Knorr-Bremse AG

Hello, ladies and gentlemen, and welcome to the Q1 2025 Financial Results Conference. At this time, our 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 Schwissauer, Head of Investor Relations.

Thank you, Operator. Good afternoon as well as good morning, ladies and gentlemen. I hope all of you are very, very fine. My name is Andreas Spitzauer, Head of Investor Relations. I want to welcome you to Knorr-Bremse's presentation for the first quarter result of 2025. Today, Marcus Tosea, our CEO, and Frank Weber, our CFO, will present the results of Knorr-Bremse, followed by a Q&A session. The conference call will be recorded on page www.knorr-bremse.com in the Investor Relations section. It is now my pleasure to hand over to Marcus Tosea. Please go ahead.

Many thanks, Andreas. Ladies and gentlemen, welcome to our capital market poll for the first quarter 2025 results. Let's start with the key takeaways for today on the page two. To keep it short and crisp, it's now Ramses in good shape. Quarter one developed as expected. We demonstrated resilience in ongoing challenges of time and ability we have maintained for more than two years now. due to the decentralized set-up of Joe Brunson, our strong local-for-local production and business approach, we have limited cross-border shipments and high localization rates in all imported regions. The overall balanced regional mix of approved revenues limits terrorist risks which we all have to face and which we all currently face. Additionally, we have a solid foundation with strong customer elevations, a superior financial position, industrial backbone, leading technologies, and most importantly, the right people at the right positions and locations. The new U.S. tariffs, if they will come, clearly don't make our lives easier. But we are confident and have the option to pass on this extra cost via price increases to our customers. Further potential implications and effects of the tariffs cannot fully be assessed at this point in time, As you and us know best that it is unpredictable what will come from this president, but we monitor the situation closely and have a task force in place to react quickly if necessary. Back to the part that is in our hands and that we control completely our boost program. We are fully on track, continue to execute the implemented measures. You know that we are in the process of selling two more assets and the respective confines are ongoing as we speak. KV signalling integration proceeds according to plan. We are working on further aspects of greenfields and will provide an update on this topic in the course of the year. Our vision is clear. Develop KV into a leading enabler for sustainable mobility and transportation in order to make it a high-quality capital goods company again that creates value. confirm our guidance for 2025 and are confident to reach our medium-term 26 targets as well. Let's now take a look at the market situation for rail and truck. Looking at the rail market, we can see that underlying demand remains very strong in all regions, also reflected in the high order intakes and record order books of RVS and its customers. We assume that demand still remains strong in the coming quarters, leading to an expected book-to-bill ratio of above 1 on a full-year basis. A good market development in China, and the expectation that 2025 should be as good as 2024 for our rail division are particularly pleasing for us. Please also bear in mind that rail's legacy business, meaning the inflation burden business, has been reduced to a smaller residual amount, which its margin supports as well. The truck markets continue to be challenging in all major regions. We expect the market environment to remain weaker in the first half of the year and still assume higher truck production rates in the second half of the year. Currently, it looks like Europe should develop slightly better and North America worse than originally expected. Both effects should balance each other out. Our assessments are based predominantly on many discussions with customers, but also on analysts' focus. As a result, we lowered our assumption regarding trust works in North America for 2025. In contrast to the VISA or e-business in trust, we expect resilient growth of opportunities in the aftermarket based business. However, we also see opportunities in the current tense trust markets overall via executing cost measures in our truck division and want to use the current situation to strengthen them. Our focus is on further optimizing our costs and searches. Let's now turn to slide 4 and look at the first quarter financials. Some of them have already been published with the preliminary release on April 29. Oil intake achieved a strong result with a 12% increase year-on-year to almost 2.4 billion euros. Both divisions contributed to this growth. Government generated revenues of almost $2 billion, more or less a stable development year-on-year. RBS compensated for CBS market-driven top-line performance last year. From a regional point of view, the APEC region, especially China, but also North and South America, contributed to the revenue increase, while Europe reported a decline. Operating profits increased. Operating avid margin