Knorr Bremse : Q1/20 Zwischenergebnis Präsentation

FINANCIAL RESULTS Q1/20

BERND EULITZ I CEO

DR. PETER LAIER I HEAD OF CVS DR. JÜRGEN WILDER I HEAD OF RVS MAY 28, 2020

1

HIGHLIGHTS Q1/20

Q1/20: Solid financial results despite impact from COVID-19

Early & fast reaction to COVID-19 already end of January with related actions

Growing AM supported development in Q1/20

RVS: No project cancellations; customer plants impacted; growing AM share CVS: Revenue developments better than regional TPRs and higher AM share

Financial strength underlines resilience of KB business model

Knorr-Bremse AG 2

Q1/20 - MARGIN RESILIENCE IN A CHALLENGING ENVIRONMENT

ORDER INTAKE

€ 892m

€ 1.59bn

-2.1% yoy

€ 736m	EBITDA
-13.0% yoy	MARGIN

-16.1% yoy

ORDER BOOK

€ 4.65bn

-1.0% yoy

	17.8%
REVENUE	PY: 19.0%

€ 1.63bn

-7.3% yoy

20.9%

EBITDA

MARGIN

14.6%

EBITDA MARGIN

Knorr-Bremse AG 3

Q1/20: FIRM ORDER BOOK, BUT COVID-19 IMPACT ON ORDER INTAKE

Order intake				Order book
€m	By type			€m
1.08		0.98

						-1,0%
		-16.1%			4.700,5	4.652,5
1,893.2
		0.9	+31.0	1,588.0
	-337.1				M&A impact
	-17.8%			Hitachi Steering Business
	Org.			€ +20m (Q1/20)
			Powertech
	decrease
			€ -19m (Q1/19)
Q1/19	Organic	M&A net	FX	Q1/20	31.03.19	31.03.20
		disposals

Book-to-bill	Knorr-Bremse AG	4

ONLY MODERATE REVENUE DECLINE AND FAST RECOVERY IN CHINA

Revenue

€m

By type

By region

		-7.3%
1,755.3
				1,627.5	28.0	-13.6%
		-0,1	+9,0	477.4		24.2	SA
	-136.7	-7.9%		M&A impact	-0.1%		Asia/
				476.9
	Org. decrease		Hitachi Steering Business				Pacific
		€ +22m (Q1/20)
				406.5
				Powertech	-13.2%	352.9	NA
				€ -22m (Q1/19)
					843.4	-8.3%	773.4	EU
Q1/19	Organic	M&A net	FX	Q1/20	Q1/19		Q1/20
		disposals

x.x% y-o-y growth	Knorr-Bremse AG		5

LIMITED DECREASE OF MARGIN UNDERPINS RESILIENCE OF KB

EBITDA
€m	Margin
		Development of EBITDA margin in Q1/20
	19.0%	▪Operating leverage burdened by lower revenue and
	17.8%	mitigation costs
		▪Early and fast measures taken to mitigate COVID-19 impact
			on employees, customers and KB results
	333.7	▪	Revenue share from AM increased from 31% in Q1/19 to
		290.2	37% in Q1/20
		▪RVS: High APAC revenue share impacted by COVID-19;
		Market	Freight market NA negatively hit. Positive effects from
		disposal of Powertech and continuously strong development
		slowdown
		of AM business.
		▪CVS: Stronger revenue decrease than RVS, Positive impact
			from fast cost adaption measures, fast recovery of TPR in
			China
	Q1/19	Q1/20

Knorr-Bremse AG 6

FCF IMPACTED BY COVID-19 INDUCED SLOWDOWN

FCF1& OCF

CapEx1

NWC

Op. ROCE (annualized)

€m

FCF

OCF

€m

% of sales

€m

Scope of days

%

			5.0%
89.1		3.5%
32.1			81.0
	3.5	62.2
	-60.8
Q1/19	Q1/20	Q1/19	Q1/20

58.7	58.5
1,144.1
	1,058.6
31.3.19	31.3.20

32.2%
	26.7%
31.3.19	31.3.20

▪FCF decrease driven by	▪Mgt. program installed to adapt	▪COVID-19 reflected in NWC
	lower profit	CapEx 2020 to Covid-19 situation	decrease
▪	Higher capex	▪Continue expansion of production	▪Stringent supply chain & stock
▪	Settlement of class action	capacity and automation	management
	in the U.S. (USD 12m)	▪Continue selective investments in	▪Safety stock regarding some
		strategic businesses (e.g. steering)	critical suppliers to ensure
1) FCF and capex are adjusted for sale & lease back transactions.	ongoing customer deliveries

