Knorr-Bremse AG · XETR:KBX

Knorr-Bremse — Investor Presentation (March 2019)

33 slides from Knorr-Bremse's investor presentation, March 2019

  1. Slide 1: IR Presentation

    IR Presentation March 2019 Knorr-Bremse Group

  2. Slide 2: Disclaimer

    Disclaimer Disclaimer IMPORTANT NOTICE This presentation has been prepared for information and background purposes only. It does not constitute or form part of, and should not be construed as, an offer of, a solicitation of an offer to buy, or an invitation to subscribe for, underwrite or otherwise

  3. Slide 3: Introduction

    1 Introduction 3 2 Key Company Highlights 7 3 Key Financials 20 4 Appendix 29 Knorr-Bremse Group

  4. Slide 4: The Knorr-Bremse leadership team

    The Knorr-Bremse leadership team Klaus Deller Ralph Heuwing Dr. Peter Laier Dr. Jürgen Wilder CEO CFO Head of CVS Head of RVS  2009-present: Knorr-Bremse  2017-present: Knorr-Bremse  2016-present: Knorr-Bremse  2018-present: Knorr-Bremse CEO, previously Head of RVS CFO Head of CVS Head of RVS (3

  5. Slide 5: Knorr-Bremse – One of Germany’s most successful industrial companies

    Knorr-Bremse – One of Germany’s most successful industrial companies “>1 Bn people trust Knorr-Bremse systems every day” 114 #1 YEARS Family-Ownership, Global market leader Shared pneumatics Technology leadership heritage and unique DNA for braking systems experience between RVS and CVS 2018 key fin

  6. Slide 6: Over 30 years of consistent strong growth >10% sales CAGR

    Over 30 years of consistent strong growth 1985 2000 2015/18 2010-2018 2019 Management buyout Bendix integrates Joint Venture with €1bn+ capex Strategic investment in >10% sales by Mr. Thiele Westinghouse Air Brake company JV DongFeng Motor goes into operation & invested to future-proof RailVision an

  7. Slide 7: Key Company Highlights

    1 Introduction 3 2 Key Company Highlights 7 3 Key Financials 20 4 Appendix 29 Knorr-Bremse Group

  8. Slide 8: Knorr-Bremse – A best-in-class industrial company

    Knorr-Bremse – A best-in-class industrial company Number one supplier for braking systems and a leading supplier of other safety critical rail 1 Global #1 and commercial vehicle systems protected by high barriers to entry 2 Synergistic business Technology and scale benefits between rail and commerci

  9. Slide 9: Global #1 – The world’s leading supplier of safety critical rail and commercial vehicle systems

    1 Global #1 – The world’s leading supplier of safety critical rail and commercial vehicle systems RVS offering (2018: 52% of sales, 59% of EBITDA) CVS offering (2018: 48% of sales, 41% of EBITDA) Train Control LRV2) Fuel efficiency Brake systems & vehicle dynamics Brake Entrance HVAC1) Management tr

  10. Slide 10: Global #1 – Number one supplier for braking systems

    1 Global #1 – Number one supplier for braking systems and a leading supplier of other safety critical rail and commercial vehicle systems … RVS CVS #1 Global brakes market share 20171) #1 Global pneumatic brake system market share 20172) ~3.0x 1.2x ~50% 42% 32% 1.4x 34% 23% ~15% % Including Drum Bra

  11. Slide 11: Global #1 – protected by high barriers to entry

    1 Global #1 – … protected by high barriers to entry Barriers to entry for RVS and CVS markets Market specifics RVS Only supplier worldwide  Regulation / homologation certified for all global and local standards and norms (GOST, UIC, AAR, ARA)  Low volumes, high number of variants with high level V

  12. Slide 12: Synergistic business – Technology and scale benefits between Rail and Commercial Vehicles

    2 Synergistic business – Technology and scale benefits between Rail and Commercial Vehicles Interdependence of RVS and CVS today Future technology development Unique scale benefits ✓ Same core technologies ✓ Shared research centres ✓ ~2x size of main competitors3) ✓ ADAS1) / HAD2) technology transfe

