Knorr-Bremse AG

Good day, ladies and gentlemen, and welcome to the Knoll-Bremse AG Q322 conference call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to Andreas Spitzdauer, Head of Investor Relations.

Thank you, Operator. Good afternoon, as well as good morning, ladies and gentlemen. My name is Andreas Spitzdauer, Head of Investor Relations of Knoll-Bremse AG. I want to welcome you to Knorr Bremse's conference call for the third quarter 2022 results. Today, Frank Weber, our CFO, will present the results of Knorr Bremse, followed by a Q&A session, which will be joined by Dr. Jürgen Wilder, head of RVS, and Bernd Spieth, head of CVS, as well. 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 itself. It is now my pleasure to hand over to Frank.

Please go ahead. Thank you, Andreas, and welcome everybody to our quarter three conference call. Thank you for joining us. Today, we will talk about the operational developments of the last quarter and the guidance for 2022. Afterwards, Jürgen Wilder, head of RDS, Bernd Spieth, head of CDS, and I look forward to your questions. Let's kick it off on chart two with our key messages. On October 13th, we announced that Marc Listerzea will join the executive board of Knau Bremse as CEO on January 1st, 2023. The whole leadership team is very much looking forward to having him on board soon. We are strongly convinced that Marc is a great additional member and he will complete our team, especially due to his international background and strong industrial experience. I respect Mark very much and have already worked with him for several years. Overall, the underlying market demand by end customers in both rail and truck remains strong in all markets, excluding China, which is still facing significant market weaknesses. Overall, the activity in most regions continues on a good level, primarily driven by the focus on emission reduction and the need for additional transport capacities. There is an increase uncertainty about the global macroeconomic development. Geopolitical headwinds, but also higher input costs and ongoing supply chain disruptions leads to an ongoing challenge for all market participants. We at KB are making very good progress with our price increases and all other cost measures to pass on our cost headwinds. In addition, our low vertical integration and strong localization strategy is very supportive in the current environment. I strongly believe that we have the necessary strength to face all current and future headwinds. Sustainability has a high priority for Knorr Bremse. Thus, we decided to further expand our sustainability efforts by committing to extend the company's climate targets also to value chain processes. In this context, we are aiming to join the Science-Based Target Initiative, SPTI, in early 2023 to set the framework for our decarbonization efforts. This scope 3 commitment is also part of the €700 million sustainability link bond that was issued in September. Last but not least, we confirm our guidance for the full year 2022. On chart 3, I want to share our market view with you. Looking at the rail market, we see that the underlying demand in most regions in both OE and aftermarket business continues to be high. visible in a continuously good order intake. Ridership levels and rail traffic are recovering slowly, but steadily driven by the overall COVID situation easing. As a result, the tender development in the industry is also very pleasing, which results in high order books of our global OEM customers. This is a good foundation for further recovery in the quarters ahead. The market in China continues to be weak, with low investments in rolling stock. Nevertheless, the higher investments in the rail infrastructure will also lead to higher demand for trains. Europe remains the strongest rail market for RBS, but also North America continues to be a solid contributor. Both markets will be driving our growth in the foreseeable future. Overall, we are confident that we will see a subsequential improvement in the global rail industry in the coming years and quarters. We expect demand to remain solid, which should also be reflected in a book-to-bill ratio above 1 for the full year 2022. The supply chain in the rail industry remains tense and inflationary headwinds are part of the game, which will stay for some time. The truck market also faces ongoing demand, good demand. Truck production rates in Europe and especially North America in the last quarter developed positively year over year. This trend should continue throughout 2022, only potentially limited by managed order books of our customers. Truck production rates in China continue to be weak as expected, but I would like to highlight that CVS again grew above market-driven above the market, driven by content per vehicle, and we will continue to do so. For the full year 2022, we have now reduced our expectations for the production of heavy-duty trucks in China to around 620,000 units. Nevertheless, long term, the market should provide attractive growth opportunities. As soon as the market recovers, we will benefit due to our leading market position and the unbroken trends of higher technology and demand for quality trucks. The situation in the global supply chain has improved over the past month, but is still unstable and characterized by disruptions and unpredictability. But we continue to see slight improvements recently compared for the first half of the year 2022. Our input costs are an ongoing challenge for the whole industry, and we see that some suppliers are under strong financial pressure. Regarding pricing discussions with our customers, we continue to make good progress. CVS was able to successfully finalize the first wave with all customers, which is beneficial for our profitability in the coming quarter. We also expect the frequency of price discussions to increase in the future and represent some kind of new normal. Aftermarket business benefits from high utilization rates and increasing mileage. This trend should continue as well. In September, we participated at the most important fair, showing our exciting new products and innovations and received superb feedback. Therefore, I would like to hand over to my colleagues Juergen and Bernd to speak about their experiences meeting our customers and the media.