Knorr-Bremse Aktie

Good afternoon, ladies and gentlemen, and welcome to Knorr-Bremse's Conference Call for the Q1 2026 results. [Operator Instructions]

Let me now turn the floor over to the Head of Investor Relations, Andreas Spitzauer.

Thank you, operator. Good afternoon as well as good morning, ladies and gentlemen. I hope all of you are very fine. My name is Andreas Spitzauer, Head of Investor Relations, and I want to welcome you to Knorr-Bremse's presentation for the first quarter results of 2026.

Today, Marc Llistosella, our CEO; and Frank Weber, our CFO, will present the results of Knorr-Bremse, followed by a Q&A session. The conference call will be recorded and is available on our homepage in the Investor Relations portion. It is now my pleasure to hand over to Marc Llistosella. Please go ahead.

Thank you, Andreas. Ladies and gentlemen, warm welcome to our Capital Market call for the first quarter '26 results. We will keep it short today as it's a busy reporting day and our very good financial figures largely speak for themselves.

So let's start with the key takeaways for today on Page #2. At a time when global headlines are increasingly shaped by volatility, fragmentation and lack of long-term thinking, we see it as our responsibility to steer Knorr-Bremse with discipline and resilience. While the broader geopolitical environment remains fragile and unpredictable, we are focused on what we can control and on making prudent decisions in an environment where prudence has become the exception rather than the rule.

Overall, we made a very strong start into 2026. In fact, this marks our best first quarter in the past 5 years. Now we are there where we should have been for a long time, and this should be a starting point for an even brighter future.

In RVS, we recorded good order intake, which led to a record order backlog. The top and bottom line figures were broadly in line with our expectations, reflecting good customer demand and solid execution.

In CVS, margin recovery took off as always promised, driven by pricing discipline as well as stringent cost and efficiency measures. In addition, operational improvements and a more balanced market environment contributed to this achievement.

The results once again demonstrate the strength and resilience of our business model, which provides robustness even among ongoing geopolitical uncertainties. Given the ongoing crisis in the Middle East, let me briefly comment on this topic. Direct exposure of our business so far is rather limited.

Revenues from the Middle East account for less than 1% of the group revenues, and we have almost no direct supply from this region. That said, we continue to closely monitor potential effects, in particular with regards to our global supply chains.

While no major disruptions are currently visible, this remains an area of active attention. Both divisions have set up task forces to react fast if necessary. Overall, our business model has proven to be resilient in crisis. This is supported by a high revenue share from the aftermarket, well above 50% in RVS and close to 35% in CVS as well as high level of local production and local sourcing across major regions.

Both divisions also have a strong record when it comes to managing crises. Last but not least, we confirm the guidance for the full year 2026. On Slide 3, let me turn now to the market or coming to the market environment, starting with Rail on Page #3.

Overall demand in Rail remains robust. Orders books at our OEM customers continue to be very high and passengers business remains stronger than freight. In APAC, we saw a slight decline year-on-year, mainly driven by tough competition.

At the same time, demand increased in India and across the rest of Asia Pacific. In North America, passenger demand remained stable, while freight continues to be at low levels. Looking ahead to full year '26, the global rail market should stay robust, which then could lead to a book-to-bill ratio of 1 or slightly above.

In Europe, order intake should remain strong. In APAC, China is expected to decline year-on-year, which is only market-driven after some pent-up demand was met. On the other side, India should develop positively on a full year basis. In North America, passenger development is positive to partially compensate the still weak freight environment, resulting in a more balanced outlook.

Turning to the Truck market. Market developments in the first quarter were fully in line with expectations. Total truck production rates continue to show first signs of recovery. Europe was significantly higher year-on-year, while North America remained significantly lower, but with visible turnaround in demand.

In APAC, China was again significantly higher year-on-year. For '26, we expect continued positive demand for aftermarket and estimating regarding the truck production rates are fully in line with our OEM customers. This means truck production rate in Europe should be flattish. Price is slightly increasing.

North America is expected to be slightly higher. China should be flat year-over-year with a strong development in the first half of the year. Overall, global truck production rates are expected to be flat to slightly up year-over-year. But please keep in mind that it is too early to fully assess the full impact of the middle crisis -- Middle East crisis.

Over the past year, we have taken decisive actions to structurally adjust our cost base and further strengthen our resilience for both divisions, but even more for CVS. These measures, together with our robust pricing discipline and resilient aftermarket business, put us in a strong position, and we look forward to demonstrating the full earning potential of CVS as markets recover.

Slide 4. Let's now turn to the first quarter financials of '26. Order intake declined only slightly year-on-year, reaching a solid level of more than EUR 2.2 billion. Group revenues amounted to almost EUR 2 billion, representing an organic growth of 2% year-on-year with a strong contribution from CVS. From a regional point of view, APAC region, but also North America contributed to the revenue increase, while Europe reported a slight decline.

The operating EBIT margin was particularly pleasing in the first quarter. It improved across both divisions, supported by a strong aftermarket business, but also by positive operating leverage and the good execution of efficiency measures within our BOOST program.

As a result, operating EBIT margin increased by 140 basis points year-on-year and thus recorded its highest first quarter figure in 5 years. As I said, this is only back to normal from now on, we have to start through. Free cash flow amounted to EUR 32 million. This is very positive, well supported by good cash management and the increase of our profitability.

With these words, I would like now to hand over to Frank. He will provide us with even more details.

Thanks, Marc. And let's move to Page 5. Of course, we continue to invest in a disciplined manner. Capital expenditure increased moderately year-over-year to EUR 62 million, reflecting focused investments in maintenance and some growth opportunities.

Net working capital decreased to EUR 1.46 billion at the end of quarter 1. However, this number is influenced by the first-time inclusion of our recent duagon acquisition and the removal of our HVAC business classified as assets held for sale.

Scope of days, respectively, could be reduced by 4 days. Free cash flow amounted to a very solid EUR 32 million compared to EUR 15 million in the prior year quarter. Despite this very good start into '26, it is worth mentioning that quarter 1 is structurally always the weakest quarter in terms of free cash flow generation.

Against this backdrop, free cash flow is expected to develop solidly over the course of the year with its peak in quarter 4. At the same time, our return on capital employed could be nicely increased to 21% as well, driven foremost by a higher EBIT contribution. It clearly demonstrates the benefits of our portfolio rotation program and our BOOST efficiency measures.

Overall, we remain firmly committed to disciplined capital allocation while continuing to invest selectively into margin accretive growth. Let's take a closer look at the RVS performance on Page 6. Order intake in RVS remains resilient and reached EUR 1.26 billion in the first quarter, resulting in a book-to-bill clearly above 1 at almost 1.2 again. Rail demand overall remains strong on a high level and should continue throughout the whole year.

Based on the expected tenders in the market, we assume that order intake in the half year 1 will be stronger than in half year 2. For the current quarter, we also expect that RVS should be able to post a strong order intake being on a similar level compared with the quarter 1 figure. As usual, my reminder on Rail's order intake dynamics for you.

Please keep in mind that this is a lumpy project business, and it does not fit well into quarterly reporting structures. Order backlog increased by 7%, reaching a new record level with more than EUR 5.9 billion. The high order backlog and its good quality provides a solid foundation for '26 and beyond.

Let's move to Page 7. Quarter 1 revenues amounted to EUR 1.06 billion, a stable development year-over-year. In organic terms, revenues increased by 1% year-over-year. This level of growth was as planned, and it should accelerate in the quarters ahead. Our aftermarket business decreased foremost due to FX headwinds and normalization of pent-up demand in China.

In organic terms, it was almost flat year-over-year. The revenue share from aftermarket was solidly at 53%. On the other hand, the OE business increased by 6%, well supported by the European business, which led to a revenue share of 47% in the past quarter.

From a regional point of view, organic revenue growth in Europe and APAC fully compensated for the slowdown in North and South America. In Europe, good OE business more than made up for the slightly declining aftermarket revenues. North America recorded flat OE business, but had to face declining aftermarket business due to a tougher market environment as well as FX headwinds.

The APAC region saw an OE decline, while aftermarket was almost flat year-over-year. China posted, as expected, lower revenues in OE and aftermarket business solely FX headwind and market-driven after pent-up demand has been met. Operating EBIT margin recorded an increase of 90 basis points to 16.5% driven by operating leverage and even more benefits from our BOOST efficiency measures.

In a nutshell, our last quarter overall developed as expected. As a reminder, quarter 1 is always a weak quarter due to Chinese New Year and the typical aftermarket business weaker in North America. In the current quarter, we expect that revenues and profitability should see a solid increase quarter-over-quarter. And for the full year '26, the operating margin of RVS is expected to be around 17.5%.

Let's continue with the Truck division on Page 8. In a still challenging market environment, order intake reached EUR 964 million in the first quarter, resulting in a book-to-bill ratio of 1.1. This underlines solid demand, particularly driven by Europe following an exceptionally strong prior year quarter.

Regionally, Europe delivered solid order intake, albeit lower year-on-year due to the high comps in '25. In North America, order intake was impacted by significant FX headwinds. On an organic basis, orders were nearly stable, which was driven by declining inventories on the dealer side. In APAC, order intake increased significantly, mainly driven by China.

Order intake in the current quarter should be on a comparable level quarter-over-quarter. Our order book at almost EUR 1.9 billion at the end of March is only 2% below the previous year's level and slightly up organically.

Let's move on to Page 9, which really highlights how hard our teams have been working on and how measures and discipline can ultimately pay off. In the first quarter, revenues reached EUR 878 million. Organically, this corresponds to a growth of 3.6%, which is a very strong result given the challenging market environment, especially in North America.

On a reported basis, OE and aftermarket business declined 1% and 3%, respectively, for CVS in the past quarter year-over-year. Thereof, the OE business in CVS decreased, especially in North America, whereas Europe was almost -- was almost able to post a strong increase.

The APAC region was on a reported figures lower, but organically nicely up. Our aftermarket business was performing well in a demanding market environment and almost stable year-over-year. In the European market, our organic revenues have experienced a 6% increase, benefiting from solid demand in this region. Revenues in North America declined organically by only minus 3%, which was much better than the double-digit drop in truck production rate year-over-year.

Even more importantly, CVS delivered a very strong rebound in profitability. Operating EBIT increased significantly to EUR 101 million, and the EBIT margin improved to 11.5%, up 200 basis points compared with the prior year period. This represents a step-up change in earnings performance.

Our margin improvement is supported by several factors: the continued impact of our BOOST efficiency program, our positive operating leverage, the favorable regional mix and the higher aftermarket share.

To sum it up, these elements clearly demonstrate that CVS is structurally stronger today and much better positioned and as we lowered its breakeven point. In the current quarter, revenues should be flat and profitability is expected to be flat to slightly up quarter-over-quarter. On a full year basis, we expect organic revenues to grow low to mid-single digit compared with the reported figure for '25. As a result, CVS then should be able to reach an operating EBIT margin towards 12%.

With that, I hand over to Marc again.

Thank you, Frank. Now have a look on the guidance for the year 2026. We just confirm our outlook, our guidance generally based on the expectation that geopolitically and economically conditions remain largely stable.

Under the assumption that the crisis in the Middle East does not escalate or continue for a longer period, particularly with regard to supply chain disruptions, Knorr-Bremse continues to expect the revenues for the current year in the range of EUR 8 billion to EUR 8.3 billion, an operating margin of at least 14% and a free cash flow between EUR 750 million and EUR 850 million. These figures are based on the assumption that exchange rates will remain largely stable, and that means on the levels of February 2026.

With that, I would like to thank you for your attention so far, and we are now available for your questions from now on. Thank you.

[Operator Instructions] The first question comes from Gael de-Bray from Deutsche Bank.

Relatively slow start to the year that you had. I'm just wondering what was behind that? I mean, beyond maybe the comps in China. I mean did you have any supply chain issues in the quarter? Or was it just a phasing effect?

And I'm also wondering if the recent issues at one of your key customers in Europe, if their slower ramp-up has been or could become an issue for you as well at some point?

Thanks, Gael, for your question. I assume that you refer basically to RVS starting to the year because in the beginning, we couldn't hear you properly. So I'm referring a bit to RVS. I mean you know that in each and every country, we are positioned. We know the market to 100%.

We know basically give and take 100% of all the tenders that are out there, some pushouts here and there, but nothing spectacular. So that's just a market situation that we are facing and that is just the pattern of the project tenders in the market.

Nothing specific there, especially also not with the customer that you just pointed out. And if you -- I think you do it much more intense than I do, listen to what they have been saying, it's more or less a cost issue that they have than just a revenue syndrome.

So we don't see anything spectacular in that regard. We expect that our growth will accelerate going into the next quarters, and this is how we see it currently. So nothing erratic, spectacular.

So in terms of the acceleration you expect to see in Q2, I mean, what does that mean exactly sort of mid-single digit, you think you're going to be back to in the second quarter on an organic basis?

That's our direction. You know that for the full year, we have pointed towards roughly mid-single-digit kind of number. And if the first quarter is below, we should be in that ballpark, right?

Okay. And the second question from me is around the HVAC business. I mean, why is it taking so long to finalize the transaction?

Two things basically, Gael. I mean, first of all, we are as a general kind of disclaimer, we are not in a hurry. We, of course, have a plan how to have the final negotiations. It's an exclusivity that we are now in with a buyer. And we have to, first of all, make sure that we get a fair deal together, which includes a fair price. So we are in the final steps of the negotiation.

And secondly, and this is taking a bit of time on the buyer side, it's also about the proper financing, and we have to ensure as well that the business we sell doesn't end up ultimately in insufficient hands when it comes to the financing of that business going into the future, and that is a bit the situation, I would say, the last 2 things that we are currently discussing.

Okay. Understood. And then the margin guidance for RVS of 17.5%, I mean, does it include the deconsolidation of the HVAC business at some point during the year, maybe either Q3 or Q4?

Again, like we said in February, talking about the full year guidance, we said we could be slightly above that number if for a quite significant time of the year, a deconsolidation of HVAC would happen.

We would be maybe slightly below 17.5% if it wouldn't happen. So I would say, give and take, midpoint of both premises is kind of 17.5%. Maybe it's 17.65% in the best case and 17.35% or something like that in a case where HVAC would stick with us. So give and take, 17.5%, we feel pretty comfortable to get to that number.

The next question comes from Sven Weier from UBS.

The first one is around the strategy update in July because you just talked about that you focus on the things that you have under control, especially in the BOOST program. So I mean, I was just wondering, should we expect like a BOOST 2 program here that should accompany the midterm margin improvement? Or will you much more on the last -- than in the last program rely more on the top line growth? That's the first one.

Thank you for that question. It's a good question. And you're right. In July, we will introduce a new program. You can guess that this has to do more with growth and with cost cuttings. But one thing is very important, and that's also for internal communication. BOOST is not over. It will not be over for the next 5 years to come because BOOST is becoming attitude.

And even I'm very proud of what the team has reached, there is a lot of potential to be done in the next years to come when it comes to cost and efficiency. It's not done. It's good. It's good on the way, but it's not done. But now the question is where are we growing, how we attract also investors, how do we attract also top talents to come because only restructuring is not enough.

And this is why we decided now, now the ship is leaner. We are more agile and now we can go for the next, I would say, targets to aim. And that's exactly what we do. We expect also an inorganic but also an organic growth potential. And this is why we already started from January this year on the next program, which will be then officially announced.

It has something with growth, yes, and it has something with beyond. And that's exactly what we do. And we have to tell you then latest in July, by end of July, what do we mean with that, where do we want to go, what kind of potentials we see.

But one thing is also for sure, we are going only for areas which are really contributing to us and not making us slower. So everything what is not an add-on will not be considered. It has to be an add-on in terms of technology, in terms of profitability and in terms of speed.

Very clear. And the second question from me also relates to what you just said on the inorganic part because I think from a capital market point of view, your entry into signaling kind of makes sense, but also especially if there's a chance that there are kind of follow-on transactions that make this part of the business a more significant value driver.

And I would say probably the same on the electronics side. So would you say -- I mean, would you agree with that, that it only makes sense to enter certain segments if there's also the potential for follow-ups and to make this a real business that moves the needle?

Because I think that's what we're all curious about. I mean, is there still things in the pipeline, for example, on signaling that you can kind of assure us that kind of follow-up transactions are generally possible.

You understand better than everybody else. If I would now be more specific, I would ruin my own prices, and that's exactly what I won't do. So also in your favor, in all our favors, I will be not so specific, but whatever you said, I can't disagree.

The next question comes from Daniela Costa from Goldman Sachs.

It's actually Meihan here. I just have 2 questions. So firstly, on China. Maybe just to confirm, like you said on the opening remarks that you're seeing a tough competition in APAC. Is that mainly in China that you're seeing more aggressive step-up from local players?

And if you could give us an update on the progress of China high-speed rail tendering for next generation? And does the change in the regional outlook in China reflect a more cautious view about the future opportunity to regain some market share in China? And I'll ask my follow-up.

Meihan, I think, first of all, I think it was Gael or Sven, I think it was Gael, who mentioned about tough comps in China and not a tough competition. So we didn't highlight and we don't see any competitive edge somehow rising or increasing.

I think it's just a misunderstanding. Please correct me if I'm wrong because we don't see anything in that regard. The situation there has not changed. And second part, Marc wants to take. So I hand over to...

I try to be as honest and clear with you as possible. In the past, especially until 2024, we were a little bit in a defense mode. And in 2024, we asked our Chinese colleagues and also the local management, is this now what we have to expect from China so that we can only defend our position and try to make -- you call it the golden tail or something like that, that's for the afterservice business, we have a very good position. And for the next years, we will be still there.

And we had a very, very good discussion. And by end of 2024, the local management said, can we stop speaking about defense? Can we just go on offense? And we said, okay, what do you need for offense? And they said very clearly, we have to be more agile in China.

We have to be more closer to the customer. We have to get a little bit more independent from Munich because whatever you develop, it's nice, but eventually, it's not as quick enough as we need it here in China. And we need to have -- we have to take a little bit more risks.

And for the last 1.5 years, this is exactly what we do. And that means I spoke about it that we are -- since years, I think 8 years, we are now considered for the high-speed trains again, which we were not.

We are seen as agile. We are more and more asked. We are more and more involved in international tenders when Chinese companies are going to be considered. And that shows us that being in China, try to be more Chinese, try to be more aggressive, and that is what we mean with competition. We have to take the competition from China.

We have to take it home. We have to see that our cycles in development are taking too long. It's not only rail, it's also truck. And we have to be aware we should not shy away from it. We should not take a position of defense. We should take a position of offense.

And that's exactly what we do. We empower China more than ever. We hire people in China, especially when it comes to engineering. We give them more degrees of freedom. They can make more calls by themselves. They don't -- they are light, but they can do a lot of things by themselves.

We are also interested and for the last months, it is going very, very well in this direction to cooperate with young Chinese companies when it comes to electronics and software programming and engineering. And that makes me and us very, very optimistic when we speak about China because we have a complete shift of paradigms.

We are no longer the old European German company defending their territory. We are becoming more agile and we can hopefully utilize and leverage this kind of learnings also for the rest of the world.

Got it. Very helpful. And my second question is just on aftermarket service for CVS as you are trying to expand more into the aftermarket for trucks market, would this mean any competition for the truck OEMs of your customers? Or would it just be still more focusing on the second-handed owners of the trucks?

It's less the substitution more complementary because our customers are brand exclusive. We are not brand exclusive. And in service, brand exclusivity is good for the first 2, 3 years, as you rightly said.

