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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon, ladies and gentlemen. Welcome to the [ KION's ] Group Q1 2024 Update Call.Today's presenter will be Rob Smith, CEO of KION Group; and Christian Harm, CFO of KION Group. I'm [ Francy ], your Chorus Call operator. [Operator Instructions] And the conference is being recorded.[Operator Instructions] The conference is being recorded.At this time, it is my pleasure to turn the conference over to Rob Smith, CEO of KION. Please go ahead, sir.
Thank you, [ Francy ]. Good afternoon, ladies and gentlemen, and welcome to our update call on the first quarter for 2024. For this call, please refer to our presentation on the IR website.I'm going to start with a summary on our Q1 2024 and give you a business update, and then Christian is going to take you through our detailed Q1 financials, our unchanged 2024 guidance, and then I'll take you through our key takeaways, and then we'll go into questions and answers.Let's start on Page 3. KION had a solid start to the year with revenue at EUR 2.9 billion, adjusted EBIT at EUR 227 million and the adjusted EBIT margin at 7.9%. Those were both sequential and year-on-year growth gains. The performance in both segments continued to benefit from our measures to improve operational and commercial agility.Despite various crises around the world, material availability improved in the first quarter compared to the prior year period. In addition, we diligently monitor and track the situation not only of our suppliers, but also their supply chains, and this allows us to initiate mitigation measures as necessary early in the process.Group order intake at [ EUR 2.4 billion ] showed a slow start to the year as we expected and remained on healthy levels, supporting our unchanged full year guidance across all KPIs. Free cash flow came in at a positive EUR 66 million due to a solid EBIT development and stable net working capital. And earnings per share increased to EUR 0.83, up from EUR 0.55 in the first quarter of last year.On Slide 4, I'll show you some insights in our latest business development and talk about some innovations. As many of you are aware that one of our largest trade fairs in the intralogistics solutions space is LogiMAT, and this took place last month in Stuttgart. There were more than 67,000 visitors, which strongly increased from last year and even surpassed the levels of visitors in pre-pandemic levels. Especially the number of overseas visitors grew almost 7x compared to previous shows.Our KION Group brands showcased comprehensive range of solutions to all our customers' challenges. Main topics of interest on the stand and on the fair were interest in automated solutions, electrification, safety, and new products.Our [ Baoli ] presented under a solution -- a slogan, We Make Material Handling Simple. We showed 3 new trucks, and we focused on profitability and reliability on the [ Baoli ] stand. STILL unveiled its vision for the future of intralogistics with it's easy to implement iGo easy plug-and-play automation solutions.And another highlight was the unveiling of our in-house produced 24-volt fuel system -- fuel cell systems for our warehouse trucks. Linde Material Handling demonstrated a wide range of automation solutions of energy options and of safety features in both indoor and outdoor exhibition space. And under the motto, Solved: Your Ambition. Our Mission, Dematic presented a new bin-to-picker AMR solution with a live demonstration featured in connection with the Linde Material Handling [ booth ], underlining our integrated solutions offering with fast implementation times on our customer projects.Another recent innovation milestone was the recent completion of our KAnIS Automation Solutions project. KAnIS stands for Cooperative Autonomous Intralogistics Systems. And it's a project between Linde Material Handling, done together with the Aschaffenburg University of Applied Sciences, focused on the further development of autonomous counterbalance trucks, completely driverless in indoor and outdoor applications and addressing the key needs that are top of mind for many logistics managers, maximizing safety in their operations, the labor shortages that they and the rest of the world are facing these days and improving their business competitiveness.Christian, I'll hand over to you now to take us through the detailed Q1 financials in the 2024 outlook.
