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Knorr Bremse : Speech of Frank Weber (Executive Board Spokesman/CFO)

05/20/2022 | 04:15am EDT

Annual General Meeting of Knorr-Bremse AG

Speech by Executive Board Spokesman and CFO

Frank Markus Weber

Munich, May 24, 2022

Advance copy of speech published on May 20, 2022

The words spoken on the day of the Annual General Meeting are the authoritative

version of this speech.

1

To our shareholders,

to the Thiele family,

to everyone following along today,

On behalf of the entire Executive Board, I too wish to welcome you here today.

Before I launch into my speech for today's Annual General Meeting, I would like to take one moment to thank you, Professor Mangold, our Supervisory Board Chairman of many years, on behalf of the Executive Board and all my colleagues at Knorr- Bremse.

I particularly wish to emphasize:

  • your highly professional and trustworthy cooperativeness
  • your incomparable commitment to our Company, and
  • your deep understanding of Knorr-Bremse and the people who work here

You have been a member and the Chairman of the Supervisory Board since 2018, the year in which Knorr-Bremse AG successfully went public. During this time, you have done a great amount for our Company. Over the last year in particular, following the unexpected passing of Heinz Hermann Thiele, you again took significant responsibility for the Company in your role as Supervisory Board Chairman by serving Knorr-Bremse in this position for a further year - a year longer than you had originally planned. In making this decision, you put the welfare of the Company above your own personal plans for life.

My dear Professor Mangold, thanks to your many years of expertise in international top-level management and extraordinary life experience, you have always been an excellent source of advice for us and Knorr-Bremse. For me - and the whole Executive Board - it has been a pleasure and honor to work with you.

At this particular time I would also like to welcome your designated successor, Dr. Ploss. On behalf of my Executive Board colleagues and myself, I would like to extend to you a warm welcome to Knorr-Bremse. We look forward to the intensive dialog and collaboration with you.

This of course also applies to Dr. Nikutta, whom I also wish to give a warm welcome.

Ladies and gentlemen,

I will begin my speech today with a look back at our business development during 2021. After that, we will take a look at the current 2022 fiscal year together. I will also address the numerous areas of geopolitical and economic tension at the moment and explain to you how our Company is responding to these challenges.

2

In the second part of my speech, I will describe the success achieved by our climate and sustainability initiatives and talk in depth about our focus topic of "innovation," which is the basis for our commercial success and growth opportunities.

Before we come to the results of the last fiscal year, I would like to turn our attention toward current events in eastern Europe this spring.

We, the Executive Board of Knorr-Bremse, are appalled by Russia's war in Ukraine and condemn Russia's invasion of that country in the strongest of terms. This war is not only an attack on a free country, but also an attack on our democracy and liberal values in Europe.

We at Knorr-Bremse decided quickly that we want to provide concrete aid to the people affected in Ukraine and to the refugees. For instance, we as a company have donated € 500,000 and also matched every donation made by our employees. Thanks to the high rate of engagement among our workforce and the generous individual donations, we have already raised more than € 1.3 million. With this money, we will support things such as the aid provided in Ukraine by the German Red Cross and UNICEF, the UN's aid agency for children.

Additionally, we have joined the Job Aid for Ukrainian Refugees initiative and are helping refugees with their integration here in Germany and with finding a job, including within our own workforce. Furthermore, our employees have started numerous initiatives in Germany and countries neighboring Ukraine to help people in the war zone as well as refugees. We support this outstanding commitment and are very proud of it.

These are important aid campaigns that showcase what we believe. We have simultaneously taken tough actions for our Russia-based business. Just a few days after the outbreak of the war, we temporarily suspended all deliveries that had Russia as their final destination. We of course comply with and support all relevant sanctions. To the extent permitted under sanction regulations, we are fulfilling the deliveries of the existing business in order to avert potential claims for damages - and in those cases only products or components that are used for civil applications and are unambiguously not subject to sanctions. What's more, we decided very early on to exit from Knorr-Bremse KAMA Systems for Commercial Vehicles, which was our German-Russian joint venture with Russian automaker Kamaz.

We have now completed this step and ended our partnership with that company.

