Investor Handbook September 2015

Investor Handbook September 2015

Disclaimer

This Investor Handbook is issued by the management of Kardex AG. It is being made available to current Kardex AG shareholders as well as persons who are evaluating the possibility to enter into a shareholder relationship with Kardex AG and thus making their own opinions on the transaction, for which they ultimately hold full responsibility. This document is for information purposes only and does not constitute or form part of, and should not be construed as an offer or invitation to subscribe or purchase any securities of Kardex AG in Switzerland or in any other jurisdiction. It should, therefore, not form the basis of any investment decision for shares of Kardex AG. This document contains forward-looking statements. These statements are based on information currently available to our management as well as on management’s current assumptions and forecasts. Various known and unknown risks, uncertainties and other factors could lead to material differences between our actual and future results, financial situation, development or performance and the estimates given in this document. Kardex AG does not assume any liability to update forward-looking statements or other information in this document or to confirm such forward-looking statements or other information to future events or developments. This document does not purport to be inclusive or to contain all the information which a prospective investor would require. Neither Kardex AG nor any of their officers, directors, employees or agents may guarantee the accuracy or completeness of this handbook or any part thereof, and each therefore rejects liability concerning such information. The distribution of this document may be restricted by law. Any persons reading this document should inform themselves of and observe any such restrictions.

Kardex AG Thurgauerstrasse 40 CH-8050 Zürich Tel. +41 (44) 419 44 44 www.kardex.com [email protected]

Version 4, September 2015

Investor Handbook September 2015

Table of Contents

Summary

6

1.1

1

Kardex in brief

6

1.2

Business model and strategy

6

1.3

Strategic drivers for growth and profitability

7

1.4

Key trends: increasing automation – with a strong need

7

1.5

for reduction of complexity Differentiating factors

8

Key figures and share information

9

2

9

2.1

Key figures at a glance

2.2

Financial highlights 2014

10

2.3

Consolidated balance sheet

11

2.4

Segment reporting 2014/Income statement

12

2.5

Segment reporting 2013/Income statement

13

2.6

Information on the Kardex share

14

2.7

Attractive dividend policy

16

3 3.1

Kardex strategic themes and the Equity Story

17

Introduction

17

Organizational Structure

17

3.2

Group mission

17

3.3

Divisional strategies

17

3.3.1

Main Strategic Projects 2015/2016 Remstar

17

3.3.2

3.1.1

Main Strategic Projects 2015/2016 Mlog

18

3.4

Key trends: increasing automation – with a strong

18

3.5

need for reduction of complexity An attractive market with long-term potential

18

3.6

Unique existing customer base is a key asset

19

3.7

The turnover mix of the divisions will change

20

3.8

Target markets

21

3.8.1

Remstar

21

3.8.2

Mlog

22

3.9 3.10

Financial targets (over the cycle)

22

Attractive dividend policy

22

Company description and management

23

4.1

4

Kardex in brief

23

4.2

Overview products and services

24

4.3

Historical evolution

24

4.4

Group structure

25

4.5

The divisions

26

4.5.1

Kardex Remstar

26

4.5.1

Kardex Mlog

31

Board of Directors and Executive Committee

34

Members of the Executive Committee

36

Capital structure

37

4.6 4.6.1 4.7 5

Industry Outlook

38

Material Handling Equipment Manufacturing (MHEM) industry

38

Type of products

38

MHEM market fundamentals

39

5.2.1

Sound global demand

39

5.2.2

Rising warehouse capacity

41

5.2.3

Cyclicality of the MHEM industry

42

Emerging trends

43

5.3.1

Improvement in efficiency needed due to surging costs

43

5.3.2

New projects, refurbishment and modernization of warehouses

43

5.3.3

Increasing use of automation

44

5.3.4

Specific stand-alone subsystems getting more important

45

After-sales service and support

46

Trends in after-sales services

47

5.1 5.1.1 5.2

5.3

5.4 5.4.1

Peer Analysis

51

6.1

6

Competition occurs mostly on division level

51

6.2

Current Strategic Positioning of Selected Segment Players

52

6.3

Peer profiles

52

SWOT Analysis

56

7

Investor Handbook September 2015

1 Summary

1.1

Kardex in brief Kardex is a leading provider of automated storage, retrieval and materials handling systems. With two entrepreneurial managed divisions, the Group developed from a product and service supplier into a globally acting industry partner with an attractive product, service and software offering under the Kardex brand name. Kardex is well positioned to grow in a market with strong fundamentals and as such will be able to achieve attractive financial returns. With over 100 000 installed Kardex Remstar machines and 900 Kardex Mlog warehouses including more than 2 000 stacker cranes, the Group has a broad existing customer base that needs ongoing after-sales services. Kardex is listed on the SIX Swiss Exchange since 1987.

Business model and strategy The mission of the Kardex Group is to provide solutions and services in order to increase the efficiency in storing and handling of goods and materials on a global scale. Kardex Remstar and Kardex Mlog are leading providers of solutions and services for automated storage, retrieval and materials handling. The Kardex portfolio includes products for heavy and light loads, software solutions, systems and life cycle services. Based on a comprehensive product and service offering, the divisions aim to serve their clients as a life-time partner for warehousing solutions; starting from consulting to implementation through to service and life cycle management. In order to maintain and strengthen its competitive position through technological innovation and customer loyalty, the Group is substantially investing in R&D activities as well as in the expansion of its service organization.

Compr ehe nsi ve Ne ed

al on iti

So lu ti

g rin fe Of

Ad d

n tio iza n er eds Ne od

s on

M

The Kardex business model

g

nn in

i bi

lit y

Pl a

ex

Fl

it y I m ple

m en t a tio n

Reliability

Efficient Solu tion s P rov ide r

bil

it y

il a

bil

A va

la va i H ig h A

& Sp e ed

Client‘s Solution Life Cycle

Se r v i c e

Efficient Life Cyc le M ana ge me nt

1.2

1.3

Strategic drivers for growth and profitability To meet its key goals, the Group has defined six strategic drivers to exploit growth and profit opportunities. 1. The service organizations and after-sales services will be further strengthened on a global scale. 2. Product innovation is focused on speed and availability to meet the clients’ very first needs. 3. The sales approach is increasingly focused on dedicated industry group solutions. 4. Efficiency programmes, ongoing process optimization efforts and the centralization of the Group’s procurement activities are expected to yield in cost reductions. 5. Marketing efforts have started to penetrate additional markets with a focus on emerging economies especially in Asia and Eastern Europe 6. Management development programmes on all levels strengthen Kardex’s reputation as premium employer and to attract good talents in the market.

1.4

Key trends: increasing automation – with a strong need for ­reduction of complexity Storage, retrieval and product handling is a key cost and efficiency factor, not only in traditional production and distribution facilities but increasingly also for service providers and in new (e.g. internet-based) business models. Many of these companies have to invest in modernizing their storage and warehouse facilities in the coming years. Costs can be reduced by further automation of such facilities in order to save space and increase the availability of the stored goods. Even in Central Europe only 30% of all distribution centres and warehouses have been automated so far, the global average is at only about 10%. But the rising labour and storage costs are making automation increasingly popular in the rest of Europe, the Americas and Asia/Pacific. A second, newer trend follows the crucial requirements for effective logistics: companies have to deliver in full and on time. But at the same time they have to cope with increased diversification and complexity. For logistics this causes high requirements regarding storing security, flow tracking, transparency and reliability of delivery.

Investor Handbook September 2015

1.5

Differentiating factors Strong market positions Kardex Remstar is a global market leader for dynamic storage, retrieval and material handling solutions. Kardex Mlog has a leading position in Central Europe for automated stacker cranes, conveyor systems and automated material handling systems. Large installed base The large existing customer base provides future revenue generating prospects through the delivery of after-sales services, refurbishment as well as new solutions to meet changing customer requirements in the two divisions of the Group. Customized solutions Each division separately as well as combined offers of the divisions are well positioned to increase the market demand for stand-alone subsystems for specific industry and service segments. Brand visibility The Kardex brand family has been unified. A new corporate identity has been launched in 2011 and further enhanced the Group’s visibility on a global scale. Global footprint Kardex’s global footprint offers a strong basis to provide sales and service worldwide.

2 Key figures and share information 2.1

Key figures at a glance Net revenues by divisions

Operating result (EBIT)

in EUR millions

in EUR millions

500

40

400

30

300

20

200

10

100

0

0

–10 10

11

12

13

14

10

Kardex Remstar Kardex Mlog (as of May 2010) Kardex Stow (till July 2013)

11

12

13*

14

 ardex Group without Stow K Kardex Stow * without gain of sale of the Kardex Stow Division

Net cash flow from operating activities

Equity and equity ratio

in EUR millions

in EUR millions and in %

40

150

30

120

20

90

10

60

55.9

59.4

36.2 30

0

25.5 14.6

0

–10 10

11

12

13*

14

Kardex Group without Stow Kardex Stow

10

11

12

13

14

Equity Equity ratio in %

 ithout gain of sale of the * w Kardex Stow Division

Net revenues by segments

Net revenues by regions

Business year 2014 in %

Business year 2014 in %

6.2

18.6

2.8

12.5

81.4

Kardex Remstar Kardex Mlog

78.5

Europe Americas Asia/Pacific Middle East and Africa

Investor Handbook September 2015

2.2

Financial highlights 2014

Positive development in the intralogistics market continues

Kardex Remstar enjoys profitable growth

Kardex Mlog confirms its turnaround

Increased service share reduces cyclicality

Strong balance sheet and stable free cash flow enable an increase in the payout ratio

Key figures (Continued Operations) EUR millions 1.1.–31.12.

2014

2013

+/– %

Bookings

308.9

100.3%

301.5

99.8%

2.5%

Order backlog (31.12.)