But after 3 years, brand exclusivity is more a negative thing. So what we're building is we build an ecosystem where we do not discriminate any brand. We do not differentiate any brand. We do not differentiate between captive owned workshops and non-captive owned workshops.

So I think the independent workshops in China and in Europe, they are very, very liberal in terms of taking support from whoever is most capable to support you. And exactly this openness is here one of the key success factors. The more you're in one brand, the less you can cover the market.

And the next question comes from Vivek Midha from Citibank.

Hope you can hear me well. My first question is around the margin in CVS, a really good print, 11.5%, up slightly sequentially from the fourth quarter of 2025. And I'm looking ahead to the full year, you talked about moving the margin towards 12%. And among your assumptions is still slightly higher truck production in North America.

Now some market participants and observers have been talking about even better than that potentially. So could you maybe talk about the sensitivities of your assumptions on CVS margin in the coming quarters and year to assumptions around the truck production rate?

Thanks, Vivek, for taking basically every word serious that we are saying. Yes, indeed, I mean, even once you start into the year in a quarter with 11.5% in order to reach then 12% for the full year requires you to reach more than 12% in some of the quarters.

And that's why we've been there a bit, so to say, expecting growth in profitability over the quarters to come and to end up definitely towards the end of the year with a margin that is above 12%. That's one clear statement. Second clear statement is, of course, I mean, yes, the expectations and the work that's going around in regards to North America has been quite more on the bullish side since several months now.

If you look at the sheer truck production rates in the months of January, February, okay, there was some bad weather here and there, but they haven't been so great, even below 20,000 units a month. And we basically, as Marc also said in the beginning and which is basically the cornerstone of BOOST, we try to deal with what we can influence, and we can influence our cost structure and our market presence in a given market.

And if that market becomes a bit better, like you said, like with some of the -- what the other OEMs are saying, then we're happy to take the operating leverage. The operating leverage that you can expect from us is on top to everything that we indicate some 20% to 25% EBIT conversion out of what's the market holding up for us in the future that we don't see yet. So that's how I would see the situation, Vivek.

There's something to add, which I think for you is more important, not more important, but also is equally important. We have managed ourselves with truck in the year '23 and '24 in a breakeven territory of 71%, 72%. And now we have managed ourselves back in a territory with 65%, 66%. So we improved our cost situation by 600 basis points.

So the breakeven is now giving us the comfort that we finally can leverage a slight increase of revenue because when you compare the numbers of '25 to '26, the revenue is nearly stable, yes. Okay, you can say adjustment of the exchange rate, blah, blah, blah.

But at the end of the day, we are reaching finally what we always aimed with a stable revenue, we can finally leverage our improved cost position. And that is also very important because finally, we reached it, and you remember it because I said it again and again, per employee, we have reached in the first quarter 2026, EUR 300,000 per employee.

And you remember, in '23, we started at 250, 260 with trucks. And this improvement is now giving us -- this is confirming what we are doing. This is what we do. And we have to do the same with Rail. And I'm very honest, in Rail, we are not at this position currently. We have a lower breakeven, yes.

That is always -- this is the rail-ish character of the business. This is more in the range of 60%, never in the range of 70%. But when it comes to personnel expenses, this ratio is much, much more -- it's much higher. So in Truck, we have reached a personnel expense ratio of below 20%. We were at 22%, 23% 2 years ago.

And that is that the productivity, not only of the capital, we have always this capital, return on capital employed, return on equity, so capital numbers, scope of days. But the question more and more is not only the capital, it's all what do you get from your employees.

And there is the first time, I'm very proud of that. We reached the EUR 300,000. We finally reached it, and we reached it 1 year earlier than we thought. And immediately, you see it on the margin. If you can keep this EUR 300,000 for the rest of the year, then it is clear whatever happens in America, North America or even other markets will immediately have an impact on our EBIT margin. And that is what we always aim for. So far, we were really in a defense mode. Now we can finally leverage what we do.

That's clear. My second question is around duagon. It's now closed. It's in the numbers. I was curious, what are your impressions of the business, now it's closed? Are you as confident on the growth in margin trajectory? And as a bit of housekeeping, I noticed that the M&A contribution to the RVS EBIT was about EUR 3 million. It would be just helpful if you could break out how much integration cost you had in the quarter, just so we can look at the underlying margin at duagon.

Yes. Thanks, Vivek. Yes, you're right, we are showing the numbers of duagon basically in the M&A bridge. And we are in the midst of the PMI process. What we see is what we thought we would get, and that's perfectly fine. We know that not every part of the business of duagon is perfect.

Some are excellent, some are okay-ish. And we are working on those parts where they are not excellent yet. The integration, as I said, is ongoing. integration costs in the third quarter (sic) [ first quarter ], I would say, are minor, yes, included, but minor.

And also, they have a similar seasonality like we also have in the business. So also there, first quarter is usually the weakest. So we expect also their acceleration of results when it comes to the further quarters ahead. We -- you know that we have outlined our financial guardrails for M&A acquisitions, and we had those already when we did the duagon deal.

So expect we still -- and we still expect that we can come with that business to an EBIT margin of 16%, but not in the first quarter or second quarter, but they would -- they should be growing over the time following a certain seasonality.

You can come already with the signaling business in America, which we bought.

Signaling, as you know, we have also completely fulfilled the expectations on the -- not only the growth, but also the profitability side on the signaling business in North America. We have done more than 18% of return in the last year for the signaling business. So we don't expect there to have really any issue on the duagon side.

Next questioner is Akash Gupta from JPMorgan.

My first one is on RVS. And here, if we look at your aftermarket revenues, the share was 52.5% in Q1, down from 55.4%. And despite this weak mix by having higher equipment or project revenues, you still managed to improve your margin by 90 basis points. So maybe can you talk about the drivers behind higher profitability despite lower services, which were down year-on-year? So that's first one.

And second one is on CVS. You mentioned that your North American revenues were down 3% against truck production rate down double digit in Q1. And I appreciate there may be some price increases in aftermarket growth dynamics. But can you say how does your overall volumes on new production compared to TPR? And are you gaining any market share in North American market?

I think they are still on mute.

I didn't do anything. Sorry, I was already answering and then I was told I'm on mute there. Akash, let me start with RVS maybe first. Obviously, we have gained also revenue in Europe, our stronghold. It's the biggest market for us, and we have a positive product mix effect out of the European products compared to some other products that we see, for example, in the classical North American business.

So definitely, it's a product mix effect that we have then out of the sheer volume, so to say, excluding FX, we have also operating leverage, of course. And as Marc also said, let's not forget, even though we talk more often about truck, we have also improved the cost position on the rail side, even maybe if it's not that obvious because we usually talk about other drivers of the RVS business, but also the guys in RVS have improved their cost position.

So that's pretty clear. And those 3 ingredients basically led to that situation that we have improved the margin.

And again, just another highlight because Marc also asked me to point out on signaling as an example here, another mix effect in a certain market is, for example, that we improved the profitability even significantly when it comes to the signaling business in North America despite the fact that some freight business is minus year-over-year or quarter-over-quarter.

CVS, indeed a bit of a tricky situation, I would say, when it comes to the market, a bit of, I would say, rather good demand or at hindsight, some great expectations in regards to how the market would be going.

Ultimately, it was -- the market was not that favorable. The market itself in North America, and you are referring a bit, so to say, to the content per vehicle kind of logic. The market has been really weak, extremely weak. We have been producing or the truck market had only a production of 54,000 trucks, heavy-duty trucks, Class 8 and the production number in the first quarter of '25 was 73,000 trucks. So the market was down from 73,000 units to 54,000 units, keep those numbers in mind.

At the same time, our organic revenue in truck in North America only declined by minus 3%. Do I say now with that, that the whole delta between minus 20-something percent on the market side and revenue of minus 3% only is all content per vehicle.

No, of course, there is also some other aspects in like you mentioned, we did some price increases. Yes, of course. But that's the situation. So we have shown good content per vehicle there. We have shown, yes, some price increases, but not only on the aftermarket side, also on the OE side.

Keep in mind, for example, tariff charge-throughs to some of the customers, which didn't occur in the first quarter of '25. All those ingredients together led to that great situation or that great resilience, I would call it, in North America.

So maybe your market share, can we say it's more stable and not changing a lot?

Yes. Yes, absolutely.

And the last question comes from Alex Jones from Bank of America.

If I can start on CVS as well. You indicated sales sort of flat into this quarter, but with orders solid in Q1, the order trajectory in Q2 sounds good and OEMs have talked about increasing production rates, especially in North America, but also to some extent in Europe. Is there anything holding back a pickup in sales in Q2 in that business?

We are just to confirm orders. We would have also taken in the first quarter orders above EUR 1 billion. So we have not limited ourselves just a joke aside, sorry for that.

But I mean, I hear all this enthusiasm that's outspoken. And we, of course, also hear from the customers they have just placed the orders, there's nothing that's hindering us nor the systems nor our production capacity.

We are ready as far as the market is. And as we all know, also some of the arguments would be around some EPA pre-buy happening in the second half of the year, which we believe as well in order to do so, given a certain lead time that you would have on the OEM side should be kind of now or never, that orders would be coming in, and that's why we're also pretty conservatively optimistic, let's put it this way, what's coming in the second quarter and the third quarter ahead of us. Nothing holding us back.

And then the second one, just cognizant of your comments around the Middle East at the start and potentially a little bit more inflation in the system. Could you just remind us on the rail side of the business and clearly, you have longer-term orders there, how you manage cost inflation on orders that are currently in the backlog?

Yes. So generally, we have altogether in this world learned a lot about the timing when high inflation came back in '22. And we have, let's say, gone through thoroughly all the contracts on the CVS as well as on the RVS side, all contracts with the customers for respective projects, and we have tightened them.

We have more price sliding clauses than we had before. We have more, so to say, material scope in the respective price sliding clauses than we had before those days. Basically, in the old days, it was the usual suspects of raw materials like cast, iron, steel, aluminum and all that stuff.

And we have broadened that range of what we could charge through after a certain time. We have also reduced the lead time of when we would be able to charge things back a bit. So we are in a better position than we have been some 3 years ago, and that's why there would always be a certain time lag, but we have bettered our situation quite significantly since that days, and that what makes us pretty comfortable going into the future with those effects.

That concludes the Q&A. I hand back to Knorr-Bremse for closing words.

Thanks a lot for all the questions. And if you have further questions, please reach out to the Investor Relations team, and we wish you a great afternoon. Thanks and bye.

Good afternoon as well as good morning, ladies and gentlemen. I hope all of you are very fine. My name is Andreas Spitzauer, Head of Investor Relations, and I want to welcome you to Knorr-Bremse's presentation for the full year preliminary results of 2025. Today, Marc Llistosella, our CEO; and Frank Weber, our CFO, will present the results followed by a Q&A session. The event will be recorded and is available on our homepage in the Investor Relations section afterwards.

It is now my pleasure to hand over to Marc Llistosella. Please go ahead.

Thank you, Andreas. Ladies and gentlemen, I'm pleased that you are participating in the capital market call on our preliminary results for 2025. The most important news first. Despite geopolitical uncertainties, we were once again able to steer Knorr-Bremse successfully through a challenging year. Thanks for the stringent execution of our BOOST measures and the dedication and expertise of our colleagues worldwide; we strengthened existing businesses, developed new areas of growth during demanding times.

Let's go to Page #2. We are reporting strong financial results today. Fiscal year 2025 clearly demonstrates Knorr-Bremse's excellence and resilience once again. With our BOOST strategy, we have delivered what we have announced. Phase 1 is almost completed, creating a more stronger and cleaner cost base. This now enables us to clearly shift the focus towards accelerating margin accretive growth. BOOST Phase 2 centers on growth and expansion while maintaining strict cost discipline. This means BOOST and the regained efficiency are not over as management culture is here to stay and a permanent part of how we run and steer our business.

Our Rail Division delivered strong margin accretive growth and reached its midterm target margin 1 year earlier. We promised the numbers and we see it already 1 year ahead. RVS now represents around 55% of total group revenues so we've become more railish as indicated in the past. At the same time, CVS showed disciplined cost management, solid performance despite a tough truck market backdrop. A great achievement by our truck colleagues. In total, we achieved our full year '25 guidance and have issued a solid '26 outlook in line with our existing midterm targets from the past. We will provide an update on new midterm targets together with the release of our quarter 2 results end of July this year.

Ladies and gentlemen, let us now take a quick look at our guidance for last year on Page 3. We were able to achieve all of our targets; including revenues, EBIT margin and free cash flow. The strong order book, the strong cash conversion rate and the low leverage underpin these results and confirm our strong resilience. We are in top financial shape ready to continue with our BOOST strategy from a position of strength. I'm very pleased that we are able to present such convincing results today. They are a clear proof that our collective efforts over the past years have paid off.

Let me continue with more details of our BOOST program on Page 4. When we launched BOOST in the summer of 2023, our ambition was clear: to make Knorr-Bremse faster, more efficient and structurally stronger again. Two years later, the benefits of the program have become clearly visible in our financial results. The consistent execution of sell-it and fix-it measures have delivered tangible margin expansion driven by a lower breakeven. BOOST is firmly anchored in value creation. Every initiative is designed to contribute to profitability, which remains our top priority.

With the brownfield part very well advanced, we are now transitioning into the next stage of BOOST. In 2026 and beyond, the focus of the whole management team will clearly shift towards greenfield initiatives, accelerating margin accretive growth and expansion while maintaining the operational discipline we have built. As a result, we expect the company to continue benefiting strongly from BOOST in '26 both through sustained efficiency gains and an increasing contribution from margin accretive growth initiatives.

Let me now turn to our sell-it program on Page 5. Overall, we are close to complete all key actions. The sales process for our HVAC business is advanced and we are fully committed to sell the business if we can realize a fair value. Therefore, we prefer a long-term and sustainable solution instead of a hasty action. We are not a forced seller and we will never be. HVAC is classified as an asset held for sale on the balance sheet. The sell-it program is only 1 side of the coin. Over the past years, we have so far divested businesses and units with revenues of more than EUR 400 million and an average EBIT margin of well below 5%.

Once the HVAC business is sold, it will make up to EUR 750 million in total as promised and as said in 2023. On the other side, we have added businesses with revenues of roughly EUR 600 million, generating margins of 15% or above. This is our definition of portfolio optimization, respectively, portfolio rotation. In other words, we have deliberately exited lower margin activities and reinvested capital into higher quality, more profitable growth platforms. Our motivation behind this strategy is very clear and remains a top priority, creating shareholder value by continuously improving the quality, profitability and growth profile of Knorr-Bremse.

Let me now turn to fix-it and our efficiency measures on Page 6. Over the past years, we have made very solid progress in improving key financials. For me and the whole management team, keeping fixed costs under tight control remains and is very important. This is not a one-off exercise. It is a permanent discipline for us. We are permanently monitoring our fix-it businesses and drive them into improved performance. The breakeven, respectively, the control of our fixed cost is particularly important to me. In the past, it suffered from revenue headwinds in countries like China, Russia and it was impacted by high inflation.

This is, therefore, very important to us as a management team to regain this financial flexibility and strength. So far, we have already been able to improve the breakeven by 4 percent points or 400 basis points. In our internal business reviews, I therefore explicitly challenged the operating units on cost structures and efficiency. Frank in parallel places a strong focus on cash flow generation. This combination has proven to be very effective. Our persistence has clearly paid off. Over the last 3 years, we have reduced headcount by more than 2,400 people, of which only 1/4 was achieved through divestments and the majority through real reduction measures with particularly strong progress in the CVS division so far.

In addition, the migration of operating activities to lower-cost countries in our major regions such as Hungary, Poland and India is already well advanced. Importantly, cost optimization goes far beyond administrative functions. We are systematically adjusting our operational footprint across engineering, production, R&D, service activities and purchase in order to achieve an optimized strategic global footprint. At the same time, we have established global shared service hubs in all major regions and are doubling down on those. These hubs are already delivering tangible benefits.

Overall, fix-it has made a meaningful contribution to margin expansion, cash flow improvement and return on capital employed enhancement of 20.2% -- at 22.8% of Knorr-Bremse. And let me be very clear, fix-it is not finished. Efficiency and cost discipline will remain an integral part of how we run Knorr-Bremse going forward. Let me briefly outline the strategic logic behind how we intend to develop Knorr-Bremse in the coming years. The main focus of our greenfield strategy is to drive revenue growth and margin expansion beyond historical levels.

Our portfolio strategy remains clearly anchored in rail and truck combined with opportunities in adjacent and other existing growth areas. The rail industry provides very attractive profit pools. As a result, future organic and inorganic investments will take place more in rail going further. Wayside signaling is an interesting segment strengthening our sustainable margin accretive growth. In truck, mobility as a service via our CVS service platform represents another greenfield pillar. Here, we are evolving towards a technology-enabled solution partner and we are systematically expanding digital and service-based aftermarket solutions, a market that is just emerging in trucks.

In energy technologies, we are building on our existing nucleus to explore attractive opportunities in intelligent grid solutions and the field of energy distribution not in a rush, but step-by-step and accretive. Beyond our core, we are selectively analyzing and developing additional growth fields like dampers and electronics business. Green technologies are still at a very early stage for Knorr-Bremse, for example, supporting our existing but small Reman business.

Overall, our ambition is to put Knorr-Bremse on several strong profit pools to reduce cyclicality and grow profitability. Let me be very clear. To be part of Knorr-Bremse, every business must meet its target margin. This discipline is central to create long-term shareholder value, an important part of our financial guardrails regarding M&A.

Let me now turn to signaling on Page 8. Signaling itself is clearly a success story for Knorr-Bremse so far. We acquired a good asset and made it even stronger. KB Signaling is well integrated and it is a market leader in an attractive segment, which can be seen in the favorable growth prospects. Over the past year, our focus was deliberately on cleaning up the project portfolio of KB Signaling. This led to a slight decline in revenues, but significantly improved the quality and risk profile of the business. At the same time, we reduced the cost base through targeted staffing optimization. With this groundwork completed, our focus is now firmly on profitable growth.

We aim to defend and further strengthen our market leadership in the United States and to expand into markets that have adopted U.S. rail standards such as Australia and South America. In Europe, we have extended our signaling footprint through the acquisition of duagon, strengthening our electronics and system capabilities. Beyond organic growth, we also remain open to selective nonorganic investments to further expand our European activities in signaling. Overall, our objective is clear to build a global high-quality wayside signaling portfolio and to fully capture the attractive growth potential of this market.

Moving please to Page 9. Let me now turn to energy, which at first glance may appear less obvious for a company noted and rooted in rail and truck braking systems. However, there are 2 very clear reasons why this field is highly relevant and interesting for Knorr-Bremse. First, energy is not new to us. For Zelisko, we have been active as a Tier 1 supplier in the European and American energy distribution market for more than 50 years. Together with Microelettrica in Milan, we already generate meaningful revenues in this segment today and the business is both growing and highly profitable.

Second, the European energy market is currently undergoing profound changes. Investments in grid modernization, intelligent power distribution and network management are increasing and demand for smart reliable solutions is high. Given our long-term standing, customer relationships and technical expertise; we see a clear opportunity to benefit from this development. Currently, we are screening this market globally and are interested in opportunistic moves. We are responding to increasing demand and concrete requests from our existing customers in the areas we are already in. Our approach is, therefore, deliberate and disciplined.

We intend to expand our positioning in energy technologies step-by-step through organic investments and being open to selective M&A opportunities, always fully aligned with our strict financial guardrails. In this way, energy represents a value-accretive extension of our portfolio by reducing cyclicality and cyclical dependency and support sustainable margin accretive growth over time. Our CVS service platform addresses the truck aftermarket for primarily digital solutions, a segment that is structurally outgrowing the OE market and offers a more attractive margin profile. We call it the truck aftermarket ecosystem.