Thank you, Rob. Let's go to Slide 6 for the key financials for the ITS segment. Order intake of 59,000 units was on the prior year level. Sequentially, there was a decrease, which is not unusual in the quarter following a list price increase.In money terms, the decrease was more pronounced due to a higher share of APAC and warehouse trucks in the new business mix. Overall, the order book remained at robust levels and supports more than 6 months of new business revenue. Margin resilience of the order book remains solid.Revenue remained on high levels driven by the positive geographic and product mix in the quarter as well as higher production levels still benefiting from the 2022 price increases. The adjusted EBIT slightly exceeded the high level of the prior quarter, reaching a record quarterly level due to the positive mix effects in the new business revenue.In addition to the volume and price-driven revenue growth, the adjusted EBIT also benefited from production efficiency gains. The adjusted EBIT margin exceeded 11% in the quarter. Current order intake patterns may lead to less favorable mix later on in the year.I continue now on Page 7 which summarizes the key financials for SCS. Overall, order intake continues to remain lumpy and impacted by customers' hesitancy to sign new contracts due to macro uncertainty and postponed expectations on interest rate cuts. We once again felt the impact of this in the first quarter with the planned signing of several orders totaling around EUR 100 million being postponed.At 38%, the share of pure play e-commerce corresponded to the levels seen in the full year 2023. As flagged in our Q4 2023 update call, the order book as of January 1, 2024, was adjusted by EUR 317 million due to a change in the presentation of the customer services business that we have aligned to the methodology applied in ITS.In addition, the order book as of March 31, 2024, was impacted by 2 cancellations totaling EUR 92 million. Now cancellations remain a rare part of our business. If you look at the orders booked and canceled in 2022 and 2023, for example, we remain well below a 1% cancellation rate.These cancellations do not indicate any trend in losing customers or market share. And in fact, our relationship remains strong with customers that canceled these negotiations for new orders underway. We expect that project cancellations will continue to be an uncommon occurrence in our business, but it will continue to happen from time to time.As a reminder, we have again included the slide in the appendix explaining and quantifying the change in the presentation of the customer service business in SCS. Overall, revenue continued to decrease sequentially and year-over-year, still reflecting the lower order intake and the high share of orders with long lead times throughout the last year.The service business continued to grow at 13% year-over-year, while the new project business declined by 18%. We continue to make further progress in working through the legacy projects in the first quarter 2024. The adjusted EBIT at EUR 18 million and the adjusted EBIT margin at 2.6% reflects the higher share of service business in the revenue and the continued sequential improvement in profitability.Now let's quickly run through the key financials for the group on Page 8. As expected, the order intake showed a slow start in the year in both segments, but remains on healthy levels and supports our full year guidance across all KPIs. The order book reflects the progress in lead time reduction in ITS and the change in the presentation of the service business in SCS. It continues to provide good workload for the next quarters.Revenue benefited from a very strong product and geography mix in ITS new business and the growing service business in both segments, more than compensating for softer SCS new project revenue. KION Group improved the adjusted EBIT and the adjusted EBIT margin reaching the second best ever quarterly adjusted EBIT.Page 9 shows the reconciliation from the adjusted EBITDA to group net income. Depreciation and amortization as well as the PPA items followed the usual quarterly pattern. Nonrecurring items of positive EUR 6 million relate to the measures to streamline the SCS cost base. A small part of the provisions built in 2023 was reversed.Our full year expectation for NII remains unchanged at minus EUR 10 million to [ minus ] EUR 20 million. The year-on-year increase in net financial expenses was mainly driven by higher net interest expenses from the leasing and short-term rental business, which resulted from higher interest rates and the growth in the business.The strong sequential improvements in net financial expenses is due to a positive impact from the fair value of interest derivatives and could reverse again in the course of the year. Pre-tax earnings increased substantially both sequentially and year-over-year and reached EUR 170 million.Tax expenses were negatively impacted by nontax deductible expenses and taxes related to prior years. This should be a temporary effect and the full year tax rate is expected to return to our guided range.Net income attributable to shareholders