107.8

35.0%

108.0

35.7%

–0.2%

Net revenues

308.0

100.0%

302.1

100.0%

2.0%

Gross Profit

102.8

33.4%

96.1

31.8%

7.0%

OPEX

74.3

24.1%

71.9

23.8%

3.3%

Operating result (EBIT)

28.5

9.3%

24.2

8.0%

17.8%

EBITDA

34.6

11.2%

30.4

10.1%

13.8%

Result for the period (net profit)

23.8

7.7%

19.9

6.6%

19.6%

Net cash flow from operating activities

28.3

28.2

0.4%

33.4%

28.7%

16.4%

ROCE

31.12.2014

31.12.2013

+/– %

Net working capital

56.9

54.4

4.6%

Net cash

85.1

77.0

10.5%

Equity/Equity ratio

115.8

Employees (FTE)

1 480

59.4%

106.9 1 447

55.9%

8.3% 2.3%

2.3

Consolidated balance sheet Year ended 31st December (amounts in EUR millions)

EUR millions

Property, plant and equipment (PPE)

31.12.2014

31.12.2013

24.6

25.1

Intangible assets

2.6

3.5

Financial assets

4.6

6.0

Non-current assets

31.8

34.6

Inventories and work in progress

17.6

18.6

Trade accounts receivable

48.1

49.4

Other receivables

10.5

7.4

Prepaid expenses

2.0

2.2

85.1

79.1

Current assets

163.3

156.7

Assets

195.1

191.3

Cash and cash equivalents (CCE)

  Share capital

59.9

59.9

Capital reserves

34.4

51.2

Retained earnings and Translation differences Equity Non-current financial liabilities

21.5

–4.2

115.8

106.9

–

2.1

Non-current provisions

16.4

18.3

Non-current liabilities

16.4

20.4

Trade accounts payable

10.7

13.9

Current provisions Accruals Other current liabilities Current liabilities Liabilities Equity and liabilities

6.5

6.0

28.2

26.8

17.5

17.3

62.9

64.0

79.3

84.4

195.1

191.3

Investor Handbook September 2015

Segment reporting 2014/Income statement

Kardex Mlog

Eliminations

Continued Kardex Group

Kardex AG Zurich (Holding)

Operating segments

Kardex Remstar

2.4

185.9

55.7

–

–

241.6

– Americas

38.5

0.1

–

–

38.6

– Asia/Pacific

19.2

–

–

–

19.2

7.2

1.4

–

–

8.6

250.8

57.2

–

–

308.0

0.2

0.9

–

–1.1

–

251.0

58.1

–

–1.1

308.0

–158.8

–47.5

–

1.1

–205.2

92.2

10.6

–

–

102.8

36.7%

18.2%

Marketing and sales expenses

–35.4

–4.5

–

–

–39.9

Administrative expenses

–21.1

–3.2

–4.0

1.8

–26.5

–6.3

–0.7

–

–

–7.0

1.0

0.1

1.8

–1.8

1.1

–1.8

–0.4

0.3

–0.1

–2.0

28.6

1.9

–1.9

–0.1

28.5

11.4%

3.3%

EUR millions

Net revenues, third party – Europe

– Middle East and Africa Total net revenues, third party Net revenues, with other operating segments Net revenues Cost of goods sold and services provided Gross profit Gross profit margin

R&D expenses Other operating income Other operating expenses Operating result (EBIT) EBIT margin

33.4%

9.3%

Financial result, net

0.1

Result for the period before tax

28.6

Income tax expense

–4.8

Result for the period

23.8

Depreciation and amortization EBITDA EBITDA margin

5.2

0.7

0.2

–

33.8

2.6

–1.7

–0.1

13.5%

4.5%

6.1 34.6 11.2%

2.5

Segment reporting 2013/Income statement

Kardex Mlog

Eliminations

Continued Kardex Group

­D iscontinued Kardex Stow

Eliminations

Kardex Group

Kardex AG Zurich (Holding) Gain from divestment

Kardex Remstar

Kardex AG Zurich (Holding)

Operating segments

174.0

60.8

–

–

234.8

82.1

–

–

316.9

– Americas

35.5

3.8

–

–

39.3

4.1

–

–

43.4

– Asia/Pacific

17.0

–

–

–

17.0

8.5

–

–

25.5

8.9

2.1

–

–

11.0

2.5

–

–

13.5

235.4

66.7

–

–

302.1

97.2

–

–

399.3

–

0.3

–

–0.3

–

0.8

–

–0.8

–

Net revenues

235.4

67.0

–

–0.3

302.1

98.0

–

–0.8

399.3

Cost of goods sold and services provided

–149.9

–56.4

–

0.3 –206.0

85.5

10.6

–

36.3%

15.8%

Marketing and sales expenses

–35.1

–5.1

–

Administrative expenses

–20.9

–3.2

–4.0

–4.9

–0.8

–

1.5

0.5

3.0

EUR millions

Net revenues, third party – Europe

– Middle East and Africa Total net revenues, third party Net revenues, with other operating segments

Gross profit Gross profit margin

R&D expenses Other operating income Other operating expenses Operating result (EBIT) EBIT margin

–80.4

–

0.8

–285.6

96.1

17.6

–

–

113.7

31.8%

18.0%

–

–40.2

–9.5

–

–

–49.7

1.7

–26.4

–3.7

–

0.4

–29.7

–

–5.7

–0.2

–

–

–5.9

–1.7

3.3

1.2

8.8

–0.4

12.9

–

28.5%

–2.1

–0.8

–

–

–2.9

–0.6

–

–

–3.5

24.0

1.2

–1.0

–

24.2

4.8

8.8

–

37.8

10.2%

1.8%

8.0%

4.9%

9.5%

Financial result, net

–2.0

Result for the period before tax

35.8

Income tax expense

–4.3

Result for the period

31.5

Depreciation and amortization EBITDA EBITDA margin

5.4

0.6

0.2

–

29.4

1.8

–0.8

–

12.5%

2.7%

6.2

2.1

–

–

30.4

6.9

8.8

–

10.1%

7.0%

8.3 46.1 11.5%

Investor Handbook September 2015

2.6

Information on the Kardex share Share capital and capital structure 2014

Par value per share (CHF) Total registered shares

2013

2012

2011

2010

11.00

11.00

11.00

11.00

11.00

7 730 000

7 730 000

7 730 000

7 730 000

5 627 453

Number of treasury shares

–

–

21 500

3 149

15 364

7 730 000

7 730 000

7 708 500

7 726 851

5 612 089

Registered capital (CHF 1 000)

85 030

85 030

85 030

85 030

61 902

Conditional capital (CHF 1 000)

–

–

–

–

9 900

Number of dividend – bearing shares

Authorized capital (CHF 1 000)

–

–

–

7 823

–

7 730 000

7 730 000

7 708 500

7 726 851

5 612 089

CHF

2014

2013

2012

2011

2010

Share price high

47.55

44.35

26.70

32.00

39.25

Share price low

37.60

23.05

11.65

10.60

23.10

Closing rate

46.25

39.20

24.40

11.95

30.30

Total voting rights

Key stock exchange figures per share

Average volume per trading day (no. of shares)

14 719

23 239

30 242

11 617

7 712

Market capitalization – CHF millions (31.12.)

357.51

303.02

188.61

92.37

170.51

2014

2013

2012

2011

2010

Earnings per share (EPS)2 – basic

3.74

4.95

3.34

0.59

–2.25

Earnings per share (EPS)2 – diluted

3.74

4.95

3.34

0.59

–2.25

12.34

7.93

7.32

24.97

–

Key figures per share CHF

Price earning ratio (closing rate) Dividend

3

Extraordinary dividend Nominal value reduction3 Equity

1.65

1.25

1.20

–

–

–

1.40

4.00

–

–

0.65

–

–

–

–

18.01

16.89

13.35

10.20

8.03

1

The Kardex Group consisted from May 2010 till July 2013 of the divisions Kardex Remstar, Kardex Stow and Kardex Mlog. Before May 2010 Kardex Mlog was not part of the Group and since July 2013 the Kardex Stow Division does not belong to the Group anymore. Those changes are affecting the comparison of the key figures per share.

2

 C alculated by the generally accepted method (net result/average number of outstanding shares).

3

 2014: Payouts funded by withdrawal from the capital contribution reserve and a nominal value reduction as proposed to the Annual General Meeting held on 23 April 2015.

The registered shares of Kardex AG are traded in the Domestic Standard of Six Swiss Exchange in Zurich. They are contained in the SPI (Swiss Performance Index). Stock exchange symbol: KARN; Swiss securities number: 10083782; ISIN number: CH0100837282; Bloomberg: KARN SW Equity; Reuters: KARN.S. Current prices can be seen at www.kardex.com.

Share price performance Kardex AG (Holding) share On SIX Swiss Exchange 1.1.2014 to 28.2.2015 based on the weekly closing price in CHF CHF 60

40

20

0 Aug. 10

Aug. 11

Aug. 12

Registered shares of Kardex AG (KARN)

Aug. 13

Aug. 14

Aug. 15

Swiss Performance Index (SPI)

The value of the Kardex share rose by 18.0% from CHF 39.20 to CHF 46.25 in 2014. In the year under review Kardex paid in May a dividend of CHF 1.25 per share and an extraordinary dividend of CHF 1.40 per share. Both payouts were made from capital contribution reserve. The overall performance for the year was 24.7%. Shareholder structure As at 31 December 2014, there were 1 566 shareholders (1 745) entered in the share register. The following shareholders held 3% or more of the outstanding share capital of Kardex AG at year end: 31.12.2014

31.12.2013

23.6%

22.9 %

BURU Holding and Philipp Buhofer JP Morgan Asset Management

5.0%

1

LB (Swiss) Investment AG1 1

3.0 %

A s soon as the stake falls below the threshold of 3%, the stake is not reported anymore.

