard Robinson Smith, Chief Executive Officer, KION GROUP AG]

Hey, Sven,

I

take

my

hat

off

to

the

performance

of

our

Industrial Truck

and

Service (sic) [Industrial Trucks & Services] (00:35:26)

business

worldwide.

I

think

it

overcame

some

very,

very

significant

challenges

during

the

course

of

last

year,

and

I

expect

that

we

continue

to

overcome

challenges

during

the

course

of

this

year.

I

certainly

wouldn't

be

talking

about

any

attitude

changes.

I'd

be

talking

about

continuously

working

to

make

our

performance

better

and

better

and

better;

and

an

important

element

of

that

will

be

the

agile

commercial

activities

that

we've

talked

about.

But

we've

got

a

very

strong

basis

and

a

strong

team,

and

I

think

we've

got a

good

run

in

this

year.

[Sven Weier, Analyst, UBS]

And

you

also

mentioned

multi-brand.

I

mean,

I

think

we

can

now

see

at

your

former

employer

[indiscernible]



(00:36:06) the

US

are

picking

up.

So,

what's

the

recipe

for Linde in

the

US?

[Richard Robinson Smith, Chief Executive Officer, KION GROUP AG]

Sven,

the

recipe

[ph]



is we had to (00:36:19)

to

assume

that

all

the

elements

that

made

the

multi-brand

strategy

at

AGCO

one-to-one

apply

here.

KION

has

great

brands

with

a

wonderful

heritage.

I

think

we

could

position

each

of

our

brands

very

successfully

in

the

market

on

a

sustainable

basis,

where

each

of

our

brands

are

able

to

do

sustainable

win-win

business

with

their

target

customers

and

taking

market

share

from

competitors

outside

of

KION.

And

I

think

we

could

do

so

by

– and

by

listening

to

our

customers

is

how

we're

starting

this.

And

the

whole

story

is

to

understand

the

customers,

their

ambitions,

their

needs

now,

how

they

see

the

future

and

help

them

realize

that

future

in

a

fashion

that

gives

them

multiple.

As

a matter of

fact,

all

the

elements of

intralogistics

and

Supply

Chain

Solutions

they

need

from

KION's

brands,

and

having

those

brands

positioned

so

we're

covering

the

entire

market

as

opposed

to

parts

of

it.

That

will

be what

we'll

be

working

on.

And

I

expect

that

over

a

period

of

time

we'll

be

able

to

talk

about

that

more,

and we'll

be

able to

show

the

effect

of

it.

[Sven Weier, Analyst, UBS]

Great.

Looking

forward

to

that.

Thank

you,

Rob.

Thank

you,

Anke.

[Operator]

Next

question

is from

the

line

of

Sebastian

Growe

from

BNP

Paribas

Exane.

Please

go

ahead.

[Sebastian Growe, Analyst, BNP Paribas Exane]

Yeah.

Hi.

Good

afternoon.

Hi,

Anke.

Hi,

Rob. Thanks

for

taking my

questions.

The

first

one

is

on

the

supply

chain

issues

and

also

then

related

to

the

guidance.

And I

would

like

to

start

on

the

supply

chain

with

the

question

simply,

what

you're

currently

observing

in

that

very

supply

chain?

Are

things

getting

better,

or

say,

at

least

more

stable

and

reliable?

It's

a

similar

comment

we

just

heard

from

[indiscernible]



(00:38:09) so

I would

be

interested

in

your

current

observations

here.

And

then

related

to

it,

when

I

think

of

your

guidance

and

also

then

the

related

growth

of

7%

to

17%

for

the

group

on

the

top

line,

how

much

of

a

risk

buffer

is

embedded

here?

And

the

same,

obviously,

would

also

apply

to

the

margin.

And,

if

I

may,

just

briefly

on

ITS

and

the

Americas

[indiscernible]



(00:38:32)

very

strong

growth

from

what

is

a

relatively

low

base

still

I

think

for

your

business.

Can you

just

walk

us

through

the

outlook

[indiscernible]



(00:38:40)

and

what

the

planned

measures

to

regain

share

in

the

region

are?

Thank

you.

[Richard Robinson Smith, Chief Executive Officer, KION GROUP AG]

Why

don't

you

and

I

tag

team

on

that,

Anke?

Let

me

talk

about

some

of

the

supply

chain

difficulties

now.