showed a strong increase both in the quarterly as well as in the yearly comparison and reached EUR 109 million. This led to earnings per share of EUR 0.83 in the quarter.Now let's continue with the free cash flow statement on Page 10. Free cash flow in the quarter reached positive EUR 66 million due to the strong EBIT and stable net working capital. The decline compared to the prior year period has to be seen primarily in the context of lower incentive payments in the first quarter 2023, following a weak financial year 2022.Net working capital remained relatively stable at the end of the first quarter. The net change from the leasing and short-term rental business was mainly impacted by the growth in the short- and long-term rental business. The positive free cash flow did not lead to a decrease in net debt, mainly due to the reduction of on-balance sheet factoring.Please note in your modeling of the second quarter 2024 free cash flow that we have proposed a dividend of EUR 0.70 per share to the AGM on the 29th of May, 2024 for the fiscal year 2023. When approved, this will lead to a dividend payment of EUR 92 million on June 3, 2024, and this is compared to EUR 25 million paid out in the second quarter of 2023.Page 11 shows the development of net financial debt and our leverage ratios. As mentioned on the previous slide, the positive free cash flow did not lead to a decrease in the net debt mainly due to the reduction of on balance sheet factoring.In fact, net debt at the end of March 2024 increased marginally by EUR 17 [ billion ] compared to the year-end 2023. Due to the improved EBITDA in the first quarter 2024 compared to the prior year quarter, the last 12 months EBITDA increased and led to a sequential improvement of [ 0.1x ] in the leverage ratios on industrial net operating debt and industrial net debt, which stood at 1.4x and 1.8x, respectively. We remain committed to improving leverage metrics further to depend [ on ] our 2 investment-grade ratings as we believe they are supportive to our business model.Slide 13 lays out our unchanged guidance. The solid first quarter allows us to fully confirm our guidance for 2024. I'd like to preempt a few questions. We have kept our full year guidance for ITS unchanged despite a very strong first quarter.As we have explained earlier, quarter 1 revenue and adjusted EBIT benefited from a very good mix with a relatively high share of counterbalanced trucks as well as high contribution from Germany, which drove margins beyond 11%. Given our recent order intake pattern, it would not be advisable to extrapolate that favorable mix for the remainder of the year.In addition, certain cost increases, especially with regards to labor, will start being effective only in the course of the year. This is why we believe our ITS guidance for the full year 2024 continues to be valid, and we continue to expect an adjusted EBIT margin of more than 10%. The strong first quarter '24 in ITS also means that our expectation for the phasing has changed slightly. We now expect the first half to be slightly stronger than the second half.You may also wonder why we kept the bottom end of the adjusted EBIT guidance range for SCS unchanged after already achieving EUR 18 million in the first quarter. While we continue to expect substantial improvements, the timing of completing certain legacy projects could have an impact on individual quarters. As always, you will find a slide on the housekeeping items in the appendix of this presentation. These are all unchanged.With that, I hand back to Rob for our key takeaways.
Thank you, Christian. On Page 14, you'll see our key takeaways. KION delivered a solid first quarter in 2024 with continued improvements in adjusted EBIT and adjusted EBIT margins. And the slow start in order intake in both segments was in line with our expectations for the quarter.Strength in automation, mobile automation plays an important role in intralogistics solutions today. And with our multi-brand presence at LogiMAT as well as the most recent milestone or implementation -- innovation implementation with our KAnIS project, KION is demonstrating strong competencies in mobile automation.In the solid start to the year with our second best quarterly adjusted EBIT on the KION Group level, this lays a solid foundation to deliver our full year guidance across all the KPIs.This concludes our presentation. Thank you for your interest so far. [ Francy ], let's turn over to questions and answers now, please.
[Operator Instructions] Our first question today is from Sven Weier from UBS.
The first one is on the order pipeline in warehouse automation. And I know the pipeline is generally good. Everybody is talking about good pipeline, but conversion still seems to be slow. And I know, Rob, you said in the past, we think in the second half as rates go down, conversion could accelerate. I just wonder what's the recent change in the interest rate outlook of maybe not so many cuts in the [ Fed ] expectations? [ Whether ] that means anything to your conversion assumptions? Or do you still see a stronger conversion in the latter part of the year? That's the first one.