We are already well positioned with Cojali providing a strong base in diagnostics, data and workshop solutions. Cojali generates annual revenues of more than EUR 130 million with a very, very attractive EBIT margin. We are now accelerating our expansion in truck services with TRAVIS at the core of the CVS service platform. We are bundling services that are essential for fleet operators, but which are not part of their core transportation businesses. Over time this will include services such as repair, parking, charging enabled by TRAVIS as an asset-light data-driven platform.

Together with TRAVIS [indiscernible], we are at the start of being a digital solution partner in the truck aftermarket, strengthening the CVS ecosystem and expanding Cojali's opportunities. Overall, this is a strong strategic fit for our Truck Division; high growth, attractive margin, asset light, scalability and a higher share of revenues less depending on cycles. And this is exactly what BOOST Greenfield stands for: building new growth platforms in structurally attractive markets that enhance the quality, resilience and growth profile of Knorr-Bremse's portfolio.

2025 was a good year for Knorr-Bremse. Let me briefly highlight the key points. In Rail, we secured several important contracts. Siemens Mobility awarded us an order covering braking systems and for the first time a coupling system for 90 lightweight trains for the Munich SVA. In China, we contributed to growth with CRRC, supplying equipment for more than 1,000 metro cars in major cities as well as technologies for around 150 trains complemented by export orders, including braking systems for over 100 locomotives for Kazakhstan.

We also entered India first high-speed rail project for an equipment initially with BEML initially equipping 2 prototype trains. Beyond that, with the opening of our new artificial intelligence center in Chennai, we are continuing our global digitalization strategy and also strengthening our presence in India. Just a few days ago, we laid the foundation stone for a new site there, which will be built over the next 1.5 years. In the future, we will bundle engineering production capacities here for both divisions together with a capacity of more than 3,500 people long term.

Digitalization in rail freight was another highlight. In the U.K., we signed a long-term agreement with VTG Rail U.K. for the supply of at least 2,000 freight control sentinel wagon sets; improving safety, availability, efficiency and infrastructure use. In simple words, we make freight trains smart. We make them smart for the first time and after more than 100 years. In Truck, we extended a major contract with a leading OEM for 200,000 electronic leveling control system while continuing to expand our digital aftermarket business. The extension of Nico Lange and my personal contract are further strong signals of continuity and stability.

It reflects the confidence in the leadership team together with all my colleagues, a strong collaboration across the organization and a shared commitment to long-term value creation. Together, this provides a solid foundation for Knorr-Bremse continued success and a very promising future. Deliberately leverage the benefits of artificial intelligence, we are now further advancing our AI transformation together with strong partners like Amazon Web Services. Our objective is to build a new operating model for the company over the long term powered by high-performance AI agents. This is an exciting initiative for which we are shaping the digital future of Knorr-Bremse, enabling us to become faster, more agile and more efficient.

Let us now take a look at the current market situation for rail and truck as well as our market expectations for the current year. Starting with rail. The overall picture remains very robust and continues to be our least concern within the group. Underlying demand is strong across all regions supported by high order books at OEMs and our customers. There has been no material change in market fundamentals and we expect a full year book-to-bill ratio around 1 or slightly higher. In Europe, demand remains solid with passenger rail continuing to outperform freight, which is still somewhat softer.

Same picture for North America where the passenger business continues to more than compensate for the still subdued freight environment. The APAC region continues to develop at a high and stable level. After good growth driven by increased ridership and pent-up demand, the Chinese rail market should normalize this year. On the other hand, we are quite convinced and we get clear indications to be part of a new rail platform in China in the future.

Turning to the truck markets. The market picture overall has improved compared to 3 months ago although regional differences remain pronounced. In North America while the market is still at a low level, we are now seeing first signs of stabilization. Orders activities and customer sentiment have improved sequentially suggesting that the market may be starting to bottom out. For 2026, we expect slightly increasing demand year-over-year. That said, uncertainties remain and we continue to assume a gradual recovery rather than a sharp rebound with half year 2 expected to develop better than half year 1 in North America. The European truck production rate should continue its positive momentum seen in '25 and it should slightly grow in '26.

I would now like to hand over to Frank, who will outline the preliminary financial figures for you.

Thanks, Marc. A big welcome also from my side. I would say let's first turn to Chart 13 to discuss the financials for the full year at first. Knorr-Bremse generated total revenues of almost EUR 8 billion, a strong figure and slightly up in organic terms. On a divisional level, RVS more than compensated for the tough truck market development especially in North America this year. From a regional point of view, Europe and APAC contributed to the organic revenue increase while North America reported a decline. The improvement in our operating EBIT margin was driven by a strong contribution from Rail supported by an attractive regional mix and good aftermarket in general.

Together with our operating leverage and structural initiatives from the BOOST efficiency program, this led to a 70 basis points increase in the group operating margin to 13%. Rail achieved its midterm target ahead of schedule with 16.5% while CVS successfully fought against the very challenging truck market and achieved a resilient and stable EBIT margin of 10.4% despite the weak market situation in our stronghold North America. Order intake and backlog also achieved great results, 6% and 8% up year-over-year on organic level.

These developments once more demonstrate KB's outstanding position in both markets and provide a great backbone for future growth. The very strong cash flow is again one of the major highlights of '25. We were able to generate EUR 790 million in free cash flow, a new record on operating level, which resulted in an improved cash conversion rate of 131%. Looking at these superior full year results, I would like to also thank all our colleagues, business partners and customers for their great collaboration and dedication in '25. Let's continue this year and support KB to become even stronger.

Let's now focus on our balance sheet on Chart 14. A core pillar of our financial policy is and remains the fostering of our superior financial profile. This strong financial foundation has proven its value over recent years and continues to provide a high degree of flexibility. This enabled us to achieve our strategic objectives and operational needs while managing -- at the same time, managing the cycles of the market dynamics. A robust equity base continues to be a key priority for us. At year-end '25, Knorr-Bremse reported an equity of almost EUR 3.2 billion corresponding to an increase and very solid equity ratio of 36%.

Our liquidity decreased to around EUR 1.7 billion solely driven by the repayment of our last year's bond maturity of EUR 750 million. Looking at the real operational effect, liquidity increased by nearly 15%. Our net debt, therefore, declined by 31% to a very healthy EUR 627 million. This was strongly driven by the repayment of the beforementioned bond translating into a strong and comfortable net debt-to-EBITDA ratio just below 0.5. As a result, KB's credit ratings of A3 and A- remain at a very solid level with stable outlooks underscoring the resilience and strength of our financial balance sheet.

Let's move to Chart 15. CapEx amounted to EUR 319 million corresponding to 4.1% of revenues. In absolute terms, capital expenditures declined by EUR 30 million year-over-year. This development is fully in line with our strategy to optimize CapEx spending to a level of 4% to 5%. Net working capital in operating terms declined by EUR 85 million year-over-year with an annual reduction of more than 3 days resulting in a once again improved net working capital efficiency year-over-year. This sustained progress reflects the continued success of our collect program, delivering improvements across all key net working capital drivers, especially inventories and trade receivables.

Importantly, these efficiency gains were achieved while maintaining the highest level of supply reliability for our customers, which is our clear priority. Since end of last year, we have accounted HVAC under IFRS as asset held for sale. Driven by higher EBIT and continued improvements in capital efficiency, ROCE increased by 200 basis points to 22.8%. This demonstrates disciplined asset input and utilization while simultaneously increasing our profitability in absolute terms.

I would like to provide more details regarding our free cash flow on Chart 16. We improved the free cash flow sequentially last year reaching EUR 471 million in the last quarter alone. Overall, the free cash flow came in at EUR 790 million on a full year level, a new record and the best operating figure in 120 years of KB. The increase was supported by stronger EBIT generation, disciplined capital expenditures and the successful execution of our persistently lowering net working capital. As a result, we delivered broad-based improvement across all the key drivers.

The cash conversion rate remained at a superb level reflecting our ability to effectively translate earnings into cash once more. In '25, it reached 131% in operating terms, which is an extraordinary figure even well above last year's level. If you include the one-off effects of around EUR 80 million for the severance packages in '25, the cash conversion rate would have even been at 138%.

Let's move to Chart 17. We continued our way to strengthen KB's sustainability performance to identify efficiency potentials and increase resilience in our operations and supply chain. Our sustainability strategy continues to deliver measurable progress across all dimensions. Since 2018, we have reduced Scope 1 and 2 CO2 emissions by 79%, keeping us fully on track to achieve our 2030 climate target of 75% reduction. Despite market-driven revenue headwinds, our emission intensity has slightly improved year-over-year while self-produced renewable power increased by 41%, further strengthening our energy resilience.

From both a regulatory and financial standpoint, EU taxonomy aligned revenues show a slight increase primarily driven by comparatively higher RVS business. This progress is supported by a very strong external validation, including the first allocation and impact report for our green bond, the leading ESG ratings and multiple sustainability awards we achieved.

Let's turn to Chart 18 to discuss the financial highlights of the fourth quarter. Order intake was strong with almost EUR 2 billion with a strong organic growth of almost 6%, which was well supported by trucks. A book-to-bill ratio of 1 again is important and good support for our future capacity utilization. Our revenues almost amounted to EUR 2 billion with a strong organic growth of more than 6% driven by both divisions. Operating EBIT margin increased to 13.5%, which is a very strong improvement year-over-year. Both divisions contributed to this development. As already outlined, free cash flow improved to EUR 471 million and followed the typical seasonal pattern over the course of the year, which we also expect for '26.

Let's take a closer look at the RVS performance on Chart 19, therefore. In terms of order intake, RVS again recorded more than EUR 1 billion, but showing a decline of 10% year-over-year which was driven by all regions except for China and needless to say, including significant FX headwinds. In quarter 4, we had expected a larger order in North America in the mid-double-digit million euro range, which was shifted into '26. Global rail demand is very strong and will continue, but sometimes as regularly mentioned, does not really fit into quarterly reporting. In general, we expect order intake in '26 to be in the range of EUR 1 billion to EUR 1.2 billion each quarter.

For the year as a whole, the book-to-bill ratio should be around 1 or slightly above 1 after also consistently recording a value well above 1 in recent years. As in '25, we expect order intake to be stronger in the first half of the year than in the second half. In the fourth quarter, the book-to-bill ratio stood at 0.91. Order book at year-end with almost EUR 5.6 billion came close to our existing record level. Organically, the backlog grew by around 9% year-over-year. This high order backlog underpins strong visibility and provides a solid basis for growth well into 2026 and beyond.

Let's move to Chart 20. Quarter 4 revenues from RVS amounted to nearly EUR 1.1 billion, which is an increase of 3% year-over-year. Especially pleasing was the growth in organic terms accelerated now to more than 7%. Our aftermarket business was almost flat year-over-year with all regions except Europe showing declines. OE business on the other side grew nicely year-over-year by almost EUR 30 million. From a regional point of view, revenue growth was fueled by Europe while APAC remained stable and North America and China very slightly declined. In Europe, aftermarket business and OE sales grew nicely. North America recorded almost stable aftermarket business, but a decrease in OE business.

The APAC region saw a stable development with OE overcompensating slightly lower aftermarket figures. China also saw flat OE revenues while aftermarket business slightly declined after some catch-up demand has been satisfied. Please keep in mind that we have had very strong China business in '24 and '25, which benefited from a meaningful increase in ridership. As a result, we expect that our China business could slightly normalize in '26, but still being well above our long-term expectation that we shared with you in the past.

Operating EBIT margin recorded an increase of 140 basis points to 17% driven by operating leverage and our efficiency measures within BOOST. In addition, we worked off all remaining legacy projects meaning the inflation burdened order backlog. In quarter 1, normally a rather weaker market quarter due to the seasonality of aftermarket business and the impact by Chinese New Year, we expect the profitability of RVS should be slightly up year-over-year. For the full year '26, the operating margin of RVS should be only slightly below 17.5% including HVAC. Therefore, and as in '25, we expect the operating EBIT margin in the second to fourth quarter of this year to be higher than in the current quarter.

Let's continue with our Truck Division on Chart 21. Order intake in CVS amounted to EUR 977 million representing an increase of around 10% year-over-year and around 20% compared to the third quarter. The very strong year-over-year organic growth of 20% was partly offset by M&A and FX headwinds. From a regional point of view, Europe was very strong and also the APAC region posted growing orders. In contrast, North America recorded significant declines due to market and FX factors. The strong development quarter-over-quarter in all regions is quite promising.

Especially in North America, we feel reassured that we have seen the bottom. Nevertheless, we still expect no sharp increase in market demand from this level. Our book-to-bill reached 1.1 in the past quarter and therefore, the order book with almost EUR 1.8 billion at the end of December remains on a good level. Order intake in the current quarter should be good as well and only slightly lower quarter-over-quarter. Nevertheless, the start into '26 was very solid so far.

Let's move on to Chart 22. Revenues decreased nominally by 4% to EUR 881 million. A rather good organic growth of over 5% could unfortunately not fully compensate for the headwinds driven by M&A and FX. Against the backdrop of a continuously challenging U.S. market, especially in the U.S. this development reflects a very resilient and solid operational performance by our Truck Division. Our OE business decreased by around EUR 30 million compared to the prior year. This was driven by a significant decline in North America as anticipated while Europe showed good growth and the APAC region recorded solid momentum as well.

The aftermarket business, on the other hand, was overall robust and saw a more or less stable development driven by Europe and China despite FX headwinds. North America was down by 10%, but slightly up in organic terms. Turning to the bottom line. Our operating EBIT amounted to EUR 99 million in the past quarter representing a strong increase of 14% year-over-year. Consequently, the operating EBIT margin improved by 180 basis points to 11.3%. This margin expansion was driven by a quick and consistent adjustment of workforce and the continued reduction of structural cost as well as the support of our accretive aftermarket business.

Looking ahead to '26, we anticipate organic revenue growth in the range of low to mid-single digit versus '25 driven by a slightly positive development of truck production rates in our major regions, Europe and North America. Based on the related operating leverage by the already lowered and continuously further optimized cost base, we expect to improve the operating EBIT margin towards 12%. We also believe that the profitability of CVS should improve step by step throughout '26. In the current quarter, we expect a slightly lower operating EBIT margin quarter-over-quarter, which will increase in the quarters ahead.

With that, I hand over to Marc again.

Thanks, Frank. So let's have a look at our guidance for '26 on the next page. Based on the assumptions outlined on the right side of the chart, we expect the following for full year '26. Revenues in the range of EUR 8 billion to EUR 8.3 billion, an EBIT margin of 14% and a free cash flow between EUR 750 million and EUR 850 million. We will give you an update of our new midterm targets with the publication of our quarter 2 results on the 30th of July.

Ladies and gentlemen, as you can see, we continue to deliver and especially what we have told you and what we have announced. KB is well on track to all strengths and beyond. Be assured that we are setting the path for further growth and value creation. In '26, we want to enter into the next area of KB, which clearly focuses on sustainable and margin accretive growth.

Thanks a lot for your attention. Looking forward to your questions.

We will start the Q&A session shortly. In case you would like to ask questions, please dial in via the provided telephone number. Mute the webcast and ask the question via telephone. Please limit yourself to 2 questions. All other participants can stay in this webcast in the listen-only mode.

[Operator Instructions] And the first question comes from Gael de-Bray from Deutsche Bank.

Two questions, please. Maybe 1 at a time. So firstly on your growth initiatives, what makes you think that you can win in the electrification market? I mean the grid and electrification markets are characterized by well-established very large players with extensive distribution network. So what's your positioning exactly? Are you a sub-supplier for the likes of ABB and Schneider or do you compete directly against these guys? And I'm also curious to understand if your focus area is just around the grid side or whether you also see opportunities to supply data center customers as well?

I think I take this. So saying about energy market, for us there's 2 vectors of potential growth. The one is that we go in the supply of components like instruments, transformers, like protection relays, circuit breakers. That's where we are very, very interested in because these are Tier 1 and Tier 2 suppliers to the Project TRS. Number two, are we aiming to get into direct competition with Schneider, Siemens or others of this size? No, that's exactly where we are not because the market has such a size, roughly EUR 480 billion, that's our definition of the market where we see absolutely a massive growth area especially when it comes to key components.

These key components, some of them we have already. We have never focused on them, but we see now that there is a massive growth in our internal units already. So we see here a growth between 25% and 30%. And this is where we say there is granularity in the market currently and we see a massive potential that we can be a creator of a new market structure. That means we accept absolutely the big guys. We will not get in competition with them. Furthermore, we are more interested to be a competent partner for this kind of customers, which so far are seen in the fragmented granularity of market. This is our strategy.

And number two, when we speak about the next vector, then we see also midsized projects and there we see Project TRS, which could be interesting for us. You know better than me that we have seen in the recent past someone -- some American went public and this is exactly where we are interested to step into.

Okay. And the second question is around the communication of the new midterm targets. I mean any color around this, maybe around the time horizon that you've said? Is it 2030? And I suspect we will hear from you around growth and margins, but any view on maybe the targeted net debt-to-EBITDA at this stage would be useful. Maybe a theoretical maximum debt-to-EBITDA level that you don't intend to exceed.

Gael, I take this one. As we outlined and Marc outlined precisely, we will shed definitely more light on that on the 30th of July. We are prepared to take it. It will be not hugely surprising for you that we are striving for more at Knorr-Bremse. I will not take any figures now in my mouth. We occasionally drop the one or the other elements of what we are pursuing going into the future. We will also not give you a 5 to 10 years midterm guidance range, but rather focus towards -- like you always knew it from us, towards the next 2, 3 years kind of. That's the way we are thinking. And as I said for some businesses, we have already here and there shared with you in the quarterly call some expectations what we can think of the businesses to achieve in the future. But let us wait for July, please. Let us first bring home all the targets that we have still at hand to be achieved.

And the next question comes from Sven Weier from UBS.

First one is also a follow-up on the new midterm targets. I mean in a way, don't we know some of the targets already; the 19% in rail, 13.5% in trucks. Now you said this is like on a 2-, 3-year view. So is the focus then end of July more around the expected growth that you see because the margins we kind of know already?

We have not fully talked about CVS for example and we have, as you rightfully said, not really talked about the clear time horizon for RVS and whether the 19% will be there. Let's see, maybe it's even a bit more. So let's see what we are talking about then in July. But of course for sure, there is some further need to discuss on our strategic revenue path going into the future and how we operationalize ultimately our greenfield ideas that Marc outlined nicely regarding the business areas and we can also shed some more light on this or we will definitely shed some more light on this. So I would say you're rather right. It will be a bit more focused on the revenue side, maybe how to generate accretive growth for this company, but also the margins of course.

And the other question I had was just on the greenfield side. First one there being on the CVS side because obviously recently we heard a lot about the truck fleet management powered by AI, that the load of the truck fleets could be much, much better in the future. And I just wonder with the products you have there, I mean would you have any inroads into that helping the truck fleets on that end or is that not going to be your focus?

Yes, it's less product in terms of hard assets, it's more services. And what now is the time is -- and this is why TRAVIS is so important because their customer leads are important. As you know, the captives are trying their best to cover the new areas. The problem with most of the fleets, they don't want to be only covered by 1 captive. They want to have a brand independent approach. And for us, this is a the chance to step in and this is where we stepped in already. We have with our PleaseFix a massive real connection to hundreds, close to thousands of independent dealerships where there is no brand dedication and which is for us very important because that's what the customer wants.

