Knorr-Bremse (KBX) German Select VII Conference summary

Business Overview and Market Position

• Maintains global #1 position in rail and commercial vehicle systems, with ~50% market share in RVS brakes and ~23% in CVS brakes for 2025, and a balanced portfolio with 55% of sales from RVS and 45% from CVS, serving over 30 countries and 100+ sites.

• Global leader in braking and safety-critical systems, with high entry barriers, long-term customer relationships, and a diversified customer base including major global OEMs and operators.

• High aftermarket share (46% of sales), providing resilience and stable, annuity-like revenue streams due to long product life cycles and homologation requirements.

• Rail division delivers higher profitability (16.5%+ EBIT margin) compared to trucks (10.5%), with rail aftermarket share at 56% and commercial vehicles at 34%.

• Well positioned to benefit from megatrends such as urbanization, sustainability, digitalization, e-mobility, and connectivity.

Strategic Initiatives and Financial Priorities

• BOOST program, launched in 2023, focuses on margin expansion, cost optimization, and footprint improvements, with over 12,000 efficiency measures implemented.

• Ongoing margin improvement initiatives and efficiency measures, including divestment of underperforming assets like the planned sale of the HVAC rail business.

• Expansion into signaling, especially in North America and Europe, through acquisitions like duagon and TRAVIS, with further M&A expected in signaling.

• Financial strategy prioritizes organic growth, disciplined M&A guided by strict criteria, and shareholder returns via dividends (40%-50% payout), with share buybacks not a near-term focus.

• ESG and sustainability are integral to long-term strategy, with ongoing efforts to double down on these areas.

Financial Performance, Guidance, and Outlook

• 2025 sales projected at €7.8bn, with an operating EBIT margin of 13.0% and R&D investment at 6.8% of sales.

• 2026 midterm targets include €8–8.3 billion in revenue, ~14% EBIT margin, and €750–850 million free cash flow.

• Rail margins expected to exceed 17% in 2026, with potential to return to historic highs (~19%) as China business stabilizes.

• Truck division margins projected to rise from 10.4% (2025) to 12% (2026), with further upside to 13–14% in a strong market.

• Aftermarket revenues expected to reach €3.6bn in 2025, with annuity-like characteristics and high customer retention.