Knorr-Bremse (KBX) German Select VII Conference summary

Business overview and market position

• Global leader in braking and safety-critical systems for rail and commercial vehicles, with a balanced revenue split between divisions and strong geographic diversification.

• 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%.

• High entry barriers and long-term customer relationships, especially in rail, support resilience and market leadership.

• Aftermarket business provides annuity-like revenue streams due to long product life cycles and homologation requirements.

• Well positioned to benefit from megatrends such as urbanization, sustainability, digitalization, 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.

• Divestment of underperforming assets, including the planned sale of the HVAC rail business, to sharpen profitability focus.

• 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, and shareholder returns via dividends (40%-50% payout), with share buybacks not a near-term focus.

• Maintains a strong financial profile with low net debt/EBITDA (0.5x) and a commitment to investment-grade status.

Outlook and growth drivers

• 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.

• Truck market has seen the trough, with modest recovery underway and stronger performance expected in H2 2026, partly due to regulatory pre-buy effects.

• Digitalization and connectivity investments, including predictive maintenance and condition-based monitoring, expected to deliver significant impact by late 2020s.