benefited from the rail division, too, in particular from a strong aftermarket business operating leverage in general, as well as our boost efficiency measures. Consequently, operating avid margin was stable year on year. In our Q4 results, we already announced potential restructuring measures which we now intend to increase to 75 million euros. So far, these efforts have become more complete and expenses of around 23 million euros were already realized in the first quarter of this year, 2025. The development of rails operating avid margin was solid, seeing an increase of 50 basic points to now 15.6%. CVS operating avid margin decreased by 150 basic points to 9.5%. Frank will provide us with more details later. Cash flow, usually negative in the quarter one, due to overall business dynamics, amounted to 50 million plus euros, well supported by strong operations. I would like now to hand over to Frank, who will outline more financials and dollars into the division. Thanks, Mark. Let's directly move to slide five. CapEx amounted to 53 million euros, which represents in relation to revenues only 2.7. This is 19 million euros and 90 basis points below previous year's level. Following several years of higher CapEx, we adjusted the target range of CapEx to revenues going forward from 5% to 6% now to 4.5% after the completion of several projects that we had at hand. You all know that we want to increase CapEx efficiency at the same time, which is what we are driving with the optimization of our global footprint initiative. We have further improved our networking capital efficiency on an apples-to-apples basis by roughly two days down to 67.2. Including KB signaling, we are now at a level of 1.56 billion euros in 71.6 days. All improvements are a result of the collect program measures and strongly supported our free cash flow development as well. Due to the rather stable and the acquisition-driven higher capital employed working capital, ROSI slightly decreased from 19.7% to 19.5%. You know that ROSI has a high priority for us. with a target of more than 20%, a level which we are planning to achieve again in the coming quarters, driven by, foremost, a higher level of profitability. Mark already mentioned our strong free cash flow. Consequently, the cash conversion rate was also quite high, reaching 10%. It is a very strong first quarter cash flow performance and clearly shows the success of our collect initiative bottom line. The result was also supported by an expected one-time cash tax reimbursement that supported a better tax result of over 30 million euros net. But even without the tax effects, free cash flow would have been strong at only minus 18 million euros. Let's take a closer look at the RVS performance on slide six. In terms of water intake, RVS again recorded a very strong quarter. We won contracts with a total volume of more than 1.3 billion euros, representing a growth of around 24% year-over-year, well supported by KB Signaling. The pure organic result with a growth rate of 19% was also quite strong. Rail demand overall remains very strong, supported by all major regions and should continue throughout the whole year. As mentioned at our full-year results, Based on the existing tenders in the market, we assume that regarding our order intake, half year one will be stronger than half year two. For the current quarter, we also expect that RVS should be able to post an order intake nicely above a billion euros again. As usual, my reminder on ways order intake dynamics for you. Please keep in mind that it's a lumpy project business in general, and it does not fit well into quarterly reporting structures. Book-to-bill stood at 1.23, which means RVS reached a book-to-bill ratio at or above 1 for 14 quarters in a row now. Again, a new record in KB's history. In 2025, we assume that Graves' book-to-bill ratio should, as Mark mentioned, be above 1 again, which should also be the case in the second quarter. As a result, the order backlog increased by around 17%, reaching a strong level with more than 5.5 billion euros. The high order backlog and the good quality of it provides a strong basis well into 2025 and beyond. Let's move to slide 7. Quarter 1 revenues amounted to 1.07 billion euros, an increase of 10% year-over-year. Our aftermarket business developed nicely in Europe and APEC, while OE business slightly decreased year over year. In North America, we saw an organically stable development. The very profitable aftermarket revenue share of RBS grew to 55%, well supported by the acquisition of KB Signaling. From a regional point of view, revenue growth was fueled by all regions, including China. In Europe, with aftermarket business more than compensated for slightly declining OE sales, driven by KB signaling, North America recorded strong increases in both segments. The APAC region, similar to Europe, saw a slight OE decline while aftermarket grew. China also saw growing revenues in both OE business and the aftermarket. Especially pleasing is the increase in high-speed revenues year over year. Operating EBIT margin recorded an increase of 50 base points to 15.6% driven by operating leverage, fueled by a strong APEC region and a positive half-to-market development, as well as KB