Knorr-bremse Ag · XETR:KBX
Knorr-bremse — Investor Day (July 2023)
34 slides from Knorr-bremse's investor day presentation, Jul 18, 2023
Slide 1: Next Level Knorr-Bremse
Next Level Knorr-Bremse Strategy Update July 18, 2023 | Marc Llistosella (CEO) & Frank Weber (CFO)
Slide 2: 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 acquire, an
Slide 3: Over the past 10 years, KB with strong performance
Over the past 10 years, KB with strong performance Growth drivers KB Group revenue (€bn) CVS RVS 6% p.a Technology leadership 7.1 4.3 Attractive niche markets #1 Long-term contracts Brake 2013 2015 2017 2019 2021 2022 systems Consolidated markets High AM exposure 38% aftermarket share in revenues St
Slide 4: KB faced challenging market conditions in the recent past
KB faced challenging market conditions in the recent past External challenges KB challenges De-globalization Russian war in Ukraine Growth Profitability Cash conversion Inflationary pressure COVID impacted Partly under- Supply chain issues growth performing businesses cause higher inventory Sl
Slide 5: CEO view: Identified KB challenges are being addressed
CEO view: Identified KB challenges are being addressed Identified KB challenges … … are being addressed Profitability contracting Strong focus on EBIT margin improvement New areas of growth missing Group-wide optimization program (PCPP) Unclear M&A strategy Application of best ownership principle Ra
Slide 6: We will "bend the curve" to bring KB to the next level
We will "bend the curve" to bring KB to the next level Illustrative Covid / Brownfield (Housekeeping) IPO until China decline Greenfield (Expansion) Inflation 20% Operating EBIT1 16% Brownfield (Housekeeping) Bringing to perfection what we currently do IPO 12% Greenfield (Expansion) Going beyond wha
Slide 7: BOOST program with clear responsibilities to reach the next level
BOOST1 program with clear responsibilities to reach the next level BOOST 2026 Strategic Products People Processes initiatives 2 Revitalizing the core 1 Culture development 3 Efficiency programs (PCPP) 4 Portfolio right-sizing Organizational transformation Brownfield 4 Fix-it program Talent mgmt. (HR
Slide 8: Cultural development is a MUST for our future success
1 Culture development Cultural development is a MUST for our future success Key areas of culture… … and what they mean Fail fast – fail early Accept failure and pull the plug early No shopping when hungry Only good M&A with holistic set of clear criteria Walk the talk Use tracking and reviews to kee
Slide 9: RVS China: Confirming business outlook from Q2'22
2 Revitalizing the core RVS China: Confirming business outlook from Q2'22; strategic priorities and AM business recovery help to sustain market position Total RVS revenues in China (in €m) Strategic priorities De-risk business systems ~ 950 ~ 800 Expected bottom Increase supply chain resilience thro
Slide 10: CVS China: Attractive outlook of Chinese truck market
2 Revitalizing the core CVS China: Attractive outlook of Chinese truck market as tailwind for CVS Regional market1 breakdown (TPR) Key insights CAGR Market China: 9% Chinese market shows the highest global share with 36% 30% in 2022, but is characterized by high volatility 35% 35% 36% 30% CVS ex
Slide 11: Higher Content per Vehicle will fuel CVS's growth
2 Revitalizing the core Higher Content per Vehicle (CpV) will fuel CVS's growth in the future 2023-2028E Global North America Western Europe Asia CVS CpV ~ 4% growth (average) Below average On average Above average E-mobility and autonomous driving to fuel CpV growth Advancement in safety features i
Slide 12: Measures identified to reduce cost base and increase efficiency
3 Efficiency program Measures identified to reduce cost base and increase efficiency Major KB efficiency indicators Measures identified (selection) (indicative) CapEx & R&D investment prioritization & right-sizing R&D spend CapEx & Depreciation Technical & commercial efficiency enhancement (VA/VE1)
Slide 13: Portfolio right-sizing / Fix-it program
4 Portfolio right-sizing / Fix-it program Turning KB into a strong portfolio manager Assessment criteria KB's tech and product portfolio Findings ▪ Best owner principle € 7.1bn € 1.4bn € 1.4bn revenue under ▪ Profitability / EBIT strict review margin Fix Keep or ▪ Positioning on further 5.7 S-curve
Slide 14: Existing and potential business scope of KB
5 Renewal of innovation power Existing and potential business scope of KB Off-highway Cloud & connectivity One-stop-shop Condition Trailer (OE + AM) monitoring technology Connectivity & digital truck Sensors Aftermarket Maintenance ecosystem ICE EV mgmt. components components DAC & Entrance Couplers
Slide 15: Focused R&D investments define product roadmap for KB
5 Renewal of innovation power Focused R&D investments define product roadmap for KB Strong R&D base… …to shape product innovation1… …with effective tracking in place Roll-over products: Electric Power Steering 5 6-7% Product upgrades: Global R&D Long-term centers R&D ratio Condition monitoring New p
Slide 16: Digitalization empowers KB's growth engine
6 Driving digitalization Digitalization empowers KB’s growth engine Strategic partnership Majority investment & minority investment Capabilities All-Makes workshop diagnostics Specialist in IoT-technologies Telematics incl. remote vehicle diagnostics Diagnostics & telematics Data analytics & big dat
Slide 17: RVS in strong position to tap into digital automatic couplers
6 Driving digitalization RVS in strong position to tap into digital automatic couplers Train Train Maintenance Shunting Preparation Operation Service Parking Digital Freight Train faster processing more transport capacity sustain, enhance, accelerate faster processing dynamic infrastructure usage Di