Appreciate your questions. The pipeline -- as you correctly described, the pipeline and our Supply Chain Solutions business does remain robust, does remain strong. We've got quite a few good conversations going with the customers on these projects. It remains lumpy, however. So our expectation remains in place after 2 years of coming back down from very, very strong growth in the COVID time. So our expectation is that the Supply Chain Solutions Market is picking up during the course of this year. It was a slow start or a soft start in Q1.And our expectation is that we're picking up the order entry over the course of this year as the market is picking up over the course of this year. I think the sentiment is a moving sentiment, Sven. And as that sentiment continues to move and evolve, it still is underpinning our expectations for -- as we were describing the market for the year and our performance in the year.
I mean, do you really sense in the conversations, especially with your U.S. clients, that the decisions are really so rate sensitive? Because I'd imagine, I mean, if rates don't come down as much in the U.S., there's a reason for that, and one of them is a very resilient economic activity, which I guess must be good for your clients. So I really was wondering how important rates are in general for those decisions? Is it really so important?
Sure, Sven. I mean, that's what I'm talking about, about expectations kind of continuing to -- more [ forward ] time. And the interest rate is clearly an important element for the customer's decision. I wouldn't tell you it's the most important element. I think that the resilience in the economy being demonstrated there is a good counterweight to the interest rates being higher for the moment or maybe for several moments longer. So it is one element, but it's not the most decisive and as the confidence continues to grow in America, we expect that the order entry will be growing there too.
Maybe one question then, the second question is on the cancellation split, and maybe for Christian, because we had this cancellation now in Q1. I think we had a few in the last 2 years. I was just curious about your comment, Christian, that they remain below 1%. I was just wondering what you're referring this 1% to? Because if I measure the almost [ 100 ] against the order intake, it's a bigger figure. So what should we compare it against?
Thanks for following up on this one, right? I mean, the reference I made to is actually on the number of projects, right? And they are a rare event, right? So on the questions you had, you're just talking about a cancellation, I think third quarter 2022, right? We had -- we talked about on last quarterly call, right? And now we have discussed it's a pretty rare event and we are confident that it remains a rare event, but we are in the project business, and I think in the project business it happens from time to time that projects are -- also got canceled.
The next question comes from Gael de-Bray from Deutsche Bank.
I'm actually trying to understand the various mix effects for ITS that you expect later in the year? I mean, you said that the recent order pattern, likely, I guess, related to the fact that we have now more warehouse trucks versus counterbalance trucks and then more trucks coming from China versus Europe. So you said it can create negative mix effect perhaps from Q4 onwards.But at the same time, I would also expect a gradual return to a better mix in terms of service versus new equipment. So I guess my question is, what's the most important mix driver for margins? Basically, where is the greatest margin differential? Is it service versus new build? Or is it warehouse versus counterbalance trucks? Or is it China versus Europe?
So I mean, the -- so as you're laying out sort of the different levers, right, for the mix differentiation. I mean, service and then the service share as such, right, is the biggest lever, but the product mix, I mean, is the second one, I would say, in this -- if I do a ranking -- like you are suggesting in terms of ranking the levers, the product mix is the second lever there as, obviously, the more complex projects, right? The counterbalance trucks typically more complex than warehouse trucks, right? They actually come with a higher absolute margin, right? And that's sort of the other driver.The third one then is basically the geographical mix, right? And I think that's the difference in the development that we have seen, or that we are seeing in the development of the market where -- I mean -- and we have said also for the full year that we expect actually the development in the orders and the orders to come in APAC to be sort of better and higher, right, than for Europe. For both of them we expect a positive development. But we have seen this difference in dynamics already in the first quarter, and we expect that dynamic to actually be there for the rest of the year.
So if the share of service is the biggest lever -- I mean, isn't it the case that the share of service should actually get a bit better going into the second half of the year? I mean, in Q1, the new business revenues grew almost 13%. The service business grew only 2%. And the share of service was down to 47%, which is, I think, one of the lowest share we've had in many, many years.Sorry, I guess my question is, obviously, don't you expect this potential improvement in the share of service to fully counterbalance the negative mix effect that would come from what you saw in the order pattern in Q1?