signaling being as strong as expected. In the quarters ahead, we strongly believe in acceleration of the RBS opportunities. In a nutshell, our last quarter overall developed as expected. And as a reminder, quarter one is usually the weakest quarter since the Chinese New Year and the similar typical seasonality in our North American upper market. In the current quarter, we expect that the profitability of RBS should see a significant increase quarter over quarter and for the full year 25. The operating margin of RBS is still expected to be well above 16%. Let's continue with the truck division on chart X. Order intake in TBS amounted to 1.06 billion euros, an increase of 1% year over year, which is a strong result in these 10 trucks markets around the world. Organically, order intake increased by 5%, and on a quarter-over-quarter level, it was even up 20%. Order intakes from North America and APEC came in as weak as expected, while Europe and South America increased. Order intake in the current quarter should be below last year's level, driven especially by increased uncertainties related to tariffs and weaker economic development, especially in North America. Nevertheless, we still believe in a sequential pickup of truck demand in Europe, while North America remains very difficult to fully assess from today's point of view. We are still confident to successfully fight current market challenges with our boost measures, our robust pricing power, and our resilient aftermarket business. Nevertheless, with reduced market numbers in North America, this is definitely getting more difficult. Book-to-bill reached 1.19 in the past quarter. Our order book of more than 1.9 billion euros at the end of March is 4% below the previous year level, but considering our two divestments of GD and Shepard, it was at a stable development. Quarter over quarter, it even increased. Let's move to chart 9. Revenue has declined by 12% to 894.49 million euros, which represents an organic decline of 8%. This development was as expected and represents a rather solid performance in a challenging environment. Thereof, the OE business in CVS decreased as expected in Europe and North America, whereas the APEC region saw a stable development. Our after-market business was robust again and saw a stable or increasing development in all regions except North America, where it slightly declined. In the European market, our organic revenues have experienced a 12% decline in line with a continuously weak market in both the truck and the trailer segment. Revenues in North America declined organically by minus 6%, primarily driven by the OE business. CVS was able to show strong resilience here, considering a decrease in heavy-duty truck production rates by more than 15% in the same quarter. Coming to the bottom line, operating EBIT of our CVS division amounted to 85 million euros in the past quarter, down around 24% year-over-year. As a result, the operating EBIT margin declined by 150 base points to 9.5%. The lower margin was mainly impacted by lower volumes and an unfavorable regional and product mix, which impacted the profitability of our truck division as well. Our resilient pricing stance, the success of our efficiency measures, and the higher share of revenues in the aftermarket were in total unable to offset the previously mentioned burdens. For 25, we continue to expect almost flat revenues compared with the reported figure for 24, given our exchange rate premises. As a result, CVS should be able to reach a slightly improved EBIT margin towards 11%. This is a bit lower than our previous expectations due to the current economic challenges in the U.S., which are, as said, currently difficult to fully assess. profitability should improve going forward, but more in the second half of this year. The margin in the current quarter is expected to be only slightly better, primarily due to the forecasted weak truck market in North America. With that, I hand over to Mark again. Thank you, Frank. Let's have a look at our guidance for 2025 on page 10. Based on the assumptions outlined, On the right side of the guidance page, we expect the following for full year 2025. A revenue range of 8.1 to 8.4 billion euros, which should lead to an operating average margin between 12.5 and 13.5. As a result, our cash flow should then reach 700 to 800 million euros. Compared to the first analysis of this guidance, we see that our expectations regarding RBS remain strong and unchanged. For CBS, our expectations are slightly more conservative due to lower market expectations for North America. Nevertheless, group level guidance ranges remain unchanged. Due to the weak economic conditions in some regions, we see opportunities and needs to increase our restructuring efforts. Therefore, the potential costs could now be around 75 million euros. As mentioned during our full year 2024 results presentation, the guidance is based on the exchange rate levels of February 2024. Therefore, due to foreign exchange movements, cancellation effects can occur. It also does not include large impacts from tariffs, for example, burdens on important economies, and it is based on stable geopolitical as well as macroeconomic conditions. Thanks a lot for your attention.

