Kion's Second Quarter Was Out of Step; Price Increases Have Yet to Reach Order Execution

Kion Group posted poor second-quarter results with the unfortunate timing difference between price increases and order book execution partly to blame. Revenue growth was just 1% on an organic basis based on our calculations. While the company has been putting through price increases, the second-quarter margins did receive the benefit with revenue generation coming from the 2021 order book that the company is still working through. The group adjusted EBIT margin was down 450 basis points in the quarter to 5%, contributing to a negative free cash flow of EUR 159 million. We recently lowered our forecasts and fair value estimate, now standing at EUR 62 to reflect our waning confidence in execution particularly on margin management. Early this year, Kion management withdrew its full-year guidance due to the uncertain market environment, while the group's CFO left in March. The CEO, who just started his position in January of this year, is acting in both roles while the CFO search continues. We maintain our narrow moat rating.