No, no, I would not expect that sort of -- the order -- the sort of the mix in the order intake, right, that you're referring to, would not sort of work against completely the service share increase pickup that we are having, right? I mean, I was talking about the relative ranking of the different levers, right? But that goes not to the extent that the order intake pattern in the difference in the margins would actually overlay the service element there. Hope that clarifies it a bit.
Okay. And maybe a quick one and a final one. What's the amount of factoring left that you have? And why did you take the decision to reduce it in the quarter?
Yes. So actually, we have been using different vehicles and contract structures for factoring in the past. There was a reassessment on some of those contracts in the context of the closing of 2023. So there were -- some were actually deemed on balance, right? And obviously, we are not continuing to use factoring structure. So that's supposed to be on balance, right? And therefore, what we see in the first quarter is basically a reduction in this factoring element, right? And that's shown in the financing element of our cash flow statement.
But is there any more to do?
No. I mean, the point is we are working with our financing partners to actually rework the terms and conditions of the factoring to actually get them into an off-balance structure again, right, into -- have the assessment that you would usually expect from a factoring structure to be off balance.
The next question comes from Akash Gupta from JPMorgan.
My first one is on ITS unit order growth rates. So for overall first quarter unit order growth was flat, but I'm wondering if you can talk about the monthly rate, particularly what was it in March so we can see whether the exit rate were better than flat or worse than flat? And secondly, has there been any change in your expectation for ITS market development both in terms of units or mix point of view that we should be aware of?
Akash, we don't comment month by month by month. But let me give you a bigger picture view on the ITS market. Remember back, it was very, very strong, in all-time highs in the COVID time. And then after last 2 years, it's normalization and coming back towards the long-term average growth rates. Our expectation over the last 2 years -- our expectation this year is that the ITS market returns in the slight growth mode. The first quarter was a bit soft, but I think it's clearly understandable. We had a very, very strong end of the fourth quarter and the whole market had a very strong fourth quarter. So having had a real good fourth, you can see people taking a bit of a breather in the first quarter. And our expectations is that the market is showing some slight growth this year.Clearly, in APAC, also in EMEA, and it's our expectation that the market is not yet growing during the course of this year in North America. I hope that's helpful, and please understand we just don't know month to month to month.
Yes. No. Very helpful. And my follow-up question is on ITS pricing. So you raised prices slightly early in the year. And I'm wondering if you can comment about industry-wide pricing that you are seeing, and whether there is a risk that pricing may not become sustainable if there is anything and any change in the demand, particularly in Europe?
So you're right, right. We had -- at the turn of the year, we had done the first price increase since 5 quarters on the ITS side. Small single-digit price increase that we have put forward, which we also put into the market. We still feel confident that we have the pricing level that actually supports the market and supports our view also for the expectation of the quarters to come and supporting our guidance there.
Akash, as we've been talking over the quarters, clearly, the pricing approach that we're taking is the commercial agility approach we've been discussing. Our teams are actively very, very conscious of cost levels and market levels and price and competitive levels in the market. And we take a decision monthly based on all those different pieces of input on making any price adjustments. And so that's the approach we take. We've embedded that into our business processes. We're continuing to do so, and we'll adjust as appropriate going forward.
Yes. But maybe just a clarification on that. So you are still seeing industry being disciplined in pricing and not just you, but also your competitors?
Yes. I mean, Akash, as you have heard me saying in the past, right, that our competition is actually acting reasonably on the pricing, and I think we continue to see that in the market.
The next question comes from Martin Wilkie from Citi.
Yes. My question was just coming back to the Supply Chain Solutions and the order outlook there. Obviously, in parallel with the sort of cycles you've seen in order intake, there's also been a change in many ways from customers looking for AI embedded solutions and more software, more intelligence, these kind of things. Do you also see that is changing what customers are looking from KION in terms of the mix of product versus software that you offer? In fact, you've talked a little bit about how the sort of software part of your business has been growing as well, even if we've seen the order intake being a little bit softer than it has been over the past couple of years.