Maybe

you

can

address

the

other

portions,

and

we'll

see how

we

finish

[indiscernible]



(00:38:58).

But

Sebastian,

I

mean

it's

no

secret.

Everyone

is

struggling

with

a

very

tight

supply

chain

right

now,

and

there

are

different

interruptions

and

there's

quite

a

bit

of

volatility

there.

That

was

with

us

last

year.

I

do

expect

that

it

continues

with

us

this

year,

at

least

the

first

part

of

it.

The

first

half

I

expect it

to

be

more

pronounced

than

the

second,

and

we'll

be

observing

this

very

carefully.

Having

said

that,

KION

added

€2

billion

of

sales

which

is

a

very

significant

amount

year-on-year

of

incremental

sales,

which

means

a

very

significant

amount

of

incremental

supply

chain

performance

and

parts

being

received

and

purchased,

and

supply

chain

challenges

being

overcome

in

2021.

And

our

team

has

been

very,

very

focused

on

that,

and

I

expect

that

we're

able

to

continue

to

meet

these

challenges

as

they

come

up.

And

hopefully,

they'll

abate

a

bit

in

the

second

half.

Anke,

would

you

like

to

talk

to

some

of

the

things,

too?

[Anke Groth]

Sure.

Hi,

Sebastian.

Yeah,

we

still

are

seeing

supply

chain

issues,

as

Rob

has

pointed

out.

Things

are

not

getting

better,

things

are

not

getting

worse. But

I

would

say,

it's

on

a

stable

–

we

are

facing

a

stable

situation

if

I

compare

it

with

Q4.

But

if

some –

one

supplier

can

deliver

again,

then

potentially

you

have

another

supplier

who

is

getting

a

little bit

into

trouble.

So

it

will

be

a

tight

management

necessary

especially

during

the

first

months

of

the

year

here.

Your

question

was,

have

we

baked

in

something

into

our

guidance?

Yes,

of

course,

we

did

so.

We

baked

some

effects

into

our

guidance.

Also

with respect

to

potentially

trucks

which

cannot

be

delivered,

but

more

substantially

also

with respect to

material

cost

headwinds.

We

have

seen

a

significant

number

this

year

affecting

us,

and

we

have

also

taken

a

considerable

amount of

headwinds

into

consideration

for

the

year

2022.

[Sebastian Growe, Analyst, BNP Paribas Exane]

Would

you

mind

putting

a

number

behind

that?

[Anke Groth]

I

don't

give

you

a

concrete

number,

as

you

know,

but

what

I

will

do

is

give

you

the

number

we

have

seen

in

the

last

year

or

so –

in

2021.

We

have

faced

material

cost

headwinds

of

roughly

€120

million,

so

that

was

even

a

little bit

more

than

our

high double-digit

to

low triple-digit

which

we

estimated,

and

you'll

see

the

effect

on

Q4.

We

spoke

about

spot

buys

we

had

to

do

in

order

to

secure

the

delivery

to

our

customers,

and

all

that

has

somehow

landed

in

our

material

cost

headwinds.

And

for

the

year

2022,

we

do

not

expect

that

number

to

go

down

based

on

the

current

market

environment.

I

think

that

is

the

guidance

we

can

give

you

on

that

one.

[Sebastian Growe, Analyst, BNP Paribas Exane]

Okay. Fair

enough. Yeah.

[Anke Groth]

It

rather

will

increase

than

going

down

[indiscernible]



(00:42:08)

[Sebastian Growe, Analyst, BNP Paribas Exane]

That

makes

sense.

And

in

terms

of

the

volume

that

you

have

put

on

to

[indiscernible]



(00:42:14)

way

when

it

comes

to

the

volumes

in

the

IT&S

business.

How

should

we

think

about

that?

[Anke Groth]

Again Sebastian,

I

have

spoken

about

12,000

trucks

which

we

couldn't

deliver

this

year

based

on

the

missing

material

and

the

missing

parts,

which

are

sitting

in

inventory

and

which

we

are

going

to

retrofit

as

soon

as

we

do

have

it.

And

all

in

all,

the

order

of

magnitude

will

hold

true

also

for

2022

plus

and

minuses,

so

don't

[ph]



name down

here

on

an (00:42:48)

exact

number

for

the

guidance.

It's

a

full

year

guidance,

as

you

know.