Contact Kardex AG Thomas Reist, Head of Finance & Controlling Edwin van der Geest, Investor Relations Tel. +41 44 419 44 79 [email protected] Contact share register ShareCommService AG, Europastrasse 29, CH-8152 Glattbrugg Tel. +41 44 809 58 53 Corporate calendar Calendar of events for Investor Relations

2016 Media and analysts’ conference

10 March 2016

2016 Annual General Meeting

21 April 2016

2016 Interim Report

11 August 2016

Investor Handbook September 2015

2.7

Attractive dividend policy In 2015 the board of directors decided to raise the pay-out ratio for the distribution of dividends from 35% to up to 75% of the operational net profit (on the basis of the consolidated income). Kardex Group: Dividend pay-outs 2010–2014 EUR millions 100

93.9

80

60

34 40 11.5

28.4

23.7 23.8

21.4

16.9

20 7.7 7.9 0 2012 Free Cash Flow

2013 Net profit

Dividend (related to financial year)

2013: Special dividend pay-out related to the sale of Stow

2014

3 Kardex strategic themes and the Equity Story 3.1

Introduction Kardex is a leading provider of automated storage, retrieval and materials handling systems. With two entrepreneurial managed divisions, the Group developed from a product and service supplier into a globally acting industry partner with an attractive product, service and software offering under the Kardex brand name. Kardex is well positioned to grow in a market with strong fundamentals and as such will be able to achieve attractive financial returns. With over 100 000 installed Kardex Remstar machines and 900 Kardex Mlog warehouses including more than 2 000 stacker cranes, the Group has a broad existing customer base that needs ongoing after-sales services. This helps to reduce the cyclicality of the business. With three production sites, service centres in all important markets and a workforce of more than 1 400 employees around the globe Kardex can rely on a globalized production and service system, which reduces risk and currency exposure and can serve its customers around the clock as well.

3.1.1 Organizational Structure The Kardex Group consists of two entrepreneurial managed divisions, organized under the roof of a Holding Company. The divisions run as stand-alone units with full P&L and balance sheet responsibility. All necessary functions to conduct a business on a stand-alone basis are under control of the divisional management except the financing and treasury functions. The central functions managed at holding level are kept at a minimum. Only finance functions (financing, controlling, treasury, consolidation, financial communication and allocation of resources) are centralized at Group level. Group Management (Executive Committee) consists of the Executive Director (Delegierter des Verwaltungsrates) and the two Divisional Managers.

3.2

Group mission The mission of the Kardex Group is to provide solutions and services to increase the efficiency in storing, retrieval and handling of goods and materials on a global scale. Based on a comprehensive product and service offering, the divisions aim to serve their clients as lifetimepartner for warehousing solutions starting from consulting to implementation through to service and life cycle management.

3.3

Divisional strategies

3.3.1 Main Strategic Projects 2015/2016 Remstar Remstar will continue its profitable growth path in 2015/2016. There will be a continued sales push in North America and Asia/Pacific alongside an effort to (recover)/stabilize business in the Middle East and Africa. With the proceeding development of the light goods product family and improvement of the life cycle service product portfolio, Remstar will further strengthen its transition from a product to an application provider. There will also be a continued effort on expanding the OEM business unit. Remstar target is to achieve sustainable EBIT-margins in the target range of 7%–12%.

Investor Handbook September 2015

3.3.2 Main Strategic Projects 2015/2016 Mlog Mlog is pursuing the development of three main growth elements; components, stand-alone subsystems and life cycle services. There will be an effort to strengthen partner management with system integrators for the components business and stand-alone sub-systems, as well as an enhanced in-house focus of the product management on pushing the components and stand-alone business. Mlog will further reinforce the, in 2014 successfully implemented, sales organization for the service and refurbishment business. Mlog target is to achieve sustainable EBIT-­margins in the target range of 4%–6%.

3.4

Key trends: increasing automation – with a strong need for ­reduction of complexity Storage and product handling is a key cost and efficiency factor, not only in traditional production and distribution facilities but increasingly also for service providers and in new (e.g. internet-based) business models. Many of them have to invest in modernizing their storage and warehouse facilities in the coming years. Costs can be reduced by further automation of such facilities in order to save space and increase the availability of the stored goods. Further key functions to operate a warehouse more efficiently are increasing the picking and commissioning speed of the goods as well as overall access time to goods. Companies with a manufacturing basis in high cost countries in Central Europe were the main drivers of the automation trend. The rest of Europe, North America and increasingly also Asia/Pacific and South America are following this trend. However, even in Central Europe only 30% of all distribution centres and warehouses have been automated so far, the global average is at only about 10%. A second, newer trend follows the crucial requirements for effective logistics: companies have to deliver in full and on time. But at the same time they have to cope with increased diversification and complexity: In distribution centres more articles in smaller amounts have to be handled faster, in manufacturing sites production is more and more individualised (e.g. car industry). For logistics this causes high requirements regarding storing security, flow tracking, transparency and reliability of delivery. In contradiction, the systems have to be easy to operate. This results in a growing demand for lower complex systems that can be overseen and managed by local, ‘normal’ skilled workforce.

3.5

An attractive market with long-term potential (Positioning of the Kardex Divisions) The accessible market segments for Kardex range from basic static products (racks) to complex and fully automated warehousing projects. The average annual growth rate for static and automated products is 4–6% – reflecting the booming emerging countries. The growth rate for integrated subsystems and complex systems is slightly higher than the expected GDP growth of the respective countries (2–4% p.a.). The most rapidly growing and newest market segment is the area of stand-alone subsystems. This market is driven by the need of smaller (light industrial and service) companies to increase efficiency by the trend towards new business models like internet shops as well as by the trend towards ‘easy manageable’ systems on a stand-alone basis as mentioned before.

Profitability is lower in the static racking market (commodities) as well as in the most complex segment (due to the higher project risks) whereas the stand-alone subsystem market offers attractive margins at lower risk. In anticipation of the market trends described before, the Kardex Group and its divisions have adapted their strategic focus during a phase of restructuring and refinancing in 2011 and 2012. On the one hand the decision was taken to exit the lower margin business (static products as well as complex systems), on the other hand to build up a stronger product and service franchise in the area of the fast growing demand for stand-alone or standardized subsystems. Kardex Remstar is one of the leading suppliers of dynamic storage and retrieval systems and Kardex Mlog is offering automated materials handling systems and stacker cranes for pallets and small parts as well as in depth know-how in project management. The accessible markets and their dynamics Market volume

CAGR 2–4 %

CAGR 4–6 %

CAGR +10 %

Profitability

Complexity

REMSTAR

3.6

MLOG

Static products

Automated products

Stand-alone subsystems

Integrated subsystems

Systems

No software (SW)

Machinecontrol SW

Warehouse control SW

Warehouse control SW with interfaces

Warehousemgmt system, interfaces ERP

Unique existing customer base is a key asset With over 100 000 installed Kardex Remstar machines and 900 Kardex Mlog warehouse systems including more than 2 000 stacker cranes the Group has a broad existing customer base that needs ongoing after-sales services. Furthermore, many of these clients must and will upgrade their systems in the years to come and Kardex is well positioned to benefit from these refurbishment needs.

Investor Handbook September 2015

3.7

The turnover mix of the divisions will change The combination of a) exploiting the opportunities created by the key trends in the accessible markets, b) the business model of the divisions, c) the large installed basis, d) using synergies between the divisions and e) the realization of the before listed strategic initiatives will lead to a change in the turnover mix of the divisions over the next years. Thereby the increased level of life cycle services as well as the higher percentage of stand-alone subsystems will positively affect the margins and reduce the exposure to cyclicality and project risks. Strategic direction: Net Sales Mix 2012->2018E in % Kardex Remstar

Kardex Mlog

15

28 13 2

70

72

29

19

49

18

6 65

New business OEM Life cycle services

6

8

Systems/Integrated subsystems System components Stand-alone subsystems Refurbishment Services

3.8

Target markets

3.8.1 Kardex Remstar Regions Within the next three years, Kardex Remstar plans with an over-proportional growth in the regions Middle East & Africa, AsiaPacific and North America. The European Regions are expected to grow at lower speed due to their partial saturation. Targeted Regional Net Sales Share in % 2014

2018

15

19

8 3

12 5 74

Europe Middle East & Africa Asia Pacific North America

64

Europe Middle East & Africa Asia Pacific North America

Customer Segments Short term Kardex Remstar will leverage its strong position in the current 4 major segments; Machinery, Electrics & Electronics, Automotive and Warehousing & Distribution. Warehousing & Distribution is considered the segment with the highest growth potential due to the worldwide development in e-commerce.

Investor Handbook September 2015

3.8.2 MKardex Mlog Regions Kardex Mlog focuses its activities in the largest market for automated material handling systems which is the central European region. Key countries are either covered with direct sales or through an international partner network. Customer Segments Kardex Mlog is addressing customer market segments and analysed the attractiveness of each segment based on overall market volume, existing solutions and installations and the competitive situation. Kardex Mlog is focussing on the market segments food, pharma, trade and consumer goods with targeted marketing and sales activities.

3.9

Financial targets (over the cycle) Growth

EBIT margin

4–6 %

Kardex Mlog Group

ROCE

7–12 %

Kardex Remstar

3–5 % p.a.

> 6 %

> 17 %

3.10 Attractive dividend policy Considering that Kardex can finance its internal growth out of the significant Free Cash Flows, the board of directors decided in 2015 to raise the pay-out ratio for dividends from 35% to up to 75% of the operational net profit (on the basis of the consolidated income).

