Knorr Bremse : Annual report for the fiscal year 2023 including consolidated financial statements, combined management report and declaration of conformity incl. Corporate Governance Report

Annual Report 2023

Profile

Knorr Bremse is the global market and technology leader for braking systems and a leading supplier of other rail and commercial vehicle systems. For roughly 120 years, we have driven sustainable innovation and connected system solutions. Our products make a crucial contribution to greater safety, efficiency, and reliability on rail and road. Knorr Bremse focuses its innovation on pioneering transportation solutions that build on global megatrends such as urbanization, sustainability, digitalization, and mobility. These concepts are shaping the global transformation within the transportation sector and offer enticing prospects for long-term growth in the rail and commercial vehicle segments.

We are proud of our

33,000

employees

at over

100

locations

in more than

30

countries

Key performance indicators

Revenues

EBIT

EBIT margin

EBIT operative

EBIT margin operative

EBT

EBT margin

Net income

Return on sales after tax

Earnings per share

Incoming orders

Order book (31.12.)

Free Cash Flow

Operating Cash flow

Capital expenditure

Capital expenditure in % of sales

R&D costs

R&D costs in % of sales

Total assets*

Equity*

Equity ratio*

ROCE*

Net Working Capital*

Knorr-Bremse share

Number of shares

Dividend per share

Employees

* adjusted in 2022

Rail

vehicle systems

Revenues

EBIT

EBIT margin

EBIT operative

EBIT margin operative

Capital expenditure

R&D costs

R&D costs in % of sales

Employees

Commercial vehicle systems

Revenues

EBIT

EBIT margin

EBIT operative

EBIT margin operative

Capital expenditure

R&D costs

R&D costs in % of sales

Employees

In € million

In € million

%

In € million

%

In € million

%

In € million

%

€

In € million

In € million

In € million

In € million

In € million

%

In € million

%

In € million

In € million

%

%

days' sales

€

In € million

In € million

%

In € million

%

In € million

In € million

%

In € million

In € million

%

In € million

%

In € million

In € million

%

2023

7,925.6

869.9

11.0

893.1

11.3

772.8

9.8

576.2

7.3

3.43

8,252.2

7,082.3

551.7

914.6

368.5

4.6

544.1

6.9

8,248.6

2,903.5

35.2

19.5

51.4

161,200,000

1.64

33,319

2023

3,747.5

531.9

14.2

535.6

14.3

116.4

238.1

6.4

17,284

2023

4,180.2

398.0

9.5

417.5

10.0

240.6

306.0

7.3

15,027

2022	+ / -
7,149.7	+10.9 %

1. +20.6 %

1. +12.4 %

1. +12.2 %

1. +13.8 %

3.03+13.3 %

8,114.1	+1.7 %
6,907.5	+2.5 %

219.3 +151.6 %

541.6+68.9 %

1. +4.6 %

1. +16.7 %

8,141.6	+1.3 %
2,628.0	+10.5 %
32.3
16.4

55.9-4.5

161,200,000

1.45+13.1 %

31,599	+5.4 %

2022	+ / -
3,401.9	+10.2 %

1. +17.2 %

1. +5.7 %

108.0+7.8 %

1. +14.5 %

16,370	+5.6 %

2022	+ / -
3,750.0	+11.5 %

1. +25.1 %

1. +23.3 %

223.6+7.6 %

1. +18.5 %

14,284	+5.2 %

Contents

01		To Our Shareholders
06	Letter from the CEO
11	The Executive Board
12	Report of the Supervisory Board
26	The Supervisory Board

02		Combined Management Report
30	About the Group
38	Further Details of Corporate Governance
42	Sustainability and Non-financial Statement
74	Business Report
87	Supplementary Report
87	Report on Risks, Opportunities, and Expected Developments
99	Knorr-Bremse AG (HGB)
	101	Assurance Report of the Independent Auditor

03		Consolidated Financial Statements
106	Consolidated Statement of Income
107	Consolidated Statement of Comprehensive Income
108	Consolidated Balance Sheet
110	Consolidated Statement of Cash Flows
112	Consolidated Statement of Changes in Equity
114	Notes to the Consolidated Financial Statements
203	Responsibility Statement
	204	Independent Auditor's Report

04		Compensation Report
216	Introduction
216	Overview of the Fiscal Year
217	Executive Board Compensation
232	Supervisory Board Compensation
235	Multi-year overview
238	Report on the audit of the remunaration report

1. Financial Calendar

1. Imprint

04	K N O R R - B R E M S E A N N U A L R E P O R T 2 0 2 3

K N O R R - B R E M S E A N N U A L R E P O R T 2 0 2 3

T O O U R S H A R E H O L D E R S

05

To Our Shareholders

01	06	Letter from the CEO
	11	The Executive Board
	12	Report of the Supervisory Board
	26	The Supervisory Board

06

K N O R R - B R E M S E A N N U A L R E P O R T 2 0 2 3

L E T T E R F R O M T H E C E O

Letter from the CEO

2023 was another tough year for business - but it was also a record year for Knorr-Bremse. And so, before I report on the performance of our Company over the past year, on behalf of all Executive Board members I would like to begin by saying a big thank you: Thank you, my dear colleagues, for your magnificent effort and for the deep commitment you demonstrated yet again over the past year. We all know that record results don't just appear out of the blue. They come from hard work. This is down to you - and all of us at Knorr-Bremse are proud of it.