Sure, Martin. Good question. I mean, let's confirm, first of all, that the artificial intelligence that we're understanding and seeing all together in the market, it's a growing and important part of our business too. It's certainly a part of our product approach. It's about -- is a part of our software approach too. The software business, as you know, we made a very important acquisition several years back of a software partner who is now an important part of our business.Software is -- at all levels, the entire stack, first of all, is integral to our business offerings and our solution offerings, and we have very good competencies in each part of the stack. The trend over time -- in the software space is over time moving more and more software to the cloud and breaking it up into more and more executable pieces that make a very good stack in terms of being able to replicate and drive installations faster over time with repeatable modular basis of software that are driving the different modular basis of systems and subsystems and integrating well into the overall warehouse execution and warehouse management system capability. So that's a very important part of our confidence. That's an important part of our solutioning. And yes, indeed, artificial intelligence is -- and capabilities with that and insights that's giving us is a part of our offerings.
And do you think that some of the softness in the overall supply chain market, not just for you but across the industry, is also because customers are working out how to implement this? So always [ seen ] sort of 2 effects. One is the hangover effect from lots of investment during the pandemic, but secondly also customers wondering how to implement this new way of running supply chains? Or is it simply seen is the beginning of a new story, beginning with new investment phase and therefore, is sort of additive to what was invested in before?
Yes, I would look at that in this way, Martin. It's -- maybe 10% of the world's warehouses have significant levels of automation in them. And so there is a huge amount of runway and growth in front of us in this industry. Our long-term expectations of the Supply Chain Solutions market is easy 9% compound annual growth as -- in the whole world's customer base, they're all working against the same trends and all working against the same drivers of their industries.People are expecting throughout the industrial verticals, transparency and very, very clear and fast delivery performance throughout the entire supply chain with full transparency. People are not able to find manual labor in their warehousing operations and their logistical operations and factories. They need the automation capabilities and customers are all working through their thinking on how to deal with those trends and how to solution their supply chains over time.So it's not new that customers are trying to figure this up. And there's a lot of runway to go. Part of our solutioning is helping customers work through those. And that's why we talk about it takes 12 months, 24 months, even longer sometimes, working with our customers to help them design their solutions and help them maximize the capabilities of the solutions we're putting in place for their business environment prior to the start point of a project so that -- assisting customers through their thinking and their solution design is an important part of our business.And as the world gets more and more technical and a little more complicated over time, that capability that we have will be a very important continued driver of closeness with customers and helping them make their choices and decisions and shape their supply chain trajectory.
The next question is from Sebastian Growe from BNP.
Two questions then from me. The first one around SCS. And after [ having ] touching on the U.S. outlook, I would be interested in your assessment of the pipeline in EMEA and APAC as your guidance did require some [ infra ]] business from what I do recall. So would it be fair to assume that quarter 2 should already see clear pickup after the quarter 1 sluggish start?And the second question around it is if you could also eventually help us with the postponed orders, if some of those have already been then recorded in the earlier part of the second quarter?And if I may quickly also ask one question -- follow-up question around the ITS discussion for the margin guidance that you have provided. So I understand that the less favorable mix comments that you made that they would be adjusted EBITDA margin related. And I would then also assume that's clearly a lower gross profit margin. But if you could also help us understand how the factory load, et cetera, is affected by just growing the volume, that would be also quite important for us?
So let's do the easy one, right? The -- some of the orders that have been postponed have already been signed. Some of that was Easter holiday impact timing. So yes, indeed. And I think that will help us with a good Q2 start in order intake as we go through the quarter and the year driving the order intake. We don't usually break out pipelines on a regional basis. But the trends that we're discussing about having a good pipeline in each of those regions remains clear and remains strong, and the customer interactions are quite good and active on those.Choosing when that's going to turn into a start project is this why we talk about -- when the project is going to start, that's why we discussed that being a lumpy business. I'd tell you another -- as long as we're talking about that pipeline, I think another positive development we're seeing is, it looks like the e-commerce customers have grown into, or are clearly growing into the capacity we help them put in place over COVID and they're returning to the tables and there's project discussions for capacity increases are clearly active.So when those convert and start projects, it's lumpy. It's good in each of the regions. And I think that's probably the best overview I'd give you before we would drill into regions, which we haven't done before. Do you want to talk to the ITS question here?