4 Company description and management 4.1

Kardex in brief Kardex AG is a leading provider of automated storage, retrieval and materials handling systems. It consists of the two divisions Kardex Remstar and Kardex Mlog. Kardex Remstar develops, produces and maintains dynamic storage and retrieval systems and Kardex Mlog integrated materials handling systems and automated high-bay warehouses. Both divisions are partners for their customers over the entire life cycle of a product or solution. This starts with an assessment of customer requirements and continues via planning, realization and implementation of customer-specific systems through to ensuring a high level of availability and low life cycle costs by means of customer-oriented life cycle management. Kardex has three manufacturing facilities in Europe. More than 1400 employees in over 30 countries worldwide work for the companies of the Kardex Group. Production plants

AB C

AB D

A - Bellheim, Germany B - Neuenstadt am Kocher, Germany C - Neuburg, Germany D - Westbrook, USA (assembly only)

C

Investor Handbook September 2015

4.2

Overview products and services Kardex Remstar Heavy loads

Light loads Software

4.3

Kardex Mlog

High Density Vertical Lifts and Carousels Horizontal Carousels

AS/RS Machines and pallet conveyors

Vertical Carousels

Mini-load Crane and MDynamic

Machine Control Software

Materials Flow Software

Warehouse Control and Warehouse Management Software

Systems

Automated warehouses and material handling systems Stand-alone subsystems

Life Cycle Services

Monitoring, Service, Modernization, 24/7 hotline and support

Historical evolution 1977

Kardex incorporated under Swiss law

1987

Kardex listed on the SIX Swiss Exchange

2000

Acquisition of AFT Automation and Conveying Systems GmbH, Germany; creation of the AFT Division

2001

Acquisition of Stow Group, Belgium

2003

Kardex takes over the remaining 40 % of the Belgian Stow Group

2004

Kardex AG merged with investment company Tuxedo Invest AG, resulting in an inflow of equity amounting to approximately CHF 61 million

2006

Spin-off of Industrieholding Cham / Kardex Remstar

2007

Sale of AFT Division Acquisition of French distribution partner Leader Systèmes SA Integration of Kardex International and Megamat to strengthen the Kardex Remstar Division

2008

Acquisition of Kardex Systems Inc (Marietta, OH), a former competitor in the US

2009

Acquisition of Scandinavian distributor Element Storage Systems AS

2010

Acquisition of Germany-based Mlog Logistics GmbH

2011/12

Strategic repositioning and recapitalization

2013

Sale of Stow Division

4.4

Group structure Effective 1 June 2011, the operational management of the Kardex Group was reorganized. The Kardex Group is led by an Executive Committee, which is headed by an Executive Director. Further members of the Executive Committee are the two Heads of Division. Headquartered in Zurich, Switzerland, Kardex AG is listed on the SIX Swiss Exchange. The Group has two divisions, Kardex Remstar and Kardex Mlog. Group Structure

Board of Directors

Committees: Audit Committee Compenzation and Nomination Committee

Executive Committee

Group Functions

Kardex Remstar Division

Kardex Mlog Division

Dynamic storage and retrieval systems

Automated warehouse and material handling systems

Investor Handbook September 2015

4.5

The divisions

4.5.1 Kardex Remstar Overview Key Figures

Branches, Dealerships & References (excerpt)

Marketshare >35%

1 250 FTEs

>100 000 installed solutions worldwide 2 production sites in Germany

74% 15%

Solutions

8%

Storage Order Picking Handling & Automation

Product Portfolio Shuttle XP Series Megamat RS Lektriever Horizontal Power Pick Global

Kardex Remstar is a leading provider of dynamic storage and retrieval systems that handle small to large and light to heavy weight goods and materials. It is gradually transforming itself from a traditionally product based company to a supplier of stand-alone subsystems. Kardex Remstar solutions provide customers with transparent savings both in space and process cost as well as with high quality that ensures seamless in-house logistics processes. The division has two main manufacturing sites, both located in Germany in Bellheim and in Neuburg. A smaller assembly facility is located in Westbrook/ME, USA. Over the last decades, Kardex Remstar has successfully completed over 100 000 projects across the globe. With its sales network and business partners, Kardex Remstar is actively present in over 30 countries and employs over 1 200 people world-wide. Kardex Remstar customers can be found in a broad range of industries, from highly industrialized through to office environments. 54% of the business is currently generated in four major segments – Machinery, Electrics & Electronics, Automotive and Warehousing & Distribution.

The division has subsidiaries in 20 countries throughout Europe, Asia and the US. It also has distributors in the Middle East, Far East and South America. For Kardex Remstar, local presence combined with a locally and globally well-functioning service organization is a crucial differentiator in terms of securing and gaining market share. Beside high product quality, key factors of a modern customer service include customer proximity and short response times, high and fast availability of spare parts and reduced general maintenance intervals. In addition, a professional global support network has to be maintained in order to ensure timely solutions to all customer needs. OEM The implementation of the OEM strategy is a key cornerstone for the further development of Kardex Remstar. This new sales channel aims to achieve a greater penetration of Kardex Remstar technologies in the intralogistics market and to increase the capacity utilization rate of existing production plants, therefore improving profitability through economies of scale. The first three contracts were signed in 2014, including with the globally present Jungheinrich Group. Targeted OEM partners range from companies that offer complementary product ranges to Solution Providers and Integrators. Life Cycle Management Life cycle service products offered to customers can be divided in 3 main service products and are designed to service and support the installed customer base over the lifecycle of all Kardex Remstar products. The following exhibit shows the contribution of each service product to Kardex Remstar’s Net Sales. Targeted Regional Net Sales Share in 2018 in %

1 14 12

73

Field services Technical support Movements modifications Other services

Field Services Service Contract Portfolio with three different levels “Essential”, “Plus” and “Extra” covering preventive maintenance, repair and parts services Preventive maintenance and ad-hoc Repair Service for non-contract customers Spare Parts Services delivery (approx. 20% of Net Sales) to customers for preventive or corrective replacement

Investor Handbook September 2015

Technical Support Remote Phone Support Services providing support via phone to minimize machine downtime in case no physical repair on-site is required Remote Support Services via remote access providing “Health – Checks” and solving problems in the installed Software Suite Movements / Modifications Move equipment due to customer needs to optimize workflow layout Safety Upgrade Kits to conform to new safety requirements Technology update packages for hardware and software Functional upgrade packages Other Services Training for various levels of Customer user groups (operators, super users, maintenance, etc.) Technician Certification Programs for Business partners

4.5.1.1 Product Offerings Solution concept Automated storage and commissioning solutions for tooling, stationery, industrial and commercial hardware and consumables Product family Vertical Lift Systems Kardex Shuttle Vertical Carousels Megamat RS Horizontal Carousels Element Products

Customer benefits

The Shuttle XP is a solution for high density storage and increased order picking productivity with almost unrestricted flexibility in terms of height (up to 30 m). One unit can carry a gross load of 60 tonnes or even more.

Improvements in picking productivity up to 400 % compared to conventional storage products lead to an enormous reduction of the costs per pick and increase of process efficiency.

The Megamat RS is an automated vertical carousel using the paternoster principle. This high density storage system enables the greatest possible warehouse capacity in both stand-alone or networked solutions.

The Megamat RS helps in saving up to 75 % of the floor space that is required for traditional shelving systems. As well as to reduce energy consumption up to 40 % and to improve security and ergonomics on a modular, future based machinery conception.

Examples

Products

Customer benefits

The Kardex Remstar Horizontal is an automated computercontrolled horizontal carousel. The pick-to-light technologies are used to indicate the active carousel, shelve level and quantity of items to be picked.

High picking productivity due to much reduced walking and waiting time, combined with software control of picking sequences ensures that the Kardex Horizontal delivers an excellent Return on Inves­tment (ROI).

New vertical lift module especially for the US- and Asian markets. Based on the shuttle technology, the Element fulfils basic customer requirements for machine driven storing concepts with limited technical options.

The Element provides simple but highly effective improvements compared to static storage racks in the way of space requirements, access time and storing efficiency to a competitive price-/ perform­ance ratio.

Examples

Solution concept Automated storage and commissioning solutions for document management Product family Lektriever Products

Customer benefits

The Lektriever is a software- controlled automated media storage and retrieval system, based on the paternoster principle. The Lektriever can hold thousands of files, videos, CDs, DVDs, or a host of other media for use in any office environments in private and public companies and ­administration.

The Lektriever will save 50 % plus on floor space when compared to conventional racks. Office staff can become 40 % more productive. Fire protection and access control are further product specific advantages which meet customer demands.

Examples

Investor Handbook September 2015

Solution concept Software solution concepts from stock control applications to fully integrated warehouse management solutions Product family Software Products

Customer benefits

Power Pick Global is a user-friendly software package which covers both storage control and material management applications from a basic to a high sophisticated level of functionality in a modular, flexible and user-friendly way.

Kardex Remstar software solutions cover the whole range of software applications for storage and distribution, based on the customer’s functionality needs. The company is also able to offer customized software solutions in order to include individual warehouse systems into ERP systems.

Examples

Solution concept Order picking solutions and handling and automation solutions Product family Special Applications Products

Customer benefits

Kardex Remstar storage systems for air-conditioned, dry and clean room conditions. Intelligent product handling and optimized production logistics to planning, controlling and monitoring logistics processes with a very high degree of precision.

Excellent logistics processes are expressed in the form of low stock levels, short supply times, on-time delivery and low logistics costs on a higher level of complexity.

Examples

4.5.1 Kardex Mlog Overview Key Figures

Branches, Dealerships & References (excerpt)

Strong market position in Germany 242 FTEs 45 years industry experience 900 installed solutions worldwide 1 production site in Germany

Solutions Storage Order Picking Handling & Automation

Product Portfolio Stacker cranes Conveyor systems Material flow systems

The German-based Kardex Mlog, a leading supplier of automated stacker cranes and materials handling systems, was acquired by the Kardex Group as of 1 May 2010. Kardex Mlog has three business segments: Greenfield installation, refurbishment and after sales service. The division focuses on automated logistic solutions. However, automated high-bay warehouses have not yet become the standard in many industries, and accordingly these markets offer good growth opportunities. More than 40 years of experience of Kardex Mlog is reflected in more than 900 successfully installed warehouse systems including around 2 000 stacker cranes that are sold till date. This installed basis offers considerable potential for expanding the service business. Because of cost and risk considerations Kardex Mlog decided to focus its attention on its key sales market of Germany, as well as neighbouring countries like Benelux & Austria. At the same time, the focus is increasingly on the acquisition of higher-margin refurbishment projects and the expansion of after-sale services to lessen the dependence on Greenfield projects. The introduction of standardized solutions for specific industries will allow lowering both project risks and project costs.

Investor Handbook September 2015

4.5.2.2 Product Offerings Product family Components Products

Customer benefits

Examples

Stacker Crane These systems are used to organize the storing and picking of pallets and consumables in shelves

The height of the systems ranges between 18 m and 45 m. Load capacity ranges between 300 to 1 600 kg. Further, the systems can be held by one or two handling devices. Travel speed can reach from 120 m/min up to 300m/min.

MSingle for pallets

Conveyor Continuous conveyors, Transfer units, vertical conveyors, transfer carriage, pallet stacker and control devices

The Conveyor system carries Euro pallets, industrial pallets, containers/cages and special pallets. It can carry a load of maximum up to 1 200 kg, with a speed ranging from 0.2 m/s to 4 m/s. The conveyor systems are mainly used in the mass production industries to move large quantities of products.

