Knorr-Bremse AG

Good afternoon as well as good morning, ladies and gentlemen. I hope all of you are very fine. My name is Andreas Spitzhauer, Head of Investor Relations, and I want to welcome you to Knorr Premises' presentation for the full year preliminary results of 2025. Today, Mark Listosea, our CEO, and Frank Weber, our CFO, will present the results followed by a Q&A session. The event will be recorded and is available on our homepage in the Investor Relations section afterwards. It is now my pleasure to hand over to Mark Listosea. Please go ahead.

Thank you, Andreas. Ladies and gentlemen, I'm pleased that you are participating in the capital market call on our preliminary results for 2025. The most important news first. Despite geopolitical uncertainties, we were once again able to steer Knorr-Bremse successfully through a challenging year. Thanks for the stringent execution of our boost measures and the dedication and expertise of our colleagues worldwide, we strengthened existing businesses, developed new areas of growth during demanding times. Let's go to page number two. We are reporting strong financial results today. Fiscal year 2025 clearly demonstrates Knorr-Bremsen's excellence and resilience once again. With our boost strategy, we have delivered what we have announced. Phase 1 is almost completed, creating a more stronger and cleaner cost base. This now enables us to clearly shift the focus towards accelerating margin and creative growth. Boost Phase 2 centers on growth and expansion, while maintaining strict cost discipline. This means boost and the regained efficiency are not over, as management culture is here to stay and a permanent part of how we run and steer our business. Our rail division delivers strong margin accretive growth and reached its mid-term target margin one year earlier. We promised the numbers and we see it already one year ahead. RVS now represents around 55% of total group revenues, so we become more rail-ish, as indicated in the past. At the same time, CVS showed disciplined cost management, solid performance despite a tough truck market backdrop, a great achievement by our truck colleagues. In total, we achieved our full year 25 guidance and have issued a solid 26 outlook in line with our existing mid-term targets from the past. We will provide an update on new mid-term targets together with the release of our Quarter 2 results end of July this year. Ladies and gentlemen, let us now take a quick look at our guidance for last year on page 3. We were able to achieve all of our targets, including revenues, average margin, and free cash flow. The strong order book, the strong cash conversion rate, and the low leverage underpin these results and confirm our strong resilience. We are in top financial shape, ready to continue with our boost strategy from a position of strength. I'm very pleased that we are able to present such convincing results today. They are a clear proof that our collective efforts over the past years have paid off. Let me continue with more details of our BOOST program on page 4. When we launched BOOST in the summer of 2023, our ambition was clear – to make Knorr-Bremse faster, more efficient and structurally stronger again. Two years later, the benefits of the program have become clearly visible in our financial results. The consistent execution of sell-it and fix-it measures have delivered tangible margin expansion driven by a lower break-even. Boost is firmly anchored in value creation. Every initiative is designed to contribute to profitability, which remains our top priority. With the brownfield part very well advanced, we announced transitioning into the next stage of Boost. In 2026 and beyond, the focus of the whole management team will clearly shift towards greenfield initiatives, accelerating marginal accretive growth and expansion while maintaining the operational discipline we have built. As a result, we expect the company to continue benefiting strongly from Boost in 2026, both through sustained efficiency gains and an increasing contribution from marginal accretive growth initiatives. Let me now turn to our Sell It program on page 5. Overall, we are close to complete all key actions. The sales process for our HVAC business is advanced and we are fully committed to sell the business if we can realize a fair value. Therefore, we prefer a long-term and sustainable solution instead of a hasty action. We are not a forced seller and we will never be. HVAC is classified as an asset held for sale on the balance sheet. The sell it program is only one side of the coin. Over the past years, we have so far divested businesses and units with revenues of more than 400 million euros and an average market margin of well below 5%. Once HVAC business is sold, it will make up to 750 million euros in total. As promised and as said in 2023. On the other side, we have added businesses with revenues of roughly 600 million euros, generating margins of 15 or above percent. This is our definition of portfolio optimization, respectively portfolio rotation. In other words, we have deliberately exited lower margin activities and reinvested capital into higher quality, more