Knorr Bremse : Q1/24 Financial Report

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Quarterly Statement

JANUARY 1 TO MARCH 31, 2024

KNORR-BREMSE AG

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K N O R R - B R E M S E G R O U P K E Y I N D I C A T O R S ( I F R S )

		Q1/2024	Q1/2023
Revenues	€ million	1,974.2	1,907.6
EBIT	€ million	237.5	190.1
EBIT margin	%	12.0	10.0
Operating EBIT	€ million	238.2	191.7
Operating EBIT margin	%	12.1	10.0
EBT	€ million	214.8	187.1
EBT margin	%	10.9	9.8
Net income	€ million	159.1	132.5
Return on sales after taxes	%	8.1	6.9
Earnings per share*	€	0.95	0.80
Incoming orders	€ million	2,112.0	2,175.9
Order book (March 31)	€ million	6,728.4	7,116.0
Free cash flow	€ million	(94.6)	(198.9)
Cash flow from operating activities	€ million	(48.3)	(137.0)
Capital expenditure	€ million	71.6	64.3
Capital expenditure as % of revenues	%	3.6	3.4
R & D costs	€ million	138.9	130.6
R & D as % of revenues	%	7.0	6.8
		Mar. 31, 2024	Dec. 31, 2023
Total assets	€ million	8,344.8	8,248.6
Equity	€ million	3,050.8	2,903.5
Equity ratio	%	36.6	35.2
ROCE (annualized)	%	19.7	19.5
Net working capital	Days' sales	69.0	51.4

• The comparative information was adjusted in accordance with IAS 8.41 in connection with the Cojali purchase price allocation (see Chapter C.3. in the notes of the 2023 Annual Report).

F I R S T T H R E E M O N T H S O F 2 0 2 4

• Order intake stable at € 2,112.0 million, a slight € 63.9 million below the previous year's level due to lower demand in

North America when compared with the previous year's strong quarter

 Order book remains at a high level at € 6,728.4 million; the decline of € 387.6 million includes the disposal of the

• € 602.6 million order book of the Kiepe Group, which was deconsolidated in Q1 2024

• Revenues of € 1,974.2 million a slight 3.5% up on the previous year
• Positive development in aftermarket revenue; share in total revenue increased from 39.2% to 40.5%
• Profitability: operating EBIT of € 238.2 million 24.2% up on the previous year with a significantly increased operating
  EBIT margin of 12.1% (previous year: 10.0%)
• R & D ratio of 7.0% of revenue (previous year: 6.8%) emphasizes the focus on strategic and future-oriented projects for innovation and technology
• Free cash flow, at € -94.6 million, up € 104.3 million on the previous year (€ -198.9 million), resulting from lower tax payments and increased quarterly income, among other things
• Knorr-Bremseconfirms its full-year guidance for 2024:
   Revenue: € 7,700 million to € 8,000 million (2023: € 7,926 million)
   Operating EBIT margin: 11.5% to 12.5% (2023: 11.3 %)
   Free cash flow: € 550 million to € 650 million (2023: € 552 million)

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B U S I N E S S P E R F O R M A N C E I N T H E F I R S T T H R E E M O N T H S O F 2 0 2 4

Stable Order Intake: € 2,112.0 Million

The order intake of the Knorr-Bremse Group as at the end of March 2024 decreased slightly by € 63.9 million or 2.9% from the comparable period of the previous year. The increased demand in the rail vehicle market was partly able to offset the shrinking commercial vehicle order intake. The increase in the rail vehicle market was attributable to the Europe region. After a strong quarter the previous year, the commercial vehicle segment saw declining order intake in Europe and North America in particular.

The positive development of the order situation resulted in an order book of € 6,728.4 million as at the end of March 2024. This was € 215.0 million up on the previous year's order book, which was € 6,513.4 million when adjusted for the Kiepe Group.