Transfer carriage

MMove Cross Drive Automatic movement of pallets, cage boxes, etc. inside and outside a warehouse

The MMove-CrossDrive is the universal transport platform for goods up to a weight of 1 500 kg. MMove-CrossDrive can be used in a variety of applications like storage and retrieval at multiple depths, distribution and intermediate storage, as a single tranpsport system. The MMove-CrossDrive can independently switch from one aisle to another.

MMove Cross Drive

MSpacer Telescopic fork for single and double deep high-bay warehouses

The MSpacer technology reduces the space requirement by approx. 10% compared to a conventional high-bay warehouse with doubledeep storage. This reduces costs and ensures more efficient use of your storage space. MSpacer can handle up to 1 000 kg load per fork. The telescope speed ranges from 40 to 80m/min, depending on load and if the storage is single or double deep.

MSpacer

Product family System Solutions Products

Customer benefits

Examples

Stand-alone Systems MDynamic MSingle A MTower MCompact

Pre-configured modular constructed system solutions. These systems consist of a storage and retrieval machine and a racking arrangement. It also has a warehouse management system to control the processes.

MDynamic

Integrated Sub-­ Systems/­Systems Complete High Bay Warehouse Planning Configuration Programming Implementation Installation and commissioning

Configurable high-bay warehouse. All services relating to the construction of a logistics facility from a single source, as general contractor for the entire project or as a specialist for individual trades.

Complete High Bay Warehouse

Additional Benefits and Services Software Products

Customer benefits

Examples

MMaterial flow systems: MBase, MVisu, MCom, MFlow, MWork, MEnergy and MWms

Software solutions for material flow systems from user administration through networking and visualization of the entire facility to an intelligent energy management system. The system can also be integrated into existing installations or new value added supply chains. It can also be customized to meet the specific demands of customers.

Material flow systems

Customer benefits

Examples

Life cycle management Products Service

Preventative maintenance Spare parts management Repairs Ramp-up support Training Soft-ware maintenance Up-date/Up-grade service 24/7 remote-service Full-service contracts

Maintenance

Investor Handbook September 2015

4.6

Board of Directors and Executive Committee The Board of Directors of Kardex AG currently consists of one executive and four non-executive members (the Articles of Incorporation stipulate between three and seven). Felix Thöni as President of the Executive Committee is an executive member of the Board of Directors and as such not independent in the sense of the Swiss Code of Best Practice for Corporate Governance. Board of Directors Philipp Buhofer 1959, Swiss citizen, HWV Horw/Lucerne Member of the Board of Directors since the General Meeting 2004 Chairman of the Board of Directors since the General Meeting 2011 Since 1997 Independent entrepreneur 1997–2002 Delegate and Chairman of the Board of Directors, EPA AG 1987–1997 Purchasing and Sales and member of Executive Management, EPA AG 1984–1987 Procurement and Marketing, Metro International (Baar, Düsseldorf and Hong Kong)

Walter T. Vogel 1957, Swiss citizen, grad. mechanical engineer, ETH Zurich Member of the Board of Directors since the General Meeting 2006 Vice Chairman of the Board of Directors since the General Meeting 2012 Since 2007 CEO, Aebi-Schmidt Group 2003–2007 CEO, Von Roll Holding AG 1999–2003 Head of the Infratec Division and member of Group Management, Von Roll Group 1995–1999 Head of Direct Fastenings Business Unit and member of extended Group Management, HILTI AG 1992–1995 Director of Marketing and Sales and member of Executive ­Management, Aliva AG

Jakob Bleiker 1957, Swiss citizen, grad. phys. ETH, lic. oec. HSG Member of the Board of Directors since the General Meeting 2012 Since 2011 Manager Confectionery and Food Division, Bosch Packaging ­Technology, Robert Bosch GmbH 2004–2011 Manager Bosch Packaging Systems Division, Bosch Packaging ­Technology, Robert Bosch GmbH 2002–2003 Manager Business Unit Sigpack Service and Specialty Market, SIG Holding AG 1998–2002 Manager Customer Support Service and member of the Executive Board, Sulzer Textil AG 1988–1998 Various management functions, Sulzer Group 1986–1987 Project Manager, Kannegiesser Maschinen AG

Ulrich Jakob Looser 1957, Swiss citizen, grad. phys. ETH, lic. oec. HSG Member of the Board of Directors since the General Meeting 2012 Since 2009 Partner, Berg Looser Rauber & Partners (BLR & Partners) 2001–2009 Chairman (since 2005), Accenture AG (Switzerland) 1987–2001 Partner (since 1993), McKinsey & Company Inc. 1983–1984 Software development, Spectrospin AG

Felix Thöni 1959, Swiss citizen, Dr. oec. HSG Member of the Board of Directors since the General Meeting 2011 Executive Director and thus Chairman of the Executive Committee since the General Meeting 2012 Since 2010 Board Member, management consultant 2003–2009 CFO, Charles Vögele Group 1992–2002 CFO, Gavazzi Group 1988–1991 Area Controller, Schindler Management AG

Investor Handbook September 2015

4.6.1 Members of the Executive Committee Felix Thöni 1959, Swiss citizen Dr. oec. HSG Since 2012 President of the Executive Committee Since 2011 Board Member, term expires April 2015 Since 2010 Member of the Board of Directors, management consultant 2003–2009 CFO, Charles Vögele Group, Pfäffikon, Switzerland 1992–2002 CFO, Gavazzi Group, Steinhausen, Switzerland 1988–1991 Area Controller, Schindler Management AG, Ebikon, Switzerland

Jens Fankhänel, Head of Kardex Remstar Division 1965, German citizen Grad. electrical engineer/automation technologist, University of Chemnitz Since 2011 Head of Kardex Remstar Division 2008–2010 Managing Director WDS Region Europe 1, Swisslog AG, Buchs, Switzerland 2005–2008 Vice President and CEO Hub Central Europe, Dematic GmbH & Co. KG, Offenbach, Germany 2002–2005 Managing Director, Swisslog Australia, Epping, Australia 1994–2002 Senior Consultant/Director, i+o GmbH, Heidelberg, Germany

Hans-Jürgen Heitzer, Head of Kardex Mlog Division 1962, German citizen Grad. mechanical engineer, Aachen Technical University Since 2011 Head of Kardex Mlog Division 2010–2011 Managing Director, Mlog Logistics GmbH, Neuenstadt, Germany 2002–2009 Managing Director, Locanis AG, Unterföhring, Germany 2000–2001 Division Manager Distribution and Project Management automatic high rack storage systems, MAN Logistics, Heilbronn, Germany 1996–2000 Division Manager Systems, Mannesmann Dematic, South Africa 1989–1996 Project Manager “Entire projects”, Mannesmann Dematic, Offenbach, Germany

4.7

Capital structure Ordinary capital Kardex AG’s ordinary share capital amounted to CHF 61 901 983 on 31 December 2010 divided into 5 627 453 fully paid-in registered shares each with a par value of CHF 11.00. At the General Meeting of 26 April 2011 shareholders approved the creation of authorised capital in the amount of CHF 30 950 986 (2 813 726 shares with a par value of CHF 11.00). Following the capital increase carried out in Septem­ber 2011 in the amount of CHF 23 128 017 and the payment of 2 102 547 shares, the company has CHF 85 030 000 (number of shares: 7 730 000) in ordinary capital as at 31 December 2014. All shares are entitled to dividends and entitle the holder to one vote at the General Meeting. The right to apply the special rules concerning treasury shares held by the company is reserved, particularly in relation to the exception from the entitlement to dividends. Conditional and authorised capital The company has no conditional and no authorised capital. Shares and participation certificates The 7 730 000 registered shares of Kardex AG have a par value of CHF 11.00 each. One registered share corresponds to one vote and the holder is entitled to a dividend. Kardex AG has no participation capital on 31 December 2014. Profit participation certificates Kardex AG has issued no profit participation certificates by 31 December 2014. Restrictions on trans­f erability and nominee ­r egistrations The registered shares of Kardex AG may be purchased by any legal or natural person. The purchasing of shares is subject to the following limitations on nominee registrations: The company may refuse registration as a shareholder in the share register if upon request the purchaser does not expressly declare that he/ she holds the shares in his/her own name and for his/her own account. The Board of Directors is entitled to delete an entry in the share register with retroactive effect from the date of that entry if such entry was based on false information. It may seek an explanation from the shareholder or beneficiary concerned in advance. Evidence of purchase is also required. The aforementioned limitations on nominee registrations are explicitly laid down in article II, § 3c, paras. 4 and 5 of the Articles of Incorporation. These provisions of the Articles of Incorporation may be rescinded by a simple decision of the General Meeting. The foregoing applies subject to any restrictions on transferability imposed by the law.

Investor Handbook September 2015

5 Industry Outlook

5.1

Material Handling Equipment Manufacturing (MHEM) industry The MHEM industry produces mechanical equipment used in the movement, storage, control and protection of materials, goods and finished products. Such equipment is used for manufacturing, retrieval, distribution, and disposal of all kinds of materials, goods and finished products. In many end user industries they have become an integral part of the value-added process. The key benefits derived by the end user industries through the use of MHEM products and solutions are: Cost reduction of development, warehousing, manufacturing and distribution processes Faster availability of materials and goods Increased throughput (picking, commissioning, delivery) Reduced order-to-delivery and time-to-market cycles Optimal utilization of available warehousing space and warehouse staff More efficient warehouse management through controlled material flow processes Integration into existing ERP-systems Subsegments of the MHEM industry (relevant Kardex markets in bold) FEM (The European Material Handling Federation) classifies the wide range of products and systems used under the MHEM industry into the following categories: 1. Conveyors: equipment to move materials along a predetermined path usually on a ‘belt’ 2. Cranes & lifting equipment: lifting and hoisting equipment such as tower and harbor cranes, mobile cranes, etc. 3. Elevating equipment: lift tables, dock levellers and tail lifts for vehicles 4. Industrial trucks: self-propelled industrial trucks, pedestrian-propelled manual and semi-manual trucks, driverless industrial trucks, industrial wheels and castors 5. Intralogistic systems: automation, control and information technologies/software (material handling, warehouse management systems), integration of several types of materials handling equipment into one system, stacker cranes 6. Mobile elevating work platforms: scissor lifts, self-propelled boom lifts, vehicle-mounted platforms, trailer push-around, vertical personnel platforms, insulated aerial devices 7. Racking & shelving: storage equipment such as adjustable pallet racking, drive-in racking and gravity live storage racking, plastic storage containers, etc.