profitable growth platforms. Our motivation behind this strategy is very clear and remains a top priority. Creating well shareholder value by continuously improving the quality, profitability and growth profile of Knoll Bramson. Let me now turn to Fixit and our efficiency measures on page 6. Over the past years, we have made very solid progress in improving key financials. For me and the whole management team, keeping fixed costs under tight control remains and is very important. This is not a one-off exercise. It is a permanent discipline for us. We are permanently monitoring our fixed businesses and drive them into improved performance. The break-even, respectively, the control of our fixed costs is particularly important to me. In the past, it suffered from revenue headwinds in countries like China or Russia, and it was impacted by high inflation. This is therefore very important to us as a managing team to regain this financial flexibility and strength. So far, we have already been able to improve the breakeven by 4% points, or 400 basic points. In our internal business reviews, I therefore explicitly challenged the operating units on cost structures and efficiency. Frank, in parallel, places a strong focus on cash flow generation. This combination has proven to be very effective. Our persistence has clearly paid off. Over the last three years, we have reduced headcount by more than 2,400 people, of which only a quarter was achieved through divestments and the majority through real reduction measures, with particularly strong progress in the CVS division so far. In addition, the migration of operating activities to lower cost countries in our major regions such as Hungary, Poland and India is already well advanced. Importantly, cost optimization goes for beyond administrative functions. We are systematically adjusting our operational footprint across engineering, production, R&D, service activities and purchase in order to achieve an optimized strategic global footprint. At the same time, we have established global shared service hubs in all major regions and are doubling down on those. These hubs are already delivering tangible benefits. Overall, Fixit has made a meaningful contribution to margin expansion, cash flow improvement, and return on capital employed enhancement of 20.2% to 2.8% of Knorr Bremse. And let me be very clear, Fixit is not finished. Efficiency and cost will remain an integral part of how we run Knorr-Bremse going forward. Let me briefly outline the strategic logic behind how we intend to develop Knorr-Bremse in the coming years. The main focus of our Greenfield strategy is to drive revenue growth and margin expansion beyond historical levels. Our portfolio strategy remains clearly anchored in rail and truck combined with opportunities in adjacent and other existing growth areas. The rail industry provides very attractive profit pools. As a result, future organic and inorganic investments will take place more in rail going further. Wayside signalling is an interesting segment strengthening our sustainable margin accretive growth. In truck, mobility as a service via our CVS service platform represents another greenfield pillar. Here, we are evolving towards a technology-enabled solution partner, and we are systematically expanding digital and service-based aftermarket solutions, a market that is just emerging in trucks. In energy technologies, we are building on our existing nucleus to explore attractive opportunities in intelligent grid solutions and the field of energy distribution, not in a rush, but step by step and accretive. Beyond our core, we are selectively analyzing and developing additional growth fields like dampers and electronics business. Green technologies are still at a very early stage for Knob-Renze, for example, supporting our existing but small remand business. Overall, our ambition is to put Knob-Renze on several strong profit tours to reduce the criticality and grow profitability. Let me be very clear. To be part of Knob-Renze, every business must meet its target margin. This discipline is central to create long-term shareholder value, an important part of our financial guardrails regarding M&A. Let me now turn to Signaling on page 8. Signaling itself is clearly a success story for Knobrenze so far. We acquired a good asset and made it even stronger. KW Signaling is well integrated and it is a market leader in an attractive segment which can be seen in the favourable growth prospects. Over the past year, our focus was deliberately on cleaning up the project portfolio of KB Signaling. This led to a slight decline in revenues, but significantly improved the quality and risk profile of the business. At the same time, we reduced the cost base for targeted staffing optimisation. With this groundwork completed, our focus is now firmly on profitable growth. We aim to defend and further strengthen our market leadership in the United States and to expand into markets that have adopted U.S. rail standards, such as Australia and South America. In Europe, we have extended our signaling footprint through the acquisition of Duogon, strengthening our electronics and system capabilities. Beyond