We are now available for your questions. So, ladies and gentlemen, let's now proceed to the Q&A session.

If you would like to ask a question, please press 9 followed by the star key on your telephone keypad. In case you wish to cancel that question, please press 3 followed by the star key. Just one moment for the first question, please. And the first question comes from Akash Kutpa, J.P. Morgan. Please go ahead. Your line is open.

Yes, hi, good afternoon, everyone, and thanks for your time. I got two, and I'll ask one each time. My first one is on truck business, and this is for Frank. Frank, when I look at the drop through in the quarter, and you had like 43% organic dope through on revenue decline of $76 million in the quarter, and this is somewhat weaker than 21% we had in Q4 and 17% in Q3. So my first question is that was there anything that you can highlight behind this higher drop-through that we have seen in the quarter, any mix or any one-off impact, and how should we see this drop-through in second quarter? That's the first one.

Thanks, Akash. Rightly pointed out, as our rail drop-through is quite nice. exactly in the targeted range that we are having. The truck one is the weaker one, has basically three impacts to that. One is the general mix effect that we're having. It's not only a regional effect as North America has been dropping further than the European market. So, this is a negative market mix effect for us. Then also some product mix effects occur when several customers are hit in different way than the other or in the previous quarter. So, that's the one element of mix effect in products and regions. The second is, of course, that we are having definitely some start-up productions for major projects in the truck division over the last months, like the GSBC, the Next, and the Synact products, where amortization for R&D kicks in, so cost increases. That also didn't help us ultimately. And then we, of course, also had with us the combination of our boost program, some investments into further efficiency measures that will then kick in later on. So these three things mix. Cost increases on the R&D side, regular amortization, and investments into the future. Those three things, Akash.

Thank you. And my second one is on the rail business. I think in your prepared remark, you said that rail OE business was down in Europe while aftermarket was up. I mean, if you just touch base on rail OE business, on what's going on in Europe, because in Q1 earnings season, we have heard from a couple of other rail suppliers like SKF as well, that saw that their growth rates in rail Europe kind of come down with this So maybe if you can touch base or elaborate a bit more on what's going on in Europe and when do you expect this market to return to growth?

Thank you.

rock solid still for us. If we look at our tenders that are out there in the market and where we have been participating, we have still not seen a single project being canceled. This holds true now since five years. We do see some push-outs in the one or the other project from one quarter to another or even two quarters. This is definitely something. If we look at the freight segment, if you search for some negatives, freight market per se is a bit weaker than it was. but not different to what we expected it to be. But we don't see there any big drop on the growth momentum in the market demand side, not at all.

Sir, maybe you can say that this European OE slowdown in revenues in rain is just facing a backlog or timing effect and should be corrected in the coming quarter.

I don't know whether I can judge on that hypothesis because I don't know the root cause of their revenues, but this is a hypothesis that might be a valid one. But I can't judge on their revenues, root causes, so to say.

Thank you.

You're welcome, Markus. The next question comes from Sven Weyer, UBS. Please go ahead.

Good afternoon. Thanks for taking my questions. The first one is a follow-up, Frank, on your statements regarding CVS margins in the full year with that working towards 11%. So shall we take that as a 10.5% to 11% guidance? And I was also wondering, I mean, with that, that would obviously imply that the margin in the second half would be like 11.5% or higher, right? I mean, do you assume that the kind of tariff uncertainties are done after the 90 days and things are back to happy days in the second half, or what are you currently assuming there? And are your restructuring measures of 75 million, are they consistent with this scenario, or are they more consistent with a darker scenario? Thank you.

A lot of questions Sven, thanks. Yeah, sorry. It's okay, totally okay. I would say first of all, yes, really mathematically that's right, but this is not kind of a hockey stick hope that we are having for CVS, but rightfully we are seeing a bit of a better situation in the market in Europe and expect the market to grow sequentially. North America, as we said, is a bit difficult to assess, but we currently see a more flattish development coming from the first quarter, so it should get from an operating leverage perspective also in Asia a bit better throughout the quarters of the year, which benefits, of course, a certain operating leverage on the profitability side. In addition, the more time, so to say, goes by until the decision for efficiency measures in the boost program, for example, the more effect it shows, bottom line, of course, that's the implementation of the boost measures, which boost our profitability as well. If we take both together and combine it, that speaks for itself that over time our margins should improve according to the boost measures and the market support. so to say. I would say we're not dreaming in regards to the market. Like you said, as I said, we're Even though it's hard to assess, we do believe that North America is based on a weak level, like it was in the first quarter, Europe getting a bit better, as I said. China also stable to a bit better over throughout the years. This is a bit the scenario where also the 75 million is based upon. And those 75 million are also repeatedly, we are saying that, not there to ensure our 26 numbers, but to strategically make this company even fitter. This has a more very strategic kind of focus, but nevertheless, it's a good opportunity also now, given the market environment. That's the way I would touch it. That's okay, Sven? Or did I miss something out?

