[13] Financial expenses

Financial expenses break down as follows: >> Table 049

Interest expenses arising from loan liabilities essentially include interest costs of €32.4 million arising from variable-rate loan liabilities under the senior facilities agreement (2012: €101.2 million) and losses of €26.7 million on interest-rate swaps (2012: €19.9 million).

Financial expenses were negatively affected by a number of non-recurring items totalling €57.5 million in 2013. The remeasurement of the options in connection with the 30 per cent equity investment in Linde Hydraulics resulted in an expense of €14.7 million in 2013 that is reported under other interest expense and similar charges. Repayment in full of the long-term bank loans under the acquisition finance arrangements (Senior Facilities Agreement or SFA) and the early redemption of the 2011/2018 floating rate note resulted in deferred borrowing costs of €24.5 million being recognised as an expense as amortisation of borrowing costs in 2013. In addition, interest-rate hedging instruments that had been used in the past for the acquisition finance arrangements were ended prematurely, which led to an amount of €18.3 million being recognised under financial expenses as interest expenses arising from loan liabilities. Adjusted for these three non-recurring items, net financial expenses amounted to €162.4 million in 2013, compared with €238.2 million in 2012. This sustained reduction in net financial expenses was due, in particular, to conversion of the shareholder loan of €670.8 million provided by Superlift Holding S.à r.l. into equity at the end of 2012, conversion of the loan provided by Superlift Holding to Superlift Funding (tranche G) into equity, full repayment of the acquisition finance and cheaper funding under the new loan facility.

Net interest expense from retirement benefit obligations relates to the net interest cost of the net liability of pension plans applying the discount rate for plans in which pension obligations exceed plan assets.

The interest cost of leases relates to the interest portion of lease payments in financial services transactions in which the material risks and rewards are borne by KION Group companies as lessees (finance leases). Sale and finance leaseback-operating sub-leases (SALB-FL-OL) incurred interest expenses of €24.0 million (2012: €20.7 million). The income from corresponding customer agreements is, according to IAS 17, a component of the rental and lease payments received and is therefore reported within revenue rather than as interest income.

The foreign currency exchange rate losses – financing – include losses on derivative financial instruments amounting to €6.6 million (2012: €7.6 million).