Positive Year-over-Year Revenue Development: +3.5 %

The revenue of the Knorr-Bremse Group increased by 3.5% or € 66.6 million year over year, coming to € 1,974.2 million in the first three months of the 2024 fiscal year. This revenue development resulted from significant growth in the Rail Vehicle Systems segment, which more than offset the slightly declining revenues in the Commercial Vehicle Systems segment. The increased revenue in the Rail Vehicle Systems segment was seen in all regions and was comprised of a greater OE volume as well as increased aftermarket revenue. The increased OE revenues in the Europe region were in particular due to significantly increased locomotive, passenger, and regional and commuter business. In the Asia region, the increased revenue - especially in the Chinese market - was complemented with similarly increased revenues in India. In North America, OE revenue increases in OE passenger business in particular were able to be achieved. Because of the stronger increases in OE revenues, the share of the aftermarket in the division's total revenues was 51.9% and slightly below the previous year (52.8%). In the Commercial Vehicle Systems segment, the decline in revenues primarily resulted from the moderately shrinking OE business in Europe, North America, and Asia. This was partially able to be made up for with increased aftermarket business, especially in Europe and Asia. Thanks to the contrasting revenue development in the Commercial Vehicle Systems segment, the share of the aftermarket in the division's total revenues was 29.7% (previous year: 28.2%).

For the Group as a whole, the share of aftermarket revenue in total revenues increased from 39.2% in the same period of the previous year to 40.5%.

Significant Increase in Operating EBIT Margin

In the first three months of 2024, operating EBIT of € 238.2 million was generated with an operating EBIT margin of 12.1% (previous year: 10.0%). This is € 46.5 million or 24.2% more than in the same period of the previous year. This development was mainly due to cost and mix factors as well as volume effects. As part of our BOOST 2026 performance program, we are taking measures to safeguard income as well as to optimize variable and fixed cost structures, and initial success has been achieved in them. The development of the share of aftermarket revenues also contributes positively to the earnings performance. Operating EBIT and the operating EBIT margin were adjusted for expenses in connection with the BOOST 2026 cost reduction program in the Rail Vehicle Systems segment. The unadjusted EBIT within the Group is € 237.5 million with an unadjusted EBIT margin of 12.0%.

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C O N S O L I D A T E D S T A T E M E N T O F I N C O M E ( C O N D E N S E D )
in € million	Q1/2024	Q1/2023
Revenues	1,974.2	1,907.6
Change in inventory of unfinished/finished products	52.1	5.4
Own work capitalized	32.4	27.1
Total operating performance	2,058.7	1,940.0
Cost of materials	(1,007.7)	(979.9)
Personnel expenses	(523.5)	(495.6)
Other operating income and expenses	(205.6)	(188.0)
Earnings before interest, tax, depreciation, and amortization (EBITDA)	321.9	276.6
Depreciation, amortization, and impairment	(84.4)	(86.5)
Earnings before interest and taxes (EBIT)	237.5	190.1
Financial result	(22.7)	(3.0)
Income before taxes	214.8	187.1
Taxes on income	(55.6)	(54.6)
Net income	159.1	132.5
Of which profit (loss) attributable to non-controlling interests*	5.4	3.5

• The comparative information was adjusted in accordance with IAS 8.41 in connection with the Cojali purchase price allocation (see Chapter C.3. in the notes of the 2023 Annual Report).

In the first three months of 2024, the material cost ratio shrank by a total of 40 basis points to 51.0% of revenues for reasons including a changed divisional mix as well as a general relaxation of procurement prices. In relation to the personnel costs ratio, there was a moderate year-over-year increase of 50 basis points to 26.5% of revenues (previous year: 26.0%), caused among other things by deals for higher wages and salaries taking effect after the first quarter of 2023. Other operating income and expenses totaled 10.4% of revenue, a figure above the previous year's level (9.9%). At 4.3% of revenue, depreciation and amortization developed at the previous year's level (4.5%). The negative financial result deteriorated year over year and brought down pre-tax income in the current fiscal year by € 22.7 million (previous year:

• 3.0 million). Pre-tax income was 10.9% of revenues and therefore 110 basis points up on the corresponding level of 9.8% in the previous year, which resulted primarily from the improvement in the material cost ratio.