So we follow the customer and they want to have a free choice of services and exactly this is where we step in. So it's more a service. It's more a transaction-based service than it is a form of asset transfer. This is the product, this is the part. This is not where we see our trade going on. What we see is that I sometimes refer to it like Amazon for trucks. It doesn't depend what you buy, it depends where you buy it. It doesn't depend what kind of service you ask for, it depends only on which platform. And the time of this platform is only one thing; size, speed, agility and services.

And this is why we think it's a game of speed. The faster and the quicker you have a network connected on this platform, the more it is very hard to reach your position. So here, speed is the name of the game. This is why we were very happy with TRAVIS. It's a Dutch company as you know, very agile, very aggressive and this is what we need. And everywhere where we as Knorr-Bremse, a little bit located by ourselves in terms of an old German company, we need different ingredients of entrepreneurship.

Cojali is another good example because their form of business is not brand dedicated. It's not 1 brand they serve. They serve everything what is in the market. So it's a very, very indiscriminative approach to the market, which I think and we think that's where the growth will be. That's where the margins will be. And that is we have to take the place because if we don't be quick and fast, others could be tempted to do so. So far we are in a relatively good position and we want to keep this position and we want to build it up.

And on the energy side, did you say that you have data center exposure or not because I didn't fully capture that on Gael's question?

The data center exposure from our side is relatively limited, but we are already supplying Project TRS who are equipping data center. So what we will -- currently not in a position to give data center the full-fledged program, but what we do already is that we provide with the ingredients, with the components, with the systems which you need to give this kind of service to data center. And this market we see also absolutely not only in America, we see it also in Europe and we see it also in Asia. And as I said, currently the market of component suppliers is extremely granularized. So we have a lot of little ones, small size, midsize providers of components and that's exactly our chance. We could scale it and we will scale it.

And the next question comes from Meihan Yang from Goldman Sachs.

Just the first one, you mentioned there was an order shift into 2026 on the RVS side. Could you give us a bit more color on this and do you expect it to be signed in 1Q '26 or any color would be helpful.

I would say it's just an example of how things go usually on a regular basis in quarters. When it comes to the bigger project business of RVS, sometimes orders are outspoken or signed kind of sometimes it doesn't happen on a last-minute notice. So it's just a EUR 50 million to EUR 100 million order in North America. It's the regular thing that you would expect. It's not signaling. So it's just happening and with that, we would be pretty close to EUR 1.1 billion and that's what we wanted to indicate with this message kind of that's how things go when it comes to quarterly reporting. But it's not a spectacular kind of all of a sudden order that's coming. It's something that's pushed out from one quarter to another and that's an example. Nothing more I think to add.

Got it. And on the second question, you talk about how you could expand the aftermarket services to your customers from AI. On your internal operating leverage, is there anything that you're seeing big benefits -- like for example you're doing your R&D or your software development much more quicker and do you see any benefits coming through in '26 already?

I think you're on the right track when you say especially in software engineering, we can accelerate massively and this is exactly what we are going to do. You remember when I said that the output per person, the output per employee has to be improved and increased. For 22 years, the output per person in this company was stable and it was not improving in terms of output and this is exactly where we are focusing for the next 3 to 4 years. We have a clear target and that includes purchasing, that includes accounting, that includes controlling, that includes HR, that includes every form of legal and compliance.

It includes every functionality, which can be seen as repetitive. 80% to 90% of the software coatings are repetitive. So we have to focus with our people, human people. We have to focus on the 10%, 15%, which are really creative. The rest has to be done by AI or I would call it by algorithms because that is not the differentiating part. So we focus on the differentiating part where we put our engineerings in and everything what is repetitive is being more and more handled by algorithms and we call it the agents. And this kind of agents when the first impact is, we are starting now.

We have started already a project in accounting and controlling. We see here effects, real effects not just a vision or so, we see real effects of 30% to 40%. That means you can say 30% to 40% of more output per person or in reduced workforce. That's the call and that is why we say so far we have a very clear plan that the output per person has to reach in, I would say, visible time 300,000. And either we grow or if we don't grow, we have to shrink our workforce. With shrinking workforce, that means we have the breakeven in mind and with that, we have the personnel expenses in mind.

And you know that our personnel expenses, especially in rail, they are now in a reach of EUR 1.2 billion. There we are not happy, I tell you this very clear because the output has to be improved. In truck, we are already on a much better way because we are here in the range of EUR 700 million coming from EUR 800 million. So we reduced our personnel expenses around EUR 100 million within 1 year in CVS. This is a potential where we have to leverage everywhere not only with trucks. And now the question is how do we get it? We get it by standardization of processes, we get it also by automation of processes and we get it also by using agents more and more in some areas.

And the next question comes from Ben Uglow from Oxcap Analytics.

I had a couple. The first was just about the kind of qualitative view, the sentiment around the CVS outlook, particularly for North America. I guess some of the truck OEMs that have reported seem to have been a little bit more optimistic, mid- to high single-digit growth in truck production rates. What I kind of wanted to know was do you see anything fundamentally different from them or are you just being sort of naturally conservative? That was my first question.

So thanks for the question. We are naturally more conservative. Why? Because you know better than me what happened in the years '21, '22. We were eventually a little bit erratic with our predictions and since that, we are more conservative and we are only claiming what we can really achieve. That's number one. Number two is for us, the best indicator for the truck American market in North America is PACCAR. PACCAR is known to be the most agile one when it comes to layoffs. It's the most agile one when it comes to production capacities. PACCAR is Champions League, absolutely Champions League when it comes to reacting to the market's ups and downs. We see that there is some upside.

But I would say the results what we have in truck -- and it's just a mathematical calculation. We have managed to make in the fourth quarter 11.5% in a market which was still very sluggish. Now you can imagine what happens when the market is going up and you know also that we are generating roughly USD 1.3 billion to USD 1.5 billion in America alone with Bendix. So it's one of our biggest markets and it's one of the most profitable market. So that is for us the significant upside which we see, but we stay conservative. We say everything what we have predicted so far is based on the cost by slightly stable market size. So if the market goes up, you know exactly what that means. There's a potential and this is what we are not claiming, but we are preparing.

Understood. And then coming back, I guess we're all excited about this energy technologies business that, frankly, I certainly didn't know existed. Can you talk a little bit more about Zelisko and the production setup? I mean presumably you've got 1 large facility or something like that. Are you expanding capacity? What are you doing organically to build that business? And I guess my follow-up question is if you think about M&A in that segment, are we talking about sort of bolt-ons, i.e., EUR 50 million, EUR 100 million type transactions or are you more ambitious in your thoughts there, i.e., there are certain assets available, which are bigger. But the question is is that what you're sort of signaling or not?

Ben, you're very curious, I have to admit that. Very smart questions, exactly the same questions which we have discussed for the last 7, 8 months. I try to do my best not to spoil our own story because otherwise everybody would know where we go and what we do. We are not -- I make it simple from the beginning. We are not shying away from a bigger ticket, number one. Number two, as long as we don't have the perfect big ticket in sight, we are going step by step. And as I said, the granularity of this market is very interesting and we see here a lot of opportunities of, let me say, smaller size tickets.

The problem is -- not the problem. The opportunity is that with 2 or 3 assets, you can already have a very, very really good market position worldwide. So for us, it's very important to do both. We are not choosing left or right. We're not saying the big bang is the only thing what we search. We go absolutely both ways. The one is we go components for components, markets increase, market share increase wherever possible. This is permanent. This could include also smaller-sized businesses, what you said, EUR 50 million to EUR 100 million tickets.

But parallel to that, we are ready and we are scaling ourselves up to have expertise in this regard so that we could imagine also a bigger ticket. So this was #3 and #2 of your question. Number one of your question was what is the current size and where are you located? We are located in Vienna, we are located in Milano and we have now a massive aggressive turn that we go to Americas with our existing business partners. That means Zelisko and Microelettrica. Zelisko is now your question is and I think it was also a little bit of a critical hint what you gave. We didn't know that it is existing.

The funny thing is 3 years ago nobody took care of this business so much. It was a little bit like a bifung in Germany, to say and this company was staying very, very solid alone, but very profitable, very small with EUR 50 million. Now within exactly 2.5 years, they doubled their revenue to EUR 100 million to EUR 110 million. Their profitability is in the range of 18% to 20%. So it's a very, very promising business and the competence is also enlarged and increasing. So we have the nucleus.

The same with Microelettrica. The business is doing quite, quite well. We have already organic growth areas not only for Europe, but also for America. But as we are not that patient and I think you are also not that patient, we say organic growth would take us too long. This is why we are very open for inorganic growth in this area.

The next question comes from William Mackie from Kepler Cheuvreux.

My first one goes to the Rail business and quite similar or aligned with Gael's question around energy. I mean signaling is clearly another target for your greenfield. But when we look at the signaling industry, it's typically dominated by the likes of Siemens, Alstom or Hitachi that treat signaling as the brain of the train and a core part of their expertise. So when you look at growing within that marketplace with a focus on profitability, what structural evidence is there that a component-led player can actually capture premium margins within the signaling industry?

Okay. With signaling, superior margins, we stepped in. It was an occasional opportunistic step and we did it. And now, excuse me, I would love to do that. I have a list of 5 assets which we have in mind; 2 of them would be very significant, 3 of them would be additional. Of course you understand that I can't give it to you. But the second of your question -- the first was more where do you see yourselves competing with Siemens, competing with ABB, competing with others, Hitachi. Yes, you're right. This is eventually not what we want.

We want to be a brand independent offerer of services and the market is really interested because before we step into the market, we always ask is there a market for us? So we ask potential customers, we ask competitors, is there an area or are we just a me-too into an existing market where you differentiate yourself with pricing or whatever. This is never going to happen with us. We are not interested in a price war. We are not interested in competing with something which is not differentiating. So we see differentiators. We see different sizes.

We see sizes which eventually for the big players are insignificant because the big players are now overrun by demand and also in energy and that gives us a massive opportunity. It's a time -- a window of opportunity for the next 3 years to go. In the next 3 years this kind of games will be decided and after that, it will be very, very hard to get into. So this is why we decided in signaling and also in energy to be very quick now. We need to make our mind. We have to be very clear what is an asset which is helping us and what is an asset which eventually is not helping us at all.

The profitability of these 2 markets and especially in signaling is different. We have here very, very profitable market players and we have very average market players. This is where we have to focus on the ones which we manage to improve and this is why we always refer to this accretive growth. It can be that in 1 year we excuse you. In the second year, we don't excuse you any longer. In the third year, you have to be at our level otherwise it is a wrong move to do. And before we acquire any asset and if we touch any asset, this growth and accretive EBIT margin plan has to be secured. If it's not secured, we don't touch it. It's very clear.

And to your question, what is the evidence of your success? The evidence of our success is whatever we said the last 3 years happened, whatever we said happened. And the evidence in the future is never given by any evidence of the past. It is also the -- yes, you can only say it's the players and it's a probability and it's a logic. If the logic is clear, then it is very unprobable the logic will be broken. If the logic is not clear, then I'm with you, then you need evidence. Future has no evidence. It has only a track record. And our track record -- and this is why it was so important that Frank and the whole team, we have now delivered everything by the number, by the number.

Remember when we came in 2023; you were shattered, you were absolutely out of trust, you were not believing anything because everything what we said was perceived as an excuse. Now for the last 3 years, we delivered every number what we have promised. Even when markets were tough in CVS last year, we delivered the double-digit number. We delivered it. We never deviated from our targeted numbers and that's exactly what we do in the future. What we have done the last 3 years will follow the next 3 to 5 years. That's what we stand for. This is what we go for and this is exactly the logic which we follow.

My second question and there's a short follow-up relates to CVS. And when we think about the fact that the future is based -- is going to be different, you've done a lot to demonstrate the cost flexibility of the business. You've highlighted the opportunity to drive out some of the structural costs in the business and you've allocated capital to enhance the profit profile of the business as a whole. So with those structural factors in mind, how should we start to think about the through cycle ability for CVS to generate returns? Should we look at the past and think actually you could achieve more as you develop around the service activities and structurally change the mix?

As we have a historical meeting where more questions addressed to the CEO, he just pointed at me so I take this one. Yes, I mean very well described. So that's why we believe we have created or will be having created a cost structure in CVS towards the end of the year of '26 where the truck business can run in a rather weaker market environment on an operating margin basis of around 12% kind of. And if the markets get then overall a bit more normal than the weak situation, then they should be able to come along with close to 13% maybe. And if the markets are even good, they can come to the 13%, 14% of margin.

That's what we believe in and that's, by the way, also the way how we on a daily basis kind of steer the truck business according to those kind of 3 inherent scenarios. And please keep in mind that the 13.5% we took already in our mouth some time ago when we had the expectation originally that markets could be quite nice, not strong, super strong, but quite nice and we still stick to that. This is what's possible with the truck business given that cost measurements that we have been taking over time. That's the way to think about the truck ambition going into the future depending on a certain market specification; weak, normal and good markets. That's the way we think.

If I can ask one short follow-up related to the new business operating model. When you described the application of AI, it was with many references to indirect functions in the business. What type of direct value-creating functions such as R&D or operational performance do you see the opportunities in as you develop a new business model?

So in this context, AI is not a cost cut. It's an accelerator. It's faster. It's quicker. In our case, it's relatively simple. We have here more than 6,000 engineers. These engineers are occupied with repetitive work, which from our point of view is not the most substantial added value work they could do. The more we get them liberated from this repetitive work, the more output they will generate and that's exactly where we see AI. At the current level of AI, there is where we see. I'm pretty sure you have seen what happened the last 5 days. We spoke about large language models and we spoke about Claude and we spoke about a lot. And now we see OpenClaw coming into the game, relatively cheap, relatively interesting.

So it is a completely disruptive approach when it comes to AI. This we have not still incorporated. But what we do, and this is why it's so important that we go to a greenfield approach like GenAI, we let it go. We let it just try it out because one thing is for sure. If you use an algorithm for your existing business, you are limiting already the opportunities for the algorithms. If you let the algorithm do things which normally are not foreseen to be done, not only repetitive work, but eventually also generating work, accelerating work, that is something where you sometimes need a new environment and a new spirit.

And this is why we have chosen Chennai because there we have absolutely -- we are ensured also that these guys and these girls who are working in there have a completely different view on it. They make it happen instead of excusing and telling us why it does not work and they will be more risk taking. So what we will not do is that in our current processes especially when it comes to safety and security relevant assets, we will not step into it directly with AI. But in terms of services, in terms of new ideas, new services and especially new applications, which eventually are not that safety relevant, we can see whether the algorithm can accelerate us and give us also new solutions. So that is where we go. We don't go full fledged now in AI and say blindly that's it. We utilize it as a tool and when the tool gets better, it has the right environment to accelerate and to leverage.

The next question comes from Akash Gupta from JPMorgan.

Most of my question has been asked. Just 1 left and that is on China. Can you talk about what are you seeing in China? I think when we look at your Q4 orders, you had some growth in both of the segments. But in general when we look at for the year 2026, what have you embedded in your outlook? And particularly in rail, how do you see the business overall between high-speed and metro and services?

Akash, I would say nothing is rocking the boat here in very general regards to China. We still see quite better numbers than we have initially guided you with for China some kind of 2 years, 3 years ago. We should be slightly weaker maybe in absolute terms in revenues than in the year '25. That's the only thing. We see a bit of weaker metro demand. It's market driven. It's not market share driven. It's solely market driven, maybe a bit less metros in the year '26 to be built than in the year '25. So maybe even below 4,000 metros overall.

So I would say a small or below EUR 50 million year-over-year reduction in China could happen, maybe EUR 30 million less next year compared to '25. So nothing spectacular, but it's 1 aspect of the business developing into '26. High speed: number of high-speed trains always a bit unclear, but we expect a similar amount, maybe 10 less also, like we had in '25; but similar amount, stable market share for us. Metros is the point maybe a bit less. That's all.

There's one thing which is not based on our recent years. Eventually you know that for the last 8 years, we were excluded -- 9 years, we were excluded for the newest latest platform of high-speed trains as a system component supplier. So we lost our position from -- in 2014, '15, we were the one, the one which were equipping the high-speed trains in China. For the last 8, 9 years we were not discriminated, but we were set back. So we were excluded in the latest new forms. Since September last year, there is a massive shift that Knorr-Bremse is reconsidered to be a potential system component supplier to the Chinese CRRC in terms of high-speed trains.

So that is something which it was hard work, it was very, very hard to reach that and it is an opportunity for us to compete currently with the best and that is in China for high-speed trains. And if we are perceived as a full-fledged provider of services for the high-speed train, that would be and that is exactly what we were fighting. And since September, we have indications that we are back in the game which we were out for 8 years. And that makes us very, very proud because it was hard work to get there back and there's a potential that not only for metros, you know it better than me, but also for high-speed trains, we could get back to be seriously a contender in this business.

No order yet, Akash.

And we have 1 last question from Alexander from BofA.

Maybe I can follow up, first of all, on that last question. You talked about the exciting opportunity for the latest generation of high-speed trains. Could you give any idea of the sort of magnitude that could add to your Chinese rail business in due course if that comes through?

Yes, it's more repetition than immediately in orders because when I came here on board in 2023, everybody told me the story is over and the party is over and we have a defense to make and it is like a long tail, which we have to defend. If this comes true and if we are really a contender and if we will succeed, this story is no longer valid. It's a game changer. I can't give you the numbers in terms of quantities for the next 2 or 3 years, but it would be a completely repositioning of Knorr-Bremse in the Chinese environment. And you know we have done a lot for the last 2, 3 years to be seen more and more as a contender, as a market player who takes the Chinese specifics very, very serious.

And sorry to tell you and you know it; you can Google it, you can search it; more than 65% of high-speed train in the world is China. So China is the place to be and high speed is the grail of the rail industry. Everything else is very important. Nothing to say about it, but that's the grail. That's the S-Class, that's the top. And if you're out of that, if you're no longer a serious contender in these kind of tenders, then you have a reputational issue and this reputational issue of course for a world market leader as us. We want to stay not only there. We want to be back in the game.

That is what we tried the last 2, 3 years. You haven't seen it in the numbers because the numbers which we have seen in rail, sorry to say, that was we were providing the services of the past and we did it well and we did it very, very well. In metro, we are very absolutely competitive. We are very good. We are good. But the grail of the rail industry is the high-speed trains in China. If there you make it, you have an excellent position for the future.

Understood. And then maybe if I can squeeze in 1 more on M&A. You've talked about it several times as a sort of key part of the greenfield strategy. Could you share a little bit about the pipeline you're seeing there and whether valuations appear acceptable? And linked to that, remind us of the sort of financial thresholds you're using to assess those deals in terms of return on capital or otherwise?

Yes. I mean I've told you several times that we have a very healthy balance sheet and we are not shying away from net debt-to-EBITDA ratios of 1, absolutely no issue. And if good or great market or business opportunities would come along, we could even go higher with a clear path to bring margin accretive revenues to this company and to help us profitably grow into the future. So that's definitely something we will -- we have our clear financial guardrails. We are searching basically only for businesses that fulfill those criteria. We have businesses with 14% of return on sales. Given ourselves as a hurdle rate we said should be on the cash side accretive and return on capital employed above 20%. All those 3 will be measured rightfully, as Marc said, after we have a clear plan that within at least 2, 3 years, those businesses should be able to achieve this. If there is no clear visible plan for us, recognizable, we wouldn't touch it. So that's pretty clear. I would say, a clear set of criteria.

