Knorr-Bremse AG

This conference will be recorded.

Good afternoon, ladies and gentlemen, and welcome to Knorr Bremse's conference call for the Q1 2026 results. 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 the Head of Investor Relations, Andreas Spitzauer.

Thank you, operator. Good afternoon as well as good morning, ladies and gentlemen. I hope all of you are very fine. My name is Andreas Spitzauer, head of Investor Relations, and I want to welcome you to Knobremse's presentation for the first quarter results of 2026. Today, Mark Listerseyer, our CEO, and Frank Weber, our CFO, will present the results of Knobremse, followed by a Q&A session. The conference call will be recorded and is available on our homepage in the Investor Relations page. It's now my pleasure to hand over to Mark Lissasea. Please go ahead.

Thank you, Andreas. Ladies and gentlemen, warm welcome to our Capital Market Call for the first quarter 26 results. We will keep it short today as it's busy reporting day and our very good financial figures largely speak for themselves. So let's start with the key takeaways for today on page number two. At a time when global headlines are increasingly shaped by volatility, fragmentation, and a lack of long-term thinking, we see it as our responsibility to steer Knoll-Brunser with discipline and resilience. While the broader geopolitical environment remains fragile and unpredictable, we are focused on what we can control and on making prudent decisions in an environment where prudence has become the exception rather than the rule. Overall, we made a very strong start into 2026. In fact, this marks our best first quarter in the past five years. Now we are there where we should have been for a long time, and this should be a starting point for an even brighter future. In RBS, we recorded good order intake, which led to a record order backlog. The top and bottom line figures were broadly in line with our expectations, reflecting good customer demand and solid execution. In CVS, margin recovery took off, as always promised, driven by pricing discipline as well as stringent cost and efficiency measures. In addition, operational improvements and a more balanced market environment contributed to this achievement. The results, once again, demonstrate the strength and resilience of our business model, which provides robustness even among ongoing geopolitical uncertainties. Given the ongoing crisis in the Middle East, let me briefly comment on this topic. Direct exposure of our business so far is rather limited. Revenues from the Middle East account for less than 1% of the group revenues, and we have almost no direct supply from this region. That said, we continue to closely monitor potential effects, in particular with regards to our global supply chains. Major disruptions are currently visible. This remains an area of active attention. Both divisions have set up task forces to react fast if necessary. Overall, our business model has proven to be resilient in crisis. This is supported by a high revenue share from the aftermarket, well above 50% in RVS and close to 35% in CVS, as well as high level of local production, local sourcing across major regions. Both divisions also have a strong record when it comes to managing crises. Last but not least, we confirmed the guidance for the full year 2026. On slide three, let me turn now to the market or come to the market environment, starting with rail on page number three. Overall demand in rail remains robust. Orders, books at our OEM customers continue to be very high, and passengers' business remains stronger than freight. In APAC, we saw a slight decline year on year, mainly driven by tough competition. At the same time, demand increased in India and across the rest of Asia Pacific. In North America, passengers' demand remains stable, while freight continues to be at low levels. Looking ahead to full year 26, The global rail market should stay robust, which then could lead to a book-to-bill ratio of one or slightly above. In Europe, oil intake should remain strong. In APEC, China expected to decline year-on-year, which is only market-driven after some pent-up demand was met. On the other side, India should develop positively on a full-year basis. In North America, passenger uh development is positive to partially compensate the still weak fake environment resulting in a more balanced outlook turning to the truck market market development in the first quarter were fully in line with expectations total truck production rates continue to show first signs of recovery europe was significantly higher year-on-year while north america remained significantly lower but with visible turnaround in demand in apec china was again significantly higher year-on-year For 26, we expect continued positive demand for the aftermarket and estimating regarding the truck production rates are fully in line with our OEM customers. This means truck production rate in Europe should be flattish. Its price is slightly increasing. North America is expected to be slightly higher. China should be flat year over year with a strong development in the first half of the year. Overall, global truck production rates are expected to be flat to slightly up year by year, but please keep in mind that it is too early to fully assess the full impact of the Middle East crisis. Over the past year, we have taken decisive actions to structurally adjust our cost base and further strengthen our resilience for both divisions, but even more for CVS. These measures, together with our robust pricing discipline and resilient aftermarket business, put us in a strong position, and we look forward to demonstrating the full earning potential of CVS as markets recover. Slide four. Let's now turn to the first quarter of financials of 26. Order intake declined only slightly year-on-year, reaching a solid level of more than $2.2 billion. Group revenues amounted to mostly 2 billion euros, representing an organic growth of 2% year-on-year, with a strong contribution from CVS. From a regional point of view, APAC region, but also North America, contributed to the revenue increase, while Europe reported a slight decline. The operating EBIT margin was particularly pleasing in the first quarter. It improved across both divisions, supported by a strong aftermarket business, but also by positive operating leverage and the good execution of efficiency measures within our BOOST program. As a result, operating EBIT margin increased by 140 basis points year on year and thus recorded its highest first quarter figure in five years. As I said, this is only back to normal. From now on, we have to start through. Free cash flow amounted to 32 million. This is very positive, well supported by good cash management. and the increase of our profitability. With these words, I would like now to hand over to Frank. He will provide us with even more details.