5.1.1 Type of products Static products The static storage systems are typically used in high-bay warehouses for storage of palletized goods or for storage of smaller boxes, creation of modular warehouse shelving and racking solutions. Racking and shelving systems are the most basic requirements in any distribution, storage or material handling operation and include various types of storage racks such as cantilever storage racks, portable stacking racks, conventional pallet racks, etc. Typical end-user industries include warehousing and logistics, retail and transportation.

Automated products The dynamic storage and retrieval systems consist of automated products such as carousels (vertical and horizontal), vertical lift modules, etc. and are using technologies such as RFID (radio frequency identification), voice and robotics. Typical products offered in this segment include shuttles, carousels, bins & accessories, pick-to-light products, lifts and various software solutions. Designed to be user-friendly, these products help to reduce costs and to optimize space. The payback period is driven by labour and land cost. Typical end-user industries include warehousing and logistics, pharmaceuticals, food, mechanical engineering and automotive. Stand-alone subsystems and integrated subsystems Automated warehousing and materials handling systems include a combination of products such as individual storage and retrieval machines, conveyor systems, material flow control systems, etc. Apart from individual equipment such as automated stacker cranes and conveyor systems, vendors also provide turnkey solutions – for example, mobile racking systems, pallet picking stores and Warehouse Management Systems. Typical end-user industries include manufacturing industries such as mechanical engineering, automotive, food, pharmaceuticals and consumer durables and service industries such as warehousing and logistics. Demand for stand-alone subsystems is growing fast and offers the best returns.

5.2

MHEM market fundamentals

5.2.1 Sound global demand Worldwide, the MHEM market size is currently estimated at USD 105 billion. The demand is projected to increase at a CAGR of 4% through 2016 to reach USD 123.6 billion driven by robust growth in automated equipments, like automated guided vehicles, automated storage and retrieval systems. Demand in Asia/Pacific region is expected to outpace the global average, increasing 6% per year through 2016. India and China will have the strongest growth among national markets due to rising manufacturing output. Though both Japan and Germany are substantial markets, they have seen modest growth in sales in recent years1.

Regional MHEM markets (2014)

Composition of MHEM in Europe (2013)

in %

in %

50 14

40 8

30

20

31

41

20 78

8

10 0

Asia

Europe

North America

Others

Global material handling product demand Source: World Industrial Truck Statistics (WITS)

Materials handling and lifting equipment Storage equipment Software and automation Source: FEM

1

Freedonia Group

Investor Handbook September 2015

Segment wise, the average annual growth rate for static products and automated products is expected to reach 4–6%2 driven by the emerging markets, especially in Asia/Pacific. The growth rate for integrated subsystems and complex systems is expected to be at 2–4%3. The most rapidly growing market – also the newest segment – is the area of stand-alone subsystems. Stand-alone subsystems are intralogistic systems that are consisting of several components (e.g. mini-load, conveyor systems and software) that are operable independently. This market is driven by the need of smaller (light industrial and service) companies to increase efficiency and the trend towards new business models as internet shops as well as by the trend towards easy manageable systems on a stand-alone basis as indicated before. The overall volume of material handling equipment market declined 3% in 2012 from 2011 due to the global economic crisis and consequent economic slowdown4. Among different geographies, Europe showed the highest decline of 6% due to euro zone debt crisis and contraction in manufacturing. Market volume of material handling equipment in 1000 units 1094

1200

1010

1000

800

600

400

316

345

401

444

201 219 200

92

0

World 2013

Europe 2014

Source: World Industrial Truck Statistics (WITS)

2 3 4

Kardex estimates Kardex estimates Wall Street Journal

Asia

North America

86

Other Regions

Worldwide market volume of material

Market volume of material handling

handling equipment

equipment in Europe

in 1000 units

in 1000 units

2014

424

2013

382

2012

356

2011

363

2010

297

2014

212

2013

191

588

2012

185

612

2011

197

2010

165

670

628

497

133

125

126

134

103

Warehousing equipment Counterbalanced trucks

Warehousing equipment Counterbalanced trucks Source: WITS

Source: WITS

5.2.2 Rising warehouse capacity Warehousing capacity additions are likely to drive the need for material handling equipments. In the next five years, on an average approximately 6.8 million square feet of warehouse space will be added with maximum space of 1.8 million square feet to be added to the largest market in Western Europe; Germany (31% of Europe’s total warehousing capacity)5. Western Europe remains the technologically most advanced market in the industry. However, a sharply rising number of new facilities in Eastern Europe, North America and Asia/Pacific are planned. Warehousing capacity additions across Europe over the next 5 years in 1000 sqm 2000

1600

1200

800

400

0

Belgium

Spain

Netherlands

UK

Under construction 5-year annual completions average Source: Jones Lang LaSalle Research

5

Jones Lang LaSalle

Italy

France

Germany Hungary

Czech Poland Republic

Russia

Investor Handbook September 2015

5.2.3 Cyclicality of the MHEM industry The overall MHEM industry moves in line, albeit with a time lag, with the global economy. This cyclicality is induced in the industry by its end users who, in line with any down-swing, postpone or cancel their orders but on the other hand have to invest extensively in any given economic up-swing. This cyclicality and the associated time lags were also observable during the last economic crisis as well as the subsequent economic recovery which started in the first half of 2009. The time lag between economic recovery and increase in MHEM orders or shipments is approximately 9–12 months and is driven by the following factors: 1. Capital intensity of the installed solutions 2. Use of handling equipment in critical processes which have high switching costs 3. Dependency of new orders on capacity expansion 4. High level of sophistication and customization requirements in most end user industries Material handling equipment manufacturers forecast Left scale: New orders and shipments in % / Right scale: GDP four quarter change in % Forecast

50

8

40 6

30 20

4

10 2

0 –10

0 –20 –30

–2

–40 –50

–4 97

98

99

New Orders Shipments

00

01

02

03

04

New Orders Forecast Shipments Forecast

05

06

07

08

09

GDP Nominal +2Q Global Insight Forecast

Source: Material Handling Industry of America (trade organization)

10

11E

12F

13F

14F

15F

5.3

Emerging trends

5.3.1 Improvement in efficiency needed due to surging costs Warehousing rents and labour costs have been consistently increasing in the last few years, forcing companies to utilize their warehousing and storage space more efficiently. Operators need to have a sharp eye on these cost factors and this has given an impetus to the storage solution equipment manufacturers. Many products with space efficient storage systems have been developed recently to address this need. In order to reduce labour costs further automation is expected to continue. European Warehousing Rental Index in % 10

5

0

–5

–10

–15 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013

Western Europe Eastern Europe Source: Jones Lang LaSalle Research

5.3.2 New projects, refurbishment and modernization of warehouses Warehouse refurbishment and modernization is gaining importance for small and large companies alike, responding to increased focus on efficiency by implementing automated intralogistics solutions. While the smaller companies use specific products and low complexity / low capital solutions, larger ones are migrating towards complete warehouse automation. End-users who cannot afford large capital expenses are refurbishing their existing manual or automated systems to extend the life cycles.

Investor Handbook September 2015

Furthermore, a survey conducted by Peerless Research Group in 2013 from 530 respondents from various industries using warehouse automation revealed that more companies are willing to upgrade or enhance their existing warehouse management systems rather than implement a new one6. Willingness to upgrade warehouse systems through organic improvements (like better equipment) in % 96 94

Taking any action (net) 68 67

Improving warehouse processes 60 60

Improving inventory control 49 42

Changing rack and layout configuration 38 36

Improving information technology

33 35

Reducing staff 19 19

Renegotiating leases

13 16

Using 3 PL 4 3

Other 2014

2013

0

20

40

60

80

100

Source: Aberdeen Group

5.3.3 Increasing use of automation Automation is increasing in the material handling process to save costs and reduce lead time. While Germany was the leader in the process, the rest of Europe and America are coming closer to Central European standards, followed by Asia/Pacific and South America. The increasing use of storage and retrieval machines without operator is one of the indicators of increasing automation.

6

Peerless Research Group

In Central Europe, only around 30%7 of all distribution centres and warehouses have been automated so far while the global average is only about 10%8. Important to note, order picking can account for 50–60% of the costs of a manually operated warehouse or distribution centre. Therefore, it implies that by increasing automation, significant cost savings can be achieved. Automation scope is high given the low level of existing automation in % 100 90

Storage

Replenishment

Picking

Receiving 89

85 80

80 70

69

60 50 40 30 20

15

2011

9

12

9

Conveyor based

Conventional

Automated

Conveyor based

Conventional

3 Automated

Automated

Conveyor based

Conventional

0

Conveyor based

6

Conventional

8

10

Other

10

2010

Source: Material Handling Industry of America (trade organization)

5.3.4 Specific stand-alone subsystems getting more important Rapidly reconfigurable manufacturing systems are acknowledged to serve the needs of the manufacturing companies for handling the shortening product life cycles and mass customization. Companies have to deliver ‘in full and in time’. As such, they have to cope with increasing diversification and complexity. This causes high requirements regarding storing security, flow tracking and reliability of delivery. As a consequence, demand for stand-alone subsystems for specific customer groups or needs is likely to grow. However, these systems need to be easy to operate by the local workforce (e.g. in Eastern Europe or Asia). In addition, new business models such as online retailers or internet based businesses are expected to come to the market and will increase investments in material handling equipment and inventory management software systems. Online retail sales are forecasted to reach an estimated USD 334 billion for US and USD 150 billion for Europe by 2012 and crossing USD 600 billion in aggregate by 20169. Such an increase in online retail needs to be supported by back end inventory management and supply chain management which will cause sound demand for MHEM industry participants.