Yes, please. So Sebastian, then maybe I take your question on the ITS margin guidance, right? I mean, I was talking about the order book on the ITS side, right? And the order book actually is reflecting in 6 months of new business revenue as we speak, right? So when we look at the order intake pattern and that impacts, right, I mean, that's fully baked into our view of confirming the guidance to solidly stay double-digit for the ITS segment as we speak. And that is just supported by the order intake pattern that we have seen, right, into our expectation for the market going forward.
And if I may quickly follow up on this one. When you talk about market expectations, I've also realized that you are calling the Americas market out for a significant decline in the first quarter. So historically, at least, the U.S. has been always called out as a lead indicator for the overall trucks market. So the question that I'm having, obviously, is if you could comment on what your confidence in an order pickup in IT&S and the remainder of the year is based on and how you read simply this current significant decline in the Americas?
Yes, Sebastian. As you are tracking us for quite a while, I think the way you remember is probably also sort of how historically you would actually have a look at that. I think the situation that we are looking at, and not just we, actually, the industry is looking at right now in North America is a bit more peculiar, right? We basically have a situation there of quite a bit of a stocking effect in the distribution channel with the indirect channel that is predominant in North America.And that makes that part of the world market actually be a separate story in its own, right? And that's detached from developments and overall macro developments or whatever that we see for EMEA and for APAC that is driving the market there. So historically, I would be with you, right? But at this point in time, I see those developments and those correlations actually do not hold.
The next question is from Elliott Robinson from Bank of America.
A quick question on the IT&S orders, please. Could you just give us a bit more color on that negative mix impact that we saw in Q1? Obviously, it was flat volumes. But I was just wondering if you could break out effectively how much of that negative mix impact came from the APAC growth versus the actual product mix in warehouse trucks?
Sorry, we would not break out the different elements of the mix effect in the first quarter.
Next question comes from Lucas Ferhani from Jefferies.
Can I just come back on the cancellation. Was there any kind of reason provided? And also, can you comment a little bit on the size of the client and the vertical, if you can as well? And also does that lead to any kind of fee -- any fee for KION or any cost for KION following this cancellation?
Sure. It's a good question, Lucas. I'm happy to give a little bit more color on that. As Christian said, it's very rare and will continue to be rare. They do happen. And when they happen, there are some good specific understandable reasons. Let's talk about a project. It was a warehouse -- a wholesale vertical that you're asking about. That customer is a long-term and good customer. We've got other active projects with them. We've got other active discussions on projects in the pipeline.Basically, they had done quite a few multiple recent acquisitions. And then as they're now sorting out the footprint and the capacities they need having taken on board the new acquisitions, those were after the previous project had been started or [ teed ] up. And so when they canceled it, since it had not yet been started, but was a project we were going to do and then get stuck when they made their footprint reallocations, it's an understandable cancellation. No, it did not have any financial impact for us other than to reduce the order book.The other customer, for example, also a long-standing customer, also a wholesale vertical. They're just simply adjusting their capacity to current needs and have multiple projects and multiple sites. And by stopping this project, it's helping them make the adjustments they need to the capacities they have. It's a specific situation and other projects with the customers are still in good conversation.
And on your expectation for Supply Chain Solutions, I mean, 9% CAGR, it's obviously it's quite high. I think since the COVID highs, we're generally struggling to kind of get back to growth here. So if I take this kind of on the other side, if we come back in 2027 medium term and you haven't grown at 9% CAGR from here in this division, what do you think may have happened to the market? Does that mean the penetration, does it go up? Does that mean it's too expensive in terms of CapEx with high interest rates? What do you think kind of could happen so that you don't actually deliver this 9% CAGR at market there for SCS?