The tax rate fell by 330 basis points to 25.9% from 29.2% in the first three months of 2023. This led to net income for the period of 8.1% of revenues as at the end of March 2024, up on the previous year's level (6.9%).

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F I N A N C I A L S I T U A T I O N

F R E E C A S H F L O W
in € million	Q1/2024	Q1/2023
Net income (including earnings share of minority interests)	159.1	132.5
Depreciation, amortization, and impairment losses on intangible assets and property, plant, and equipment	84.4	86.5
Additions to, reversals of, and discounting of provisions	22.5	18.9
Non-cash changes in the measurement of derivatives	16.3	(26.9)
Other non-cash expenses and income	2.8	(18.7)
Income tax expense	55.6	54.6
Income tax payments	(38.2)	(29.0)
Changes in inventories, trade accounts receivable and other assets which cannot be allocated to
investing or financing activities	(342.1)	(442.2)
Changes in trade accounts payable and other liabilities which cannot be allocated to
investing or financing activities	(5.5)	86.0
Changes in provisions due to utilization	(27.1)	(28.9)
Other	23.8	30.0
Cash flow from operating activities	(48.3)	(137.0)
Cash changes in intangible assets and property, plant, and equipment	(46.3)	(61.9)
Free cash flow	(94.6)	(198.9)

In the first three months of 2024, the € 48.3 million cash outflow from operating activities represented a very significant

• 88.7 million decrease from the previous year's quarter. This results from, among other things, the € 26.6 million increase in the net income for the period. Furthermore, following gains of € 26.9 million on the measurement of derivatives in the previous year's quarter, the net income for the period in Q1 2024 includes a loss of € 16.3 million as well as other non- cash expenses and income of € 2.8 million, mainly based on FX results (previous year: € -18.7 million).

The cash changes in intangible assets and property, plant, and equipment fell by a significant € 15.6 million as a result of the receipt of a purchase price installment for a past sale of property, from € 61.9 million in Q1 2023 to € 46.3 million in Q1 2024.

Free cash flow in the first three months of 2024 came to € -94.6 million, improving by a very significant € 104.3 million year over year (previous year: € -198.9 million).

C U R R E N T A N D N O N - C U R R E N T A S S E T S
in € million	Mar. 31, 2024	Dec. 31, 2023
Intangible assets and goodwill	1,467.1	1,466.9
Property, plant, and equipment	1,864.1	1,863.9
Other non-current assets	407.4	398.9
Non-current assets	3,738.7	3,729.8
Inventories	1,231.4	1,142.3
Trade accounts receivable	1,605.0	1,359.3
Other financial assets	171.1	160.9
Contract assets	76.4	77.4
Cash and cash equivalents	1,268.6	1,291.4
Assets held for sale and disposal groups	5.3	221.1
Other current assets	248.5	266.5
Current assets	4,606.1	4,518.8

Q1 2024 also saw a seasonal increase in trade accounts receivable compared with December 31, 2023. In this regard - as in previous years - we expect a noticeable improvement by year end. Furthermore, the trend in inventories reflects

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measures to preserve the global supply chains as well as efficiency improvement measures. The decline in assets held for sale and disposal groups mainly results from the deconsolidation of the Kiepe Group.

The absolute net working capital increased by € 381.9 million from its 2023 level (€ 1,131.3 million) to its current

• 1,513.2 million. The commitment of the net working capital in days' sales did increase by a very significant 17.6 days from 51.4 days on December 31, 2023, to the current 69.0 days, however the days' sales improved from 70.9 days1 by 2.8% when compared with the same period in 2023.

