Knorr Bremse : Half Year Report 2021

Interim Report

January 1 to June 30, 2021

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Half-year financial report

JANUARY 1 TO JUNE 30, 2021

KNORR-BREMSE AG

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Knorr-Bremse Group key performance indicators (IFRS)

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

				1st half of 2021		1st half of 2020
Revenues		million		3,418.9		3,055.8
EBITDA		million		632.2		535.5
EBITDA margin		%		18.5		17.5
Operating EBITDA margin		%		18.5		17.5
EBIT		million		495.5		397.5
EBIT margin		%		14.5		13.0
Operating EBIT margin		%		14.5		13.0
Net income		million		346.1		256.9
Earnings per share (basic)			2.07	1.47
Incoming orders		million		3,602.9		2,727.1
Order book (June 30)		million		5,161.0		4,363.3
Operating cash flow		million		223.6		118.6
Free cash flow		million		108.2		(13.3)
Cash conversion rate		%		31.3		(5.2)
Capital expenditure (before IFRS 16 and acquisitions)		million		129.6		147.9
Capital expenditure as% of revenues (before IFRS 16 and acquisitions)		%		3.8		4.8
R&D costs		million		211.8		194.8
R&D costs as% of revenues		%		6.2		6.4
				6/30/2021		12/31/2020
Total assets		million		7,356.7		7,390.0
Equity (incl. non-controlling interests)		million		2,089.2		1,921.7
Equity ratio		%		28.4		26.0
ROCE (annualized)		%		26.7		25.6
Net financial debt / (cash)		million		202.5		(102.8)
Net working capital		million		1,126.3		746.4
Employees (incl. leased personnel)				30,474		29,714

First half of 2021

Encouraging development of the order situation: Order intake of 3,602.9 million up 32.1% from the previous year and the pre-coronavirus level, primarily as a result of a very clear recovery in demand in the commercial vehicle business in all regions

Record order book of 5,161.0 million up 18.3% on the previous year

Revenues of 3,418.9 million significantly up on previous year by 11.9% as a result of noticeable growth in the global OE business in the commercial vehicle segment

Aftermarket revenues slightly up (1.4% revenue reduced from 37.7% to 34.2%

Strong increase in profitability: EBIT of 495.5 million up 24.6% from the previous year with an EBIT margin (RoS) of 14.5%; a significant margin improvement of 1.5 percentage points compared with the previous year (13.0%) underlines profitable growth; the EBITDA margin of 18.5% rose significantly by 1.0 percentage point compared with the previous year (17.5%)

Free cash flow of 108.2 million significantly up on previous year ( -13.3 million), partly due to higher earnings contributions and the final payment received from a sale-leaseback transaction (for the northern part of the Munich site) in the first quarter of 2021

Full repayment of remaining credit facilities from Covid-19 measures program in the amount of 500 million in the first half of 2021

Confirmed guidance for full year 2021:

6,50 6,900 million (20206,157 million) Operating EBIT margin: 13.0% to 14.5% (2020: 13.2%)

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Group Interim Management Report

B U S I N E S S R E P O R T

General Economic and Industry-related Conditions

Economic Activity and Industry Environment

Global economy and financial markets

The development of the global economy in the first half of 2021 confirms the picture from analyst forecasts since the end of 2020 i.e., a gradual but uneven recovery this year. Access to vaccines has proved to be the most important dividing line, along which the global recovery has been split into two blocks: those for whom a further normalization of activity is in prospect during the year (almost all advanced economies) and those that will be confronted with new infections and rising Covid-19 death rates.

(Source: IMF July 2021)

Continued expansionary monetary policy worldwide with still low-key interest rate levels is strengthening equity markets. In the first half of the year, the Dax gained 13.1% and the MDax 10.0%.