We

are

putting

ranges

around

in

order

to

not

give

one

exact

number

and

then

might

be

proven

to

be

wrong.

So

that's

also

with

respect

to

trucks

and

material

cost

headwinds.

[Sebastian Growe, Analyst, BNP Paribas Exane]

Yeah.

Yeah,

Sure.

And

on

the

Americas?

[Anke Groth]

Rob,

do

you want

to

speak

about

our

positioning

and

our

development

in

North

America? Sebastian,

can

you

repeat

your

question?

It

was

how

we

develop

further

or

intend

to

grow

our position

for

the

North

America

on

the

truck

side.

Wasn't

that

your

question?

[Sebastian Growe, Analyst, BNP Paribas Exane]

Yeah.

Sure.

I

think

it

has

been

obviously

going

on

for

ages

[indiscernible]



(00:43:36) that

you

had

in

the

past

double-digit

market

shares

in

the

region,

and

with

that

obviously

also

pretty

high

volumes.

And

now

you're

[indiscernible]



(00:43:45)

pretty

low

market

shares

of

[indiscernible]



(00:43:48)

and

we

have

seen

obviously

in

quarter four,

a

very,

very

strong

development.

It's always

difficult

to

extrapolate

a

quarter,

but

if

you

could

just

help

us

with

understanding

what

has

driven

that

phenomenal

increase

and

how

we

should

think

about

the

further

trajectory

from

here?

That

would

be

helpful.

[Richard Robinson Smith, Chief Executive Officer, KION GROUP AG]

Yeah,

that's

an

exciting

story,

Sebastian.

We've

put

a

team

in

place

there

that

has

worked

very

hard over

the

last

1.5 years

to

capitalize

on

some

good

decisions

that

we

did

make

in

the

past

years,

too.

I'm

quite

conscious

that

the

story

all

the way

back

to

1977.

And

where

we

are

now,

the

2021

performance

was

quite

exciting.

We

took

our

revenues

up

very,

very

significantly.

If

you

want to

talk

about

units

in

the

market,

we

went

from

probably

about

4,000

units

per

year

on

average

to

an

order

entry

last

year

of

10,000. There

was

a

lot

of

work

done.

It's

an

interesting

time

in

the

North

American

market

right

now.

The

market

is

growing

very

strongly. It

was

a

record

year

in

North

America

last

year.

And

some

of

the

competition

is

facing

some

interesting

challenges,

and

we

see

it

as

an

opportunity

for

our

business

there.

And

I

think

the

2021

order

intake

at

10,000 demonstrates

the

impact

of

working

on

the

key

accounts.

And

part

of

the

key

accounts

is

benefiting

from

the

very

strong

teamwork

between

our

Industrial

Trucks

&

Services

business

and

our

Supply

Chain

Solutions

business

in

North

America.

Some

of

the

key

accounts we

were

able

to

enter

for

the

Truck

business

came

from

the

Supply

Chain

Solutions

business.

In

addition,

there

are

some

real –

very

good

work

on

getting

some

substantially

stronger

dealers

into

our

network.

We've

been

working

on

a

network

transformation,

going

from

smaller

and

less

performing

dealers

to

larger

and

financially

strong

and

very

focused

dealers

for KION

there,

and

have

seen

some

very

substantial

increases

with

the

dealers

that

just

came

in

last

year,

making

a

big

difference

in

the

order

entry.

So,

we

see

it

as

a

very

good

starting

point,

but

watch

that

space

because

our

expectation

is

to

go

get

a

very

strong

share

there.

We

expect

to

be

able to

demonstrate

that

in

the

times

to

come.

So,

thanks

for

picking

up

on

that.

We're

focused

on

that.

The

team

is

working

hard

on

it.

We

got

the

right

team

in

place.

We've

got

exciting

dealer

network

improvements.

We've

got

products

going

in

that

are

right

for

the

market,

especially

focusing

on

the

warehouse

segment

and

the

warehousing

segment.

I

think

that will

be

a

good

boost

for

us.

And

look,

watch

this

space

and

we

keep

talking

about

it.

And

we're

excited

about

the

cross-selling

capabilities

that

Industrial

Trucks &

Services

and

Supply

Chain

Solutions

are

demonstrating

and

have

in

their

plans,

especially

around

the

key

accounts

that

we talked

about

[Sebastian Growe, Analyst, BNP Paribas Exane]

Okay.

Sounds

encouraging.

Thanks.