C A P I T A L E X P E N D I T U R E
		Q1/2024	Q1/2023
Capital expenditure (before IFRS 16 and acquisitions)	€ million	71.6	64.3
Capital expenditure as % of revenues	%	3.6	3.4

The capital expenditure on property, plant, and equipment and intangible assets was € 71.6 million and significantly above the previous year's level. Capital expenditure as a percentage of revenues increased slightly from 3.4% in the previous year to 3.6%. Significant capital expenditure in the first three months of 2024 went primarily toward increasing the efficiency of our global manufacturing processes and toward capacity adjustments. Furthermore, there was a focus on digitalization and on capital expenditure on research and development projects.

C O N S O L I D A T E D E Q U I T Y
in € million	Mar. 31, 2024	Dec. 31, 2023
Subscribed capital	161.2	161.2
Other equity	2,818.3	2,674.7
Equity attributable to the shareholders of Knorr-Bremse AG	2,979.5	2,835.9
Non-controlling interests	71.4	67.6
Total equity	3,050.8	2,903.5

As at March 31, 2024, the Knorr-Bremse Group had an equity ratio of 36.6%. The increase from December 31, 2023, (35.2%) is mainly attributable to the profit contribution from the first quarter of 2024.

C U R R E N T A N D N O N - C U R R E N T L I A B I L I T I E S
in € million	Mar. 31, 2024	Dec. 31, 2023
Provisions (incl. pensions)	435.0	447.7
Financial liabilities	2,210.8	2,172.8
Other non-current liabilities	159.1	144.3
Non-current liabilities	2,804.9	2,764.8
Trade accounts payable	1,199.2	1,201.5
Financial liabilities	649.7	587.1
Contract liabilities	225.8	233.0
Liabilities directly associated with assets held for sale	2.8	153.0
Other liabilities	411.5	405.6
Current liabilities	2,489.1	2,580.2
Total liabilities	5,294.0	5,345.0

• The comparative information was adjusted in accordance with IAS 8.41 in connection with the Cojali purchase price allocation (see Chapter C.3. in the notes of the 2023 Annual Report).

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The non-current liabilities increased slightly from year end 2023 by an amount of € 40.1 million.

The current liabilities decreased by a slight € 91.2 million to € 2,489.1 million. The current financial liabilities increased by

• 62.7 million to € 649.7 million, mainly as a result of an increase in short-term bank debt and liabilities to employees. Countering this was a € 150.2 million decrease in liabilities in connection with assets held for sale, mainly as a result of the deconsolidation of the Kiepe Group.

The following debt financing existed as of March 31, 2024:

• Corporate bond of Knorr-Bremse AG in the amount of € 750.0 million (maturing in June 2025)
• Corporate bond of Knorr-Bremse AG in the amount of € 700.0 million (maturing in September 2027)
• Lease liabilities in the amount of € 535.5 million
• Bank liabilities of the Knorr-Bremse Group in the amount of € 93.4 million

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I N F O R M A T I O N O N R E P O R T A B L E S E G M E N T S

R E V E N U E S B Y S E G M E N T
in € million		Q1/2024	Q1/2023
Rail Vehicle Systems		964.1	855.2
Commercial Vehicle Systems		1,010.7	1,052.9
Other segments and consolidation		(0.6)	(0.6)
Group		1,974.2	1,907.6
E B T B Y S E G M E N T
in € million		Q1/2024	Q1/2023
Rail Vehicle Systems		122.3	103.6
Commercial Vehicle Systems		104.6	92.6
Other segments and consolidation		(12.2)	(9.0)
Group		214.8	187.1
Our two segments performed as follows in the first three months of 2024:
R A I L V E H I C L E S Y S T E M S S E G M E N T
		Q1/2024	Q1/2023
Revenues	€ million	964.1	855.2
Of which aftermarket	%	51.9	52.8
EBIT	€ million	144.8	111.8
EBIT margin	%	15.0	13.1
Operating EBIT	€ million	145.5	111.8
Operating EBIT margin	%	15.1	13.1
Incoming orders	€ million	1,062.0	1,000.3
Order book (March 31)	€ million	4,739.0	5,026.5