• ROCE on solid level despiteCOVID-19 impact

Knorr-Bremse AG 7

RVS: RESILIENT ORDER BOOK DESPITE COVID-19

Order intake	Order book
€m	By type

1.14				0.98
		-15.5%
1,035.0
			+7.4	874.2
	-148.7	-19.5
	-14.4%
	Org. decrease
	Powertech €-19m
Q1/19	Organic	M&A net	FX	Q1/20
		disposals

6.6%
3,336.1	3,555.1
31.03.19	31.03.20

Order book increased by 6.6%yoy

• Order book increase yoy by end of March, overcompensating the Powertech divestment
• NA: Freight, locomotives and AM decreased due to lower transport volumes, leading to lower utilization of existing vehicles and lower demand
• APAC: Impact by COVID-19 particularly in China (earlier than other countries in APAC), leading to OE delays and lower AM demand by operators
• EU: On similar OI level in Q1/20 vs. Q1/19
• Tough comparable financial figures: strong OI in Q4/19 due to timing of tender awards led to balanced OI in Q1/20

Book-to-bill

Knorr-Bremse AG 8

RVS: SOLID MARGIN IN DIFFICULT BUSINESS ENVIRONMENT

Revenue		EBITDA / EBITDA margin
€m	By type	Organic revenue flat yoy in Q1/20

				21.9%	20.9%
	-2.1%
911.3	0.5
	+0.1%	+2.1	892.2		-6.7%
	-21.7			199.5	186.1
	Org. increase

	Powertech €-22m
Q1/19 Organic M&A net FX Q1/20	Q1/19	Q1/20
	disposals

EBITDA margin

• EU:generally higher, strongly driven by AM
• APAC:lower due to OE and AM, partially compensated by increase in pass cars (mainly India) and Metro. China: overall lower due to COVID-19 peak in Feb.
• NA:generally lower mainly driven by market decrease in Freight and Locomotive, but stronger AM
• AM revenue share further increased

EBITDA margin of 20.9% in Q1/20

• Positive contribution from cost and cash measures
• Positive impact from higher AM share
• Project and geographic mix (e.g. lower share from Freight in NA)
• COVID-19effect in APAC

Knorr-Bremse AG 9

CVS: OI DECREASE IN LINE WITH TRUCK MARKET DEVELOPMENT

Order intake

Order book

€m	By type
1.02	0.97

-16.8%

859.4

+20.4	+23.6	714.7
-188.7

-22.0%

Org. decrease

Hitachi Steering Bus.

€ +20m

Q1/19 Organic M&A net FX	Q1/20
disposals
	Book-to-bill

-19.2%
1,377.1
	1,113.2
31.03.19	31.03.20

Good Book to Bill rate despite COVID-19

• EU/ NA:Pre-COVID-19 normalization of market demand after years of strong growth in line with expectations; First impact of COVID-19 in March 2020
• APAC:Delays in February and March due to COVID-19 followed by fast market recovery in China
• SA:Impact of Covid-19 since beginning of April

Good development of order book in Q1/20

• Order book at end of Q1/20 only 1.9% below YE19 showing a stable situation vs.pre-COVID-19
• EU/ NA:Q1/19 strongly supported by pre-buy effects; Q1/20 weaker due to market downswing and COVID-19

Knorr-Bremse AG 10

CVS: REVENUE DEVELOPMENT IN ALL REGIONS BETTER THAN TPR

Revenue

EBITDA / EBITDA margin

€m

By type

				16.6%	14.6%
	-13.0%
846.1
	+21.7	+6.8	735.8		-23.5%
	-138.9			140.7
	-16.4%				107.6
	Org. decrease
	Hitachi Steering Bus.
	€ +22m
Q1/19	Organic M&A net	FX	Q1/20	Q1/19	Q1/20
	disposals

Revenue impacted by weaker economy and COVID-19, but AM increase and better than TPR (-27% yoy) in Q1/20

Development yoy in Q1/20	NA	EU	APAC
TPR (Class 8)	-31%	-33%	-25%
CVS (Revenue)	-17%	-19%	+17%

• EU & NA:Weaker revenue in Q1/20 due to expected market downswing, first impact by COVID-19 in second half of March
• APAC:Main COVID-19 effect in China in February with solid recovery through March; Other Asian countries impacted by COVID-19 from second half of March onwards
• AM increased by 9.7% yoy to € 211.3m in Q1/20