No, no, you did not, but did I understand you correctly that For the US, you're also not assuming a pickup in the second half, but maybe kind of sideways from Q1.

No more. That's what Mark said and myself as well. Our market expectation, like we said, worsened for North America, where we were still thinking so at the very beginning of the year, but we now expect it to be weaker and Europe a bit better.

And just on the truck order intake comment you made, because I think you said it will be down year on year in Q2. I mean, I think it's probably a bit ungrateful to ask how trading was in April because of the Easter break. It probably would have been weak anyhow. But should we expect like a number that starts with an 8th? Or how bad could Q2 be on orders?

No, the April didn't have an 8. But April was not that bad, despite Easter, but not bad at all. But it's not going... As the Americans say in regards to our Germans saying, one swallow doesn't make a summer yet, but April was rather good.

Okay.

I would like to add something to Mr. Weier and also to Mr. Gupta's question, because your question, of course, understandable. Nobody, especially not in the banking environment, has any clue what will happen in the next two months. Nobody. Nobody. I just remind you what we have seen and heard from our dear friends, so-called experts. In January, we heard that the euro and the U.S. dollar will be at parity latest in the next six weeks to come. Now, the dollar is 1.13 to 1.14 to the euro, so the experts were wrong. The experts said in January, U.S. is the capital market to be, right? That was the sentence. That was the expertise. Now everybody is fleeing from American markets, and there is a re-justification to be in the European or in the non-American markets. Then, in April, when the markets crashed temporarily, everybody was saying that the markets are just the beginning of a big, big, huge correction. Now, just four weeks later, the markets recovered, and we are even in Germany faster than we were at the beginning of April. Then we heard that Europe will latch. That we heard in February. Now Europe is better in terms of progression of GDP than America. All the experts were wrong. Four times wrong within four months. In the next, in the last, and then I will not bother you with this, the inflation will rise or stay high, and now we see by this unreasonable tariffs conflict, we see a massive deflationary and pressure from China because they will flood the markets and that will bring down the inflation around the world but USA. So having said so, I understand fully your, let me say, uncertainty what is now our plan. I tell you very clear and I try to do my best the last two and a half years. We do not care so much on others. We have to take care of ourselves. We have to bring down our costs. That's what is a fact. Everything else is a strategy. This is a fact. We have to address, and this is why we are after 75 more million to spend. We want to make our personal costs more. We want to get it down. We want to make sure that our R&D process is only done in projects which are having a return within three to four years. We want to make sure that our capex is absolutely true what we decide, and the capex will be lower this year because we are very stringent in this. So as you rightly said, and some of you said it and wrote it, very often and frequently this health healing is the one which is thriving and that is fully right and that is absolutely what we want to do we want to be prepared for the worst of the market we want to be prepared when the markets are going up But we cannot predict in this environment anything but ourselves. And what we can really work on is our self-healing. That's our cost. Our cost, we can work. There we can focus, and that's exactly what we do. We focus, focus, focus on execution, on cost reduction programs. That's what we do. That's what we focus. And I'm sorry, there will be a lot of questions. How do you see when Russia is going to pace? Will Ukraine be a rising market for our truck industry? Eventually, yes. Eventually not. But the impact on our Avid will be still insignificant. Sorry for that, but I think this was... Good to be said, because that's the premise what we are planning, that's the planning what we're working, and that's the planning also in the communication with you. What are you doing to face all that? You know what? You have to clean the house, you have to be prepared for the worst flood we have ever seen. And we have to make sure that we will survive every form of crisis which will occur. Also, when you ask us, what is with your Indian growth plans when you see a war between Pakistan and India? We don't know so far how this works, but we know how to compensate it because India so far has not had dramatic impact.

Next question. Okay, the next question then comes from Peter from Sydney. Please go ahead. Thank you very much, everyone, and good afternoon.