[Operator]

Next

question

is

from the

line

of

Daniel

Gleim

from

Stifel.

Please

go

ahead.

[Daniel Gleim, Analyst, Stifel Schweiz AG]

Yes.

Good

afternoon,

Anke,

Rob.

Thank

you

for

taking

my

questions.

I

actually

have

two

of

them.

First

one

is

for

Rob.

I'm

wondering

whether

we

will

see

a

Capital

Markets

Day

at

the

end

of

this

fiscal,

and

whether

you

will

present

2027

guidance

or

mid-term

targets

at

that

point.

That

is

question

number

one.

[Richard Robinson Smith, Chief Executive Officer, KION GROUP AG]

Well,

I

expect we

do

have

a

Capital

Markets

Day

at

the

right

point

in time,

Daniel,

and

we'll

be

telling

you

exciting

things

about

what

we've

already

done

and

what

we

have

in

mind.

There

will

be

no

reversal

on

the

2027

strategy,

so

I

think

we're

very

well positioned

with

our

2027 strategy,

and

I

talked

about

an

ability

to

refine

it

and

extend

it.

And

so,

I

don't

see

an

immediately

pressing

need

for

a

Capital

Markets

Day

in

the

short

term,

but

at

the

right

moment

in

time

we'll

be

coming

and

sharing

some

further

exciting

future

plans.

[Daniel Gleim, Analyst, Stifel Schweiz AG]

Very

clear.

Thank

you very

much.

The

second

one

is

for

Anke.

I

value your

opinion

how

to

calculate

true

underlying

margin

for

the

SCS business

in

2021,

given

on

what

we

heard

so

far.

I

think

you

mentioned

€60

million

in

additional

costs

for

the

full

year.

Is

that

the

correct

number?

And

secondly,

I

wonder

whether

simply

adding

back

those

€60

million

to

the

EBIT

line

gets

the

job

done?

Or

would

you

also

point

to

lost

sales

that

we

would

need

to

add

back

to?

[Anke Groth]

No,

there

are

no

lost

sales

you

have

to

add

back

to.

Underlying

margin,

I

would

say, is –

you

have

seen

the

margin

development

in

the

first

three

quarters

of

the

year,

and

we

were

hit

in

the

fourth

quarter

by

additional

costs

as

we

have

pointed

out

in

order

to

serve

the

customers.

In

order

to

maintain

milestones,

we

really

had

to

face

higher

labor

and

installation

costs

which

we

haven't

seen

in

the

three

quarters

before.

I

would

say

that

you

also

can

look

at

our

mid-term

targets

where

we

have

given

the

guidance

for

SCS

of

12%

to

14%

profitability.

So,

that

gives

you

a

good

hint

towards

the

profitability

SCS is

able

to

achieve.

[Daniel Gleim, Analyst, Stifel Schweiz AG]

Now,

this

is

where

[indiscernible]



(00:49:20)

question.

And

maybe

pushing

my

luck

a

little

bit,

when

we

think

about

the

€60

million

in

2021,

could

we

roughly

scale

what

the

€60

million

will

look

like

in

2022?

Is

it

half

of

that

or

one-third?

How

should

we

think

about

that

number

in

2022

from a

zero

comparison

basis,

so

not

incremental,

but

€60

million

in

2021

compared to

X in

2022?

[Anke Groth]

Yeah,

you

can

try

our

luck

and

maybe

I'll

give

you

a

little

bit

more.

It

gives you

a

more

complete

answer

with

the

€60 million.

I

think

you

misunderstood

it.

So

the

€60

million

we

said,

is

more

than

half

of

the

full year

impact,

so

you

can

easily

double

that

up

for

the

full year

impact.

But

I

would

expect

that

to

go

down

in

the

year

2022.

As

we

said,

it

was

really

–

we

were

hit

hard

in

Q4

on

the

SCS

side

with

respect

to

cost

increases,

particularly

for

some

sides

of

particular

customers

where

we

wanted

to

keep

the

schedule,

where

we

also

have

not

negotiated

a

postponement

of

certain

milestone

so

that

has

really

hit

us

hard

in

the

fourth

quarter.

And

I

see

some

spillover

effect,

as

I

said,

from

2021

projects

going

into

2022, where

we

will

also

see a

higher

cost

burden.

But

I

would

not

expect

to

see

that

in

the

full year,

so

to

say.