organic growth, we also remain open to selective non-organic investments to further expand our European activities in signalling. Overall, our objective is clear, to build a global, high-quality wayside signalling portfolio and to fully capture the attractive growth potential of this market. Moving please to page 9. Let me now turn to energy, which at first glance may appear less obvious for a company noted and rooted in rail and truck braking systems. However, there are two very clear reasons why this field is highly relevant and interesting for Knobrenzel. Energy is not new to us. For Celisco, we have been active as a Tier 1 supplier in the European and American energy distribution market for more than 50 years. Together with Microelectrica in Milano, we already generate meaningful revenues in this segment today, and the business is both growing highly profitable second the European energy market is currently undergoing profound changes investments and great modernization intelligent power distribution and network management are increasing and demand for smart reliable solutions is high giving a long-term selling customer relationships and technically expertise we see a clear opportunity to benefit from this development Currently, we are screening this market globally and are interested in opportunistic moves. We are responding to increasing demand and concrete requests from our existing customers in the areas we are already in. Our approach is therefore deliberate and disciplined. We intend to expand our positioning in energy technologies step by step for organic investments and being open to selective M&A opportunities, always fully aligned with our strict financial guardrails. In this way, energy represents a value accretive extension of our portfolio by reducing cyclicality and cyclical dependency and support sustainable margin accretive growth over time. Our CVS service platform addresses the truck aftermarket for primarily digital solutions, a segment that is structurally outgrowing the OE market and offers a more effective margin profile. We call it the truck aftermarket ecosystem. We are already well positioned, with Kohali providing a strong base in diagnostics, data and workshop solutions. Kohali generates annual revenues of more than 130 million euros with a very, very attractive EBIT margin. We are now accelerating our expansion in truck services with Travis at the core of the CVS service platform. We are bundling services that are essential for fleet operators, but which are not part of their core transportation businesses. Over time, this will include services such as repair, parking, charging, enabled by Trevis as an asset-light, data-driven platform. Together with Trevis, VESP and Placefix, we are at the start of being a digital solution partner in the truck aftermarket, strengthening the CVS ecosystem and expanding Kohali's opportunities. Overall, this is a strong strategic fit for our truck division. High growth, attractive margin, asset light, scalability, and a higher share of revenues, less depending on cycles. And this is exactly what Boost Greenfield stands for. Building new growth platforms and structurally attractive markets that enhance the quality, resilience, and growth profile of Knorr Bremse's portfolio. 2025 was a good year for Knorr Bremse. Let me briefly highlight the key points. In rail, we secured several important contracts. Siemens Mobility awarded us an order covering braking systems and for the first time a coupling system for 90 lightweight trains for the Munich S-Bahn. In China, we contributed to growth with CRC, supplying equipment for more than 1,000 metro cars in major cities, as well as technologies for around 150 trains, complemented by export orders, including braking systems for over 100 locomotives for Kazakhstan. We also entered India, first high-speed rail project, for an equipment initially with BEML, initially equipping two prototype trains. Beyond that, with the opening of our new artificial intelligence center in Chennai, we are continuing our global digitalization strategy and also strengthening our presence in India. Just a few days ago, we laid the foundation stone for a new site there, which will be built over the next year and a half. In the future, we will bundle engineering production capacities here for both divisions, together with a capacity of more than 3,500 people long-term. Digitalization in rail freight was another highlight. In the UK, we signed a long-term agreement with VTG Rail UK for the supply of at least 2,000 freight control Sentinel wagon sets, improving safety, availability, efficiency, and infrastructure use. In simple words, we make freight trains smart. We make them smart for the first time and after more than 100 years. In truck, we extended a major contract with a leading OEM for 200,000 electronic leveling control system while continuing to expand our digital aftermarket business. The extension of Nico Lange and my personal contract are further strong signals of continuity and stability. It reflects the confidence in the leadership team together with all my colleagues. A strong collaboration across organization and a shared