Slide 18: Condition monitoring to become a major source of digital offering
6 Driving digitalization Condition monitoring to become a major source of digital offering RVS helps customers to efficiently monitor and measure KPIs: Key performance of door systems defined by: Availability All doors in service Reliability Highest MTBF1 Condition monitoring @ IFE Passenger safety
Slide 19: KB with range of tailored solutions to support customers' green transition
7 Enabling ESG KB with range of tailored solutions to support customers' green transition Exemplary case studies CVS: Active Caliper Release RVS: Intelligent HVAC System ▪ Patented mechanical braking system ▪ Energy-efficient air conditioning ▪ Automatically separates braking pads ▪ Smartly adjusts
Slide 20: Selective M&A: disciplined approach with updated M&A criteria
8 Selective M&A Disciplined approach based on a holistic set of updated M&A criteria will guide future acquisitions as add-on to organic growth Strategic focus Financial guardrails for larger transactions Capital goods (no automotive) Value-accretive No larger restructuring cases Positive NPV (< €
Slide 21: More than 10 Prio A M&A targets with € 1.2bn revenues identified
8 Selective M&A More than 10 Prio A M&A targets with total of € 1.2bn revenues identified Status Quo Clear set of guardrails and M&A criteria defined Classification for RVS and CVS conducted, and Prio A and B targets defined to derive M&A shortlist Prio A targets with focus on timely execution
Slide 22: Clear vision for 2026: Become strong capital goods company
Clear vision for 2026: Become strong capital goods company by successfully managing portfolio of robust assets Strong capital goods company Market leader Aftermarket Innovation Pioneer in specific Enabler for ESG for mobility solutions champion with OE leader digitalization areas and green mobility
Slide 23: Targets 2026: Ambitious financial targets to drive value creation
Targets 2026: Ambitious financial targets to drive value creation Strong capital goods company € 8-9bn > 14% 80-90% cash revenues Op. EBIT margin conversion 23
Slide 24: Status Quo | KB's very solid financials are a strong foundation
Status Quo | Despite a challenging environment, KB’s very solid financials are a strong foundation for the transformation Robust topline growth & high AM share High cash conversion potential € 6.9bn Free cash flow CCR FY22 € 219m + 2% 38% Share of 43% ~ 100% p.a. AM sales YE22 FY22 FY18 FY22 Order B
Slide 25: Financial Strategy | KB target picture translates into clear financial targets
Financial Strategy | KB target picture translates into clear financial targets supporting profitability growth Targets FY26 1 2 3 4 5 6 Strong and Margin increase Clear Efficient capital Disciplined and Doubling down on profitable organic from Operational improvements in allocation (internal value-a
Slide 26: Organic Growth | organic CAGR of 5-6%
1 Organic Growth | Strong megatrends and product focus support organic growth path of RVS and CVS and result in an organic CAGR of 5-6% Revenues in €bn 4.0 - 4.5 3.8 AM 3.2 3.3 3.4 ~30% 2.8 1.1 28% 0.8 0.8 0.9 TPR TPR TPR TPR ~4% - Regular Trucks 0.8 growth price red. population globally by OEMs & b
Slide 27: Profitability | increase op. EBIT margins by ~300bps
2 Profitability | Operating leverage, cost measures and portfolio optimization to increase op. EBIT margins by ~ 300bps BOOST 2026 Op. EBIT in €m Op. EBIT margin in % 13.7% Brownfield Greenfield 12.3% > 13.5% 10.7% 8.3% 9.0% 434 404 Accretive from Optimization Pricing 361 339 growing AM Inflation bu
Slide 28: Cash Flow | lift Cash Conversion Rate sustainably
3 Cash Flow | We expect to lift our Cash Conversion Rate sustainably by optimizing working capital & managing CapEx Key focus 80 - 90% 43% SOD “Project Collect” CCR1 FY22 CapEx and D&A Working Capital Financial result Tax CCR FY26 sustainably Prioritization Close regional Optimization and Optimizati
Slide 29: Capital Allocation | Our clear priorities
4 Capital Allocation | Our clear priorities 1 - 3 to safeguard efficient capital allocation 1 Organic growth Return Dividend payments 6-7% R&D ratio1 1 (40-50% payout ratio) Internal capital allocation Net Present Value 5-6% CapEx ratio1 3 Share buybacks ROCE Amortization 2 Inorganic growt
Slide 30: M&A | Disciplined approach based on updated M&A criteria
5 M&A | Disciplined approach based on a holistic set of updated M&A criteria will guide future acquisitions as add-on to organic growth Strategic focus Financial guardrails for larger transactions Capital goods (no automotive) No larger Value-accretive restructuring cases Positive NPV (< € 50m rev
Slide 31: ESG | Clear measures and implementation timing defined
6 ESG | Clear measures and implementation timing defined to achieve ambitious and tangible targets Objectives Key targets (examples) Reduction of scope 1 and 2 - 75% 2030 Enable green & safe mobility emissions Significantly reduce emissions Reduction of scope 3 2030 Environment Targets validated
Slide 32: Targets 2026 | Above market growth and strong profitability improvements
Targets 2026 | Above market growth and strong profitability improvements supported by BOOST program should lead KB to op. EBIT margin above 14% BOOST 2026 Op. EBIT margin in % Growth ~ 2% ~ (1%) > 14% Revenue € 8-9bn ~ 2% 10.5-12% 11.1% "Sell it" Profitability Operating Op. EBIT margin > 14% leverag
Slide 33: Key Takeaways
2026 targets Margin improvement is key priority € 8-9bn revenues Highly resilient business with growth potential in AM Long-term above market growth fueled by mega trends Key > 14% op. EBIT margin Takeaways Improvement of cash conversion rate Solid balance sheet 80-90% Good & disciplined value-orien
Slide 34: Knorr-Bremse Strategy Update 2023
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