Thanks, Mark. And let's move to page five. Of course, we continue to invest in a disciplined manner. Capital expenditure increased moderately year over year to 62 million euros, reflecting focused investments in maintenance and some growth opportunities. Networking capital decreased to 1.46 billion euros at the end of quarter one. However, this number is influenced by the first-time inclusion of our recent Duagon acquisition and the removal of our HVAC business, classified as asset held for sale. Scope of days, respectively, could be reduced by four days. Pre-cash flow amounted to a very solid 32 million euros compared to 15 million euros in the prior year quarter. Despite this very good start into 26, it is worth mentioning that quarter one is structurally always the weakest quarter in terms of free cash flow generation. Against this backdrop, free cash flow is expected to develop solidly over the course of the year with its peak in quarter four. At the same time, our return on capital employed could be nicely increased to 21% as well, driven foremost by a higher EBIT contribution. It clearly demonstrates the benefits of our portfolio rotation program and our boost efficiency measures. Overall, we remain firmly committed to disciplined capital allocation while continuing to invest selectively into margin-equative growth. Let's take a closer look at the RVS performance on page 6. Auto intake in RVS remains resilient and reached 1.26 billion euros in the first quarter, resulting in a book-to-bill clearly above 1 at almost 1.2 again. Rail demand overall remains strong on a high level and should continue throughout the whole year. Based on the expected tenders in the market, we assume that order intake in the half-year one will be stronger than in half-year two. For the current quarter, we also expect that RBS should be able to post a strong order intake being on a similar level compared with the quarter one figure. As usual, my reminder on rails order intake dynamics for you. Please keep in mind that this is a lumpy project business and it does not fit well into quarterly reporting structures. Order backlog increased by 7%, reaching a new record level with more than 5.9 billion euros. The high order backlog and its good quality provide a solid foundation for 26 and beyond. Let's move to page 7. Quarter one revenues amounted to 1.06 billion euros of stable development year over year. In organic terms, revenues increased by 1% year over year. This level of growth was as planned and it should accelerate in the quarters ahead. Our aftermarket business decreased foremost due to FX headwinds and normalization of pent-up demand in China. In organic terms, it was almost flat year over year. The revenue share from aftermarket was solidly at 53%. On the other hand, the OE business increased by 6%, well supported by the European business, which led to a revenue share of 47% in the past quarter. From a regional point of view, organic revenue growth in Europe and APEC fully compensated for the slowdown in North and South America. In Europe, good OE business more than made up for the slightly declining aftermarket revenues. North America recorded flat OE business but had to face declining aftermarket business due to a tougher market environment as well as FX headwinds. The APEC region saw an OE decline while aftermarket was almost flat year over year. China posted as expected lower revenues in OE and aftermarket business solely FX headwind and market driven after pent-up demand has been met. Operating EBIT margin recorded an increase of 90 basis points to 16.5%, driven by operating leverage and even more benefits from our boost efficiency measures. In a nutshell, our last quarter overall developed as expected. As a reminder, quarter one is always a weak quarter due to Chinese New Year and the typical aftermarket business weaker in North America. In the current quarter, we expect that revenues and profitability should see a solid increase quarter over quarter, and for the full year 26, the operating margin of RVS is expected to be around 17.5%. Let's continue with the truck division on page 8. In a still challenging market environment, order intake reached €964 million in the first quarter, resulting in a book-to-bill ratio of 1.1%. This underlines solid demand, particularly driven by Europe, following an exceptionally strong prior year quarter. Originally, Europe delivered solid order intake, albeit lower year-on-year due to the high comps in 2025. In North America, order intake was impacted by significant FX headwinds. On an organic basis, orders were nearly stable, which was driven by declining inventories on the dealer side. In APEC, order intake increased significantly, mainly driven by China. Order intake in the current quarter should be on a comparable level quarter over quarter. Our order book at almost 1.9 billion euros at the end of March is only 2% below the previous year's level and slightly up organically. Let's move on to page nine, which really highlights how hard our teams have been working and how measures and discipline can ultimately pay off. In the first quarter, revenues reached 878 million euros. Organically, this corresponds to a growth of 3.6%, which is a very strong result given the challenging market environment, especially in North America. On a reported basis, OE and aftermarket business declined 1% and 3% respectively for CVS in the past quarter year over year. Thereof, the OE business in CVS decreased, especially in North America, whereas Europe was almost able to post a strong increase. The APEC region was on a reported figure lower, but organically nicely up. Our aftermarket business was performing well in a demanding market environment and almost stable year over year. In the European market, our organic revenues have experienced a 6% increase, benefiting from solid demand in this region. Revenues in North America declined organically by only minus 3%, which was much better than the double-digit drop in truck production rate year over year. Even more importantly, CVS delivered a very strong rebound in profitability. Operating EBIT increased significantly to 101 million euros, and the EBIT margin improved to 11.5%, up 200 base points compared with the prior year period. This represents a step-up change in earnings performance. Our margin improvement is supported by several factors. The continued impact of our boost efficiency program, our positive operating leverage, the favorable regional mix, and the higher aftermarket share. To sum it up, these elements clearly demonstrate that CVS is structurally stronger today and much better positioned as we lowered its break-even point. In the current quarter, revenues should be flat and profitability is expected to be flat to slightly up quarter over quarter. On a full year basis, we expect organic revenues to grow low to mid single digit compared with a reported figure for 25. As a result, CVS then should be able to reach an operating EBIT margin towards 12%. With that, I hand over to Mark again.