[Daniel Gleim, Analyst, Stifel Schweiz AG]

Very

clear.

Thank

you

very

much,

both

of

you.

[Operator]

Next

question

is

from

the

line

of

Jorge

Gonzalez

Sadornil

from

Hauck

Aufhäuser

Investment

Banking.

Please

go

ahead.

[Jorge Gonzalez Sadornil]

Hello.

Thank

you,

Rob

and

Anke,

for

taking

my

questions.

My

first

question

will

be

around

your

expectations

for

the

order

intake

evolution

of

Supply

Chain

Solutions

in

2022.

I

was

interested

to

know

if

you

see

a

softer

evolution

for

the

e-commerce

vertical,

taking

into

account

that

the

post-COVID

economy

scenario

that

we

currently

have

is

maybe

a

little

bit

worse

for

e-commerce

after

the

rapid

growth.

And

if

you

see

other

verticals

growing

faster

this

year,

it

would

be

interesting

to

have

some

feedback

about

that.

And

my

second

question

will

be

around

the

mix

for

industrial

truck

orders

in

2021.

You

show

us

that

the

volume

grew

51%,

but

if

I

remember

well,

the

orders

in

euros

grew

by

40-something

percent.

So

I

was

wondering

how

the

mix

has

changed?

If

this

is

going

to

[ph]



revert (00:52:07)

at

some

point,

and

if

that

is

going

to

mean

also

better

margins

maybe

in

the

future

when

the

mix

change

not

to

potentially

bigger

[indiscernible]



(00:52:19)

maybe you

can

tell

me

a

little

bit

more

on

this,

please?

[Anke Groth]

Okay.

Let's

have

a

[ph]



trial mail (00:52:27)

on

your

first

question

before

we

deep

dive

into

the

next

one.

e-commerce

is

still

a

very,

very

strong

vertical

of

ours

and

a

strong

growing

vertical.

So

e-commerce

and

what

we

call

general

merchandise,

you

can

also

somehow

put

that

together,

is

one

of

the

fast,

strong,

growing

verticals,

then

followed

by

grocery

and

food

and

beverage.

So

if

you

take

not

only

pure-play

e-commerce

but

also

look

at

general

merchandise

who

have to

go

into online

channel

fulfillment,

you'll

see

a

very

strong

growth

of

that

one.

If

we

go

into

the

mix

question,

I

would

say,

so

warehouse

is

slightly

down.

The

overall

trend,

nevertheless,

remains

that

the

warehouse

is

increasing

and

that

has

a

negative

effect

on

the

value;

not

on

the

numbers

and

units

of

trucks,

but

on

the

value,

as

the

warehouse

trucks

are

smaller

trucks

and

have

a

lower

average

sales

price.

Yeah.

And

maybe

if

we

have

not

hit

your

question

correctly

then

please

repeat

it.

[Jorge Gonzalez Sadornil]

No,

that's

perfect.

Yes.

I

was

wondering

if

it

is

because

you

are

selling

more

small

forklifts.

And

well,

from

now

on,

this

is

– maybe

there

is

not

going

to

be

the

correlation

between

now the

volumes

and

the

price.

[Anke Groth]

Yeah,

there

is

some

–

with

the

increase in

share of

warehouse

trucks,

there's

a little

bit

of

decoupling

absolutely.

So,

you

know

that

we

quite

often

talked

about

the

statistics

and

that

also

the

small

hand

pallet

trucks

getting

a

motor

are now

part

of

the

statistics

and

adding

to

the

units.

But

from

the

overall

pricing

position,

these

are

rather

very

low-value

trucks

and

all

of

that

has

–

yeah,

goes

into

the

numbers.

[Jorge Gonzalez Sadornil]

Thank

you very

much.

[Operator Instructions]

[Operator]

Next

question

is

from

the

line

of

Philippe

Lorrain

from

Berenberg.

Please

go

ahead.

[Philippe Lorrain]

Hey, good afternoon.

Thanks

for

taking

my

question.

That's

going

to

be

more on

the

working

capital.

I

was

wondering

a

little

bit

how

we

should

think

about

the

net

working

capital

in

2022.

Inventories

went

up

a

lot

in

2021

driven

by

all

positions,

and

that

was

especially

the

case

in

work

in

progress.