AM up and fast reaction to COVID-19 mitigate EBITDA impact

• Global cost adaption program incl.short-term measures set up to fight COVID-19 impact and to safeguard profitability
• Dilutive effect from Hitachi Steering Business
• EBITDA margin at 14.6% despite lower revenue

Source: LMC Automotive Global Commercial Vehicle Forecast (Quarter 1, 2020).	Knorr-Bremse AG		11

IMPACT BY COVID-19

Knorr-Bremse AG 12

RVS - POSITIVE LONG TERM TREND IN RAIL IS UNCHANGED

Strong order book with more than € 1.2bn in manufacturing projects that provide long-term revenue visibility and ensure industrial activity for the period 2020-2024.

Customer commitment to the continuity of ongoing manufacturing projects.

Talgo

OE business

▪	No cancellations, but selective tender process shifts
▪	Temporarily closed customer plants nearly all
	reopened

Order backlog of USD 33.1bn in transportation. Gradual recovering in the second half of the year.

Bombardier

With some 151m passengers DB Long- Distance set a new passenger record

in 2019 (+1.9%yoy). New capital expenditures rose by 41% to € 5.6bn in 2019. DB' aim is to substantially increase the performance of rail in Germany.

Deutsche Bahn

Siemens Mobility, an integral part of Siemens AG, was

largely able to steer clear of the effects of the coronavirus crisis in Q2. Despitepandemic-related

restrictions limiting access to customer locations, Siemens Mobility continued to successfully execute its projects. Resilient performance supported by high order backlog of € 32bn.

Siemens Mobility

▪Temporary lower utilization of trains unlikely to

impact positive long term trend of rail mobility

▪China:1) COVID-19 impact in Feb., but V-shape

recovery beginning in Mar. 2) Support by market

demand and governmental stimuli

▪Europe:1) COVID-19 impact in Q2/20 expected 2)

Governmental support in many countries 3)

Investments in eco-friendly mobility continues

▪NA:1) COVID-19 impact in Q2/20 expected 2) Lower

demand in Freight for longer expected, but limited

Strong rail market fundamentals driven by sustainable transport needs. No cancellation of orders in backlog. Resilient market mid-term.Objective of a 5% average annual growth rate of sales over the period2019/20-2022/23should be slightly impacted

from temporary tender activity slowdown.

Alstom

exposure of RVS

AM business

▪AM impacted to a lesser extent by COVID-19 due to lockdowns, lower mileage and temporary closures of

depots in H1/20

Knorr-Bremse AG 13

RVS - IMPACT BY COVID-19

OWN OPERATIONS

• Early and strong health measures implemented globally to safeguard employees
• All plants are open again after selective short term closures and furtherramp-up of capacity globally well on track
• High level of localization supportive

SUPPLY CHAIN

• No supplier closed due toCOVID-19 anymore (peak ~20%)
• • Asia: China back to normal/ India still issues
  • Europe: much improved
  • NA: ok
• Supplier strategy pays off
• 1. • Dual sourcing of strategic components
     • High level of localization
  2. Under the condition of a further recovery ofCOVID-19.

COUNTER MEASURES

• >250 cost and cash measures defined and partly implemented
• China: limited efficiency measures necessary
• Europe: 20%short-time work in admin departments
• NA: some layoffs due to weak freight market

FINANCIAL IMPACT1

• Lock downs, supply chain issues and customer plant/ depot closures impact OE and AM in H1/20
• Expected development: H2/20 > H1/20
• OE: no cancellations, but selective tender process shifts
• AM: - Resilient AM mitigates OE pressure
• • Train availability improving, utilization low
  • OE contracts include age limits of components

Knorr-Bremse AG 14

ACT Research

CVS - CONTENT PER VEHICLE AND AM MITIGATED COVID-19 IMPACT

1. Cautious regarding the demand recovery even after the end of production lockdowns 2) U.S. and Europe demand would not recover similar to China

1. The new normalin the U.S. and Europe could be 20% below previous levels.

Volvo/ MS

OE business

▪	Nearly all customer plants are open again
▪	Support from content per vehicle growth continues

As market conditions improve throughout the year, we have confidence that the company is positioned to build upon its quarter performance and take advantage of what we expect to be a stronger

second half.	Navistar

Across all industries, we expect to increase the rate of production from May

onwards and perhaps we will be able to return to normal levels in June or July.