Thank you, Frank. Now, have a look on the guidance for the year 2026. We just confirm our outlook, our guidance journal based on the expectation that geopolitically and economically conditions remain largely stable. Under the assumption that the crisis in the Middle East does not escalate or continue for a long period, particularly with regard to supply chain disruptions, Clark Brampton continues to expect The revenues for the current year in the range of 8.3 billion, an operating margin of at least 14%, and a free cash flow between 750 and 850 million euros. These figures are based on the assumption that exchange rates will remain largely stable, and that means on the levels of February 2026. With that, I would like to thank you for your attention so far, and we are now available for your questions from now on. Thank you.

Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press 9 and star on your telephone. If you would like to cancel your question, please press 3 and star. We kindly ask you to limit your questions to a maximum of two. The first question comes from Gael de Bry from Deutsche Bank. The stage is yours.

The relatively slow start to the year that you had. I'm just wondering what was behind that. I mean, beyond maybe the comps in China. I mean, did you have any supply chain issues in the quarter or was it just a phasing effect? And I'm also wondering if the recent issues at one of your key customers in Europe, if their slower ramp up has been or could become an issue for you as well at some point. Thank you.

Thanks, Gerd, for your question. I assume that you refer basically to RBS, because in the beginning we couldn't hear you properly, so I'm referring a bit to RBS. I mean, you know that in each and every country we are positioned, we know the market to 100%. We know basically give and take 100% of all the tenders that are out there. Some push outs here and there, but nothing spectacular. So that's just a market situation that we are facing. And that is just the pattern of the project tenders in the market. Nothing specific there, especially also not with the customer that you just pointed out. And I think you do it much more intense than I do. Listen to what they have been saying. It's more or less a cost issue that they have than just revenue issues. So we don't see anything spectacular in that regard. We expect that our growth will accelerate going into the next quarters and this is how we see it currently. So nothing erratic spectacular.

So in terms of the acceleration you expect to see in Q2, I mean, what does that mean exactly? Sort of mid-single digit you think you're going to be back to in the second quarter on an organic basis?

That's our direction. You know that for the full year we have pointed towards roughly mid-single digit kind of number. And if the first quarter is below, we should be in that ballpark, right?

Okay, thank you. And the second question from me is around the HVAC business. I mean, why is it taking so long to finalize the transaction?