And to add on this and to finalize it, there is 1 thing and I think you're all aware of the club of the 25%. Growth and EBIT margin together has to exceed the number of 25%, capital goods. That's the Champions League. We are currently not in this Champions League. Rail is close, truck is not. And our aim is that the whole company, including truck, rail and whatever, is a significant part of this Champions League Top 25% club. That's our aim. That is not a forecast for the 30th of July. This is what we aim. This is what we want. This is where we have been in the past. We haven't been there for the last 5, 6 years, but now our aim is to get back on this Champions Club League. We will not be the top of that not at the beginning, but we have an aim. There we want to get back.

Okay. Thank you very much for your questions. We wish you a great springtime and happy to talk to you next time most likely in May. Thank you very much.

Welcome to Knorr-Bremse's conference call for the Financial Results of the Third Quarter 2025. [Operator Instructions] Let me now turn the floor over to your host, Andreas Spitzauer, Head of Investor Relations.

Thank you, operator. Good afternoon as well as good morning, ladies and gentlemen. I hope all of you are very fine. My name is Andreas Spitzauer, Head of Investor Relations. I want to welcome you to Knorr-Bremse's presentation for the third quarter results of 2025.

Today, Marc Llistosella, our CEO; and Frank Weber, our CFO, will present the results of Knorr-Bremse, followed by a Q&A session. Once again, the conference call will be recorded and is available on our homepage, www.knorr-bremse.com in the Investor Relations section.

It is now my pleasure to hand over to Marc Llistosella. Please go ahead.

Thank you, Andreas. Ladies and gentlemen, welcome to our Capital Market call for the third quarter '25. Let's start with the key takeaways for today on Page 2. We are reporting a strong quarter today. In uncertain times, we continue to focus on our earnings by using our financial flexibility, keeping strict cost control, plus staying close to customers and driving our service business. Knorr-Bremse benefits from dominant market position in both divisions, a diversified revenue generation and ongoing stringent execution.

RVS is in strong shape. It posted strong organic growth and continuously increased its profitability quarter-over-quarter by the implementation of BOOST. In addition, RVS performance underlines the great potential of the rail industry in total. As a consequence, we are expanding this successful division with the acquisition of duagon.

Coming to CVS, one thing is clear. The development of profitability is the most important indicator of our success and our truck colleagues delivered. Despite an extremely challenging North American truck market, CVS managed a slight margin expansion, an extraordinary achievement, which is based on the benefits of our cost and efficiency measures, well supported by a more resilient aftermarket business.

The BOOST program overall remains the centerpiece of our strategy and is fully on track. Regarding our BROWNFIELD measures, we are well on track of the sale of the last assets we have in the SELL-IT program. These assets within rail generates roughly EUR 300 million in revenues and is clearly dilutive.

Looking at Greenfield, our clear path of additional growth and accretive business expansion for Knorr-Bremse. In the field of subscription-based and data-driven services, we recently acquired Travis Road Services. Together with Cojali’s highly attractive services, we want to strengthen the less cyclical activities in the Truck segment, striving for a leading position in Europe and later beyond. Last but least, we confirm our operating guidance for 2025.

Let's now have a closer look at our Duagon acquisition on Chart 3. Duagon itself, a Swiss-based company, is a leading supplier of electronics and software solutions for safety-related applications in rail being active in Europe, North America, China and India. We are convinced that Duagon is an excellent strategic fit for Knorr-Bremse's existing portfolio. Beyond strengthening the RVS segment, the acquisition also unlocks substantial synergies in electronics. For example, in braking and door systems where we are already global experts.

Furthermore, the products will enhance the global operations of 2 key KB business units, Selectron and KB Signaling. As trains and rail world networks become increasingly digitalized, the acquisition enables both the Railway Electronics and Signaling technology units to fully capitalize on the rapidly growing market.

For KB Signaling, which is expanding its North American business globally, Duagon offers additional opportunities for international growth. The accretive transaction reinforces KB2's Boost strategy and marks another milestone on its transformation journey. By integrating Duagon, Knorr-Bremse strengthened its position in high-growth digital markets and increases the revenue share of the RVS segment overall currently from 55% to even beyond, driving sustainable value creation.

The acquisition fulfills all of the M&A guardrails, which were given by ourselves, which we set more than 2 years ago and follow for the time being. We welcome all new colleagues to the team and look forward to a successful future.

Let's now have a look at the market situation for trail and rail and truck. Overall, the demand in rail is our least problem within the KB Group. Underlying demand remains robust across all regions as evidenced by a strong order intake and record order books for RVS and its customers. We expect this momentum to continue in the coming quarters, resulting in a full year book-to-bill ratio well above 1. The only exception in this is the freight market, which continues to face some challenges. Also here, we see a low concentration on the North American market.

The market development in China itself remains pleasing on a high level this year, which is quite supportive for our profitability as well. Truck markets show a mixed picture. As you're all aware of and as you have already heard from our customers and peers, truck production rate in Europe moved higher in the past quarter, but currently, we are observing a slight softening in market momentum, including some postponement into next year, which also corresponds to the perceptions of our truck OEMs.

The North American market is in a very challenging time. Truck production rates declined significantly in the third quarter and a near time recovery appears unlikely. Therefore, we lowered our expectations regarding truck production rate for the second half of this year as the usual autumn recovery has also been significantly weaker this year compared to the previous years.

Our North American customers are still taking single days off and slowing down production lines in their factories so far. They are acting rationally and only adjusting their workforce as they know that markets can catch up quickly, especially in North America once a recovery starts. As a result, we have reduced our North American workforce by around 15-plus percent in the recent months, help yourself, then helps you got. At the same time, we are using the current situation to consistently implement our structural measures.

The better than originally expected development in Europe cannot compensate fully the weaker-than-expected development in North America. Nevertheless, every crisis presents opportunities. We should benefit via operating leverage from a lower fixed cost base when the crisis in North America comes to an end, which it will happen.

With that, I will hand over to Frank, who will give you -- walk through the financials in detail.

Yes. Thanks, Mark, and hello, everybody. Thanks for joining us today. Please turn to Slide 5, and let's have a look at the good financials of the third quarter.

Order intake achieved a strong result at almost EUR 2 billion. The market-driven decline in truck was overcompensated by the strong rail order intake and led to a more than 5% organic growth. Knorr-Bremse generated revenues of EUR 1.9 billion organically with nearly 3%, a slightly higher figure year-over-year. Our operating EBIT margin was positively impacted by both divisions, driven in particular by our portfolio adjustment, the strong aftermarket performance, our operating leverage and the respective cost measures and of course, by KB Signaling.

As a result, the operating EBIT margin improved by 100 basis points year-over-year. With a 13.3% operating EBIT margin, we delivered the best profitability within the last 16 quarters for Knorr-Bremse. Our free cash flow in quarter 3 amounted to EUR 159 million and converted once again into more than 100%. We are proud of our global teams maneuvering KB so successfully through a rather challenging '25.

Let's move to Slide 6. CapEx amounted to EUR 78 million, which represents in relation to revenues 4.2%. Spending in absolute numbers decreased by EUR 2 million. This development is fully in line with our strategy to optimize CapEx spending following our lowered target range of CapEx to revenues of 4% to 5%. We expect some higher CapEx spending in the running quarter as usual.

A pleasing development saw once again our net working capital, which decreased significantly year-over-year, respectively, by 7 days versus prior year. Including KB Signaling, we are at the level of EUR 1.6 billion and 72 days of efficiency. The continuous improvement in net working capital is based on the ongoing success of our Collect program, including improvement basically in all major net working capital ingredients, especially the lower level of inventory supported the improvement of working capital by more than EUR 160 million year-over-year. Free cash flow amounted to EUR 159 million. This is only a slightly lower figure compared to the prior year, driven by the unfavorable development of FX.

On a 9-month view, free cash flow even increased by more than EUR 70 million. Quarter 4 will be the strongest quarter, as always, following our usual seasonal pattern. Cash conversion rate in the third quarter amounted to a strong 104%. Despite the acquisition-driven higher capital employed, our ROCE nicely increased from 18.6% to 21%, which is an increase of 240 basis points. ROCE remains a high key priority for us, and we expect to further grow it in the future, primarily driven by a higher profitability.

Let's take a closer look at the RVS performance on Slide 7. RVS once again delivered a very strong quarter in terms of order intake, reaching nearly EUR 1.2 billion. This corresponds to an organic growth of 6%, driven by solid operations and contributions from KB Signaling. Global Rain demand overall remains strong. For the current quarter, we expect that RVS should be able to post an order intake between EUR 1 billion to EUR 1.1 billion.

Our book-to-bill ratio stood at 1.12, which means RVS book-to-bill ratio at or above 1 for 16 quarters in a row. As a consequence, order backlog increased by around 8% and 12% even organically, reaching again a new record level with almost EUR 5.7 billion. The high order backlog and the good quality of it provides a strong basis for the rest of the year as well as beyond.

Let's move to Slide 8. Revenues in quarter 3 amounted to EUR 1.05 billion, an increase of almost 6% year-over-year following a bit of a weaker organic growth in quarter 1 and quarter 2 and even despite significant FX headwinds. Our aftermarket business developed also very nicely in Europe, North America and APAC.

From a regional point of view, revenue growth was fueled by Europe and North America. In Europe, both OE and aftermarket business grew nicely. In North America, it increased aftermarket and OE business despite FX headwinds. The APAC region saw a very stable aftermarket development, while OE slightly declined. China only slightly decreased year-over-year in both OE and aftermarket. We are pleased about that stable development in China, especially in high-speed local business and the aftermarket. There are still no signs of a better metro market.

We improved our operating EBIT margin by 100 basis points to 17.0%, which is already beyond our midterm guidance for next year. This superb improvement is driven by the positive aftermarket development, operating leverage, our BOOST measures as well as the positive contribution of the Signaling business. In the current quarter, we expect a book-to-bill ratio of around 1. The EBIT margin of RVS should be flat quarter-over-quarter. On a full year level, the operating margin is expected to be at around 16.5%.

Let's continue with the Truck division on Chart 9. Order intake in CVS amounted to EUR 783 million below our initial expectations at the beginning of the quarter due to the missing pickup in the North American truck market after the summer break. On the other side, organically, orders increased by 4%. On a year-over-year organic level, this growth was driven by Europe and the APAC region, which recorded slight organic growth, while North America was significantly down, hit by the sharp downturn in the U.S. market.

Order intake in the current quarter should be rather flat quarter-over-quarter, supported by Europe and the APAC region. The North American market remains very difficult to fully assess at this point in time, but we expect no improvement of the market dynamics until year-end. Book-to-bill reached 0.94 in the past quarter. Our order book of more than EUR 1.7 billion at the end of September is 7% below the previous year's level, but at the same time, it is only 2% organically lower.

Let's move on to our CVS division on Chart 10. Revenues declined to EUR 833 million, which represents minus 9% year-over-year. This development is solely driven by the divestments of GT and Sheppard as well as the negative translationary FX impact from the U.S. dollar and the renminbi, especially.

In organic terms, the development was stable, which represents a solid performance in such a challenging environment. OE business in CVS decreased as expected in North America and South America, predominantly driven by lower truck production rates and FX. Europe recorded good and the APAC region even significant growth. Our aftermarket business performed much better than OE in the past quarter. The OE business grew in Europe and China, but the strong market decrease in North America could not be compensated by aftermarket growth.

In addition to the sale of Sheppard and the strong euro exchange rate compared to the U.S. dollar, the low truck production rate had a particular negative impact on our performance, especially in the U.S. In the current quarter, we expect that CVS total revenues should be flat to very slightly increasing compared to the third quarter.

Coming to the bottom line. Operating EBIT of CVS amounted to EUR 87 million in the past quarter, down around 4% year-over-year. Given the massive market headwinds and unfavorable FX, a very resilient number. The profitability was impacted by lower OE volumes and an unfavorable regional mix, which could be more than compensated by benefits from our Boost measures, a higher aftermarket revenue share, solid contributions from our portfolio adjustments as well as a recovery from tariff burdens.

As a result, we were able to increase our operating EBIT margin by 50 basis points year-over-year to 10.5% in such a tough environment. For quarter 4, profitability should slightly improve quarter-over-quarter, well supported by cost measures and a good aftermarket development with a foundation of stable markets in Europe and North America. Overall, we are confident to further fight ongoing market challenges with our long-term BOOST program as well as our short-term measures in North America, our robust pricing and our resilient aftermarket business. On a full year basis, CVS should be able to reach an operating EBIT margin around the same level as last year.

With that, I hand over to Marc again.

Thank you, Frank. So let's have a look on our guidance for 2025 on Slide 11. To make it very short and crisp, basically confirm all KPIs of our guidance shown on the chart, just another 3 months to go. Please bear in mind, however, that due to the stronger euro and the weaker truck market in North America, the lower end of our revenue guidance is more likely to be achieved. Our countermeasures are having a positive effect on the other side on the EBIT margin outlook, meaning that the midpoint represents a very, very realistic expectation.

Free cash flow is also being affected by the stronger euro, but we are also comfortable to reach the midpoint at least of the guidance. Having said so, we are ready for the next year to go. We had a very, very busy year 2025. And we are very confident that with our self-healing activities, which had impact -- an impact of a reduction of workforce, for example, only in trucks from 15,000 over the last 18 months to now 12,000 people, we are ready for the lift of next year. And the 10% to 10.5%, which we are aiming for the year 2025 compared to the results of the years in '23 and '24 have a much higher value because we are ready to go for the next year based on a much better fixed cost base. Thank you very much.

[Operator Instructions]

And the first question comes from Sven Weier, UBS.

It's Sven from UBS. The first question is around -- in the past couple of years, you've always given kind of indications for the year ahead. You didn't do this time. Is the reason because you feel quite happy with where consensus sits? Or do you refer that simply to lack of visibility that you have, especially on the truck side? That's the first question.

Thank you very much, Sven. So in the past years, there have been mixed feedbacks to us giving an outlook already in October for the next year. Some were saying, why are they doing this? And others have been highly appreciating it. So this time around, we decided not to do it. Why? Because as you rightfully said, we are totally fine with where the consensus currently sits for next year, I would say. This is it. And of course, markets are also a bit of less predictable these days, especially when it comes to the truck market, I would say, and especially the region of North America. But that's the answer to it, Sven.

Yes. And it's fair to say that when I look at current consensus, probably the risk is more on the downside on truck, but maybe on the upside on rail. So that could be a bit of a wash from today's point of view at least

Yes. Nothing to add, Sven.

The follow-up, if I may, is just on truck margins, right? I mean you will be around 10.5%. And I guess it's probably fair to say that reaching the 13.5% next year is really tough to say the least, but we know that, of course. I just wonder, I mean, how prepared and how far are you ready to go to reach that target within the foreseeable future, let's say, in terms of additional measures that you take? I mean, you talked about this in the past, right, where I think there are still some very obvious areas such as R&D, but still seems extremely high for the truck business and the way it performs at the moment. But at the same time, it also seems a bit of a no-go zone for me. So are there any sacred cows in terms of your willingness to achieve the target?

Yeah, thanks, Sven. Let me put this a bit into a broader perspective. When we gave the midterm guidance some 3 years ago, obviously the market assumptions, even though we were not at all anyhow aggressive looking at the market, because we always wanted to make it kind of a self-help story at all, were significantly different, especially when it comes to the U.S., but also when it comes to Europe. The market expectations back then were based on 22 levels. And so that was the starting point to it.

We feel totally fine with a long-term view on truck that the margin of 13.5% is definitely not out of reach and is a targeted number that we have on the plate if the market turns out to be more favorable than it is today. Given the current situation, look at the quarter 3 alone, U.S. is minus 28% in truck production rate. We only declined 13% in revenues. I think a great sign of resilience.

And with all those measures that also Marc mentioned

With our adjustment of the current fixed cost structure that we are doing under BOOST plus the footprint reallocation going into the strategic future, where we are also touching quite a lot of global footprint facilities, we are right on track, I think, with a weaker market to achieve around 12% of return. So as a first step, I would see us moving up from this 10.5% levels with a disastrous market, with better fixed cost structure into a world of the 12-ish, and then strategically into above 13% return level.

I also mentioned to you many times, Sven, that maybe the 15% that we had in the all-time high, one or two years at CVS is maybe not achievable anymore, but the 13.5% is strategically a perfect fit for the profitability target of this company.

And R&D, let me remind us all, is not a no-touch area for us. We had a certain range of products that hit the market recently and are still going to hit the market, so we have a certain time where we have high R&D spendings, but we have also told you that going into the future we see our 6% to 7% range of R&D for the group, rather to go down to the lower end of that range towards the 6-ish number over time.

So we're heavily working on prioritizing our R&D, but we will not be penny-wise pound-foolish, and spoil our future by cutting some of the R&D costs in innovation and customization for our customers.

And did I understand this correctly, Frank, that with the measures that you have put in place now and even without the market really recovering, you could go from 10.5% to 12% and then the rest will come from a market recovery? That's the fair summary?

This is, in a nutshell, a fair summary.

The next question is from Akash Gupta, JPMorgan.

Thanks for your time. I have a couple of questions on M&A that you announced in the last couple of quarters. The first one is on this Travis Road Services, which is quite an exciting area to expand into. The question I have is that can you talk about the synergies with the rest of the portfolio, and can this allow you to accelerate your aftermarket spare parts revenue or directionally to acquire this company was purely based on an ecosystem that you have within you with expertise that may help growing this business? So that's the first one.

Going into the services in a stagnating market, as the truck industry is, is also following the digitalization of the industry. And the more we are setting up now a platform, which is now fulfilling most of the end customers' requirements, is for us a massive access point to future and current profit sources. This market is completely different in their business ecologic and also in the logic.

Here, managing mobility as a service is more and more in the up run to do. So the insurance of making assets working and the truck is an asset nothing more, nothing less. That is something where we are more investigating in the future. With our first step in 2022 with Cojali, we stepped into this business. Why did we do that? It was one part of that was, of course, to ensure that our parts will be then delivered to the customer. But this is a multi-brand. In fact, the brand is not relevant. It's a service to end customers. And that makes us a much, much wider scope and gives us a wider access to profit sources, which currently were not reachable.

So to make it very short, whether this is going to break path from Knorr-Bremse or not, for this kind of businesses and services, it's not that relevant. It's a side effect. The more effect is, as you know, in platforms, the more you can cover with a platform, especially if it is directed to the customer, the more you have a control, the more you have access to profit sources, which so far were not reachable for us.

What I mean with that, we are now currently having, with this acquisition, a real decisive part in our chain of pearls. The chain of pearls is 12 to 14 buckets. And now we are covering, with this acquisition, 12 of the 14 buckets. There's one more to come, and that's exactly what we are now targeting in the next 2 months to come. And then we would be the only one in the market who is covering it from A to Z, from number #1 to number #14, which is extremely exciting because that gives us a completely different picture on the Truck business.

And my follow-up is on acquisition of Duagon's electronics business. I think one thing which caught my eye was that you are giving 2026 revenues and margin. Normally, either we get this year's expectation or previous year reported. So maybe if you can talk about what sort of growth we are expecting in this business, and if the business doesn't reach to EUR 175 million revenues next year, would there be an implication on selling prices? And the background of this question is that in Knorr, we have seen in the past that the company bought assets with some projection that didn't materialize. So just what sort of safety net do you have this time around?

I would ask you for one thing in terms of fairness, Mr. Gupta. You take the acquisitions before 2022 and you take the acquisitions after 2022. So when you give me any evidence of failing on our predictions in any form of acquisition which we have done after 2022, I'm very happy to discuss it with you. For the acquisitions before 2022, I cannot take any form of responsibility. Of course, I can explain to you endlessly that a lot of these investments were not leading anywhere but to, I would say, dilutive business.