  13. Slide 13: Market outperformance – continued growth above rail industry levels

    3 Market outperformance – Knorr-Bremse is well positioned to deliver continued growth above rail industry levels Knorr-Bremse with strong track record of industry outperformance Key future growth drivers CAGR (2010-2017) RVS sales1) (HGB) and market Asia Growth Outsourcing  Chinese high-speed  Out

  14. Slide 14: Market outperformance – growth in content per vehicle

    3 Market outperformance – Strong growth in content per vehicle expected to result in continued outperformance of global commercial vehicle market Knorr-Bremse with strong track record of industry outperformance Key future growth drivers CAGR (2010-2017) CVS sales1) (HGB) and market Megatrends and co

  15. Slide 15: The industry innovator – Driving innovation in mobility and transportation technologies

    4 The industry innovator – Driving innovation in mobility and transportation technologies through R&D leadership and edge in connected systems Knorr-Bremse invests more in R&D1) Consistently pioneering “first to market” innovations… 2018 IFRS 2017 German GAAP 5.5% 6.2% 2.5% 5.2% 4.4% 365 207 152 123

  16. Slide 16: Resilience – Business model supported by high aftermarket exposure

    5 Resilience – Business model supported by high aftermarket exposure, broad geographical and customer diversification and strong localisation Strong resilience of growth and profitability Different economic cycles High aftermarket share  ~50/50 split RVS and CVS (by sales)  ~34% total sales1) – an

  17. Slide 17: Resilience – Attractive aftermarket business with comprehensive service offering

    5 Resilience – Attractive aftermarket business with comprehensive service offering drives profitability and contains high future potential Aftermarket is the growth and resilience backbone Key features Sales CAGR (2010-2017) HGB (€bn) Aftermarket sales 2018 (€bn) Annuity-like 15% 1.4 0.81) ▪ Regulat

  18. Slide 18: Superior financial profile – Outstanding track record of growth and profitability

    6 Superior financial profile – Outstanding track record of growth and profitability improvement Strong track record of resilient and profitable growth 30% Performance Performance pre-global post-global HGB IFRS economic crisis economic crisis Normalisation Chinese HS boom 25% CAGR 8% sales 2003-2018

  19. Slide 19: Leadership excellence – Clear vision for future value creation

    7 Leadership excellence – Clear vision for future value creation Expand technology Capture opportunities leadership position from megatrends 1 2 ▪ Growth potential from new technologies ▪ RVS as natural outsourcing partner for OEMs ▪ Introduction of ADAS1), HAD2) and ▪ Win in RVS de-regulated market

  20. Slide 20: Key Financials

    1 Introduction 3 2 Key Company Highlights 7 3 Key Financials 20 4 Appendix 29 Knorr-Bremse Group

  21. Slide 21: Track record of strong and sustainable top-line growth

    Track record of strong and sustainable top-line growth … Historical sales1)2) by division (€m) CAGR2) 6.616 2005-18 2010-18 2017-18 6.154 Group 5.824 7.0% 7.5% 7.5% 5.471 5.206 5.217 3.160 2.891 4.241 4.300 4.303 2.492 4.6% 8.1% 9.3% 2.493 2.228 2.228 3.712 3.384 3.251 3.121 2.098 2.070 2.068 2.743

  22. Slide 22: … combined with disproportionate EBITDA growth

    … combined with disproportionate EBITDA growth Historical EBITDA1)2) profitability (€m) CAGR2) 21,8% 20,3% 2005-18 2010-18 2017-18 19,0% 19,2% 18,1% 17,8% Group 15,7% 15,7% 14,2% 14,6% 9.8% 10.6% 5.6% 12,7% 13,2% 13,5% 12,4% 1.269 1.178 9,7% 1.116 1.060 1.052 987 468 517 6.7% 8.8% 2.6% 349 504 338 4

  23. Slide 23: RVS – Sales development driven primarily by Europe and China

    RVS – Sales development driven primarily by Europe and China with profitability reflecting regional margin mix dynamics Regional sales development1)2) EBIT2) (€m) (€m) +6.2% 2014-17 2014-18 CAGR: 2.9% CAGR: (2.1%) 3.462 3.331 3.260 40 24 (12.6%) 21,7% 21,3% 2.982 2.993 435 2.979 17,9% 18,4% 370 6.1%