Two things basically, Gail. I mean, first of all, we are as a general kind of disclaimer, we are not in a hurry. We of course have a plan how to have the final negotiations. It's an exclusivity that we are now in with a buyer. And we have to, first of all, make sure that we get a fair deal together, which includes a fair price. So we're in the final steps of the negotiation. And secondly, and this is taking a bit of time on the buyer side, it's also about the proper financing. And we have to ensure as well that the business we sell doesn't end up ultimately in an insufficient market.

uh in insufficient hands when it comes to the the financing of that business going into the future and that is a bit uh the situation i would say the last two things that we are currently discussing okay i understood and then the the margin uh guidance for rvs of 17.5 percent i mean does does it include uh the deconsolidation of the edge vac business at some point during the year maybe either q3 or q4

Again, like we said in February, talking about the full year guidance, we said we could be slightly above that number if for a quite significant time of the year a deconsolidation of HVAC would happen we would be maybe slightly below 17.5 if it wouldn't happen so I would say give and take midpoint of both premises is kind of 17.5 Maybe it's 17.65 in the best case and 17.35 or something like that in a case where HVAC would stick with us. So give and take, 17.5, we feel pretty comfortable to get to that number.

Thank you very much.

You're welcome, Gerd.

Thank you. And the next question comes from Sven Weyer from UBS. The floor is yours.

Yeah, good afternoon. Thanks for taking my 2 questions. The 1st, 1 is around the strategy update in July, because you just talked about that. You focus on the things that you have under control, especially in the boost program. So, I mean, I was just wondering, should we expect, like, a boost to program here that should accompany. you know, the midterm margin improvement, or will you much more than in the last program rely more on the top-line growth? That's the first one.

Thank you for that question. It's a good question, and you're right. In July, we will introduce a new program. You can guess that this has to do more with growth than with cost cuttings. But one thing is very important, and that's also for internal communication. Boost is not over. It will not be over for the next five years to come because boost is becoming attitude. And even though I'm very proud of what the team has reached, there is a lot of potential to be done in the next years to come when it comes to cost and efficiency. It's not done. It's good. It's good on the way, but it's not done. But now the question is, where are we growing? How do we attract also investors? How do we attract also top talents to come? Because only restructuring is not enough. And this is where we decided now. Now the ship is leaner. We are more agile. And now we can go for next, I would say, targets to aim. And that's exactly what we do. We expect also an unorganic, but also an organic growth potential. And this is why we already started from January this year on the next program, which will be then officially announced. It has something with growth, yes, and it has something with beyond. And that's exactly what we do. And we have to tell you then latest in July, by end of July, What do we mean with that? Where do we want to go? What kind of potentials we see? But one thing is also for sure, we are going only for areas which are really contributing to us and not making us slower. So everything what is not an add-on will not be considered. It has to be an add-on in terms of technology, in terms of profitability, and in terms of speed.

Very clear. And the second question from me also relates to what you just said on the inorganic part, because I think from a capital market point of view, you know, your entry into signaling, you know, kind of makes sense, but also especially if there's a chance that there are kind of follow on transactions that make this part of the business a more significant, you know, value driver. And I would say probably the same on the electronic side. So would you say, I mean, would you agree with that, that it only makes sense to enter certain segments if there's also the potential for follow-ups and to make this a real business that moves the needle? Because I think that's what we're all curious about. I mean, is there still, you know, things in the pipeline, for example, on signaling that, you know, you can kind of assure us that, you know, kind of follow-up transactions are generally possible?

You understand better than everybody else. If I would now be more specific, I would ruin my own prices, and that's exactly what I won't do. So also in your favor, in all our favors, I will be not so specific, but whatever you said, I can't disagree.

Okay. That's good enough for now. Thank you.

Thank you very much. And the next question comes from Daniela Costa from Goldman Sachs. This stage is yours.

Hi. It's actually Meihan here. I just have two questions. So firstly on China, maybe just to confirm like you said on the opening remarks that you're seeing a tough competition in APAC. Is that mainly in China that you're seeing more aggressive step up from local players? And if you could give us an update on the progress of China high-speed rail tendering for the next generation. And does the change in the regional outlook in China reflect a more cautious view about the future opportunity to regain some market share in China? Thank you. And I'll ask my follow-up.

Hi. Okay. Yes, yes, yes. Meihan, I think, first of all, hi. I think it was Gail or Sven, I think it was Gail who mentioned about tough comps in China and not a tough competition. So we didn't highlight and we don't see any competitive edge somehow rising or increasing. I think it's just a misunderstanding. Please correct me if I'm wrong, because we don't see anything in that regard. The situation there has not changed. And second part, Mark wants to take, so I hand over to him.

