Introduction & Market Context
Knorr-Bremse AG (ETR:KBX), a global leader in braking systems for rail and commercial vehicles, presented its Q1 2025 financial results on May 8, 2025. The company reported stable overall performance despite contrasting results between its rail and truck divisions, with rail showing strong growth while the truck segment faced market headwinds.
The company’s balanced geographic footprint—with 49% of revenue from Europe, 27% from North America, and 24% from Asia-Pacific—provided resilience amid challenging geopolitical conditions. This diversification strategy appears to be paying dividends as Knorr-Bremse navigates varying regional market dynamics.
As shown in the following key performance overview:
Quarterly Performance Highlights
Knorr-Bremse reported Q1 2025 revenues of €1.96 billion, representing a slight decrease of 0.8% year-over-year. Despite this, the company maintained its operating EBIT margin at 12.1%, unchanged from the previous year. Order intake showed significant improvement, increasing by 12.5% to €2.38 billion, while the order book grew by 10.6% to €7.44 billion, providing solid visibility for future quarters.
A notable achievement was the turnaround in free cash flow, which improved to €15 million from a negative €95 million in Q1 2024. This improvement reflects the company’s enhanced focus on working capital management and operational efficiency.
The company’s net working capital efficiency and cash flow metrics demonstrate meaningful progress:
Rail Vehicle Systems Division Performance
The Rail Vehicle Systems (RVS) division emerged as the clear bright spot in Knorr-Bremse’s Q1 results. RVS order intake surged by 23.5% organically to €1.31 billion, with growth across all regions. The division’s order book reached €5.53 billion, representing an 11.1% organic increase year-over-year.
Revenue in the rail segment increased by 10.5% to €1.07 billion, with organic growth of 4%. The division’s operating EBIT rose by 13.9% to €166 million, improving the margin to 15.6% from 15.1% in the prior year. This performance was driven by a higher aftermarket share, which increased to 55% of divisional revenue, along with efficiency improvements through the BOOST program and positive contributions from the recently acquired North American signaling business.
The following chart illustrates the strong performance of the RVS division:
Commercial Vehicle Systems Division Challenges
In contrast to the rail division, Knorr-Bremse’s Commercial Vehicle Systems (CVS) segment faced significant headwinds. Revenue declined by 11.6% to €894 million, while operating EBIT fell by 23.8% to €85 million, resulting in a margin contraction to 9.5% from 11.0% in Q1 2024.
The performance was primarily impacted by lower truck production rates in Europe and North America, creating negative volume effects and unfavorable regional mix. Despite these challenges, the aftermarket business showed resilience, with its share increasing to 34% of divisional revenue. The company noted that benefits from the BOOST efficiency program and portfolio optimization helped partially offset the market-driven pressures.
The following visualization shows the revenue and margin impacts in the CVS division:
Strategic Initiatives
Knorr-Bremse highlighted progress in its strategic initiatives, particularly the BOOST efficiency program. The company reported that carve-outs of non-core businesses are proceeding as planned, while the integration of KB Signaling (formerly Alstom (EPA:ALSO) Signaling North America) is progressing well. This acquisition, consolidated since September 1, 2024, is already contributing positively to the rail division’s performance.
The company’s key strategic positioning in the current market environment includes:
Forward-Looking Statements
Knorr-Bremse confirmed its full-year 2025 guidance, projecting revenue between €8.1-8.4 billion (compared to €7.88 billion in FY24) and an operating EBIT margin of 12.5-13.5% (up from 12.3% in FY24). Free cash flow is expected to range between €700-800 million, in line with the €730 million achieved in FY24.
The guidance assumes stable foreign exchange rates, essentially stable geopolitical and macroeconomic conditions, and no significant impacts from tariffs. The company anticipates potential restructuring costs of around €75 million. For the divisions, RVS is expected to deliver solid increases in both revenue and operating EBIT margin, while CVS revenue is projected to be almost flat despite disposals, with a slight increase in operating EBIT margin.
The market outlook for both rail and truck segments is illustrated in the following chart:
The company’s full-year 2025 guidance is summarized here:
Detailed Financial Analysis
Knorr-Bremse’s financial position remains solid, with improvements in several key metrics. Capital expenditure decreased from 3.6% of sales in Q1 2024 to 2.7% in Q1 2025, reflecting more disciplined investment. The company’s annualized ROCE (Return on Capital Employed) stood at 19.5%, slightly down from 19.7% in the prior year.
The order intake strength across both divisions provides a positive indicator for future quarters, with the book-to-bill ratio exceeding 1. This suggests potential revenue growth in the coming periods, particularly in the rail division where global book-to-bill is expected to remain above 1 for the full year.
While the truck segment faces near-term challenges, management expects truck production rates to improve in the second half of 2025, which should provide some relief to the CVS division. The aftermarket business continues to be a stabilizing factor for both divisions, with higher margins helping to offset some of the pressure in the original equipment business.
Overall, Knorr-Bremse’s Q1 2025 results demonstrate the company’s ability to navigate a complex market environment through its diversified business model, operational efficiency initiatives, and strategic focus on high-margin aftermarket business. The confirmation of full-year guidance suggests management confidence in the company’s ability to maintain this trajectory throughout 2025.
Full presentation:
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