Payables

went

up

and

helped

a

bit,

but

looking

at

the

project

business

the

contract

balance

was

relatively

stable

because

new

orders

and

prepayments

finance

to

contract

assets

expansion.

So

is

there

anything

particular

to

expect

on

the

contract

balance

for

2022,

due

to

the

advancement

of

project

execution

and

also

on

the

remaining

working

capital

position,

so

perhaps,

probably

more

like

inventory?

That's

the

question.

[Anke Groth]

Hi.

Philippe.

Yeah,

inventories.

I

think

I

said

also

in

the

last

call

that

inventory

will

go

down.

Unfortunately,

I

was

proven

wrong.

We

see

parts

not

arriving

and,

therefore,

ending

up

with

a

high

number

of

unfinished

trucks

in inventory.

But

yes,

I

would

expect

that

to

go

down

during

the

course

of

this

year;

and

therefore,

giving

a

relief

there.

Contract

liabilities,

I

would

expect

to

go

rather

up,

so

inventory

down;

contract

liabilities

up.

And

let

me

make

one

remark.

If

we

look

at

SCS,

at

year-end

the

net working

capital

was

again

negative.

So

you

know

that

we

have

spoken

about

a

quite

unusual

pattern

during

the

year

2021,

but

at

year-end

it

was

negative

again.

So

SCS

is

contributing

negatively

to

our

working

capital.

And

that

is

also

expected,

of

course,

for

the

year

2022.

[Philippe Lorrain]

Yeah,

that's

a

fair

point.

So

you

said

like

contract

liability is

going

up,

but

what

about

the

contract

assets?

Would

that

go

up

as

well

like

in

line

with

that

so

that

we

still

keep

like

a

contract

balance

that is

perhaps

relatively

stable?

Or

would

there

be

like

a

real

shift

observed

in

the

contract

balance?

[Anke Groth]

I

would

rather

expect

a

positive

contract

balance.

[Philippe Lorrain]

So

more

growth

in

the

assets

then

or

how

do

you

understand

the

positive...

[Anke Groth]

No,

no,

no,

rather

on

a

stable

level.

[Philippe Lorrain]

Okay. Okay.

Perfect.

And just

in

terms

of

the

guidance,

so

that's

basically

what

you've

baked

into

your

free

cash flow

guidance,

I

guess, no?

[Anke Groth]

Yeah.

Sure.

Everything

we

know,

we

baked

into

the

guidance.

[Philippe Lorrain]

Okay.

And

these

bigger

fluctuations

that

you've

seen

especially

on

the

contract

balance

in

the

project

business,

is

that

leading

you

to

changing

your

view

perhaps

on

the

target,

let's

say,

kind

of

net

financial

leverage

for

the

business? Do

you

believe

perhaps

that

having

a

net

financial

leverage

that

doesn't

go

up

too

quickly

is

perhaps

the

right

thing

to

do

because

of

the –

we

have

potential

working

capital

fluctuation?

[Anke Groth]

I'm

not

100%

sure,

I

got

your

question.

Nevertheless,

let

me

try

and

answer.

So

if

we

look

at

our

net

financial

position,

you

have

seen

that

it

came

down

very

nicely

based

on

our

cash

flow

generation.

We

do

not

have

too

many

maturities

coming

up

this

year.

There

is

one-off

roughly

€90

million

promissory

notes

which

we

intended

to

pay

back.

Apart

from

that,

yes,

in

Q1

we

will

see

needs,

and

we

already

do

have

commercial

paper

out

and

so

on

in

order

to

finance

working

capital.

And

you

know

that

in

the

first

quarter

we

normally

are

negative

from

a

cash

perspective.

So

we

have

to

finance

working

capital

in

the

first

quarter.

But

that

is

following

the

usual

pattern

we

do

see

in

a

normal

year.

[Philippe Lorrain]

Yeah.

Sure.

Okay.

And

perhaps,

I'm

going

to try

again

like

on

the

topic

of

costs

and

so

on,

but

just

to

understand

a

bit.

So,

last

year

you

increased

prices

in

the

trucks

twice,

once

in

July

and

once

towards

year end,

that's

going

to be

effective

like

in

later

this

year.

If

cost

inflation

continues

to

be

a

topic

and

there is

no

normalization,

let's

say,

how

should

we

or

how

have

you

thought

about

the

guidance

on

the

profit

line?

And

should

we

expect

as

well

further

price

increases

perhaps

unscheduled

over

the

course

of

the

year,

and

hence

a

delay

again

in

building

up

the

margin?