No, Lucas, that's not my expectations. My expectation is that the market is very clearly underpinned by the trends I've talked about, the very need for speed, need for transparency, lack of manual labor, need for automation that really drives the capabilities that customers need to be successful in the market.So my expectation is the 9% over time. And my expectation, if you're following this now for several years, it was a very, very strong growth during COVID, primarily in the e-commerce space that drove a very strong growth rate. There has been a normalization over the past 2 years, and our expectation is it's getting back into growth mode over the course of this year. And over the longer term, the growth rates that we're projecting we feel very comfortable about is underpinned by those trends and underpinned by good market understanding and analysis.
And maybe just a follow-up on that. Do you see then the possibility of risk? Because we talked about potentially demand coming back kind of end of 2023, early 2024, and then it seems to be a bit further pushback. So do you see a risk that actually it's not necessarily an H2 pickup, but it's more of a 2025 pickup?
No. As we've been describing, we've reconfirmed our full year guidance for the year and our expectations as we've communicated them. I think is a slow start in Q1, and we expect that the market over the course of this year goes back in the growth mode on a revenue basis.
The next question is from Philippe Lorrain from Bernstein.
A quick question to come back to the point you made on the factoring. So in your annual report you were stating a factoring volume of about EUR 112 million. And from my memory, factoring volumes were never huge, so maybe it's 1% of sales or it's basically less than 10% of total receivables. So by how much have you reduced the volume in Q1? And is it a structural change that you have here, because I did not really pick up that from your comments?
Yes. Philippe, if you look in the annual report, we are actually talking about [ EUR 65.9 million ] for the assessment of the factoring lines. And about half of that was the effect that I was talking to in the first quarter, EUR 35 million.
And is it structural? So i.e. will you keep that, that way? Or are you going to reverse it again?
The point is, I mean, obviously, we will not continue to do on balance sheet factoring. I think that goes without saying, right? So we are working with our financing partners to actually look at the contractual -- underlying contractual arrangements to fit them into an off balance sheet arrangement as you would expect from a factoring arrangement actually.
The next question is from Alexander Hauenstein from DZ Bank.
I've got a question with regard to Dematic's AutoStore distribution partnership with -- yes, with regard to the AutoStore systems. And I'm wondering if you could comment about how happy you are with this kind of cooperation? Is this kind of material in terms of the systems you're selling here? Can you comment on that? So this would be the first question.And the second would be, I understand there's a mini load project going on. Is it right that you plan STILL to go into the market by 2025 here? And could you give us some color here, maybe upfront? Is that something which also might have a game-changing effect here for yes, your activities within the segment?
Alexander, we're very happy with the good collaboration and work we're doing with AutoStore. We're one of the very important integrator routes to market for them. They go-to-market through players like us, and we're a very important part of that channel for them. It's a good -- I correct you, it's not a system. It's actually a subsystem in our overall solution, for example, a micro fulfillment center. It incorporates an AutoStore subsystem and puts other modules and systems around that for an overall micro fulfillment center solution.But it's a good collaboration. It's very good for giving our customers our USPs on a micro fulfillment center. It's a good business for us, and it's a good business for AutoStore. So it's clearly a sustainable and good business model. And it's a unique solution that we're providing customers. And it's an important way of addressing, for example, take downtown footprints and you're getting the most out of downtown properties that have walk-in customers out front and small storage rooms in the back enables some good e-commerce and enables good fulfillment for customers and SKU availability. Our overall solution [ does ] and AutoStore subsystem is a good part of that.
Okay. And some comments on the mini load projects?
We don't comment on particularly new product introductions, Alexander. I'm not quite sure which one you're talking about, and we've talked about several on our website, and have some exciting developments underway, but don't particularly have a -- maybe help me with your question better or we could take it offline and we could work with our IR team. Why don't you do that? And then we can drill down on the specifics of your question.
Ladies and gentlemen, that was our last question, and I would like to hand back to Rob Smith for closing comments.
Thanks very much, [ Francy ]. And thank you all for joining our call and for your good, strong interest and good questions today. It was a good solid start in the first quarter, and it underpins our commitment and our conviction on our full year guidance. So we're looking forward to discussing that further with you in-person at different conferences and times going forward and when we're out about in the next couple of weeks and months. So until then, take good care, and thank you very much. Bye-bye.
Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you very much for joining. Have a pleasant day. Goodbye.