Knorr-Bremse AG

Welcome to Knorr-Bremse's conference call for the third quarter 2026 results. The conference is being recorded. 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 your host, Sofia Kozave of Investor Relations.

Thank you and welcome everyone to Knorr-Bremse's third quarter 2026 earnings call. My name is Sophia Kozave from Investor Relations and it's a pleasure to have you with us today. CEO Marc Llistosella and CFO Frank Weber will take you through our Q3 results and key developments, followed by a Q&A session that will also be joined by our head of RAIL, Dr. Nicolas Lange. As usual, the call is being recorded and a replay will be available on our website after all. Handing over to Marc, the floor is yours.

Yeah, thank you. I would like to start immediately. Strongest Q3 in five years. Everything what we promised in 2023 we achieved. Boosters nearing successful completion in terms of time. Delivered on our targets. Profitability has significantly increased, as said, as always. Operational resilience has improved. And from the program of Boost, we are now in the next phase with Growth Beyond. As always said, we have put our focus on the housekeeping for the first three years. And we have always communicated all the respective KPIs. and we have chosen four to five significant KPIs where we thought and we think they are the major lever for our future success. Growth Beyond is now starting from this extremely excellent base and with that I would like to describe Growth a little bit. Some will start rather soon. The official start of Growth Beyond is January 1, 2027. And here we have very clearly in mind that we have in revenue terms, even this year will be quite good. But if you compare the last numbers of the last four years, our growth was not the most preferred and most looked after item in KPI. As we have said, housekeeping is now the first and most important rule to be fulfilled. So what we see is, medium term we will have not a linear path, and we will come to this later, especially in rail. We will see that we will face the first really strong impacts in terms of growth, including a relatively high profit margin in 2028. Q3 KV Truck by itself was an excellent quarter. It was an excellent quarter for the top line and it was an excellent quarter for the bottom line. All our pre-performance indicators improved significantly. Since five years, we are the first time above 12%, which is very appreciated. And especially the cost discipline and also the personal cost reduction, where we are now currently in the range of 19%, that leads and led to this excellent result. Trucks market in Europe and in North America were supportive, partially. Even the numbers were not exceeding the numbers which we have seen in 2024, but in 2024 we had not the cost situation and therefore we have not reached by far the profitability terms which we have reached now. So we had a better market and we had 200 basic points lower profitability. So the self-healing, what you always refer to, is now coming absolutely into place. So that means we can really leverage every form of revenue growth over proportionally in terms of profitability exactly as we planned it and exactly as we always proposed it. So, that's the general statements and then I would like to go with you through the slides if you're prepared. On page number three, the highlights on Innotrans and the IAA, transportation two of the most important trade fairs in our markets, but I would like to mention also Auto Mechanica, Because as you know, we're enlarging our business more and more, especially in trucks, to digital ecosystem. Why? Because this will be the future and it is highly profitable for the ones which are first in line. And that's exactly what we have achieved with our ecosystem in trucks. We are first and we are by far the most, I would say, multiverse in terms of offers. and that brings us in an excellent position. InnoTrans itself, the highlights were very clear as we always said, digitalization, data management, rail infrastructure. Highlights for us, the electromechanical break. Here, how trains will break in the future. So we are ready for this shift in the industry, which we know will not happen in the next two, three, four years. It will take longer, but we have the technical solution today. We can offer it and we're ready to go. Next, digital freight opportunities. The automatic coupler is well perceived in the industry. Our solution, homemade, house-kept, by ourselves, without any acquisition, is seen as absolutely a benchmark in the industry. So this shows that our R&D is well spent and it shows that our engineers are well prepared to go also for enlargement of portfolio and also of products. We are in a technical leading position which we are very proud of because it was done by ourselves. So you see our money for R&D sometimes and often and more is well invested. The industry is on the right track. We don't see any technical showstopper for the digital freight opportunities and especially other markets will follow. Other markets like China and also Australia and more and more also secondary markets are getting more interested in our digital freight opportunities. So the digital freight train seems to get reality faster and quicker than we thought, which is good. Railwayside signaling successful presentation of our signal portfolio and also here very clear message signaling