Order intake in the Rail Vehicle Systems segment, with an increase of € 61.7 million, is moderately above the previous year's level and amounted to € 1,062.0 million as at the end of March 2024 (previous year: € 1,000.3 million). As a result of the sale of the Kiepe companies, the order book as at March 31, 2024, decreased by 5.7% to € 4,739.0 million (previous year: € 5,026.5 million). However, adjusted for the order book of the Kiepe companies in the previous year's quarter, the order book increased organically by 7.1%.

Revenue in the Rail Vehicle Systems segment in the first three months of 2024 was € 964.1 million and therefore 12.7% up on the previous year. This development mainly results from the significant revenue increases in the aftermarket as well as in OE business. The division was able to raise its aftermarket revenues in all regions. In Europe, OE business recorded significant growth, especially in regional and commuter as well as in the passenger and locomotive businesses. Among North American OE revenues, growth in the passenger and metro businesses more than compensated for slightly declining revenues from freight business. In the Asia region, the increased revenue resulted in particular from revenue in the Chinese high-speed business. Because of the stronger increases in OE revenues, the share of the aftermarket in the divi- sion's total revenues was 51.9% and slightly below the corresponding level in the previous year (52.8%), despite rising aftermarket revenues.

Operating EBIT was € 145.5 million as at March 2024 and had therefore increased by 30.1% from the previous year's level (€ 111.8 million) for cost, volume, and mix reasons, with an operating EBIT margin of 15.1% which was significantly up on the previous year (13.1%). The positive development is in particular due to initial success in the BOOST 2026 performance program as well as growth in the European brake business.

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C O M M E R C I A L V E H I C L E S Y S T E M S S E G M E N T
		Q1/2024	Q1/2023
Revenues	€ million	1,010.7	1,052.9
Of which aftermarket	%	29.7	28.2
EBIT	€ million	111.2	93.5
EBIT margin	%	11.0	8.9
Operating EBIT	€ million	111.2	95.2
Operating EBIT margin	%	11.0	9.0
Incoming orders	€ million	1,051.1	1,176.1
Order book (March 31)	€ million	1,991.4	2,090.6

Order intake in the Commercial Vehicle Systems segment was € 1,051.1 million in the first three months of 2024 and was therefore 10.6% down on the previous year. The larger number of orders in South America was only able to partly compensate for the declining order intake in other regions. This can also be seen in the development of the truck production rate, in which an increase in Asia partially compensated for the declining production in Europe and North America. The order book as at March 31, 2024, subsequently fell by 4.7% year over year.

The revenues attained as at the end of March 2024 were € 1,010.7 million and 4.0% down year over year. While the aftermarket business saw a slight increase, the OE business declined moderately. As a result of this development, the share of aftermarket revenue in the total revenue of the Commercial Vehicle Systems division as at March 2024 increased slightly to 29.7% compared with the previous year (28.2%).

The operating EBIT in the Commercial Vehicle Systems segment successfully increased by a significant 16.8% from the previous year to € 111.2 million as at the end of March 2024. This also led to the operating EBIT margin increasing to 11.0% compared with the previous year (9.0%). Price effects in Europe and North America, along with cost reduction measures, contributed to this, too.

R E V E N U E B Y C O U N T R Y O F K N O R R - B R E M S E C O M P A N Y
in € million	Q1/2024	Q1/2023
Europe/Africa	1,011.1	956.6
North America	479.8	494.6
South America	40.7	34.5
Asia-Pacific	442.5	421.8
	1,974.2	1,907.6

As at the end of March 2024, 51.2% of the Group's revenues was attributable to the Europe/Africa region (previous year: 50.1%), 24.3% to North America (previous year: 25.9%), 2.1% to South America (previous year: 1.8%), and 22.4% (previous year: 22.1%) to the Asia-Pacific region.