7 Kardex estimates 8 Kardex estimates 9 Techcrunch

Investor Handbook September 2015

5.4

After-sales service and support Product related services (which include installation, maintenance, repair and engineering services) are gaining in importance and have established a capacity to contribute in growth of large and medium scale product companies. Due to increasing competition from low cost manufacturing locations like China, India and other Asian countries, product related service business offers higher top line and bottom line growth to be derived from significant differentiation and increased brand loyalty. Due to increasing competition, MHEM companies are focusing on providing consultative value added services to their customers after the normal sales cycle. The contribution of revenues from after-sales services to total revenues has been increasing in the recent past. Contribution of revenues from after-sales services of total revenues in % 40

35 30

25 20

15

10 5 0 2007

Kardex

2008

2009

Daifuku

2010

2011

2012

2013

Jungheinrich

Source: Company Annual Reports

According to a McKinsey & Co. study, 62% of new hardware product orders in the US, and 64% worldwide, include maintenance and support contracts. It implies that there is still a large potential of products sold that could generate additional after-sales revenues and profits if properly pursued. Deloitte’s study of leading manufacturers world-wide highlighted the business potential for after-sales in manufacturing. The manufacturing businesses studied reported on an average 75% more profits from the services and parts operations than from the main product business. In average, after-sales accounted for 26% of their revenues, while in some cases, it sometimes accounted for more than 50% of total revenues.

5.4.1 Trends in after-sales services After-sales service gaining importance The after-sales service is expected to increase the bottom lines of the capital equipment manufacturers as profit from after-sales services are greater than the profit on the sale of equipments10. A study conducted by the IDC Manufacturing Insights on the global capital equipment manufacturing industry has revealed that after-sales services will act as a key competitive differentiator and a major source of revenue for the capital equipment manufacturers. As 70–90% of the total lifetime cost of heavy equipment is incurred in maintenance and repair, after-sales services will not only provide high profit margins, but also regular cash flows that will act as a hedge against market volatility. It is expected that players in the market who adopt a service-centric strategy will take advantage of potential future opportunities. Higher investment in service excellence is expected to increase and transition from “products & services” to “service-centric“ to “products as service platforms” is also expected. The ultimate goal is to achieve a balanced portfolio of services and products that delivers both consistent revenue and growth. Innovation via implementation of smart technologies in after-sales service MHEM companies are planning to use services as a key differentiator and aim to provide enhanced services through product service innovation and value-added services for existing products11. With the implementation of smart technology applications such as sensors and data acquisition along with data analytics, these companies can generate more revenue as well as help in cost reduction. In addition, content-aware applications and services, such as monitoring equipment for consumables’ replenishment and location-based services can help companies to grow their business and improve their after-sales services. However, most of the companies are either not well equipped or lack talent to deliver these technologies. As a result, it is becoming a stumbling block for companies to move from product-centric organization to a service-centric organization. Hence, modernizing the service supply chain with smart technologies and initiatives in big data/analytics, cloud computing and social media will be necessary to realize service revenue and profitability goals. Integration of hardware and software Manufacturers are increasingly integrating their hardware and software to enhance their after-sales services effectiveness. As a result, they are able to monitor their machines in real time and give insights and cost saving information to their clients. This helps the clients in proactively identifying and addressing potential problems. The machine downtime is drastically reduced as clients can repair or replace critical parts before they can shut down the machine. And manufacturers can provide after-sales services throughout the lifetime of machines leading to ready availability of spare parts and lower maintenance cost for the clients.

10 Infor 11 SupplyChainBrain

Investor Handbook September 2015

Preventive measures against counterfeits Counterfeit products are increasing at an alarming rate and pose serious threat to the manufacturers of high-end and specialized equipments. These products are flowing in the markets all over the world and are leading to losses of millions of dollars of revenue to the companies. Some of these counterfeits are so real that it is difficult to differentiate them with genuine products. To counter the problems of counterfeiting, companies are using steps to protect and authenticate their products. A survey conducted on 337 companies by VDMA (German Machinery and Plant Manufacturers’ Association) in Germany revealed that nearly all companies, whether affected by piracy or not, are applying preventive measures to protect themselves12. They are using intellectual property registration such as patents or trademarks, carefully selecting their partners and using confidentiality agreements. Preventive measures to protect against product and brand piracy in % Registration of IP rights

70

63 62

41

Know-how protection via secrecy/NDA

Technical product protection

28 26

Strict distribution management 2010

65 55

61

38

14 18 20

Public relations

2012

82

69

Carefully chosen partners

2014

75

15 10 0

17

20

40

60

80

100

Source: VDMA

Transitioning from free to fee based model MHEM companies are strategically focusing on services wherein they get customers to pay for services that did not exist before or for one that used to be free. For this, companies are launching services that are planned to increase customer loyalty and mitigate decreasing product margins. According to a study conducted by International Institute for Management Development (IMD), services can play the role of both an offensive and a defensive strategy – 59% of executives consider services as a proactive tool to grow revenues and profits and 30% of respondents viewed services as way to retain existing customers and build barriers to entry13.

12 VDMA 13 IMD

5.5

Technology and product development Investing in R&D activities MHEM companies continue to make significant investments in their R&D activities to stay competitive. Some of the noticeable technological innovations or improvements in material handling systems are: Smart sensors and interactive interfaces are the latest technological innovations. These technologies enable a dashboard view of performance of the machine-based on user-defined operating range for each opportunity. Auto-ID or automated identification technology enables end-users with total supply chain visibility by recording the product’s identity and location within the whole supply chain. This information is used to track the location of the products and also perform specific actions such as labelling, packaging, sorting, shipping and receiving. Radio Frequency Data Terminals (RFDT) are used to improve the coordination amongst the warehousing staff with the help of hand held laser scanners. Real Time Warehouse Control Systems (RTWCS) enable efficient material flow based on work flow, priority and resource optimization. Industry 4.0 (“Internet of things”) gives rise to a need for change from a central to an embedded intelligence. There will be a fundamental change in requirements to Intralogistics core technology and product range. Implementing lean material handling techniques Lean material handling techniques are being implemented by many companies. Examples of products being improved to suit lean handling requirements include mini-load automated storage and retrieval systems, unit-load automated storage and retrieval systems, horizontal and vertical carousels. Mini-load automated storage and retrieval systems: they are used to handle loads in small containers, boxes or totes, enabling the user to store more material in less space. Suppliers are not only focusing on increasing the height and speed of mini-loads but also developing independent mini-load handlers and drive systems which compensate for mass movement with motor-driven anti-pendulum and belt-driven omega drives. Instead of using mini-loads as a mere stand-alone storage system, there is an increasing trend to include them as an integrated part of an overall picking strategy in order to achieve the lowest cost per piece picked. Unit-load automated storage and retrieval systems: distribution centres used to store pallet loads, replenish mini-loads or direct picking. New products are being developed, which are as high as 48 metres tall but with lower weight as before. This decrease in weight reduces the required drive motor capacity resulting in lower power consumption. Shuttle and vertical carousel: the standard widths of trays for shuttle systems rise up to a useful width of 4.0 metres which allows more picks with one move and increases productivity. For vertical carousels there is an increasing demand for special applications such as refrigeration, humidity or clean room control.

Investor Handbook September 2015

Updating existing software In addition to R&D activities and lean material handling techniques, MHEM companies continue to focus on material handling software and plan to expand and update existing applications. According to 2013 Materials Handling Technology Software Survey, this year’s results clearly reflect the importance of material handling software. Nearly 43% of respondents report that the usage of such systems has increased in the last two years. Around 35% of the respondents plan to evaluate, upgrade or purchase warehouse management software in the next 12 months. Majority of companies are planning to evaluate, upgrade or purchase their warehousing management software in % 35

Warehouse management software 18

Supply chain management and planning software

Transportation management software

15

Asset tracking

15

Labour management software

16 4

Yard management systems

26 25 24

10

6

Other

8

None of these

Source: VDMA

31

7 7

Slotting software

Plan to evaluate/upgrade/purchase in use

37

21

Warehouse control systems

57

28

11

0

10

20

30

40

50

60

70

6 Peer Analysis

6.1

Competition occurs mostly on division level Overall, Kardex competes with many large and mid-size companies which are operating in businesses similar to one or both divisions of Kardex. It is important to note that Kardex is not competing as a whole because it operates with two independent entrepreneurial managed divisions. However, on a product level and/or division level, tough competition occurs. Some competitors leverage their knowledge and expertise in selective segments in comparison to other peers and prefer to have a larger manufacturing presence and sales network. Kardex Remstar enjoys market leadership in the dynamic storage solutions market in many countries with a global market share of approx. 35%. Over 35 years of experience in the dynamic storage market, a broad range of automated storage and retrieval solutions and global presence are the factors that give Kardex Remstar an edge over its competitors. More than 90% of total revenues of Kardex Mlog are generated in the German market. According to Kardex estimates, Kardex Mlog had a market share of approximately 15% in 2012. With over 100 000 installed Kardex Remstar machines and 900 Kardex Mlog systems including more than 2 000 stacker cranes the Group has a broad customer base that will need ongoing after-sales services. This setup provides future revenue generating prospects as the level of service business can systematically be increased and margins can be improved in the future. The following table lists various peers of Kardex (estimated ranking), according to the two divisions of Kardex. Kardex Remstar competitive landscape

Kardex Mlog competitive landscape

Kardex Remstar

SSI Schäfer

Hänel GmbH & Co. KG

Daifuku Co Ltd

Modula

Dematic AG / HK Systems, Inc.

SSI Schäfer

Swisslog AG

Zecchetti srl

TGW Systems Integration

SencorpWhite

Knapp Logistics

Constructor Dexion

Viastore Systems Inc Kardex Mlog LTW Intralogistics GmbH Stöcklin Logistik AG Vanderlande Industries

Source: Kardex estimates

The majority of these companies are held privately. Exceptions are: Kardex, Daifuku and Jungheinrich.