In the past year the general economic situation showed very little material improvement: The global economy remained under massive pressure. The brutal war waged by Russia against Ukraine, geopolitical tensions, persistently high energy prices and only a gradual decline in inflation - all these factors exerted pressure on our business.

Despite these global challenges, however, Knorr-Bremse achieved all of its ambitious goals. One of the most important achievements was this: We improved our profitability. This was particularly underpinned by our earnings optimization program and our cost discipline. And so we demonstrated once again: Knorr-Bremse can conquer a crisis. This strong resilience is reflected in all our results: Our order books and order intake as well as our revenues reached new records.

Expressed in figures, this means: Knorr-Bremse's revenues in the full year 2023 rose by 10.9% to around € 7.9 billion. Both divisions contributed equally to these positive developments. Thanks to persistently high customer demand, the order intake rose by 1.7% to a new high of € 8.3 billion. With a 2.5% increase to around € 7.1 billion at the year-end the order book recorded a new all-time high as well.

Profitability also improved through the cross-divisional Profit & Cash Protection Program (PCPP) - as part of our strategy program "BOOST 2026" - in particular: The operating EBIT margin reached a value of 11.3%. The rise in free cash flow to a level above € 552 million also demonstrates the positive effects of the entrepreneurial countermeasures we have already implemented.

K N O R R - B R E M S E A N N U A L R E P O R T 2 0 2 3

L E T T E R F R O M T H E C E O

07

  Our BOOST program is clearly aligned to unlocking value - all our initiatives aim to increase the value of Knorr-Bremse: Our profitability has top priority. 

- Marc Llistosella,  CEO

With these results we met our outlook for the 2023 fiscal year in full. In view of this performance the Executive Board and Supervisory Board will propose to the Annual General Meeting that a dividend of € 1.64 per share be paid.

The prerequisite for such a first-class performance is the trust our customers place in us as a global market and technology leader. This marked confidence our customers display in the quality of our products and services is evidenced by the very clear successes of our two divisions: Thus our RVS (Rail Vehicle Systems) division successfully signed major international contracts with large vehicle manufacturers. Among other things, Knorr-Bremse will be fitting out a total of 52 metrotrains comprising a total of 156 cars in the Indian cities of Bhopal and Indore with braking and air conditioning systems in a partnership with Alstom and providing comprehensive service over a period of 15 years. An order from the world's largest train manufacturer CRRC (China) and a multi-system order for Hitachi Rail in Italy - which includes our new passenger train coupling systems - are among the further highlights.

08

K N O R R - B R E M S E A N N U A L R E P O R T 2 0 2 3

L E T T E R F R O M T H E C E O

We underscored our innovative strength in the CVS (Commercial Vehicle Systems) division with the further development of a number of important products and solutions in 2023, including the iTEBS X system, for example. At the end of last year, Knorr-Bremse commenced mass deliveries of the new-generation intelligent electronic trailer braking system. The successful "eCUBATOR" innovation unit was extended beyond 2023 with an expanded target

• over the past three years the unit has seen the development of innovative and intelligent solutions for electrically driven commercial vehicles. In the future, the innovation unit will have an even more intensive focus on new business fields that are related to zero-emission vehi- cles and offer excellent growth opportunities for Knorr-Bremse. In addition to other renowned companies and research institutes, Knorr-Bremse as a prime development partner of the ATLAS-L4 joint project is working on putting autonomous trucks on the road.

In addition to these operational successes, both divisions completed price negotiations successfully, thereby reducing the inflation-related effects on our earnings. We cannot overestimate this success nor the trust of our customers. For us as one of the major suppliers of components in both the rail and the truck industry, such price negotiations go to the core of our economic viability.

Demand in the rail vehicle market was robust in all regions. In the 2023 fiscal year the RVS division significantly increased its revenues to approximately € 3.7 billion. Due to economies of scale, the efficiency measures implemented, the pricing measures mentioned earlier, and an improved share of aftermarket revenue, the operating EBIT margin reached 14.3%. Demand in the global commercial vehicle market was also at a good level in the previous year. With a rise in revenues to around € 4.2 billion the division achieved another strong result in the 2023 fiscal year. The division's profitability was very positive with an operating EBIT margin of 10.0%.

In future, we aim to bring the aftermarket, data-driven solutions and the performance in fast-­ growing markets such as India even more into focus. The rising demand for rolling stock as well as the urgently needed digitalization of the railways are opening up further potential for growth for us in aftermarket business. Thanks to the very good collaboration with our subsidiary Cojali we are also clearly expanding our core business in the field of digitalization in the truck segment and accessing a wider group of customers with new service solutions. A strong trend toward urbanization and the associated infrastructure investments make India one of the most attractive markets of the future where Knorr-Bremse is seeking to generate profitable growth, in both divisions.