I try to be as honest and clear with you as possible. In the past, and especially until 2024, we were a little bit in a defense mode. And in 2024, we ask our Chinese colleagues and also the local management, is this now what we have to expect from China so that we can only defend our position and try to make, you call it the golden tail or something like that, that for the after-service business, we have a very good position and for the next years, we will be still there. And we had a very, very good discussion. And by end of 2024, the local management said, can we stop speaking about defense? Can we just go in offense? And we said, okay, what do you need for offense? And they said very clearly, we have to be more agile in China. We have to be more closer to the customer. We have to get a little bit more independent from Munich because whatever you develop, it's nice, but eventually it's not as quick enough as we need it here in China. And we need to have, we have to take a little bit more risks. And for the last one and a half years, this is exactly what we do. And that means, I spoke about it, that we are, since years, I think eight years, we are now considered for the high-speed trains again, which we were not. We are seen as agile. We are more and more us. We are more and more involved in international tenders when Chinese companies are to be considered. And that shows us that being in China, try to be more Chinese, try to be more aggressive. And that is what we mean with competition. We have to take the competition from China. We have to take it home. We have to see that our cycles in development are taking too long. It's not only rail, it's also truck. And we have to be aware, we should not shy away from it. We should not take a position of defense. We should take a position of offense. And that's exactly what we do. We empower China more than ever. We hire people in China, especially when it comes to engineering. We give them more degrees of freedom. They can make more calls by themselves. They are aligned, but they can do a lot of things by themselves. We are also interested, and for the last months it is going very, very well in this direction, to cooperate with young Chinese companies when it comes to electronics and software programming and engineering. And that makes me and us very, very optimistic when we speak about China, because we have a complete shift of paradigms. We are no longer the old European-German company defending their territory. we are becoming more agile and we can hopefully utilize and leverage this kind of learning for the rest of the world.

Got it. Very helpful. And my second question is just on aftermarket service for CVS. As you are trying to expand more into the aftermarket for trucks market, would this mean any competition for the truck OEMs of your customers or would it just be you still more focusing on the second-handed owners of the trucks?

It's less the substitution, it's more complementary because our customers are brand exclusive. We are not brand exclusive. And in service, brand exclusivity is good for the first two, three years, as you rightly said, but after three years, brand exclusivity is more a negative thing. So what we're building is we build an ecosystem where we do not discriminate any brand and We do not differentiate any brand. We do not differentiate between captive-owned workshops and non-captive-owned workshops. So I think the independence workshops in China and in Europe, they are very, very liberal in terms of taking support from whoever is most capable to support you. And exactly this openness is here one of the key success factors. The more you are in one brand, the less you can cover the market.

Got it. Very helpful. Thank you.

Thank you. And the next question comes from Vivek Mehta from Citibank. This stage is yours.

Thank you very much, everyone, and good afternoon. Hope you can hear me well. My first question is around the margin in CVS, a really good print, 11.5% up slightly sequentially from the fourth quarter of 2025. And looking ahead to the full year, you talked about moving the margin towards 12%. And among your assumptions is still slightly higher truck production in North America. Now, some market participants and observers have made me talk about even better than that potentially. So could you maybe talk about the sensitivities of your assumptions on CVS margin in the coming quarters and year to assumptions around the truck production rate? Thank you.

Thanks, Vivek, for taking basically every word serious that we are saying. Yeah, indeed. I mean, even once you start into the year in a quarter with 11.5 in order to reach then 12 for the full year requires you to reach more than 12% in some of the quarters. And that's why we've been there a bit, so to say. expecting growth in profitability over the quarters to come and to end up definitely towards end of the year with a margin that is above 12%. That's one clear statement. Second clear statement is, of course, I mean, yeah, the expectations and the word that's going around in regards to North America has been quite clear. More on the bullish side, since several months now, if you look at the sheer truck production rates in the months of January, February, okay, there was some bad weather here and there, but they haven't been so great, even below 20,000 units a month. And we basically, as Mark also said in the beginning, and which is basically the cornerstone of Boost, we try to deal with what we can influence. And we can influence our cost structure and our market presence in a given market. And if that market becomes a bit better, like you said, like with some of what the other OEMs are saying, then we're happy to take the operating leverage. The operating leverage that you can expect from us is on top to everything that we indicate, some 20% to 25% EBIT conversion out of what's the market holding up for us in future that we don't see yet. So that's how I would see the situation, Vivek.