In Cojali, we bought a company which is completely exceeding. We bought it to a company value of roughly EUR 400 million. Now we have an estimate of over EUR 1 billion. That is a fact, and then we can give you the numbers for that.

The next acquisition, which we did one KB Signaling in the rail business, and this business was coming out so far extremely positive. It came out extremely positive in EBIT margin, and it came out also extremely positive in terms of revenue. So all our predictions were even overrun.

Now the last acquisition was Duagon and also the Travis. And in the Duagon, we are very, very comfortable that we are not -- we are targeting the 16% because this business is also very, how you say, taking into place what we are already having with Selectron and also KB Signaling, it's a perfect fit. It's additional. It's not a new adventure. In fact, it's like a mosaic that we are parting now putting the -- all the pieces together to a one picture.

So having said so, we are very, very absolutely convinced that with Duagon, we have another asset in the class of KB signaling, what we did last year. And we are very confident that the numbers which we have foreseen are absolutely realistic. I would even say they are conservative. You can see the business is already generating a very, very reasonable, very healthy profit line. And then coming to your question, which was a little bit provocative, when you compare it with all the acquisitions done before 2022, none of these businesses had a real profitability proven in the past.

In Duagon, we have a profitability record, and we have also a return record, which is proven. Now it is on us to make it and to lift it. And a growth record...

And they also have a growth record, which we expect to be close to double digit.

I think for Akash, it's more important the profitability than only the growth. Growth without profit is meaning this. And that, I think, is the main difference. The past was very, very much driven by growth, growth, growth. And the question of profitability was like it will come. This is completely different to 2022. We are first ensuring that every form of acquisition has to be accretive, either immediately like KB signaling or very short-term minded. That means within 12 to 24 months. Anything else is not touched.

And the next question is from Vivek Midha of Citi.

Hope you can hear me well. My first question is on CVS. It's in a similar vein to Sven's question, but just looking to better understand the mechanics. You mentioned 15% reduction in the North American CVS workforce and also broadly lowering the fixed cost base in that division. So should we think about these layoffs as permanent layoffs? I'm interested in understanding how much impact there's been from structural cost savings versus more temporary measures such as furloughs. In order to understand how the margins can improve when the volumes come back.

Yes. Of course, there's always a flexibility that we keep in the plants, looking at the normal market times of around, I would say, around 10% in some countries, even more kind of flex workers, temp workers, what have you, basically in the field of blue collar, not so much on the white collar side, but on the blue collar side, of course, in order to breathe through certain market conditions, that's clear.

So the 15% that also Marc mentioned does include, to some extent, also the blue collars, of course, directly affected and indirect workers in the plant areas. But the thing is that also on the white collar side, we did more than 10% of cost reductions, and that's directly impacting the fixed cost, and that's why this is sustainable and is lowering the breakeven point quite significantly for that business going into the future.

So it's a mixture of both, but it has a sustainable effect because the white collar had -- white collar reduction had a similar dimension like the blue collar reductions.

I would like to add to Frank's comments. The company is always quoted to have 32,500 people employed. This is not the case. We have currently 30,520 people employed. The target is very clear. Whatever happens to the revenues, whatever happens to anything else, this number has to go down because what -- for the last 22 years, the revenue per employee was not moving up. I have never seen this in my life, and this is exactly why we're addressing it. It has to move up in terms of truck above EUR 300,000, and it has to move up to EUR 250,000 to EUR 260,000 for RVS.

There is a difference in the structure. This is explaining why there is a difference. So far, we are below these numbers. And that means as long as we have not reached these numbers, there will be no longer substantial buildup of workforce, whatever the revenue is bringing or not. So we have a very clear target and very clear line. We want to reduce, number one, the breakeven. This is very clear. This is not for discussion, whether the market is up or down, the breakeven has to be target, number one.

In the last years, we had a breakeven in derailment, I would say, for the last 24 months, we are really pressurizing down this kind of breakeven. What is the most part of this breakeven by 60% to 70% is the personnel expenses. The personnel expenses were highest in 2024. Even the numbers were fine, but this was not even noticed by others. We have noticed it. So we have to bring down the personnel expenses significantly in truck. We had reached a number which was close to 22%. Now by the last month, we're in the reach of 19%. And the target is to be below 20%.

In terms of RVS, we have reached a number of exceeding 27.5% personnel expenses cost, and that has to be brought down to 25%. With that, we will improve significantly our breakeven. And with that, we will be more and more independent from the ups and downs of the market. And as you rightly described it, the self-healing has to be done and has to be proceeded.

So to your question, do we have to then expect when the market is going up to see significant upscaling of workforce? The answer is a clear no way. Number two on this is we are now starting an AI campaign and initiative where exactly the white collars are addressed yes, and we want to do repetitive work more and more by digital AI agents. And that's exactly what we started with our initiative where we have now settled the first start in Chennai, where we are focusing AI experts to bring us substantial and also long-term lasting solutions to make sure that for repetitive work, we are not hiring people.

So in short words, no, we are not estimating to have higher people. Second, we are breaking down absolutely our breakeven, and we have very clear targets and very clear KPIs how to lead that.

Fully understood. My second question is a bit of a mid to long-term question around RVS. So you've done a 17% margin in the third quarter and guiding for a similar margin in the fourth quarter. That's above your midterm target for the division. So my question very broad is where next do you see for the division over the midterm and long term? I appreciate you maybe want to give a fuller answer to this at some point in the future, but interested in some early thoughts.

Yes. Thanks, Vivek. I mean I refer a bit, of course, to the question or the answer to the question of Sven. We are totally fine with the consensus as it stands for next year. There, the margin is on that level or even slightly above the 17%. This is, I think, a number that's totally fine for the Rail division. This is, as we also said quite a few times, not the end. We have plenty of measures in place, some already started to implement with also strategic, as I said before, footprint reorganizations so that margin beyond the 17% -- 17%, 18% is reachable for the Rail division, we are aiming strategically to go towards 19%. Somehow, this is the idea of the business, and that should post a very great profitable growth for this business.

Now it's out. You also said so before, I think, last year.

The next question comes from William Mackie from Kepler Cheuvreux.

So my first question, Marc, to you really is to go back to the M&A that you've undertaken around service and the efforts to expand specifically in CVS. I just wonder if you can talk a little to how the development of competitive tension evolves as you push into the aftermarket in the heavy truck industry, that's somewhere, I guess, many of the OEMs, as you well know from your past lives, are also looking to expand and capture value.

So how does that balance evolve in your mind between the existing installed base, supporting it, capturing the data and leveraging that for your benefit rather than -- and avoiding too much competition with your OEMs? And then the more simple question is that you have an exceptionally strong balance sheet and great cash performance. Looking forward, you've talked to capital allocation and guardrails, but just a little bit more flavor on how you see the pipeline evolving and where you can enhance your string of pearls to strengthen the business?

Okay. I'll come with number 2 first. because it's not limited to CVS when I speak about potential acquisition candidates in the near future. As you can imagine, we started with Brownfields, yes, Boost was mainly Brownfield, help yourself, then you will be helped. That's what we have done. We are on our way. By the way, Boost is not finished by next year. Boost is a continuous improvement process and program now, which will last for years to come. And this is why I made so much emphasize on the breakeven on the personnel expenses on the ratios. This has to go through now with everybody.

So coming to the Pearls, the platform business itself has one very important criteria. It has to be brand independent. The more you are captive, the more you limit your brand, you limit also your platform and your reach. And what we do now together with Cojali and Travis and also with the other things to come, by the way, all of them will not exceed the range what you have seen so far. So there will be midsized to small size cap, but there it is more to capture and to occupy the place than to say, "Oh, I have already the biggest in this area.

And here, the problem or the competition for the captives like our customers, they are very, very centered about and around their brand. For them, it is nearly impossible to have a multi-brand approach. The multi-brand approach makes us independent. And this is why I said it's not important only to sell our pets and our brake disks via this channel. For us, it's more important to see the movement of everything what is going in this domain.

And here, we have an access now where we are, especially for the second life cycle of trucks. After 3 years, the warranty is over. And then 70% to 75% of our customers are leaving the captive service facilities. And this is not only in Europe, this is also in America. So they are going to independent dealerships. And these independent dealerships have one big strength. Their strength is they are flexible, they are agile and especially they're not brand dependent. And this is where we are stepping in.

So we are not really going into competition with our customers and clients in the first 3 years, we are going more for the last 7 years, which the trucks normally last in Europe or in America, it's 8 years more. So together, it's between 11 and 12 years before it will be getting to markets which eventually are a little bit different. So this kind of span we are then addressing -- this kind of span we are addressing. And there we know by ourselves that the use take, the take quota for original parts, spare parts is getting significantly lower than in the first 3 years. And this market is highly interesting, highly competitive. But what we're aiming here is to be like a spider in the net. Whatever you move, we notice and hopefully, we will participate.

And I must say it's a very good -- I'm very proud of the team because they came up with that over the last 2.5 years, and they have now formed something like ally a platform strategy, which could make us very, very, very profitable in this regard because in this kind of services and platform, you have completely different propositions on profitability.

My follow-up relates to the CVS business. Congratulations on the continual evidence of the strong muscle memory and cutting costs at Knorr-Bremse in CVS in the face of weaker markets. I noticed the gross margins were relatively flat year-on-year actually. My question goes to the general pricing environment for CVS, perhaps specifically in North America. In a market where you've seen falling volumes, how effective have the teams been in passing through prices to mitigate cost-related headwinds from tariffs or other factors or just to be able to maintain the underlying gross profitability?

So the American team is very close to the market. The American team is, by the way, even more agile when it comes to swing so to lay off people is much, much faster. It's much more efficient than we see it in Europe, especially in Germany. They are closer to the customer, much closer. And in America, we have a customer which is also very, very much involved into aftersales business and that is in this regard specifically per car. So what we see is that we are very close in cooperation with our customers here. They understand when we have to increase the prices, and they understand also the pressure we are running through and going through.

One thing is for sure, the American, North American truck market is by far the most profitable market in the world. Yes. The American market is a protected market that has to be very clearly mentioned. You don't see there a lot of Asians really coming in. And the market itself is very settled, saturated and also allocated. So you have players, you don't have new players. So here, it's very clear that it is a very mature market with extremely interesting margins.

The European market is more competitive with much lower margins to have, yes. The margins here are roughly in average below 400 basis points below, not only for the OES, but also for the OEMs. The truck market in Asia is completely different, highly competitive, very low margin and very difficult to have a leading position to be defended because there's always a new player who is attacking you.

So our focus in terms of profitability is very, very clear in the North American market. It's very, very clear also the European market. And for expansion in terms of growth and also in technology and trying out, that is the Asian market itself. You know it also by the content per vehicle, which is a fraction in China to North America, it's a fraction. So everything what in America and Europe is coming up with digitalization and any form of redundant systems, safety systems, that is the market where we are in. So it is playing in our favor because here, we can't be replaced quite easily. Here, we are not just a commodity. Here, we are a differentiating factor.

So that is what plays in our cards in these 2 markets and which makes us very, very learning in the Asian market. So long story short, the team is very ready to go with that. They're very qualified. We are very technical, instrumented and technical-based salespeople. So that means they're not just salespeople on the commercial side, but mainly also on the technical side. We have a good differentiation to our competitors, and we are seen also as a leading force here when it comes to marketable market innovations.

And the next question is from Ben Uglow of Oxcap.

I had a couple. First of all, on the RVS margin improvement, the 1 percentage point. I mean, historically, that is a very big number, a big gain. And I guess my question is, Frank, maybe could you give us a bit more detail of what's in that 1 percentage point? How much of this is simply just due to OE and aftermarket type mix? And is there any significant regional variation in there, i.e., have we seen one region doing better? And the reason, obviously, why I mentioned this is in the past, your China margins were higher, et cetera. So I just wanted to understand the basis of that improvement.

Good to hear you again, Ben. Thank you. I missed the beginning, maybe 100 basis points you talk about rail, right? The quality of...

Yes.

Clear, I mean, I would say regional difference is China is stable as expected, rather a bit of operating leverage, so to say, with a bit of headwinds on the FX side. So it's not China driving it. Europe has gained growth and operating leverage and North America supported by signaling. So this is from a regional view it.

So all that in Europe and North America basically being a bit of a weakness on the rail freight side in North America, which goes hand-in-hand with what we see in the truck market in North America. So that's it, I would -- how I see it from a regional point of view. Of course, aftermarket share, which is the big when it comes to the sales channel mix has supported us in that improvement of profitability. We are now running at a level of around 55% of aftermarket share globally, which is an improvement compared to last year. So that is a good driver.

And the third element is the continuous boost measures that we are implementing more and more. Those 3 drivers are basically the bit of positive America, Europe, aftermarket and the cost measures.

Understood. That's helpful. And then -- and I guess a question for Marc. Trying to sort of understand what's going on in the North American truck market at the moment is extremely difficult. And a lot of companies are making all kinds of different statements, I would say. In terms of your customer conversations, in terms of your kind of day-to-day dialogue with truck OEMs, how would you characterize those conversations over the last sort of couple of months? Is it just getting better -- sorry, is it just getting worse? Or are things even changing at the margin? The reason why I ask this is different companies are talking about a better line of sight on tariffs. Some companies even talking about EPA 2027. So I wanted to know from your point of view, how are those conversations?

What we see is a normalization. Most of our customers are very conservative, as you can imagine. They supported the current government massively. Some of them even paid. And there -- then after the enthusiastic in the first 4 months of this year, there came a certain form of irritation for another 4 months till August. And now we are in a phase of frustration and frustration in the sense of standby. Nobody wants to move, nobody wants to make a mistake. For example, this morning, we have been informed that Mr. Xi Jinping and Mr. Trump came to conclusion when it comes to rare earth. This came for all of us a little bit by surprise. The markets developed already this week based on that.

On Saturday, we had the first signals that they come. Exactly 10 days before, we had in the press and also the Capital Markets was predicting a massive friction between the superpowers. And this kind of erratic or nonpredictable movements lead in truck industry to stand by. They won't cut, they won't increase. They will just wait. The consumer confidence will be for them eventually more important. The container traffic will be -- freight movement will be more important.

Currently, we see not only the trucks hammered by that, but also the freight trains. We see that it is -- this is an impact on both industries, not only on the one industry. And we would say the worst is behind us because uncertainty is even worse than bad news. You know this better than me. The uncertainty is now, I would say, the fork is clearing up. And with that, we could imagine, but we are not paying on that. Don't get me wrong. We are prepared for it, but we're not paying on that, that we can eventually see in the next quarters to come a massive release and a massive improvement on the sentiment.

And we are very confident to see this message because someone wants to be in the midterms. We know the midterms next year in November, and we know it's -- the economy is stupid, and we know this has to run and everybody will do everything to make it run in America. And now we are a little bit more confident than we have been eventually in August.

Just a minor addition from my side, Ben, also looking at the interest rates, I think the light signals currently being set, talking to the fleet customers directly, our sales guys, of course, on a daily basis. They are also saying, okay, whatever the kind of fleet age might be, and whatever the right theoretical point towards a new buy of a truck would be, if I don't have the money, it's too costly for me to borrow money. And I think this is also the right signals that the Fed is maybe currently sending towards any recovery.

The next question is from Gael de-Bray, Deutsche Bank.

I have two questions, please, two of them relating to RVS. The first one is on the share of aftermarket, which apparently dropped in Q3 pretty substantially compared to H1, 50% or so in Q3 versus 57% in the first half. So it appears that there's been a big sequential decrease in aftermarket revenues for RVS in Q3. So I guess my question is what's been driving this?

And then the second question is around the growth dynamics in broader terms for RVS. I mean RVS has enjoyed very strong commercial dynamics with orders continuously surprising on the upside over the past few quarters, even over the past couple of years now. However, at the same time, RVS revenue growth has come a bit short of expectations this year with Q3 -- I mean, this was again the case this quarter. So could you elaborate on the lead times and whether one could expect to see finally some acceleration in organic revenue growth next year?

Yes, you're welcome. So first, let me start with the aftermarket. I mean the bigger chunk was there in the first and second quarter, driven by also some signaling replacements and aftermarket growth momentum that we have seen. And if I'm not mistaken, it was you, Gael, who asked me the questions at the quarter 2 call, why the signaling business is so strong in profitability.

So it was rather a bit of exceptionally high in quarter 1 and quarter 2, that aftermarket share driven by the signaling business and where I said already in July, it will come down quite naturally, not sustainably, but naturally come down in the second half of the year '25. That is the reason. So number one question, KB Signaling, major driver to it with exceptional situation quarter 1, quarter 2.

Second question, rail demand going forward, as Marc also said right in the beginning, is the least issue that we are currently seeing. We have in plenty of jurisdictions support programs out there, fueling the demand quite sustainably. EUR 1 trillion package in the U.S. the bipartisan infrastructure law. We have the German stimulus program. We have Brazil investing EUR 15 billion; Italy, EUR 25 billion over the years to come, Egypt, Turkey, what have you. So all these, so to say, programs leading to a fueling of the market growth that we kind of see between 2% to 3% as a basis should be going up with all those programs above those numbers.

And we are totally fine, so to say, to reach our 5% to 7%, let me put it this way, CAGR of organic growth for the rail business over the years to come. And by the way, this is not a different number from what we said some 3 years ago as the situation in rail is noncyclical. We said back then it's 6% to 7% over several years. One year, it's 10%. The next, it's maybe 4%, then it's 7%. So something around that is what we see the lead time.

Second element of your second question is very different. I mean, it depends on the product itself that we are selling ultimately a brake system, you would have at least when the design phase is finalized, you have a lead time of 12 to 18 months for more sophisticated product like a brake system, brake control unit. When it comes to a door system, it's after the design phase kind of 6 to 9, maybe 12 months, 6 to 12, let's put it this way. And towards a more simple product, HVAC system, it's 3 to 6 months. So it takes always the design phase of the train, then add these additional lead times, this is what we are looking at on a regular basis.

Sometimes you have also project pushouts from one of the other customers. This is then a bit of irregularity in the market. But in a normal market, I would say those are the lead times. And with that order book that we are having, we're so pleased, so to say that we couldn't even afford much more order intake in order to get them all, so to say, produced within the next 12 months. We are, I would say, fully booked basically.

And the last question is from Tore Fangmann from Bank of America.

Just one last from my side. When we look into the truck market, I think a few of the OEMs have now opened the books for '26 from September onwards. Could you just give us any indication on how your discussions with the truck OEMs are going right now? And any first idea of how this could mean into like the start of Q1 and the Q2 of '26?

Thanks, Tore. Nothing spectacular, I would say, sometimes it's what I recall since quite some time that after summer break, internal news in big corporations flow a bit hesitant at first and then towards October, November, basically, the sales guys come up with a good or with a rather bad news, so to say, towards their supervisors. This is what we usually say. That's why we also said a bit, we see a bit of a softening in Europe because some orders in the EDI system, then you just -- if you only have 2 more months to go, you rather shift into the new year into January and February, you realize you can't get them done in December anymore.

So Christmas is coming like a surprise kind of and then you shift a bit orders into January, February, but that's the usual thing that happens basically each and every year. We don't see anything special this time around. I think we have to, in North America, see what -- how many days around Thanksgiving, the plants on the customer side will be closed down and what they do with the Christmas break. But as we also said, we expect a rather flattish market quarter 4 compared to quarter 3, maybe tiny little bit less truck production rate there. But nothing spectacular in the discussions with our customers. And what we see is what Paccar and Volvo announced, I think, is pretty straightforward. Nothing more to add on our side.