commitment to long-term value creation. Together, this provides a solid foundation for Knobram's continued success and a very promising future. To deliberately leverage the benefits of artificial intelligence, we are now further advancing our AI transformation together with strong partners like Amazon Web Services. Our objective is to build a new operating model for the company over the long term, powered by high-performance AI agents. This is an exciting initiative for which we are shaping the digital future of Knorr-Bremse, enabling us to become faster, more agile and more efficient. Let us now take a look at the current market situation for rail and truck, as well as our market expectations for the current year. Starting with rail, the overall picture remains very robust and continues to be our least concern within the group. Underlying demand is strong across all regions, supported by high order books at OEMs and our customers. There has been no material change in market fundamentals and we expect a full year book-to-bill ratio around one or slightly higher. In Europe, demand remains solid, with passenger rail continuing to outperform freight, which is still somewhat softer. Same picture for North America, where the passenger business continues to more than compensate for the still subdued freight environment. The APEC region continues to develop at a high and stable level. After a good growth, driven by increased ridership and pent-up demand, the Chinese rail market should normalize this year. On the other hand, we are quite convinced and we get clear indications to be part of a new rail platform in China in the future. Turning to the truck markets, the market picture overall has improved compared to three months ago, although regional differences remain pronounced. In North America, while the market is still at a slow low level, we are now seeing first signs of stabilization. Orders, activities, and customer sentiment have improved sequentially, suggesting that the market may be starting to bottom out. For 2026, we expect slightly increasing demand year over year, That said, uncertainties remain and we continue to assume a gradual recovery rather than a sharp rebound with half year two expected to develop better than half year one in North America. The European truck production rate should continue its positive momentum seen in 25 and it should slightly grow in 26. I would now like to hand over to Frank who will outline the preliminary financial figures for you. Yeah, thanks, Mark. Thank you.

Yeah, you're welcome. Yeah, big welcome also from my side. I would say let's first turn to chart 13 to discuss the financials for the full year at first. Knorr Bremse generated total revenues of almost 8 billion euros, a strong figure and slightly up in organic terms. On a divisional level, RBS more than compensated for the tough truck market development, especially in North America this year. From a regional point of view, Europe and APEC contributed to the organic revenue increase, while North America reported a decline. The improvement in our operating EBIT margin was driven by a strong contribution from rail, supported by an attractive regional mix and good aftermarket in general. Together with our operating leverage and structural initiatives from the Boost Efficiency Program, this led to a 70 base points increase in the group operating margin to 13%. Rail achieved its mid-term target ahead of schedule with 16.5%, while CVS successfully fought against the very challenging truck market and achieved a resilient and stable EBIT margin of 10.4%, despite the weak market situation in our stronghold North America. Auto intake and backlog also achieved great results, 6% and 8% up year-over-year on organic level. These developments once more demonstrate KB's outstanding position in both markets and provide a great backbone for future growth. The very strong cash flow is, again, one of the major highlights of 2025. We were able to generate $790 million in free cash flow, a new record on operating level which resulted in an improved cash conversion rate of 131%. Looking at these superior full-year results, I would like to also thank all our colleagues, business partners and customers for their great collaboration and dedication in 2025. Let's continue this year and support KB to become even stronger. Let's now focus on our balance sheet on chart 14. A core pillar of our financial policy is and remains the fostering of our superior financial profile. This strong financial foundation has proven its value over recent years and continues to provide a high degree of flexibility. This enabled us to achieve our strategic objectives and operational needs while managing at the same time managing the cycles of the market dynamics. A robust equity base continues to be a key priority for us. At year end 25, Knorr Bremse reported an equity of almost 3.2 billion euros corresponding to an increased and very solid equity ratio of 36%. Our liquidity decreased to around 1.7 billion euros solely driven by the repayment of our last year's bond maturity of 750 million euros. Looking at the real operational effect, liquidity increased by nearly 