Investor Handbook September 2015

6.2

Current Strategic Positioning of Selected Segment Players CURRENT POSITIONING

STRATEGIC THRUSTS

Solutions

Dematic Daifuku

Diversified Players

Some Sub-systems

Intelligrated Mecalux

No Sub-systems

PRODUCT INTEGRATION

Schäfer Swisslog WDS Muratec

TGW

Witron Knapp

Kardex Mlog

Swisslog HCS

Kuka Systems

VanDer Lande

Siemens Logistics

Beumer

Focused Players

Integrators

Margin pressure due to lack of scale and own hardware Add-on of equipment and/or component players Combination with mid/largesize player

Kuka Robotics

Interroll Habasit

Product Players/ Equipment

Jungheinrich

Multi-Country/Regional

Intercontinental

Global

Further product, market and geographic integration Medium-sized players Focused companies Combination with complementary company Market and geographic integration

Fives

Kardex Remstar

Deep product and service offering Global footprint Diversified end-markets

Deep existing product focus No or limited integration aspiration Remain status quo Geographic integration

GEOGRAPHIC PRESENCE Source: Lazard

6.3

Peer profiles Daifuku Co Ltd Based in Japan, Daifuku Co Ltd engages itself in three business segments – namely, Logistics systems, Electronics Equipment and Others (involved in the sale of car-washing machines, rear lifts for automobile chairs). Approximately 92 % of the sales are generated through the logistics systems segment. The company serves a diverse customer base belonging to many industries centred on food, pharmaceuticals, pharmaceutical wholesalers, distribution and agriculture, through a wide range of products by combining conveying, storage, sorting, picking and controls. Dematic AG Dematic AG, a German-based company, provides solutions in logistics material handling automation. Its product portfolio contains light goods storage & buffering solutions, pallet handling and package handling products and palletising systems. Dematic was created out of the merger of Siemens AG and Mannesmann Dematic in 2001, however, later in 2006 the company was acquired by a US-based private equity firm, Triton Fund. The company has production plants in the US, Europe, China and Australia and sales distribution centres all across the world.

Handler A/S (SSI Schäfer) Handler A/S, founded in 1981, is a Denmark-based company. The company manufactures shelving and pallet racking, in-house transport materials and total logistic solutions. Handler’s product range includes vertical lifts, picking carts, trolleys, pallet racks, mezzanine constructions and Shark, a warehouse management software system which focuses on automated picking and storing. The company also provides complete turn-key solutions for warehouses. Hänel GmbH & Co. KG Established in 1953 by Gerhard Hänel, Hänel GmbH & Co. KG is a German-based company. The company has five branch offices located in Europe and the US and has sales centres in more than 60 countries worldwide. The company is mainly into manufacturing of carousels, lift systems, conveyors, teleferics, escalators and moving walkways. The company’s Hänel Lean-Lifts and Hänel Rotomats are high-quality products that use complex technologies. HK Systems, Inc. (Dematic) The US-based HK Systems, Inc. is a manufacturer of automated material handling systems and supply chain execution software with over 1 000 large systems operational in North America. Through its three manufacturing facilities situated in the US, the company produces automated storage and retrieval systems, automated guided vehicles, conveyors, picking systems, palletisers and depalletisers and logistics software. It has been acquired by Dematic in mid 2010. Jungheinrich AG Established in 1953, Jungheinrich AG is one of the largest suppliers of industrial trucks, warehousing technology and materials flow technology. The company is mainly focused on providing all-round solutions for stacking, transporting, warehousing and order picking. Its product portfolio comprises of a comprehensive range of forklift trucks, racking systems, services and consulting, with its main focus on intralogistics. Headquartered in Hamburg, Germany, the company has four production plants, of which three are in Germany and one in China. The distribution network of Jungheinrich expands to Europe, the US, Asia, Middle East and Africa. Knapp Logistics Knapp Logistics is an Austrian material handling solutions provider that mainly provides systems and solutions for warehouse logistics and warehouse automation. The company produces a range of storage systems, conveyor systems, picking systems and warehouse logistics software. Through its 26 subsid­ iaries and representative offices, the company has a sales presence throughout the world. LTW Intralogistics GmbH Established in 1981, LTW Intralogistics GmbH is an Austria-based intralogistics solutions provider. The company is a part of Doppelmayr Group which is involved in cable car technology. The company produces conveyors and conveying equipments, stacker cranes and warehousing control and management software. LTW Intralogistics supplies the components required for high-bay warehousing systems as well as complete turnkey systems. The company has sales presence in Europe, the Americas as well as the Near and Far East.

Investor Handbook September 2015

Modula Modula belongs to Systems Group and is an Italy-based provider of automated material handling systems for warehouses, distribution centres and manufacturing operations worldwide. The company manufactures vertical and horizontal high-density storing systems called MODULA® and CUBE® respectively. The company also develops MODULA WMS® software which provides a complete warehouse management software solution for any requirement. SencorpWhite Formerly known as White Systems Inc, SencorpWhite is a US-based company engaged in the business of designing and building storage and retrieval systems for small parts storage. The company’s products and services include carousels, vertical lift modules, robotics and systems integration, along with Windowsbased software and controls. In April 2010, the company consolidated its businesses with Sencorp, Inc, a thermoforming and sealing machines producer. SSI Schäfer Established in 1937, the German-based SSI Schäfer Group is recognized as a leading systems integrator for automated warehouses and distribution centres worldwide. SSI mainly produces warehouse e ­ quipments. Further, it also provides equipments for workshops, plants and offices along with customized solutions for waste engineering and recycling. The product portfolio includes storage and transport containers, shelves, pallets, cantilevers, manually operated mobile racking systems and fully automated storage systems. The company has 16 production plants in four continents and is represented in 53 countries worldwide. Stöcklin Logistik AG Based in Switzerland, Stöcklin Logistik AG began with producing wheels and trucks and later entered into the material handling equipments sector with the production of warehouse trucks, pallets and conveying and storage systems. The product portfolio of Stöcklin is classified into two segments: Materials handling & storage systems, and Floor handling equipment. Along with the plant in Switzerland, the company has nine subsidiaries across Europe and South America. Swisslog AG Swisslog is a Switzerland based company that provides material handling solutions and integrated logistics solutions to almost 50 markets across the globe. The services offered by the company include building complex warehouses and distribution centres to in-house logistics solutions for hospitals. The company has two divisions, namely, the Warehouse & distribution solutions division, which caters to warehouses, and the Healthcare solutions division, which offers material handling solutions to hospitals.

TGW Systems Integration TGW Systems Integration is an Austria-based supplier of automated intralogistics solutions for ware­ housing, production, order picking and distribution. The company engages in providing integrated logistics solutions and material handling equipments and is also responsible for providing planning, designing, manufacturing, installing and supporting integrated logistics solutions to both large and small companies. Main products of the company include pallets, cartons and conveyors, AS/RS technologies, as well as the system controls and warehouse controls. The company has production plants in the US, the UK, Germany, Spain, Poland, France, Italy and Austria with a worldwide network of business partners and sales teams. Viastore Systems Inc Viastore Systems Inc, based in Germany, supplies integrated material handling systems to distributors and manufacturers worldwide. The products provided by the company include high-speed order picking systems, automated storage and retrieval systems and dynamic automated picking, storage and transportation systems. In addition, the company also develops in-house warehouse management software (viad@tWMS) and material flow control software. The company along with having a production plant in Germany has subsidiaries in Europe, Asia and the US, with representative offices in Denmark and Turkey. Zecchetti srl Zecchetti srl is an Italy-based, privately owned company founded in 1960. The company has been operating in the packaging sector and has recently entered the automated warehousing systems market. Zmagazzini is the company’s specialised division involved in warehouse logistics. The product portfolio of the company consists of automated warehouse systems, conveyors, palletisers, shuttle cars, automated warehouse with stacker cranes and control software. Vanderlande Industries Vanderlande is a material handling and logistics automation company based in Veghel, Netherlands. It is the world's fifth-largest materials handling systems supplier. More specifically, Vanderlande is a global market leader in baggage handling systems for airports and sorting systems for parcel and postal services.

Investor Handbook September 2015

7 SWOT Analysis

Strengths The stronger Dollar compared to the Euro boost sales in the North America and the AsiaPacific Strong market positions

Weaknesses High exposure to Europe Risk considerations at Kardex Mlog Production base solely in Germany

Strong balance sheet, high Free Cashflow Strong product and service offering Experienced and skilled management team Focussed product & market strategy Attractive market fundamentals (growth & margins)

Opportunities

Threats

OEM Sales Expansion

Market downturn in Europe

Increasing demand for stand-alone logistics systems

Labour cost development in Germany

Emerging markets to offer potential for growth driven by increase in manufacturing output and fixed investments Increasing trend of end-users towards automation Increased outsourcing of logistics function to 3PL and 4PL providers, one of the key end-users of the industry Refurbishment and after-sales service requirement of end-users Increasing costs of warehousing space to stimulate demand for space efficient storage systems Increasing costs for commercial land as well as labour in the US and in Asia Active life cycle management Succesfull repositioning of Kardex Mlog Enhanced operational efficiency

Price pressure New competitors Trend towards market concentration; the pace of Mergers and Acquisitions in the MEHM industry has quickened

Investor Handbook September 2015 Kardex Tool Storage and Material Handling

Shuttle XP Kardex Remstar

Megamat RS Kardex Remstar

Horizontal Kardex Remstar

Megamat RS Kardex Remstar

Shuttle XP Kardex Remstar

Service Kardex Mlog and Kardex Remstar

Conveyor Systems Kardex Mlog

Miniload SR Machines Kardex Mlog

Kardex High Bay Storage and Conveyor Systems

Greenfield Installation Kardex Mlog

Pallets SR Machines Kardex Mlog

Monorail Kardex Mlog

Vertical Conveyor Kardex Mlog

Conveyor Systems Kardex Mlog

Miniload SR Machines Kardex Mlog

Mobile Shelving Kardex Remstar

Lektriever Kardex Remstar

Times Two Kardex Remstar

Kardex Office Solutions

Kardex AG Thurgauerstrasse 40 CH-8050 Zurich Switzerland Phone: +41 (44) 419 44 44 Fax:

+41 (44) 419 44 18

For detailed information: www.kardex.com