Daimler Trucks/ Handelsblatt

The effects of the corona pandemic have forced us to reconsider our investment priorities and research and development projects. And we are bracing ourselves for a substantial decline in both sales revenue and operating profit in the second quarter. All key figures will be negatively

impacted. Traton

▪EU:1) Slow down of TPR after many years of strong

growth as expected 2) Clear impact by COVID-19

started end of March and first signs of recovery on a

lower level

▪NA:1) Normalization of TPR after many years of

strong growth as expected 2) Strong COVID-19

impact started in Q2/20 and lasting

▪China:1) COVID-19 impact in Feb./Mar. 2) Apr./May

very strong recovery 3) Additional market share gains

Without clear forward visibility on the COVID-19 endgame, the crystal ball is particularly opaque, as the economy begins to reemerge from its medically-induced coma… Coupling an otherwise structurally sound pre-COVID economy, with strong governmental support and rising pent-up demand, there is a case for the economy to rebound into 2021.

AM business

• AM demand with high resilience (e.g. growth in Q1/20 yoy)
• Pent-updemand AM after end of lockdowns expected

Knorr-Bremse AG 15

CVS - HIGH AVAILABILITY OF DELIVERY FOR CUSTOMERS ENSURED

OWN OPERATIONS	COUNTER MEASURES
• Early and strong health measures implemented globally to	• Large global cost adaption and cash program started
safeguard employees	early
• Only a few plants closed for some days, mandated by	• China: early measures implemented, now mainly
governments, all plants are running with	withdrawn
−Flexible shifts depending on customer demand	• Europe: 40% short-time work implemented
−Step by step demand increase in some regions	• NA: layoffs due to weaker customer demand
• High level of localization supportive

SUPPLY CHAIN

• ~1% of total suppliers are temporary closed (peak >20%)
• • Asia: ChinaV-shape recovery/ Japan improved
  • Europe: Significant improvement no major obstacles
  • NA: Some issues in Mexico, but manageable so far
• Supplier strategy pays off
• • Dual sourcing of important components
  • High level of localization

FINANCIAL IMPACT1

• NA/ SA: Clear negative impact by lower truck production rates expected
• EU: Lower truck production rates expected, but some improvement over the year expected
• CHINA: Impacted as well, but good recovery incl. higher revenues in upcoming months expected
• Resilient AM and content per vehicle strengthen margin

1) Under the condition of a further recovery of COVID-19.	Knorr-Bremse AG		16

COVID-19 MEASURES - EARLY START AND FAST IMPLEMENTATION

High flexibility of cost and cash structure

Gross cash

€ 2.5bn

as of May 2020

• Cost adaption and cash measures close to € 200m in implementation
• Proven track record driving efficiency and cost adaption in the past
• Potential in NWC and capex, if needed
• Gross cash of € 2.5bn offers high flexibility
• Asset-lightbusiness model of KB leads to lower fix cost proportion
• Personnel costs
• • EU: Short time work mainly started in Q2/20
  • NA:Lay-offs implemented
• Material costs provide high level of cost flexibility (~50% of total costs)

Knorr-Bremse AG 17

OUTLOOK1- 2020 WILL PROVE OUR RESILIENT BUSINESS MODEL

• Measures implemented to secureemployees' health
• Cost adaption and cash measuresdefined and in implementation
• € 2.5bn cash provide enoughfinancial stabilityand flexibility
• Strong order bookis a positive indication for the coming months
• Ready to support recovery ofcustomer demand

Financial outlook 2020 to be provided with Q2/20 results

1) Under the condition of a further recovery of COVID-19.	Knorr-Bremse AG		18

Q&A / BACKUP

Knorr-Bremse AG 19

FINANCIAL CALENDAR

Upcoming events
Event	Date	Location
Investor meetings (conference calls)	29.05.20	Munich
dbAccess Berlin Conference 2020 (virtual)	03./04.06.20	Berlin
Annual General Meeting 2020 (virtual)	30.06.20	Munich
Release Half Year/Second Quarter 2020 Report	10.09.20	Munich
Release Nine Months/Third Quarter 2020 Report	19.11.20	Munich

…	Knorr-Bremse AG		20

INVESTOR RELATIONS CONTACT

Andreas Spitzauer

Phone:	+49	89 3547 182310
Mobile:	+49	175 5281320
Email:	[e-mail]

Sophia Kursawe

Phone:	+49	89 3547 187311
Mobile:	+49	151 62330709
Email:	[e-mail]

…	Knorr-Bremse AG		21

DISCLAIMER

IMPORTANT NOTICE

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Knorr-Bremse AG 22