And there's something to add, which I think for you is more important, not more important, but also is equally important. We have managed ourselves with truck in the year 23 and 24 in a break-even territory of 71, 72%. And now we have managed ourselves back in a territory with 65, 66%. So we improved our cost situation by 600 base points. So the break-even is now giving us the comfort that we finally can leverage a slight increase of revenue. Because when you compare the numbers of 25 to 26, the revenue is nearly stable. Okay, you can say adjustment of the exchange rate, blah, blah, blah. By the end of the day, we are reaching finally what we always aimed with a stable revenue we can finally leverage our improved cost position and that is also very important because finally we reached it and you remember it because i said it again and again per employee we have reached in the first quarter 2026 300 000 euros per employee and you remember in 23 we started at 250 260 with trucks and this improvement is now giving us this is confirming what we are doing. This is what we do. And we have to do the same with rail. And I am very honest, in rail, we are not at this position currently. We have a lower breakeven, yes. That is always, this is the rail-ish character of the business. This is more in the range of 60, never in the range of 70. But when it comes to personal expenses, this ratio is much, much more, it's much higher. So in truck, we have reached a personal expense ratio of below 20. We were at 22, 23 two years ago. And that is that the productivity, not only of the capital, you know, we have always this capital, return on capital employed, return on equity, so capital numbers, scope of days. But the question more and more is not only the capital, it's what you get from your employees. And there is the first time, I'm very proud of that, we reached the 300,000. We finally reached it, and we reached it one year earlier than we thought. And immediately you see it on the margin. If we can keep this 300,000 for the rest of the year, then it is clear whatever happens in America, North America, or even other markets, will immediately have an impact on our EBIT margin. And that is what we always aim for. So far we were really in a defense mode. Now we can finally leverage what we did.

That's clear. Thank you very much for all the color. Very helpful. My second question is around Diogon. It's now closed. It's in the numbers. I was curious, what are your impressions now of the business? Now it's closed. Are you as confident on the growth and margin trajectory? And as a bit of housekeeping, I noticed that the M&A contribution to the RVS EBIT was about $3 million. It'd be just helpful if you could break out how much integration cost you had in the quarter, just so we can look at the underlying margin at Duagon. Thank you.

Yeah, thanks, Vivek. Yeah, you're right. We are showing the numbers of Duagon basically in the M&A bridge. And we are in the midst of the PMI process. What we see is what we thought we would get, and that's perfectly fine. We know that not every part of the business of Duagon is perfect. Some are excellent, some are okay-ish, and we are working on those parts where they are not excellent yet. The integration, as I said, is ongoing. The integration costs in the third quarter, I would say, are minor. Yes, included, but minor. And also, they have a similar seasonality like we also have in the business. Also, their first quarter is usually the weakest, so we expect also their acceleration of results when it comes to the further quarters ahead. You know that we have outlined our financial guardrails for M&A acquisitions, and we had those already when we did the Duargon deal, and we still expect that we can come with that business to an EBIT margin of 16%, but not in the first quarter or second quarter, but they should be growing over the time following a certain seasonality.

You can come already with the signaling business in America, which we bought.

Signaling, as you know, we have also completely fulfilled the expectations on not only the growth, but also the profitability side on the signaling business in North America. We have done more than 18% of return in the last year for the signaling business. We don't expect to have really any issue on the Duagon side.

Very clear. Thank you very much. You're welcome.

Thank you. Next questioner is Akash Gupta from JP Morgan. The floor is yours.

Yes. Hi. Good afternoon, everyone, and thanks for your time. My first one is on RVS. And here, if you look at your aftermarket revenues, the share was 52.5% in Q1, down from 55.4%. And despite this weak mix by having higher equipment or project revenues, you still managed to improve your margin by 90 basis points. So maybe can you talk about the drivers behind higher profitability despite lower services which were down year-on-year? So that's first one. And second one is on CVS. You mentioned that your North American revenues were down three percent against truck production rate down double digit in Q1, and I appreciate there may be some price increases in aftermarket growth dynamics, but can you say how does your overall volumes on new production compare to TPR, and are you getting any market share in North American market?

Thank you. I think they're still on mute. Didn't do anything.