Yes. Just to add from my -- for the Capital Markets, relevant whether we perform or not. And we are performing exactly to what we predicted. We performed in '24 to our predictions and announcements. We perform now to our predictions and announcement in '25. And now give me a reason why should you not believe that we are performing exactly as we planned it for 2026 with 14-plus percent EBIT margin. I wouldn't see it because the pattern certainly gives my words more gravity than anything else. So I don't see the doubt. Whether the truck is with currently 44% of revenue share, whether this is now coming up or not, as I said at the beginning, I don't believe independence of market. I believe in your own abilities to play with the market. So that it's more important whether your costs are under control than whether the market is going up by 2% or going down by 3%.

It is our absolute obligation that for next year, the 14% has to be achieved. And we are doing everything on the cost situation and our -- what we can address. What we can't address, we can't address, we can hope. For markets, you can only hope. For costs, you can do. And what we do is we do what we do. And for the last, whatever it was, 16 months, we did it and we did it as predicted. We did it as announced and now you can say, yes, what makes us think that in the next 11 quarters or 12 quarters, you will do what you announced.

Sorry to say, I can only offer you the past. For the last 12 quarters, we did always and overfulfilled what we announced. And I can give you absolutely our understanding and our obligation is to do the same in the next year and the same is in the fourth quarter. Whether the market is bad or good, sorry to say, with this, we will not have an excuse, then we have to overcompensate. If left is going wrong and right is going right, we have to overcompensate it because overall, the result is 13% we wanted to reach in 2025. This is what to go for, 14% plus. That is the target for '26. That's what to go for. Whether the market is good or bad, no excuse, we have to reach it. Thank you.

Okay. Thank you very much for your time. If you have further questions, please reach out. And yes, we wish you a great afternoon. Thanks a lot.

Thank you colleagues.

Good afternoon, ladies and gentlemen, and a warm welcome to Knorr-Bremse's Q2 2025 Earnings Call. [Operator Instructions]

Let me now turn the floor over to your host, Andreas Spitzauer, Head of Investor Relations.

Thank you, operator. Good afternoon as well as good morning, ladies and gentlemen. I hope all of you are very fine. My name is Andreas Spitzauer, Head of Investor Relations. I want to welcome you to Knorr-Bremse's presentation for the second quarter results of 2025. Today, Marc Llistosella, our CEO; and Frank Weber, our CFO, will present the results of Knorr-Bremse, followed by a Q&A session. The conference call will be recorded and is available on our homepage, www.knorr-bremse.com in the Investor Relations section.

It is now my pleasure to hand over to you, Marc Llistosella. Please go ahead.

Many thanks, Andreas. Ladies and gentlemen, welcome to our Capital Market call for the second quarter '25 results. Let's start with the key takeaways for today on Page 2. Knorr-Bremse continues to be in good shape. Yes, we do. Resilience and stringent execution in challenging times continue to be the key strengths of our house. I would like to highlight our very strong aftermarket business, once again, 47% of our total revenues, which helps to counterbalance economic volatility and protects our profitability.

Our strong market positions globally and our diversified revenue mix also support our results now and hopefully going forward. RVS continues to be very strong with an EBIT margin of 16.5%. More to come. In the past quarter, our Rail division has already achieved its target margin for 2026, 18 months earlier than originally planned. We are proud to have reached this milestone and congratulations to our rail colleagues. The sequential margin improvement of CVS reaching more than 10% is remarkable, considering the tough truck market in North America currently, our resilient aftermarket business, but also the implementation of stringent cost measures supported this achievement.

In the years ahead, '26, '27, '28, both the rail and truck industry should benefit from the announced German stimulus program as well as from the European defense initiatives regarding the investments in infrastructure. Our Rail division expects first orders already in '26 and '27 to come, while trucks should benefit indirectly from strong economic growth in both Germany and Europe.

U.S. tariffs continue to be monitored closely by our teams. We are confident to fully pass on the extra costs via price increases to our customers, some with a certain time delay. Please keep in mind that this is the current assessment, potential changes on the mode of Mr. Trump and tariffs in terms of timing and rates are uncertain today.

BOOST is fully on track. As the carve-out process of the outstanding RVS targets is almost complete, potential investors will be contacted after the summer break and we still expect signings by the end of the year. We confirm our operating guidance for '25. Since the original guidance for '25 was issued in February, the euro has significantly strengthened against many other currencies and against all the experts judgment that we will see parity.

We have taken this development into account and are now assuming the current exchange rates, which will have an impact on the expected revenue development in 2024. But it's purely [indiscernible]. As we are almost exclusively affected by translation effects, our EBIT margin and cash flow expectations for this year remain completely unchanged.

Let's go to #3. Have a look on the market situation of rail and truck. Looking at the rail market, we can see that underlying demand remains strong in all regions, also reflected in good order intakes and fully and full order books of RVS and its customers. We believe that demand will remain strong in the coming quarters to come, leading to an expected book-to-bill ratio of above 1 on a full year base.

The market development in China is strong on a high level this year. We welcome this progress, which is quite supportive for our profitability as well. Truck markets show a mixed picture currently, as you all know and as you have already heard from our customers. Europe shows signs of recovery with stable truck production rates. The first half of the year has developed better than expected. This is also mirrored by good capacity utilization rates in our European plants and the fact that we have neither short-term work nor reduced shifts.

For the second half, we expect a stable market demand in Europe. Same for the Chinese truck market, which is expected to develop stable this year as well. The North American market is the big black box currently because it's erratic. Truck production rates in the second quarter were down significantly, and the expected recovery for the second half of the year is rather unlikely at this point of time. Nevertheless, we do not expect further deterioration, but a stable development in the second half of the year compared to the first half.

Currently, our North American customers are taking days off and slowing down production lines in the factories. On the other hand, they are acting rationally and only slightly reducing their workforce. We expect to have a clearer picture after the usual summer holidays. The better than originally expected development in Europe cannot fully compensate the weaker-than-expected development in North America. Nevertheless, it requires us to present opportunities. This market downturn in North America will eventually come to an end and will then meet a lower breakeven point on our side. This is the core of housekeeping. be prepared for everything what comes. And the lower the breakeven is, the better is the positive impact of a returning market. That's what we are going for.

Now Page #4. Please turn to that page, and we look at the good financials of the second quarter. Order intake achieved a strong result, more or less stable at EUR 2 billion. The decline in truck was almost fully compensated by profitable business and intake from rail. Knorr-Brends generated revenues of EUR 2 billion, a stable development year-over-year. Organically, we posted an increase of 1% RVS compensated for CVS market-driven top line decrease. Our operating profit margin benefited as well from Rail's performance, in particular from a strong aftermarket business, operating leverage, our Boost efficiency measures and KB Signalings contribution.

Consequently, operating EBIT margin increased by 60 basis points year-over-year. Free cash flow amounted to EUR 146 million. Due to some cost opportunities, we announced restructuring costs of EUR 75 million this year. Consequently, EPS in quarter 2 amounted to EUR 0.87, affected by restructuring costs of EUR 28 million. For the full year, we expect EUR 3.50 to EUR 3.60. The portfolio optimization and restructuring measures have a onetime impact to the bottom line last year and will this year. As a result, earnings will improve quite meaningfully next year, benefiting from a stronger asset base and lower breakeven points. I'm proud of our teams maneuvering KB so successfully through challenging times and also interesting times with a lot of opportunities to come.

With these holy words, I hand over to Frank.

Thanks, Mark, and hello, everybody. Let's move on to Slide 5. CapEx amounted to EUR 63 million, which represents in relation to revenues 3.1%. Spending in absolute terms decreased by EUR 2 million or 10 basis points year-over-year. This development is fully in line with our strategy to optimize CapEx spending following our lowered target range for CapEx to revenues of 4% to 5%. There will be some acceleration of investments in the second half of the year. We have further improved our net working capital efficiency again by 2 days versus prior year. Including KB Signaling, we are now at a level of EUR 1.5 billion and 67.6 days. This step forward is clearly based on the success of our collect program, including improvements in all major net working capital categories quarter-over-quarter, respectively, inventory, accounts receivables and accounts payables.

Despite acquisition-driven higher capital employed working capital, ROCE nicely increased from 20.2% to 21.3%. You know that ROCE has a high priority for us with a target of more than 20%, a level which we are planning to exceed in the coming quarters, driven foremost by a higher level of profitability. Free cash flow amounted to EUR 146 million despite negative FX effects. Consequently, the cash conversion rate was nicely higher, reaching 96%. With that quarterly cash generation, we are roughly EUR 100 million ahead of last year year-to-date amount.

Let's take a closer look at the RVS performance on Slide 6. In terms of order intake, RVS recorded a very strong quarter once again, resulting in almost EUR 1.3 billion. This represents a growth of around 13% year-over-year, supported by good organic development as well as via the acquisition of KB Signaling. The organic growth rate stood at 8%. Rail demand overall remains strong, also supported by the APAC region ex China and Europe.

As mentioned in previous earnings calls and based on the outstanding tenders in the market, we assume a stronger half year 1 compared to half year 2, this regarding orders. Nevertheless, for the current quarter, we expect that RVS should be able to post an order intake slightly above EUR 1 billion again. As usual, I want to remind you to please keep in mind that rail is a lumpy project business and does not fit well into quarterly reporting structure in terms of order intake and lead times. Book-to-bill ratio stood at 1.17, which means RVS reached a book-to-bill ratio at or above 1 for 15 quarters in a row now.

Order backlog increased by around 14%, reaching a new record level with more than EUR 5.5 billion. The high order backlog and the good quality of it provides a strong basis for the rest of the year and beyond. Let's move to Slide 7. Quarter 2 revenues amounted to EUR 1.1 billion, an increase of 9% year-over-year, also positively impacted by KB Signaling. On an organic level, the increase was 4%. Our aftermarket business developed nicely in Europe and North America, resulting in a strong aftermarket share of 59%.

From a regional point of view, revenue growth was fueled by all regions. In Europe, both OE and aftermarket business grew nicely. Also, North America strongly increased its aftermarket business, driven by KB Signaling, while OE business significantly decreased year-over-year given the weak freight market in the U.S. The APAC region saw a stable OE and a growing aftermarket business. China also grew nicely in OE, while aftermarket was slightly down year-over-year. Keep in mind that the second quarter in '24 was a particularly strong quarter in aftermarket business due to pent-up demand and some pull-ahead effects back then.

The recovery of ridership, which started in '24 still continues. We are quite happy about the development in China, especially in high-speed local business and the aftermarket. So far, there are still no signs of a better metro market. We improved our operating EBIT margin by 90 basis points to 16.5%, driven by the positive aftermarket development, operating leverage, a strong performance of the accretive APAC region as well as the positive contribution by KB Signaling. In the current quarter, we expect a book-to-bill ratio of around 1. The EBIT margin of RVS should be flat or slightly higher quarter-over-quarter.

On a full year level, the operating margin is still expected to be well above 16%. Let's continue with the Truck division on Chart 8. Order intake in CVS amounted to EUR 820 million, a decrease of 17% year-over-year, which was expected given the divestments we made and the weak North American Class 8 truck production rates. In organic terms, orders only decreased by 5%. On a year-over-year level, quarterly order intake in Europe was slightly and in North America, significantly down.

The APAC region overall slightly grew, benefiting from a good development year-over-year in China. Order intake in the current quarter should be able to increase mid- to high single-digit quarter-over-quarter, supported by Europe. The North American market remains very difficult to fully assess at this point in time. Book-to-bill reached 0.92 in the past quarter. Our order book of more than EUR 1.77 billion at the end of June is 10% below the previous year's level. Adjusted by our 2 divestments of GT and Sheppard, it was organically a minus 3%.

Let's move on to Chart 9. Revenues declined to EUR 895 million, which represents minus 10% driven by the divestments of GT and Sheppard and only minus 2% in organic terms. This development was as expected and represents a solid performance in such a challenging environment. OE business in CVS decreased as expected in all major regions, predominantly driven by lower market demand and FX. Only Europe was able to post a slight reduction. Our aftermarket business performed better than OE, including an almost flat development in Europe and an increase in APAC driven by China. However, both regions were unable to fully offset the double-digit decline in North America.

In the current quarter, we expect that CVS total revenues should stay around the same level of the past quarter, so no real growth impulses here. Coming to the bottom line. Operating EBIT of our CVS division amounted to EUR 92 million in the past quarter, down around 18% year-over-year, but up compared with the first quarter of this year. As a result, the operating EBIT margin declined 90 basis points year-over-year to 10.3%, but up 80 basis points quarter-over-quarter. The lower margin was mainly impacted by lower volumes and an unfavorable regional mix, which could not be fully compensated by benefits from our Boost measures and the higher aftermarket revenue share.

I would like to mention as well that a double-digit EBIT margin is a good achievement considering the very weak but still accretive North American market. Profitability should slightly improve in the current quarter compared to quarter 2, supported by stable markets in Europe and steady demand in North America at a low level. In addition, we expect to see more benefits from our cost measures and aftermarket. Overall, we are confident to successfully fight current market challenges with our long-term measures as well as our short-term measures in North America, our robust pricing power and our resilient aftermarket business.

On a full year base, CVS should be able to reach an operating margin above previous year. With that, I hand over to Marc again.

Thank you, Frank. Let's have a look on our guidance for the end of the year on Page 10. Main message, we confirm our operating guidance. Solely due to translation foreign exchange effects, we have adjusted our revenue outlook for this year. In case the dollar ratio to the euro will change or the renminbi, we will see the controversial effect. So it's not a reduction of our revenue in operation. It's only because it is -- we are a European company. It's noted in euro. So therefore, we have done it, not for any other reason.

The operating EBIT margin is not impacted by any of this. It stays between 12.5% and 13.5%. Free cash flow, we steam and we see between EUR 700 million and EUR 800 million. Compared to the first announcement of the guidance back in February, our expectation regarding RVS has slightly increased. For CVS, we are more conservative about the North American market, and our guidance does not incorporate any recovery in this market in the second half of the year. So we see it flattish.

Nevertheless, group level guidance regarding profitability and free cash flow remains unchanged. And seeing the July already gone, we are very positive to reach it. Thanks a lot, and thanks for the team. Thanks for your attention. And now we are available for your questions.

[Operator Instructions] The first question comes from Sven Weier of UBS.

It's Sven from UBS. The first one is on the Boost program. I was just wondering, obviously, it's been now up and running for a while, seems to go really well. I was just wondering if this allows you also to look into additional structural measures. And if that's the case, whether you could also give us an example and let us know when it would be the right time to speak about this more comprehensively. That's the first one.

Thanks, Ben. Good to hear you. Yes, I think we have very initially back some 1.5 years ago when we kicked off Boost somehow made -- chosen the sequence to do first, so to say, the brownfield and greenfield stuff and later on go for some more structural footprint discussions. We have, as you know, in the meantime, used the perfect storm kind of what's going on in the industry and elsewhere in order to also negotiate through some footprint discussions already now. And so that's what you see reflected in the EUR 75 million. We are going for some footprint adjustments basically in regards to Europe, shifting some production from Germany to Poland, shifting some production to Czech, shifting production from Austria to our campus in India. Those are some structural measures we are intending to do and are already nowadays preparing for that, which is really a strategic move, nothing that we would need to do in order to achieve our midterm guidance, but very strategic move. We have been pursuing already. Those are some examples, if I would say so. So basically shift more from high-cost countries into low-cost countries and bring together some efficiencies in terms of synergetic moves.

Yes. Thanks for that color. That's helpful. The second question I had was just because you also mentioned the German stimulus benefit, but I guess to benefit more from that, you probably have to increase your infrastructure exposure like in signaling like you did in the U.S. And obviously, I guess, the Signaling deal, the Cojali deal have all turned out to be highly accretive as we could also see now in the quarter again on signaling. We see big rail merger in the U.S. We see Wabtec being active. So do you feel you also have to do something to react to that to increase your exposure also to the German stimulus? Or are you still looking to do deals outside the 2 divisions?

Thanks also for that one. So first of all, I think the potential stimulus program, not only in Germany, but also European-wide has, I would say, more phases kind of like the just infrastructure element. It also depends whether there are some, of course, GDP stimulus measures included. So it should be by far more having an impact on us than just on the pure extension of railway infrastructure or the expansion of modernization of streets or what have you. So we are pretty well -- we are doing pretty well with our plans, even though they are not concrete enough in order to write home on it. But we feel pretty comfortable there. It's nothing that we would have a revenue impact all of a sudden in a quarter by EUR 500 million or something like that. It's a very smooth, continuous and sustainable support of the underlying market that we are seeing for many years to come. And that's it.

We don't -- we are not back off, so to say, in regards to anything that should be done inorganically. We will always keep in mind and very clearly strive for that financial guardrails we have been given ourselves. We are not doing something nasty kind of and irrational. We have a strict scheme of what we are searching for in terms of targeted businesses and margin profiles that those businesses should have. So nothing also on latest competitors' moves in regards to M&A, nothing where we would be, so to say, in a defensive position at all.

Why are you feeling you make good progress on further deals given that it's been a while since the Alstom one? Do you feel you're going ahead well in that regard? Or is it difficult to find good targets?

Yes. First of all, I mean, given the financial guardrails that I just outlined that you know well, it's needless to say that it's more difficult to find suitable targets on the truck side of things. On the rail side, still opportunities out there. You know Sven and this has not changed, I would say, over the last 2, 2.5 years that we have somehow some 10-plus targets on a regular basis on the table, whether we are in the process, ahead of the process or thinking about it strategically only. So we still have opportunities. in certain dimensions in the field of aftermarket, in the field of digitalization, in the field of platform business suitable for our aftermarket ecosystems or digitalization of things. And this is something where we are also, I would say, not in a hurry, but we are carefully looking at those, and it's -- this is the situation, I would say.

That's clear. Thank you, Frank, and also for the clear quarterly guidance for Q3 for both divisions.

Thank you very much, Sven.

The next question comes from Akash Gupta of JPMorgan.

I got 2 as well. And the first one is on margins. I mean, you talked about the segment margin expectations for Q3, but I was just wondering if you can also give some color on what shall we expect for corporate costs because I see that corporate cost in Q2 was a bit lower than what we had in both Q1 as well as Q2 last year. So shall we expect this roughly $10 million run rate for rest of the year? Or do you think it should come back to the levels that we have seen before?

Yes. Thanks, Akash, for that. Obviously, so to say, you have quite an amount of intercompany charges always when it comes to headquarter costs. So always expect for the full year number that's EUR 60 million, EUR 65 million roughly for the full year. That's a number we feel comfortable about. That means roughly that we are on a level of an average like EUR 15 million, plus/minus then at times. So this is something that you would see ongoingly. And sometimes you have a quarter where you charge a bit more out than on the others, but that's roughly the number to take into consideration.

And then maybe a follow-up on full year margin guidance. So you did 12.6% margin in the first half, and I think you're indicating slightly better margin in Q3. Do you think we still have a reasonable probability of ending in the upper half of the range, i.e., 13% to 13.5% because your guidance is still quite wide. And given the progress on first half, I just wanted to understand how do you feel about full year guidance and where you might land based on your anticipation for second half?

Yes. Thanks for that question, Akash. I think it's, as always, kind of we try to set the guidance ranges in order that we feel pretty comfortable with what we are planning in regards to the midpoint of those ranges. Nothing to add on this. Obviously, some things need to turn out a bit better in order to be on the upper side and some need to come out a bit worse to be on the lower side of things. But that's -- I feel -- we feel comfortable with the midpoint of things.