[Anke Groth]

Rob

will

talk

about

the

agility

in

pricing.

And

yes,

we

have

two

price

increases

last

year.

The

second

one

is

now

visible

in

the

order

backlog

and

then

we

have

the

more

pronounced

one

at

the

beginning

of

this

year,

which

will

come

into

force

than

with

the

orders

more

towards

the

second

half

of

the

year,

more

towards

autumn.

But

we

also

will

be

much

more

agile

throughout

the

course

of

this

year,

and

I

hand

over

to

Rob

to

comment

on

that

one.

[Richard Robinson Smith, Chief Executive Officer, KION GROUP AG]

Yeah.

I

think

that

you're

talking

about

one

element

of

pricing.

I

think

you're

primarily

discussing,

in

previous

times

one

or

twice a

year

uplifts

on

the

list

price

of

new

trucks.

And

the

list

price

of

new

trucks

is

one

element or

many

elements

of

pricing.

And

agile

pricing

means

you

can

work

on

multiple

elements

and

you

can

do

that

at

quite

a

much

interesting

– more

interesting

frequency

than

once

or

twice

a

year.

Agility

means,

one

can

be

working

on

that

at

any

point

in

time

as

appropriate

to

get

the

balance

right

to

be

handling

the

productivity

and

material

costs

and

the

inflations

and

the

energy

costs

with

productivity

in

the

operations

and

the

supply

chain,

but

also

frequent

adjustments

and

agile

adjustments

on

the

pricing.

So,

that's

what

I

mean

by

agile

pricing

and

we'll

be

seeing

that

as

we

go

forward.

[Philippe Lorrain]

Okay.

So,

you

mean

like

[ph]



as well like (01:01:20)

prices

in

the

aftermarket

I

guess,

because

that's

the

one

that

you

can

probably

address

[indiscernible]



(01:01:26)?

[Richard Robinson Smith, Chief Executive Officer, KION GROUP AG]

That's

one

element

I'm

addressing.

I'm

addressing

basically

everything

besides

what

you

were

talking

about

with

primarily

just

new

list

prices

on

new

trucks.

And

there's

many

more

elements

commercially

that

can

be

addressed

in

an

agile

pricing

fashion.

[Philippe Lorrain]

Sure.

Okay.

And

perhaps

just

like

last

topic

because

you

mentioned

the

energy

costs.

Would

you

mind

giving

us

like

a

little

bit

of

a

hint by

how

much

you're

exposed

to

rise

energy

costs,

perhaps

electricity

versus

gas?

We

have

some

data

on

your

megawatt-hour

consumption

from

the

sustainability

report,

but

putting

a euro

median

amount

behind

that

could

be

helpful.

[Anke Groth]

Yeah. We

would

expect

that

we

are

rising

by

a

low

double-digit

million

euro

impact

this

year.

So

it's

not

the

highest

cost

for

us,

to

be

honest,

Philippe.

But

nevertheless,

it's

a

headwind

additionally

which

we

take

into

consideration.

[Philippe Lorrain]

Perfect.

Thanks

very

much. I'm back in the

queue.

[Operator]

In

the

interest

of

time,

we

have

to

stop

the

Q&A

right

now,

and

I

would

like

to

hand

back

to

Rob

Smith

for

closing

comments.

Please

go

ahead.

[Richard Robinson Smith, Chief Executive Officer, KION GROUP AG]

Thank

you,

Stuart,

and

thank

you

very

much

for

joining

our

call

today.

We're

really

excited

about

the

2021

performance

and

results

that

we

described

earlier

today;

record

elements

in

that.

And

we're

very

focused

on

delivering

our

2022

prognosis

as

we've

shared

in

route

to

deliver

in

the

2023

mid-term

objectives

that

I

and

our

KION

team

stand

fully

behind.

I'm

looking

forward

to

seeing

many

of

you

when

we're

out

and

about

in

the

next

couple of

weeks

in person,

and

look

forward

to

picking

up

these

conversations

then.

Thanks

for

coming

and

thanks

for your

time

and

your

very

good

questions.

Bye-bye.

[Operator]

Ladies

and

gentlemen,

the

conference

is

now

concluded,

and

you

may

disconnect

your

telephones.

Thank

you

for

joining

and

have

a

pleasant

day.

Goodbye.