I have a question around China, where again you've seen a good development in rail in the first quarter. On the last call, you commented that you expected a normalization in 2025 after the strength in 2024, something more like a slattish development. So should we think of this as phasing or are things developing better than you may be expected?

Thank you. You're welcome. I would say it's with the normalization, we mean that it's not maybe growing the way that it did in 24 on a year-over-year basis. So it's now absolutely delivering the market, it's delivering what we expected it to do. So we have seen some good high-speed builds some 60 high-speed trains being built. We've seen nearly 1,100 metros being built in China in the first quarter. We see that the Ridership levels in the first quarter have been two to three percentage points higher than the ridership levels in the first quarter of last year. So that's not a significant growth anymore. If you just extrapolate it, and that definitely speaks for what we forecasted, it's a rather normalization, rather stable kind of development. So all is fine in regards to that speech back then.

Thank you. You're welcome. The next question comes from Gary Debray. Go ahead. Good afternoon, everybody.

I have two questions, please. I mean, the first one is out of curiosity, what would the full year guidance for revenues and purchase flow look like if you had to update currency effects for today's level? And then the second question is rather on the M&A side. I mean, we've heard from IMI this morning that they placed their transport business in the review. Is this a business you could be potentially interested in? Thank you very much.

Can you repeat the second part of your question? Which company was that that you mentioned, or what was it?

It was IMI, which said this morning that they are thinking about potentially divesting their transport business. I think they do pneumatic and hydraulic valves and actuators and a few other things for the truck market.

Okay, thanks, understood. Again, thanks for that question. I mean, as you know, and we always disclose the numbers again this morning in the backup, you see the exposure that we are having in U.S. dollar, roughly $2 billion strong is our exposure. And if you assume 10% volatility in the FX rate, you end up with roughly an impact of 200 million euro in regards to the dollar. So it's been the first quarter we had around 1.0405 euro to dollar. Currently we're at 1.14. In the second, as we speak, spot rates, So this is roughly, let's say, 10%. So if they would occur for a 12-month basis, it would be 200 million. If they would occur for X months, you can calculate it, or we all have to calculate it by ourselves, depending on how long these levels would stay. But this is always, so to say, our... so to say, service to you that we provide you with the exposure for all the currencies in the backup. But this is the number for US dollar. IMI, I have not heard about this topic and it's not on our table.

Okay, so not in your radar. Just coming back to the FX point, do you confirm you don't really have any transaction information impact relative to assets?

Not a big one. Of course, you always have to have a true up on balances, addition every month and That might be a bit of a transactional effect, but the rest of the transactional effects are minor to our understanding as of today. But only translationary effects that really count. Maybe a bit of transactions in the moment that the FX rates drop significantly or at the month end where the FX drops. significantly, then there might be a bit of a hiccup, but nothing else. The rest is basically sensational.

Thank you very much.

You're welcome, Gail.

The next question comes from Lucas Ferrani-Jeffries.

Please go ahead.

Hello. Good morning. Thanks for taking the I have two, maybe we do it one at a time. The first one is just on the restructuring, if you can give a bit more detail on what's behind bar, how much is maybe for trucks or rail. Is it all clear kind of what you need to do? Is it mainly labor also looking at the footprint? Thank you.

You're welcome, and thanks for that question. We have maybe not digged so deep in the past on that. But it's a rather comprehensive field of action that we are having on the plate here. It's a lot of footprint, plenty of footprint issues. I would say even a bit more rail-related than truck-related. shed some light on it would be like we're moving production basically as a headline from high-cost countries out into more best-cost countries. For example, from Germany to parts of Eastern Europe, from Spain or Germany or Austria to India, as some examples that you understand what we are doing and also some capacity issues that we are facing given the market. That's also part of it, but the bigger chunk of it is the pure footprint strategy realization that kicks off usually with adapting, so to say, your current labor workforce. So both elements, but the big chunk is footprint and a bit more rails than truck.

Perfect, thank you. And then regarding the rail orders and the kind of H1 versus H2, that doesn't include the potential deal in signaling that you kind of mentioned before?

