Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Knorr-Bremse AG (KNRRY, Financial) reported strong demand in the rail sector across all regions, contributing to a positive margin trend.
- The company is on track with its BOOST 2026 program, which aims to enhance growth and efficiency.
- Knorr-Bremse AG (KNRRY) raised its guidance for 2024 due to strong performance in both divisions and a positive outlook for the rail division.
- The company's order intake was robust, with a book-to-bill ratio of 1.06%, indicating strong demand.
- Operating EBIT margin improved significantly, reaching 12.5%, supported by efficiency measures and better pricing.
Negative Points
- The truck market is experiencing a decline, particularly in Europe, which could impact future performance.
- Supply chain challenges persist, particularly with small specialist suppliers, potentially causing delays and increased costs.
- The company anticipates a significant decline in truck production rates in Europe and North America in the second half of 2024.
- Despite strong performance, the company faces FX headwinds and disposals that affected revenue growth.
- The company is still dealing with legacy backlog issues in the rail division, which could impact future profitability.
Q & A Highlights
Q: What has surprised you positively or negatively in the BOOST 2026 strategy program after one year?
A: Frank Weber, CFO, noted the eagerness of the organization to engage with the BOOST strategy program, which was not always the case in the past. Marc Llistosella, CEO, highlighted the solid business concept and market positioning, with room for improvement in process standardization and R&D allocation. He found the company's potential for self-improvement encouraging, with no significant negatives.
Q: How is the order intake for the truck market, given concerns about the market?
A: Frank Weber, CFO, stated that there is no cliff in order intake. Despite market challenges, particularly in Europe, the order intake remains stable, with North America showing an increase compared to last year. The market itself was down significantly, but Knorr-Bremse's order intake is stable.
Q: Can you provide insights into the regional profitability of the CVS segment, especially in Europe?
A: Marc Llistosella, CEO, explained that Europe is the center for R&D activities, and its profitability is on a global average level. The European market's downturn impacts profitability but not overwhelmingly, as the region is not the most accretive.
Q: What is the status of the legacy backlog in RVS, and how will it impact the second half of 2024 and 2025?
A: Frank Weber, CFO, mentioned that the legacy backlog is expected to contribute EUR 500-600 million in revenues this year, with more impact in the first half. For 2025, the impact is expected to be around EUR 200-300 million, with less in the second half of 2024.
Q: How do you expect the new EPA emission regulations in North America to impact pre-buying, and when might it start?
A: Frank Weber, CFO, anticipates a pre-buy effect due to the new regulations, likely starting in late 2025 or early 2026, as fleets prepare over 12 to 18 months.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
