Knorr-Bremse AG

Dear ladies and gentlemen, welcome to the Knorr Bremse AG's conference call to the Q3 2020 on financial results. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. If any participant has difficulties hearing the conference, please press star key followed by the zero on the telephone for an operator's assistance. May I now hand you over to Mr. Andreas Spitzauer, who will lead you through this conference. Please go ahead.

Thank you, operator. Good afternoon, as well as good morning, ladies and gentlemen. My name is Andreas Spitzauer, Head of Investor Relations of Knorr Bremse AG. I want to welcome you to Knorr Bremse's conference call for the third quarter 2021 results. The conference call will be recorded and is available on our homepage, www.knorr-bremse.com, in the Investor Relations section. Here you can find today's presentation and later a transcript of the call. It is now my pleasure to hand over to Dr. Jan Mrosik, our CEO, and Frank-Marcus Weber, our CFO. Please go ahead, Dr. Mrosik.

Thank you, Andreas, and a warm welcome to all of you. As usual, I will start with an overview about the highlights, and then Frank will dive deeper into the quarterly figures and our outlook, followed by the usual Q&A session. In the third quarter of 2021, we continued to deliver overall solid performance despite an ongoing challenging environment in both industries. A special thanks to our employees for a great job maintaining business operations at such good levels. Speaking of our employees, I would like to highlight that recently we rolled out the so-called Heinz Hermann Thiele share program We have recorded significant participation as more than 25% of all Knorr Bremse employees, respectively 5,300 people took part in the program around the globe so far. We are very happy about this overwhelming trust in Knorr Bremse shares. With focus on the operational side, in the third quarter 2021, Knorr Bremse generated revenues of 1.6 billion euros. an increase of 4% year-over-year. Operating EBIT margin was 13.6% if the provisions for restructuring expenses in the U.S. are excluded for a rail freight unit. Margin increased by 90 base points year-over-year. Truck division contributed a revenue increase of 10%, and the operating EBIT margin gained 180 base points to 10.8%. After several extraordinary quarters, we saw the expected decrease in order intake and revenues. Nevertheless, CVS performed very well despite the increasing challenges regarding the supply situation for the whole truck market. RVS posted a revenue decrease of 2% year over year, driven as before by postponements of orders due to lower rail traffic caused by the pandemic. Operating EBIT margin came in at 17.6%, a slight decrease by 20 basis points. The strong order book of 5 billion euros provides high visibility for the expected development of revenues in the upcoming quarters. Based on the overall good results in the first nine months of 2021, we confirm our guidance for full year 2021 and are able to narrow the ranges and we'll go more into detail on this during the presentations. Let's have a look at the recent market situation in rail and truck on chart number three. After being already affected last year by less rail traffic, rail markets this year are continuously burdened by the pandemic and the recovery has been slower so far than expected. Market fundamentals are, however, fully intact, echoed by rail operators. The long-term growth drivers remain attractive. but we saw ongoing shifts of projects both in OE and aftermarket. Nevertheless, we do not have to record any cancellations. Rail OEMs which recorded solid order intakes recently are now in their design phases. We expect that orders will hit us step by step gradually in the quarters ahead. Lead times during COVID are prolonged from originally 6 to 12 months to 12 to 18 months now. Ongoing lower rail traffic and fewer trains on tracks due to COVID still affect the aftermarket business too. Overall, we observe increasing ridership levels being linked to decreasing infection numbers, but normalization will take time. Overall, the RVS team is working hard to get the most out of the recovery. The truck side, underlying demand continued to be strong and utilization rates of trucks remain on high levels due to high global freight and transportation needs. Despite the tense supply situation, especially with semiconductors, the CVS team has well managed the crisis so far. Federal production cuts and plant shutdowns at OEMs level caused by these supply issues have negatively affected truck production rates. The Chinese truck market, as expected, recorded a decline of truck production rate due to the introduction of China 6 in July. Let's move to chart number four now, please. Fall 2021 is another COVID year for rail, but we believe the industry will return to its growth path again when the pandemic is more under control. Promising long-term growth drivers of the rail industry are unchanged. Our strong market position and long-term customer relationships will support RBS future development. Rail remains the most eco-friendly mass transportation system. It is an integral part of reaching climate goals which underlines the importance of our market. And we are very proud that at Knorr Bremse we can make a significant contribution to sustainable global transportation and mobility. On the truck side, we expect that supply shortages will remain well into 2022. But robust underlying demand for trucks will continue for some time too. supporting our OE and aftermarket business. Production of semiconductors has not improved yet. Distributors' inventory levels have deteriorated, which is why we expect the situation to remain tense in 2022 too. Despite a strong task force team in place, which is doing a great job, we are also expecting higher input costs in the future. Nevertheless, CVS strong market position will enable us to forward some cost increases. Product production rates for 2021 will depend predominantly on the development of the supply side. However, market research companies expect significant increases in Europe and North America overall in 2021. With this, I hand over to Frank.