Financial position
Principles and objectives of financial management
The KION Group pursues a sound financial policy of maintaining a strong credit profile with reliable access to capital markets. By pursuing an appropriate financial management strategy, the KION Group makes sufficient cash and cash equivalents available at all times to meet the Group companies’ operational and strategic funding requirements. As part of its financial management activities, the KION Group aims to continually reduce its financial liabilities and, to an increasing extent, optimize the financing of the long-term leasing business. In addition, the KION Group manages its financial relationships with customers and suppliers and mitigates the financial risk to its enterprise value and profitability, notably currency risk, interest-rate risk, price risk, counterparty risk, and country risk. In this way, the KION Group creates a stable funding position from which to maintain profitable growth.
The financial resources within the KION Group are provided on the basis of an internal funding approach. The KION Group collects liquidity surpluses of the Group companies in central or regional cash pools and, where possible, covers subsidiaries’ funding requirements with intercompany loans. This funding enables the KION Group to present a united front in the capital markets and strengthens its hand in negotiations with banks and other market participants. The Group occasionally arranges additional credit lines for KION Group companies with local banks or leasing companies in order to comply with legal, tax, and other regulations.
The KION Group is a publicly listed corporate group and therefore ensures that its financial management takes into account the interests of shareholders, the banks providing its funding, and other lenders. For the sake of all 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 generally long-term approach, with an age structure extending until 2027.
Depending on requirements and the market situation, the KION Group also avails itself of the funding facilities offered by the capital markets. The KION Group therefore seeks to implement proactive risk management by rigorously pursuing its corporate strategy and to maintain an investment-grade credit rating in the capital and funding markets by ensuring a solid funding structure.
The KION Group continues to have an investment-grade credit rating that helps it to secure more advantageous funding conditions in the capital markets. In October 2020, Fitch Ratings reaffirmed the Group’s long-term issuer default rating of BBB– with a stable outlook and its short-term issuer default rating of F3. The new bond placed by KION GROUP AG in September was given a rating of BBB–. Standard & Poor’s confirmed KION’s issuer rating of BB+ with a stable outlook in November 2020 and awarded a senior unsecured rating of BB+.
KION GROUP AG has issued guarantees to the banks and other lenders for all of its payment obligations to them and is the borrower in respect of all the payment obligations resulting from the promissory notes.
The KION Group maintains a liquidity reserve in the form of agreed and confirmed credit lines and cash in order to ensure long-term financial flexibility and solvency. In addition, it uses derivatives to hedge currency risk. Interest-rate swaps are entered into in order to hedge interest-rate risk.
Certain loans and promissory notes taken out by KION GROUP AG stipulate adherence to covenants. The agreed financial covenant involves ongoing testing of adherence to a defined maximum level of leverage. Less favorable interest terms may be imposed if this level of leverage is increased. Exceeding the maximum level of leverage as at a particular reference date may give lenders a right of termination. In May 2020, the financial covenant in respect of the current credit facility and the additional, now terminated liquidity line was temporarily suspended as agreed with the banks providing the funding. This suspension was still in effect at the reporting date.