Sorry, I was already answering and then I was told I'm on mute. Akash, let me start with RVS maybe first. Obviously, we have gained um also revenue in in europe our stronghold it's biggest market for us and we have a positive product mix effect out of the the european products compared to some other products that we see for example in the classical north american business so definitely it's a product mix effect that we have Then out of the sheer volume, so to say, excluding FX, we have also operating leverage, of course. And as Mark also said, let's not forget, even though we talk more often about truck, we have also improved the cost position on the rail side. even maybe if it's not that obvious, because we usually talk about other drivers of the RVS business, but also the guys in RVS have improved their cost position. So that's pretty clear. And those three ingredients basically led to the situation that we have improved the margin. And again, Just another highlight because Mark also asked me to point out on signaling as an example here. Another mixed effect in a certain market is, for example, that we improved here the profitability even significantly when it comes to the signaling business in North America, despite the fact that some freight businesses minus year over year or quarter over quarter. CVS. CVS indeed a bit of a tricky situation I would say when it comes to the market a bit of I would say rather good demand or at hindsight some great expectations in regards to how the market would be going ultimately it was the market was Not that favorable now the market itself in North America and you are referring a bit So to say to the content vehicle kind of a logic the market has been really weak Extremely weak we have been producing or the truck market had only a production of 54,000 trucks heavy duty trucks class 8 and the production number in the first quarter of 25 was 73,000 trucks. So the market was down from 73,000 units to 54,000 units. Keep those numbers in mind. At the same time, our organic revenue in truck in North America only declined by minus 3%. Do I say now with that that the whole delta between minus 20 something percent on the market side and revenue of minus three only is all content per vehicle? No, of course, there is also some other aspects in, like you mentioned, we did some price increases. Yes, of course. But that's the situation now. So we have shown good content per vehicle there. We have shown, yes, some price increases, but not only on the aftermarket side, also on the OE side. Keep in mind, for example, tariff charge-throughs to some of the customers which didn't occur in the first quarter of 25. All those ingredients together led to that great situation or that great resilience, I would call it, in North America.

Thank you. So maybe on market share, can we say it's more stable and not changing a lot?

Yes. Yes, absolutely.

Thank you.

And the last question comes from Alex Jones from Bank of America. Please go ahead.

Great, good afternoon. Thanks for taking my questions. If I can start on CVS as well. You indicated sales sort of flat into this quarter, but with orders solid in Q1, the order trajectory in Q2 sounds good, and OEMs have talked about increasing production rates, especially in North America, but also to some extent in Europe. Is there anything holding back a pickup in sales in Q2 in that business? Thanks.

um we are also just to confirm orders we would have also taken in the first quarter orders above a billion so we have not limited ourselves uh just a joke at the side sorry for that but uh i mean i hear uh all these uh enthusiasm uh that's outspoken and we of course also hear from the customers they should just place the orders there's nothing that's hindering us nor the systems, nor our production capacity. We are ready as far as the market is. And as we all know, also some of the arguments would be around some EPA pre-buy happening in the second half of the year, which we believe as well. In order to do so, given a certain lead time that you would have on the OAM side should be kind of now or never. that others would be coming in, and that's why we're also pretty conservatively optimistic. Let's put it this way, what's coming in the second quarter and the third quarter ahead of us. Nothing holding us back.

Thank you. And then the second one, just cognizant of your comments around the Middle East at the start, and potentially a little bit more inflation in the system. Could you just remind us on the rail side of the business and clearly have longer term orders there, how you manage cost inflation on orders that are currently in the backlog? Thank you.

Generally, we have all together in this world learned a lot about the timing when high inflation came back in 2022. And we have, let's say, gone through thoroughly all the contracts on the CVS as well as on the RVS side, all contracts with the customers for respective projects. And we have tightened them. We have more price-riding clauses than we had before. We had more, so to say, material scope in the respective price-riding clauses than we had before those days. Basically, in the old days, it was the usual suspects of raw materials like cast iron, steel, aluminum, and all that stuff. And we have broadened that range of what we could charge through after a certain time. We have also reduced the lead time of when we would be able to charge things back a bit. So we're in a better position than we have been some three years ago. And that's why there would always be a certain time lag, you know. But we have bettered our situation quite significantly since that day. And that's what makes us pretty comfortable going into the future with those effects.

Thank you. You're welcome, Alex. Thank you very much.

That concludes the Q&A. I hand back to Knorr Bremse for closing words.

Thanks a lot for all the questions. And if you have further questions, please reach out to the Investor Relations team. And we wish you a great afternoon. Thanks and bye.