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Kion's half-yearly report (key data communicated on July 13, full report submitted on 30th) reflected the damage caused by Covid-19 across all customer sectors. The activities of Supply Chain Solutions (brand/operating unit: Dematic; automation technology, software and services for supply chain systems) proved to be an anchor of stability to both revenue and earnings level.

The Supply Chain Solutions segment succeeded in a first half of the year (H1) with strong order dynamics due to the acquisition of major orders in North America as well as in Europe (major e-commerce addresses). In Q2, the order volume more than doubled: Adjusted for currency effects, an increase in value of 107% was achieved. Revenues declined by 1.7% to EUR 635m. In the meantime, projects for automation solutions have been postponed (orders from the clothing and consumer goods industries). The adjusted EBIT margin decreased by 1.6 percentage points to 8.4% after currency adjustments. Isolated to one quarter, the data of this segment, which is characterized by major orders and their customer's demand (percentage of completion; project duration six to twelve months), are modest – but more essential is that Dematic has been moving in the right direction for almost two years. The major projects acquired at the end of 2019 and in H1/2020 are scheduled for completion in 2021. In the medium term it is planned to expand Dematic's capacity in such a way that project volumes totalling EUR 1.0 billion can be processed per quarter.

For Industrial Trucks & Services, the market signals had been pointing towards a downturn since Q1/2019. Covid-19 has now led to a intensification in Q2/2020: Cumulatively across all suppliers, orders for material handling equipment in Western Europe plunged by 29.0% in terms of unit sales (vs. prior year). The slump affected Kion in Western Europe (Q2 unit sales: -29.8%), Eastern Europe (-18.9%) and especially in the USA and Canada (-38.9%). Orders in China recovered well compared to the first quarter of the year. In terms of value and adjusted for currency effects, order intake in Q2 declined by 18.8% worldwide. Revenue from new orders for material handling equipment slumped by 33.7%, while high-margin service revenue (maintenance, spare parts, rental vehicles) declined by 13.8%. In the end, segment revenue shrank by 21.8% after adjustment for currency effects. The adjusted EBIT margin of 1.2% achieved for this segment (adjusted for currency effects) decreased by 9.5 percentage points. This reflects the massive deterioration in fixed cost degression. Production inefficiencies due to bottlenecks in supplier products also played a role.

Kion failed to provide a full-year outlook in the context of the half-yearly report - something we can understand in view of the situation determined by Covid-19. In April, Kion had cashed the full-year outlook that had only been formulated at the beginning of March. In principle, the company is concentrated on the customer group of trade/logistics and are not directly linked to the cycles of the manufacturing industries. The problem of underutilisation of growth-oriented capacity (expensive adjustment measures) manifested itself in the large number of fractions - a downturn in the wholesale and retail trade following the decline in employment in the manufacturing industries, non-delivered components/systems. Dematic's strong order momentum provided a ray of hope. In view of the devastating revenue and profit performance of the forklift truck business in the first half of the year due to market conditions, and in view of a further darkening of the outlook, we maintain our sceptical valuation assessment.


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