our acquisition the biggest of Canelo Bremse in the last two decades was extremely successful and we see already that the signaling part of our American business is contributing massively to our results. They really showed innovative solutions and being a market leader in North America, our inspiration is also to be more and more seen and perceived in other markets. IA highlights so far autonomous driving ready for us, then electric driven vehicles and also Chinese RMAs showed many new electric compositions and also solutions. Electrification and regulation penetration in China is now reaching first time of history more than 40%. It's not for the whole year, but we see that there's a massive shift from combustion engine to electrification and electrified trucks. Personal KB highlights, electric power steering, ready to go. First customer we found, second customer we found. So now it will come more and more to an implementation of an absolutely new product to the market. Clear financial benefits for the customers and also very clear cost of ownership is not the only one. We are reducing also this CO2 emission. KB showed high technology leadership and excellence at both fairs, and I say not both, at all the three major fairs. We are well positioned, excellently positioned, and we see it also in exchange with the customers and clients that we are on the right track. And now we come to page four. Rail overall underlying demand is healthy and long-term growth opportunities are strong and unchanged. And if there are questions, we will come to this a little bit later. Customers of our order books are close to record levels. We never have seen more orders in our order book is the highest ever in terms of rail, not in terms of trucks, but also the books in trucks are coming up. Passenger very strong across most markets. Freight weakness in Europe and North America. Yes, that stays still. But we see excellent long-term opportunities for KB Rail. By knowing that, what I said, the freight automation, what we are more and more going into, this is now picking up. Because we see when the next cycle in freight comes, we are ready to change also the logic of this market in terms of new opportunities for products. KB shares are strong and stable and that I think is also an important message because we have risen some of our pricing. We have been very, very much on the profitability but we have not lost market shares. This is really an excellent work of the whole team. North America in trucks. Strong improvement of market ongoing. You all see that. We have been a surprising uprise in the numbers. OEMs and KB are sold out till the end of the year. We are, as you know, the most careful always by these uprisings. And this is why we are being very moderate. We see 2027 to be expected very positive, but this will not lead to a release in our cost reduction programs. EU, slight improvement goes on. We see slightly better momentum in Germany, finally, but we see also that, and that's the most important message, we can live with the normal market, and the normal market is for us a very moderate market. Why? Because we have improved significantly our cost positions. Page number five. Boost has transformed Club Remse into a stronger, more profitable and more resilient company and especially here the break-even of this company has been reduced and all of you are aware what break-even means. The fixed cost coverage is now at a much better and much more healthy position than it was three or four years ago. Orderbook, not to be explained again, you see the best quarter we had since 20, and before I can confirm as well, revenues for the quarter better than operating EBIT margin, we had only one quarter better, that was in 2018, that was the quarter fall, where we had 14.7, now we had 14.6. Yes, there must be room for improvement, and that's what we target. In terms of current return on capital employed, I think this is important for all of us, how efficient we are using the capital which is then given to us. And finally, after four or five years, we are back in the range of 24 or above. I think this is an excellent number, and we can confirm to you this is now for us the baseline. So that means we start from a position of financial and cultural strengths. Page number six. These are the bubble slides. The bubble slides are very clear. Main message here. Boost strategy paid off and pays off. It's not over. It's an underlier for the future. And this enabled us to be in a strong position. Second highest quarterly EBIT in KB's history, I told you just. Free cash flow has never been, never been as it is today in a quarter and comes really aggregated for the year. We're in an excellent position of crossing the 500, which means we are really converting our operating profit into free cash flow, which is done. We can invest, we can acquire, we can pay dividends to our shareholders. Truck or KPI is strongly improved. are very proud of it, nearly 200 basic points in the profit margin, which is excellent. The overall number is 938, which is a good number, and we see that the downturn we have seen the year before is now nearly are, I would say, brought at par. The only thing is you see also the lower numbers of revenue, we can generate much higher profitability. That is what we aimed. That is what we wanted. With this, I would like to hand over to Frank. Frank, it's yours. Thank you, Marc.