15%. Our net debt therefore declined by 31% to a very healthy 627 million euros. This was strongly driven by the repayment of the before-mentioned bond, translating into a strong and comfortable net debt to EBITDA ratio just below 0.5. As a result, KB's credit ratings of A3 and A- remain at a very solid level with stable outlooks, underscoring the resilience and strength of our financial balance sheet. Let's move to chart 15. CapEx amounted to 319 million euros, corresponding to 4.1% of revenues. In absolute terms, capital expenditures declined by 30 million year over year. This development is fully in line with our strategy to optimize CapEx spending to a level of 4 to 5%. Networking capital in operating terms declined by 85 million euros year-over-year, with an annual reduction of more than three days, resulting in a once again improved networking capital efficiency year-over-year. This sustained progress reflects the continued success of our Collect program, delivering improvements across all key networking capital drivers, especially inventories and trade receivables. Importantly, these efficiency gains were achieved while maintaining the highest level of supply reliability for our customers, which is our clear priority. Since end of last year, we have accounted HVAC under IFRS as asset held for sale. Driven by higher EBIT and continued improvements in capital efficiency, ROSI increased by 200 base points to 22.8%. This demonstrates discipline's asset input and utilization while simultaneously increasing our profitability in absolute terms. I would like to provide more details regarding our free cash flow on chart 16. We improved the free cash flow sequentially last year, reaching 471 million euros in the last quarter alone. Overall, the free cash flow came in at 790 million euros on a full year level, a new record and the best operating figure in 120 years of KB. The increase was supported by stronger EBIT generation, disciplined capital expenditures and the successful execution of our persistently lowering net working capital. As a result, we delivered broad-based improvement across all the key drivers. The cash conversion rate remained at a superb level, reflecting our ability to effectively translate earnings into cash once more. In 25, it reached 131% in operating terms, which is an extraordinary figure, even well above last year's level. If you include the one-off effects of around 80 million euros for the severance packages in 25, the cash conversion rate would have even been at 138%. Let's move to chart 17. We continued our way to strengthen KB's sustainability performance to identify efficiency potentials and increase resilience in our operations and supply chain. Our sustainability strategy continues to deliver measurable progress across all dimensions. Since 2018, we have reduced scope 1 and 2 CO2 emissions by 79%, keeping us fully on track to achieve our 2030 climate target of 75% reduction. Despite market-driven revenue headwinds, our emission intensity has slightly improved year-over-year, while self-produced renewable power increased by 41%, further strengthening our energy resilience. From both a regulatory and financial standpoint, EU taxonomy-aligned revenues show a slight increase, primarily driven by comparatively higher RVS business. This progress is supported by a very strong external validation, including the first allocation and impact report for our green bond, the leading ESG ratings, and multiple sustainability awards we achieved. Let's turn to chart 18 to discuss the financial highlights of the fourth quarter. Our intake was strong with almost 2 billion euros with a strong organic growth of almost 6%, which was well supported by trucks. A book-to-bill ratio of 1 again is important and good support for our future capacity utilization. Our revenues almost amounted to 2 billion euros with a strong organic growth of more than 6%, driven by both divisions. Operating EBIT margin increased to 13.5%, which is a very strong improvement year over year. Both divisions contributed to this development. As already outlined, free cash flow improved to 471 million euros and followed the typical seasonal pattern over the course of the year, which we also expect for 26. Let's take a closer look at the RWS performance on chart 19 therefore. In terms of order intake, RVS again recorded more than a billion euros, but showing a decline of 10% year-over-year, which was driven by all regions except for China and, needless to say, including significant FX headwinds. In Q4, we had expected a larger order in North America in the mid-double-digit million-euro range, which was shifted into 26%. Global rail demand is very strong and will continue, but sometimes, as regularly mentioned, does not really fit into quarterly reporting. In general, we expect order intake in 26 to be in the range of 1 to 1.2 billion euros each quarter. For the year as a whole, the book-to-bill ratio should be around 1 or slightly above 1, after also consistently recording a value well above 1 in recent years. As in 2025, we expect order intake to be stronger in the first half of the year than in the second half. In the fourth quarter, the