  24. Slide 24: CVS – Sales growth driven by strong momentum across key regions

    CVS – Sales growth driven by strong momentum across key regions coupled with significant margin expansion Regional sales development1)2) EBIT2) (€m) (€m) +9.3% 2014-17 2014-17 CAGR: 9.1% CAGR: 10.6% 3.160 2.891 69 (11.2%) 16,0% 2.492 2.493 60 55 14,4% 14,6% 2.228 2.228 924 7.3% 13,8% 13,1% 2.070 99

  25. Slide 25: Top-line visibility supported by high order intake and order book

    Top-line visibility supported by high order intake and order book Order intake 2014-181)2) Order book 2014-182)3) (€m) (€m) 1.1x 1.0x 1.0x 1.1x 69% 59% 67% 68% 1.0x 1.0x 1.0x 1.1x 44% 40% 43% 46% 1.1x 0.9x 1.1x 1.1x 87% 73% 87% 88% CAGR 6.2% CAGR 6.3% 7.001 6.657 4.563 4.177 5.668 5.723 5.510 3.577

  26. Slide 26: Knorr-Bremse is a high return and cash generative business

    Knorr-Bremse is a high return and cash generative business Strong cash generation abilities Key drivers and factors (€m) I  ROCE normalisation along with EBIT in 2016 2.7x 2.8x 2.4x 2.5x largely driven by China RVS HS margins EBIT 102% 92%  Additional margin upside from historical 76% acquisitions

  27. Slide 27: Fully invested asset base driving low capex requirements

    Fully invested asset base driving low capex requirements Capex1) Net working capital2) (€m) (€m) 4,1% 4,6% 3,8% 3,7% 14% 12% 13% 13% 239 249 47 235 52 46 192 46 44 31 45 782 31 748 710 719 208 203 190 161 2014 2015 2016 2017 Investments in tangibles Investments in intangibles % of sales D&A (€m) 201

  28. Slide 28: 2019 guidance – fully on track towards our mid-term guidance

    2019 guidance – fully on track towards our mid-term guidance 2019 guidance ▪ Group: 6,800 – 7,000 mEUR (+3.8% – 6.9% after eliminating disposals) Revenue ▪ Assuming constant currencies, organic growth only, already considering disposals ▪ Unchanged economic & political environment P&L ▪ 18.0% – 19.0

  29. Slide 29: Medium-term guidance

    Medium-term guidance Medium-term guidance ▪ Group organic CAGR of c. 4.5%–5.5% ➢ RVS c. 5–6% Revenue ➢ CVS c. 4–5% P&L ▪ Assuming constant currencies ▪ Margin expansion c. 150 bps compared to 2017 EBITDA ➢ Driven by both divisions Margin ➢ RVS division slightly ahead vis-à-vis CVS division ▪ Capex r

  30. Slide 30: Financial calendar

    Financial calendar Upcoming investor relations events Event Date [mm/dd/yyyy] Location Full Year report 04/30/2019 Munich Berenberg USA Conf. 05/21/2019 – 05/23/2019 Tarrytown, USA 1Q 2019 Analyst Call 05/29/2019 Munich db Access 06/06/2019 – 06/07/2019 Berlin JPM EU Cap. Goods CEO 06/13/2019 – 06/1

  31. Slide 31: Appendix

    1 Introduction 3 2 Key Company Highlights 7 3 Key Financials 20 4 Appendix 29 Knorr-Bremse Group

  32. Slide 32: Effective corporate governance with clear accountabilities and aligned management incentives

    Effective corporate governance with clear accountabilities and aligned management incentives Two-tier board clear accountabilities Executive board incentivised to create shareholder value1) Supervisory board Proportion of individual remuneration components in case of 100% target achievement ■ Member

  33. Slide 33: Group income statement 9M 2018

    Group income statement 9M 2018 Consolidated statem ent of profit or loss Nine Months 3rd quarter 2018 2017 2018 2017 TEUR TEUR TEUR TEUR Revenues 4.994.045 4.562.514 1.671.805 1.586.521 Changes in inventories of unfinished/finished products 29.098 46.516 (177) (12.610) Other ow n w ork capitalized 4

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