No, I think it's a good question as well. The distribution of the order intakes throughout the year always depends on what tenders are in the market because it needs a long preparation time, usually in four tenders, so we know exactly which tenders are out there in the market and just seeing the distribution of those tenders and applying a certain certain percentage of how likely we will be able to win that contract. This implies the half year one and half year two thing. The big or potentially big North American project that's in the signaling market is further delayed as we know at this point in time. So it's definitely not a topic that is relevant if it would even come one day, not relevant for 25, maybe end of 26. but not earlier. It looks like it's further delayed due to political uncertainties, more or less.

Okay, understood. And just a last one on the German stimulus and what we're seeing in terms of the increased governance spending. Obviously, it's not clear yet how it's going to be broken down, but most likely some of it will go to transport to rail. I mean, it was mentioned by Deutsche Bahn that they needed a lot more part of it for track force, part of it for equipment. Just what's your view on when we could see that be unlocked and whether you think it's going to be a big impact for rail or you don't necessarily see it as a huge support for you?

Thank you. Yeah, so definitely this is very helpful for us, very clearly. We mentioned that beforehand. It's nothing that we ever expected to happen, so to say, within the next month with an impact on our P&L, but definitely mid-term this will help us, this whole program. It will help us, by the way, not only in rail, but because everybody is usually talking about rail impact only. It's also road infrastructure taken in the mouth of the politicians. We don't have a clear plan, but what some are uttering, this also relates to truck in future. So, in general, this is a very good thing, basically, for us, and we will be definitely also in the eye of the storm of that. but it's nothing that will happen now over the next month. They don't expect a billion of additional revenue kicking in, but it's slowly, so to say, helping the markets to grow for us. Yeah, I mean, some are clearly saying that also, of course, the Deutsche Bahn demand is there and the investment need is there, Again, as I said, it's too difficult to really assess. There is not actually a plan existing yet. I think we have to wait, knowing the political processes here in Germany, I think we have to wait another one, two, three months, maybe until it's pretty clear what the plan is. By the way, similar procedure like we had with the Green Deal, I think in 2022 it was, or 21. It also took quite a long time in order to get the real clarity what's behind the measures, and then I think we can discuss further if you agree. Thank you.

Perfect. Thank you very much.

You're welcome.

Our next question comes from Claire Lou, Morgan Stanley. Please go ahead.

Hi. Good afternoon. Thank you for taking my question. My first one is just on rail. Obviously, excellent results on rail. And you mentioned support from signaling business. So I was wondering if you can quantify a little bit more in terms of how much signaling business grew in Q1 in both order intake and sales. And what do you see as a reasonable growth level for the full year, please? Thank you.

Yeah, thank you, Claire. Pretty easy for me to answer that question because in Q1-24, we didn't have the KB signaling business. So it's the first time in our books regarding the PML and regarding the balance sheet, needless to say. So you see in our walks that we are regularly providing basically the effect of the signaling business if you look under the section of M&A. We have acquired that business with a return of around 16% EBIT margin and a $300 million return revenue for a full year. We are on a level of around €70 million of revenues in the first quarter, and the margin is a bit better than what we bought. Thank you very much. And I gave you already a full year indication, right? Thank you.

Okay, thank you. And the second question is just on M&A pipeline. Given the current macroeconomic environment, do you see in your conversations in M&A, is there any slowdown or potential kind of delay on anything? Any comments there would be helpful. Thank you.

I mean, you of course feel also a bit the uncertainty talking to the, of course, M&A banks and listening to what the market is doing and not doing currently. Uncertainty is definitely a factor, but we don't see any slowdown in the process of the two assets where we are still in the world in regards to selling them. We still believe that it's possible to get a signing done towards the end. Both longer procedures are not driven by the fact that there is a bit of something going on in the market, uncertainty, but it's rather more technically complicated carve-out process. for at least one of the businesses, the bigger one, but has nothing to do with the hesitation in the market or that the market would be collapsing, the M&A market. No, we don't see a bit of hesitation, yes, but not a significant shift in patterns.

Okay, thank you.

You're welcome.

Okay, thank you everyone for this Q&A session. I'd now like to hand it back to the speakers for some closing remarks.

Okay, thank you very much for all your questions. If you have further ones, please get in contact with us and we wish you a great afternoon. Thanks and bye-bye. Thank you, bye.