All this has had a huge overall impact on our Russian business operations: We are mainly delivering mechanical products and components only - and a mere fraction of these compared with last year. No new business is being acquired

3

Ladies and gentlemen,

I would now like to continue with a look back at the 2021 fiscal year.

The previous year was full of challenges:

the continuing Covid-19 pandemic, noticeable supply constraints, customers postponing orders, and rising geopolitical tension were just a few of the factors. However, we successfully overcame all this thanks to the fantastic dedication and amazing performance of the entire Knorr-Bremse team.

The financial figures for 2021, which we published on February 24, prove this, too:

  • Our order book was at € 5.6 billion at the end of 2021, which is larger than it has ever been.
    Our consolidated revenues came to € 6.7 billion, up 9%.
  • Our operating EBIT margin rose to 13.5%, 30 basis points higher than it was in 2020.
  • Net income grew to roughly € 650 million, an increase of almost 22%.
  • We increased our total amount invested into research and development by almost 9% to € 431 million, which created a foundation for further innovation in our successful products and services.
  • The main driver of revenue in 2021 was our Commercial Vehicle Systems division, or CVS, with a revenue jump of 20%. The EBIT margin improved in this division despite the difficult procurement conditions, rising by 240 basis points to 10.7%.
  • Our Rail Vehicle Systems division, or RVS, attained stable revenue with a pleasingly high EBIT margin of approximately 18%. It achieved that even with a tough year for the rail industry, during which numerous customer projects were postponed due to reduced train utilization. It is important to note here that railroad operators have not canceled any orders so far.

In spite of all the challenges and adversity: We achieved our forecasts for the 2021 fiscal year. Knorr-Bremse also grew faster than the markets did over the past year. Moreover, it achieved higher profitability at the same time. We have delivered on our promises!

On behalf of the whole Executive Board, I wish to express my gratitude to our more than 30,000 employees globally for this success that we had in the 2021 fiscal year. They have done a fantastic job.

4

I would now like to give you, our shareholders, a brief overview of how the most important balance sheet ratios at Knorr-Bremse developed over the last fiscal year. They form the backbone of our strong financial profile:

  • Given the uncertain economic environment, we believed that it was important to maintain a high degree of financial stability and flexibility while simultaneously reducing the Company's debt. By the end of 2021, gross debt was € 1.4 billion and reached a ratio of 1.15 in relation to EBITDA. Net debt to EBITDA came to - 0.09.
  • In all our efforts, we attempted to maintain a "very healthy" level of equity. It came to € 2.43 billion at year end, which represents a strongly risen equity ratio of approximately 34%.
  • We are reaping rewards from our strong focus on free cash flow. It amounted to € 600 million in the 2021 fiscal year and was accompanied by a cash conversion ratio of 93%, which is a very high figure compared to our peers.
  • We will reinforce our efforts in the future too for further growth and will increase capital expenditure and expenses for research and development accordingly. However, we will keep a close eye on cash flow and strive for a cash conversion ratio of 80% to 90%.

A core component of our overall performance is our success with sustainability and ESG, that is, the environment, society, and corporate governance. At Knorr-Bremse, we listen to the people in our society. And they want to us to tell them what contribution Knorr-Bremse makes to tomorrow's sustainable world.

We at Knorr-Bremse want to shape the future of sustainable transportation and have made a commitment to supporting the reduction of carbon emissions - emissions made by our customers as well as us ourselves. We have reached a very important milestone in our own ambitious climate targets:

  • The Knorr-Bremse sites around the world have been carbon-neutral - and therefore climate-neutral - since the end of 2021. Last year, 98% of the electricity supplied to Knorr-Bremse globally came from renewable energy sources and was obtained via green electricity contracts or green electricity certificates. We are very proud of this interim result and will not stop at it, either. Every gram of carbon dioxide counts for the protection of the climate.
  • Furthermore, we are fully on track to reach our ambitious long-term target of halving our total carbon emissions by 2030. By 2021, we were already able to reduce more than 73% of our carbon emissions from 2018 levels.

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Knorr-Bremse AG published this content on 20 May 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 May 2022 08:14:09 UTC.


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