Bilateral exchange rates against the US dollar were stable, although the EUR/USD exchange rate ranged between 1.17 and 1.23 during the year. (Thomson Reuters)

Rail vehicle market

No significant events for the global market for rail vehicles have occurred on the demand side in 2021 to date. However, the market continued to be affected by the Covid-19 pandemic in 2021, which is reflected in, for example, delay of projects. Overall, development was in line with expectations, as outlined in the Annual Report of March 2021.

Commercial vehicle market

The global commercial vehicle market developed slightly more positively than expected compared with the last evaluation of March 2021. This is reflected in the market forecast for the full year.

Corporate Management Indicators

The most significant financial key performance indicators at Knorr-Bremse are revenues, (operating) EBITDA/(operating) EBITDA margin, (operating) EBIT/(operat ratio is used as another key management indicator. These are explained in detail starting on page 73 of the 2020 Annual Report.

M A N A G E M E N T I N D I C A T O R S

		1st half of 2021		1st half of 2020
		3,418.9		3,055.8
		632.2		535.5
EBITDA margin (as % of revenues)		18.5		17.5
Operating EBITDA margin (as % of revenues)		18.5		17.5
		495.5		397.5
EBIT margin (as % of revenues)		14.5		13.0
Operating EBIT margin (as % of revenues)		14.5		13.0
ROCE, annualized (%)		26.7		22.2
		59.3		70.5
Employees (as of June 30, including leased personnel)		30,474		28,941

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D I V I S I O N A L R E V E N U E S A N D E B I T

		1st half of 2021		1st half of 2020
Rail Vehicle Systems
		1,654.6		1,740.8
EBIT margin (as % of revenues)		18.2		18.7
Operating EBIT margin (as % of revenues)	18.2	18.7
Commercial Vehicle Systems
		1,764.9		1,314.7
EBIT margin (as % of revenues)		12.1		7.2
Operating EBIT margin (as % of revenues)		12.1		7.2

We also regularly measure non-financial performance indicators. These help us with the management and long-term strategic positioning of the Company. The most significant non-financial performance indicator is the number of employees (FTE).

The definitions of the key figures in this report have not changed since the 2020 Annual Report.

Significant events in and after the reporting period

The significant events in and after the reporting period can be found in the notes to the condensed interim consolidated financial statements. The acquisition of the EVAC Group, which is described in the

		Related party dis-
closures	Events after the reporting date	ction.

Financial performance

G R O U P K E Y I N D I C A T O R S

		1st half of 2021		1st half of 2020
Incoming orders		3,602.9		2,727.1
Order book		5,161.0		4,363.3
Revenues		3,418.9		3,055.8
EBITDA		632.2		535.5
EBITDA margin		18.5		17.5
Operating EBITDA margin		18.5		17.5
EBIT		495.5		397.5
EBIT margin		14.5		13.0
Operating EBIT margin		14.5		13.0
Net income		346.1		256.9
Capital expenditure (before IFRS 16 and acquisitions)		129.6		147.9
Depreciation, amortization and impairment		136.7		137.9
R&D costs		211.8		194.8
Employees (as of June 30, including leased personnel)		30,474		28,941

Incoming orders in the Group of 3,602.9 million in the first half of 2021 (previous year: 2,727.1 million) were significantly up on the level of previous year by 32.1%. This was due to very high demand in the commercial vehicle business and led to an order book of 5,161.0 million as of June 30, 2021 (previous year: 4,363.3 million), which thus reached a new record level. The forward order book of 9.1 (previous year: 8.7) months underlines our good order situation. The book-to-bill ratio the ratio of order intake to revenues was 1.05 in the first half of 2021 (previous year: 0.89). Incoming orders and order books are taken from management reporting and are not part of the review by the auditor.

e first half of the reporting year with a rise of 11.9% to 3,418.9 million (previous year: 3,055.8 million). The acquisition of the EVAC Group in the

field of rail vehicle systems, which was made at the end of the first half of 20214.1 million to revenues. Currency -adjusted (to actual rates in 2020) and adjusted for the aforementioned acquisition of the EVAC Group, revenue rose by 15.9%.