book-to-bill ratio stood at 0.91%. Orderbook at year end with almost 5.6 billion euros came close to our existing record level. Organically, the backlog grew by around 9% year over year. This high order backlog underpins strong visibility and provides a solid basis for growth well into 2026 and beyond. Let's move to chart 20. Quarter 4 revenues from RBS amounted to nearly 1.1 billion euros, which is an increase of 3% year over year. Especially pleasing was that growth in organic terms accelerated now to more than 7%. Our aftermarket business was almost flat year over year, with all regions except Europe showing declines. OE business on the other side grew nicely year over year by almost 30 million euros. From original point of view, revenue growth was fueled by Europe, while APEC remained stable and North America and China very slightly declined. In Europe, aftermarket business and OE sales grew nicely. North America recorded almost stable aftermarket business, but a decrease in OE business. The APEC region saw stable development with OE overcompensating slightly lower aftermarket figures. China also saw flat OE revenues while aftermarket business slightly declined after some catch-up demand has been satisfied. Please keep in mind that we have had very strong China business in 24 and 25, which benefited from a meaningful increase in ridership. As a result, we expect that our China business could slightly normalize in 26, but still being well above our long-term expectation that we shared with you in the past. Operating EBIT margin recorded an increase of 140 base points to 17%, driven by operating leverage and our efficiency measures within BOOST. In addition, we worked off all remaining legacy projects, meaning the inflation burdened order backlog. In quarter one, normally a rather weaker market quarter due to the seasonality of aftermarket business and the impact by Chinese New Year, we expect that profitability of RBS should be slightly up year over year. For the full year 26, the operating margin of RBS should be only slightly below 17.5%, including HVAC. Therefore, and as in 2025, we expect the operating EBIT margin in the second to fourth quarter of this year to be higher than in the current quarter. Let's continue with our Truck Division on chart 21. Order intake in CVS amounted to €977 million, representing an increase of around 10% year-over-year and around 20% compared to the third quarter. The very strong year-over-year organic growth of 20% was partly offset by M&A and FX headwinds. From a regional point of view, Europe was very strong and also the APEC region posted growing orders. In contrast, North America recorded significant declines due to market and FX factors. The strong development quarter-over-quarter in all regions is quite promising. Especially in North America, we feel reassured that we have seen the bottom. Nevertheless, we still expect no sharp increase in market demand from this level. Our book-to-bill reached 1.1 in the past quarter and therefore the order book with almost 1.8 billion euros at the end of December remains on a good level. Order intake in the current quarter should be good as well and only slightly lower quarter over quarter. Nevertheless, the start into 26 was very solid so far. Let's move on to chart 22. Revenues decreased normally by 4% to €881 million. Our rather good organic growth of over 5% could unfortunately not fully compensate for the headwinds driven by M&A and FX. Against the backdrop of a continuously challenging US market, especially in the US, this development reflects a very resilient and solid operational performance by our Truck Division. Our OE business decreased by around 30 million euros compared to the prior year. This was driven by a significant decline in North America as anticipated, while Europe showed good growth and the APEC region recorded solid momentum as well. The aftermarket business, on the other hand, was overall robust and saw a more or less stable development driven by Europe and China, despite a fixed headwinds. North America was down by 10%, but slightly up in organic terms. Turning to the bottom line, our operating EBIT amounted to 99 million euros in the past quarter, representing a strong increase of 14% year over year. Consequently, the operating EBIT margin improved by 180 base points to 11.3%. This margin expansion was driven by a quick and consistent adjustment of workforce and the continued reduction of structural costs as well as the support of our accretive aftermarket business. Looking ahead to 26, we anticipate organic revenue growth in the range of low to mid single digit versus 25, driven by a slightly positive development of truck production rates in our major regions, Europe and North America. Based on the related operating leverage by the already lowered and continuously further optimized cost base, we expect to improve the operating EBIT margin towards 12%. We also believe that the profitability of CVS should improve step by step throughout 26. In the current quarter, we expect a slightly lower operating EBIT margin quarter over quarter, which will increase in the quarters ahead. With that, I hand over to Mark again.