Opportunity and risk report
As a result of the coronavirus pandemic, the KION Group’s risk situation has changed compared with the description in the 2019 annual report, particularly with regard to market risk, sales risk, procurement risk, and production risk. The changes in these general risks affect both segments. As things stand at present, there are no indications of any risks that could jeopardize the Company’s continuation as a going concern. The KION Group’s overall opportunity situation has not changed significantly compared with the description in the 2019 annual report.
Macroeconomic conditions deteriorated considerably in the first nine months of 2020 and the market outlook is very uncertain. The KION Group therefore assumes a higher level of market risk than it did at the end of 2019. Another market downturn could compound customers’ already noticeable reluctance to invest – especially in the more cyclical Industrial Trucks & Services segment – and thus have an adverse impact on demand for the KION Group’s products. The KION Group reacted quickly to the changes in demand by taking various measures to adjust its costs. It is continuing to monitor the geopolitical situation, market, and competitive environment very closely so that it can respond promptly and appropriately to any changes.
Given the challenging macroeconomic environment, there is a heightened risk that customers will cancel or postpone orders. Although there are no indications of major problems arising from changes to existing orders at present, the KION Group is continuing to engage in dialog with its customers and monitoring the situation closely.
Any new wave of infection resulting in either government or customer-imposed restrictions might prevent or limit the access to customers’ premises that is needed to perform contractually agreed work. This gives rise to heightened revenue risk for both segments.
Governments responded to the coronavirus pandemic with extensive containment measures that disrupted and blocked global supply chains. In the remaining months of the year, the KION Group believes it may continue to face a greater risk of delivery backlogs or non-fulfillment of deliveries in respect of individual commodities or components, depending on how the pandemic progresses. It is mitigating this risk by continually monitoring supply chains, the availability of materials, and suppliers’ ability to fulfill orders. For critical materials, it has also increased its buffer of inventories and set up dedicated project teams whose job it is to ensure the supply of materials in the production plants and at suppliers’ sites.
The KION Group continues to anticipate a heightened risk of disruption to operating processes and production outages at individual sites. These could be caused by comprehensive government-imposed restrictions and directives or by chains of infection occurring within the workforce, or may arise as secondary risks resulting from the aforementioned procurement risks. The KION Group has introduced extensive organizational measures to ensure compliance with hygiene rules and make working hours more flexible. It has also put processes in place to ensure a sustained improvement in the availability of materials. In terms of personnel, the measures taken to protect the Group’s workforce are proving effective and no chains of infection have occurred in production operations so far.