And my second question was on RVS. So you had a good book-to-bill of 1.2x in the first half, and that is an acceleration from book-to-bill you had in the past couple of years. The question I have is that how shall we think about phasing of these strong orders into revenue? Are there several orders with longer duration that will have limited impact on the, let's say, next 12-month revenues? Just wondering if you can talk about timing of acceleration in organic sales growth, given in the first half, we had only 3.8%, which looks somewhat lackluster compared to what your rail customers are reporting in recent quarters?

Yes. Thanks. Also here, a very fair question. As always, the order intake and the duration of those orders that sit in our order book are quite significantly different between rail and truck, whereas the CVS orders usually are scheduled for the next 12 months, so to say, give and take. We talk about even in cases for some projects, several years on the rail side, on the project business side. And it's plenty, of course, of those projects sitting in our order book. So yes, the answer is yes. It's to quite some extent, also a widespread time line until those projects really turn out to be revenues on the rail side. Our order book is so good. The timing transparency is also so good that we feel totally comfortable to achieve with that existing order book situation that we are having today as well as the newly -- on a daily basis, newly incoming orders on our side as well on the OE side of things, keeping that we should be able to keep our market share and therefore, achieve fully our midterm growth targets of 5% to 6% CAGR for the group. This is -- sorry, for the rail business. This is definitely nothing that we see in dangered here and fully loaded, I would say.

The next question comes from Gael de-Bray of Deutsche Bank.

Can I start with the bridge, the EBIT bridge for the RVS division? I mean what's striking here is the contribution from M&A, EUR 21 million contribution to EBIT or only EUR 76 million of revenue. I mean it does imply a margin of around 28%, right, which looks much higher than the 16%-ish level I had in mind for the Alstom signaling business. So why is the accretive impact from M&A so positive? That's question number one.

Yes. Very generally speaking, we are totally happy, so to say, about the business that we have acquired and the way it developed. The management team has done so far, a fantastic job. We have not changed a single person in the management team, fully dedicated, fully committed to the company. It's just great to look at how they work. And yes, the business -- the underlying business as a result is really doing great. Do we have -- it's a project business as well to some extent. It's not only aftermarket business. So you also have here a bit parts of seasonalities in. And therefore, yes, don't, so to say, multiply the results for this first half year and for this quarter -- for the quarter by 4 or for the half year by 2. If you look at the second half year, the number already -- sorry, if you look at the full first half year, the number of the 28% already comes down. So you see a bit that the second quarter was extremely well-run quarter. For the full year, we expect that we even slightly overachieve what we intended the business to reach, but not a margin of above 20% already. We are aiming to improve it constantly further, but it's seasonality as a simple and short answer would be seasonality effect.

Okay. Understood. And then, I mean, if I look now at maybe the same kind of bridge at the group level. So I calculated that the margin benefited from around 100 bps of positive portfolio effects. So both positive -- I mean, positive for both RVS and CVS. And then it implies obviously that the margin would have been only 12.1%-ish in the second quarter without the various M&A activities. I know they are part of the job, right? But nevertheless, on an underlying basis, it appears that the margin trajectory is not exactly positive yet and that it is still down on a year-on-year basis by about 40 bps or so. So I guess my question is, it would be great if you could comment on the cost-cutting activities potentially on the amount of savings that have been achieved so far in the first half and what's expected in H2, maybe also going into 2026 for us to better appreciate the underlying margin trajectory.

Yes. First of all, it's a combination of, of course, the significant headwinds that we see organically, be it quarter-over-quarter in the second quarter or even for the full half year when it comes to truck and at the same time, the quite positive really organic moves that you see on the rail side. But we also need to see that part of the positive development on the rail side is also driven by the acquisition of Signaling like we intended it to be, and that even brought us to a level where we were originally expected to reach only in '26 already. So keep in mind, of course, the one is significantly reduced and the other is improving. And I mean, organically, this is not a huge upswing in terms of profitability as those 2 things, to some extent, balance each other out. Look at the share reductions that we see in the market in North America, which is an accretive margin, a very accretive margin market for us on the truck side, where we have a significant reduction year-over-year. So this is the situation. We have to face it that the 2 businesses are not kind of running synchronized when it comes to the macros of it.

Well, I get it that it was pretty challenging in trucks. But even for RVS, I mean, the organic drop-through is pretty anemic this quarter.

Yes. If you just look quarter-over-quarter, like I said, we had last year a very strong Chinese quarter 2. If you remember, we had the discussion here with quite some questions on that very strong quarter 2 in China and which is something that is definitely not repeating itself this year around. We said we had some pull-ahead effects already in the second quarter, which turns out to be true and we're coming to the third quarter and to the fourth quarter of '24. So expect to see a better organic conversion moving into quarter 3 and quarter 4 for rail.

Okay. Okay. That sounds pretty great. So a better organic conversion in Q3 and Q4, but do you also expect to see a step-up in organic revenue growth for RVS in Q3 and Q4 compared to H1?

Yes, this should be a level that should be higher than the 4%.

We are moving on to the next question. The next question comes from William Mackie of Kepler Cheuvreux.

A couple of questions, probably more higher level. The balance sheet is really strong. And I wonder if you could just talk conceptually about the strategic flexibility you have to develop the portfolio in terms of theoretically what sort of leverage rate you could take it to? And building on that discussion perhaps and what I think Sven had asked earlier, perhaps touching on where you see live opportunities to expand the portfolio, perhaps driving into that digitalization and service segments that you've flagged before that are adjacent to your business? And also how you're progressing with the divestment -- the final divestments that you had on the table as part of one of the later stages of the Boost program?

Thanks, Will. Totally different angle now. That's good. So strategic flexibility, yes, I mean, we have currently net debt-to-EBITDA leverage of around 0.6, so to say. We have -- or I have always said that I feel totally comfortable with one, no worries at all. Even above one to some extent is for me absolutely no issue if the right target comes along, fulfilling the criteria that we have set. So this is a bit the way we are thinking. We have no issue with one, slightly above one if the right target comes along. So we still have some opportunity. That is the first answer.

The second is, I mentioned it already, I think it was Sven somehow indicating that we have certain target areas to do something in terms of M&A, if anything would be coming along. It's definitely -- we are a resilient company based on the strong aftermarket that we are having. So the aftermarket area for both divisions is definitely a focus field where we're looking at to expand our ecosystem in that regard is definitely something the digitalization of businesses, be it OE products, but also aftermarket products on the digitalization side is something where we are pretty much interested.

We have also opportunities to expand our signaling business, of course, more globally, which could then also be something where we find bits and pieces here and there. And we always said that if we would want to do something in that regard, we would need some acquisition because we don't have the complete set of knowledge, respectively, products at hand here. So those are, I would say, some 3, 4 life examples that I can give you.

Third element, how we can't even read my own handwriting .

We have basically some 60% of everything we have initially planned achieved as of now. Now it's been quiet for some months on our side in regards to divestments. Last one was in January. So we have some EUR 300 million roughly, nearly a bit less than EUR 300 million still to go out of which we have one bigger, let's say, bigger animal on the plate currently, which is part of the rail business. It's not the brakes business. It's not the doors business. So this business is in the production side, pretty much integrated into the other businesses. So that means in North America, in Europe, in Spain as well as in Australia. We have we have to do carve-outs, technically do some carve-outs. That takes a bit of time. We are on plan to approach investors after summer break. We should be able to start that. But it took a bit of time to divide the FTEs from one bucket to another and have the carve-out entities ready.

So we are on track. It took a bit of time. We knew it took a bit of time, and we hope that we can sign it towards the end of the year. This is still the plan. And this is the big chunk. And with that, we would be even able to overachieve the EUR 700 million that we originally indicated.

That's wonderful. My second sort of area of questioning was perhaps in a couple of buckets around gross margins. I wonder if you can just speak to a couple of questions. Firstly, how would you describe the gross margin development in the backlog for rail? Should we expect that as that backlog converts, it becomes accretive to the underlying profitability? And secondly, with regard to gross margins in CVS or more generally, in this downturn across the European and North American markets, have you seen any change in the level of gross margin perhaps due to tariff costs or other factors? Or looking towards your 13.5% goal, are we basically -- is that dependent on volume and operational leverage?

First of all, I'm not 100% sure whether I understand the question regarding RVS pretty clear. Pretty clear, we have had difficult times in '22 and '23 regarding the high inflation situation where we had the significant cost pressure but at the same time, couldn't pass on to the full extent to the customers on some of the contracts. But all the order intakes that came in, I would say, starting from beginning of '23, all have the same good margin quality that we had in the past, plus, of course, the strategic necessity on top targets that we should need to have in rail. So all the new incoming orders since we counter steered after we got hold of the inflation situation is totally covering that target aspiration of future RVS margins.

[indiscernible] that your worry still? We still have that -- we have, again, that margin quality. We only had a drag of a year where we had difficulties back in '22. On the CVS side.

No, absolutely. No worries with Knor-Bre. I just get the detail of the opportunity, yes.

Yes. Okay. On the CVS side, no structural changes, except also back in the days, of course, for the high inflation times, we had raw material increases and all that stuff, but that's all kind of normalized and already state-of-the-art kind of -- but we have a bit of temporarily sitting tariffs in the P&L, even as we speak, which has, so to say, it's a phasing effect. It's not something that we intend to swallow, and we will work very hard in order not to swallow it ultimately, but it's still sitting in our P&L as we speak, maybe for 2 months, 3 months, 4 months, depending on the lead time of the certain products. But overall, we are trying very, very hard, and this is what we intend to do to pass over all the tariff costs to the customers.

And the fourth element -- second element of your third question, of course, when we announced the Boost program in summer of '23, the assumptions for the market in truck were roughly that from '23 onwards towards '26 they should be rather stable to 1% increase CAGR. That's what we discussed plenty of times. So we didn't plan for a big growth of the truck markets, not at all. But of course, we didn't plan for a reduction of 10% to 20%. This is also true.

Yes. And that's why we always said the 13.5% is maybe more difficult to achieve.

[Operator Instructions] Moving on to the next question is from Lucas Ferhani of Jefferies.

I have a first question just on that point on tariffs. Can you talk a little bit about the headwinds you have on the margin that is related to tariffs and kind of the difference between rail and trucks there? Obviously, is pretty small, the business there, but it would be interesting to understand the headwinds from tariffs there.

Yes. Lucas, thank you very much on that -- for that one. We've been pretty blunt, I think, with you all since the beginning of that discussion. We are since decades, I would say, as Knorr-Bremse, a company that's very decentrally organized. We always went there where the markets are. We are having high localization rates basically in the countries we serve. And therefore, we are not pulling the localization rabbit out of the head just now as the tariff discussion starts. So this is part of the DNA of Knorr-Bremse ever since. And I told at the beginning of the year when it all started that we maybe have a gross exposure on tariffs of EUR 200 million to EUR 250 million, EUR 250 million, I think is somehow the dimension. It's a bit more on the truck side than it is on the rail side. That's the color I can give to that number.

And now it's about what are the commodities. Ultimately, once there is an agreement there or not there, this is what we will see in the end. Like I said before, we have for a half year now -- so basically, it's 4 months it's the end of March, and it's the second quarter, we have some nearly EUR 10 million sitting in our P&L. temporarily, as I said, temporarily, this is the effect that we had so far in 4 months.

Perfect. It's understood. And then the second one was just on U.S. trucks. Can you provide a bit more details on your discussions with customers at the moment? And specifically, is kind of one of the issue, tariff and the uncertainty around it and the difficulty maybe on pricing trucks and making sure that they're ready to produce or also kind of general kind of macro uncertainty related to that? Because obviously, we're getting more clarity on tariffs. There are several deals that are being signed and to an extent that's removing a little bit that headwind? Or do you think the underlying market outside of that uncertainty is also weak?

Thanks, Lucas. With all the topics we are facing in an industry, we're happy that we don't have to deal with the pricing of the customers' trucks. So that's one topic that we don't care about as our priority #1. But joke aside, let me see it this way. It's extremely difficult to predict how the situation in the Class 8 and Class 6 to 7 is, of course, also relevant for us, but the biggest chunk is Class 8, how the market will really develop. so many determinants out there who would increase, reduce those levels. We see -- yes, we see retail stock levels at quite a big number. It's more than 90,000 trucks, if I'm not mistaken, already there. It's a bit of a similar situation like we had towards end of last year.

I think it was October, November when also there were quite some high stock levels, which then resulted in lower production. Long story short, so many ingredients, we think about roughly the truck market for Class 8 should be on a level for the full year of 250,000 units, give and take, 5,000 units more or less doesn't move really the needle. So that's roughly the dimension. We have roughly seen half of it already in half year 1 and so a similar dimension roughly in the second half of the year. That's the situation.

The days -- the closure days of plants for the customers are not excessive as we can see compared to previous years. Only one of our customers is closing down in July and August more than 10 days. It's only one and the others are in between 5 to 8 days as far as we know at this point in time for our -- according to our EDI systems. We see, yes, that the order intakes are quite significantly down in the U.S. compared to last year's quarter 2. But so many things around influencing that market. We still see a lot of uncertainty out there. Everyone you ask basically gives you a bit of a different answer. That's our guess at this point in time.

Perfect. And one last follow-up on that point U.S. trucks. I know that, obviously, the situation is difficult, but is there any still kind of discussion around kind of EPA changes and whether these are still coming or not or any way your kind of customers are preparing for that or it's no longer a topic at all?

Yes. Also here, it couldn't get more controversial if you just listen to some of the OEMs, which I don't name now, but the one is saying he still believes in some EPA prebuy and even already in '25, the others are saying not even in '26. So -- and I have to admit the OEMs should be much closer, of course, to it to those emission effects, so to say, that are deleted or reduced in aspiration. I don't know about the 30 adjustments that potentially should be made to the EPA regulations. We don't know the details there. But we have anyhow not never said that we expect any revenue impact for us in the year '25. So it's not of relevance anyhow whether there is something coming or not. It would only be a surprise if something would come in '25, but we don't believe that. In regard to '26, let's wait and see how the discussions will go and the clarifications will go.

Moving on. The next question is from Holger Schmidt of DZ Bank AG.

I have 2 questions. When you acquired [indiscernible], you talked about a potential larger project tender. I think the volume was EUR 600 million, EUR 700 million. Is this project still in the market? Has it been canceled or just being postponed? And then the second question is on the global AI center in Chennai. What kind of impact do you expect this to deliver? And when can we expect a positive impulse out of it?

Sorry, please forgive me, Holger. The second was about Chennai. Okay. Okay. Let me start off with the first. You know that a bit of difficult political times we have since quite some months. The situation in regards to the time line of the project, that project in North America, not necessarily the U.S., but North America is still not clear. There have been delays over months due to political circumstances, which is out of our control, completely out of our control. So we can't say at this point in time. It's still delayed and discussions are ongoing, but it's still not clear whether it kicks in at the timing that we agreed within the SPA. So it still needs a bit more time still and the EUR 600 million to EUR 700 million for the other listeners was always a multiyear view, of course, the integral of multiyears in regards to revenue potentials that we saw back there for that one.

The second question is on our AI center. Yes, we are striving. You know that we are -- we have been always and we are still striving, of course, for on the one hand side, synergetic moves within the group wherever we can grab them. At the same time, of course, for the latest and greatest in regards to technology and the combination of those 2 aspects is the creation of that hub in Chennai, combination of rail and truck, artificial intelligence and innovation center that we are doing. We have so far had certain bits and pieces here and there, and we are doing a combined approach now with the Chennai office and more even to come.

I mentioned to several of the colleagues already at conferences, of course, that we are doubling down in India. You know that Mark mentioned that as well already a year ago. We believe in India. We believe in the growth potential of India in both divisions. And so we have agreed to spend nearly EUR 100 million, so to say, in the extension of our footprint in India over the years. And there is quite something to come still for us in order to really harvest everything that we have in India as a potential, as I said, for both divisions. So it's just a start into our doubling down in India, what we have seen here.

Okay. A follow-up on the large project here. I mean if it's not going to kick in, in the time agreed, do you get some kind of compensation?

Yes, Holger, good question. Yes, there is -- yes, it's exactly the way you described it. It's regulated in the SG&A, what would happen in that case. Yes. USD 30 million that we would get back, which is somehow the net present value of the project overall that we would get.

Moving on to the next question. The next question is from Tore Fangmann, Bank of America.

I just once more have to come back to the North American truck outlook. So if I understand correctly, you expect the truck production in line with H1 in North America. But as I see it, most truck OEMs have recently announced layoffs in the region, seemingly looking to reduce their production rate. Has this come up with your recent discussions with them? Or is there any reason why there's a difference in the view?

So thanks, Tore. That's not a contradiction at all. We have also reduced our workforce in North America accordingly. Maybe the one is a bit faster than the other or the other way around. I don't want to touch on this, but we have also adjusted our workforce structures. Usually, we have some 10% to 15% always this kind of flexibility in the [indiscernible], basically kind of in a nutshell, a global number, 10% to 15% is the flexibility we have consisting of temps and some other flex time workers, and we have done the same thing. So both messages, I would say, are not contradicting each other.

But you're not planning to reduce the production there. You just -- so you can have still the same production basically with fewer people in the factories.

Yes. Yes. The current production, we're not producing the same amount like we have produced last year. That's obvious because the market is down. But as of today, looking into the future of the year, we keep that production with -- compared to last year's lower number of people on the shop floor and in the management as well and white collar as well, needless to say.

Next question is from Vlad Sergievskii of Barclays.

First question is on China Rail business, please. In 2023 strategy presentation, you expected your rail revenue in China to bottom at around EUR 650 million this year. Could you update us what are you now expecting in terms of China revenues this year based on what you have seen recently? And how this new expectation is compared to the EUR 650 million previously?

Thank you, Vlad, for that question.

[indiscernible] up on sales for the last 3 years, isn't it?

Vlad, I hope that your target share price is correlated to that EUR 650 million or 1/10 of that EUR 650 million. So maybe with the news I give you now, we have potential to increase it. You are right, flat, fully right. We have given the very difficult years of '21 and '22, where we have been taken out of the market to a large extent, we have been losing market share. The everbreendy situation kicked in, the real estate market complications, all that kicked in and our assumptions going forward back in the days were that the market should normalize for us on a very stable level in China, Mainland China of around EUR 650 million, maybe even a year that it could go down to EUR 600 million.

That was the rationale behind it, given a not increasing metro market and even a stable kind of high-speed market going into the future. The situation now is that the high-speed business is doing better than we expected it to do back in the days. We thought that maybe 100 to 150 high-speed trains should be built a year. Going into the future, we are now at the level of roughly 240, 250 high-speed trains a year. We are having a better aftermarket than we expected back then. The ridership levels and China is still the only country in this world where ridership levels nowadays are exceeding 2019 numbers by far. So they are more than 20%, 25% higher than what we had -- what China has seen in 2019. So better ridership levels and better high speed brought us to levels which are now, I would say, above EUR 700 million, close to EUR 750 million when it comes to Mainland China alone. So that's the situation, I would say.

So maybe EUR 100 million up compared to what we back then thought driven by those 2 things. At the same time, Metro is a bit weaker, the metro market. So no increase yet due to real estate market coming back. So a bit the situation there. If that's okay for you, Vlad, or should I go into more details.

That's great. That's super helpful. I appreciate you sharing this. If I can also ask you about the book-to-bill at Rail. Obviously, as you mentioned, 15 quarters of F1, very solid and consistent performance over here, which is great to see. Would you be able to give us some color of how this order intake at Rail is split between new equipment orders and service orders? Is this split roughly consistent with what you report in revenues or backlog duration in one part or the other is expanding faster?

First of all, like I said, the book-to-bill ratio is significantly above, not a steady state, of course, yes. We always -- and this is the clear plan and also looking at the tenders that are out there in the market, something above -- slightly above 1.5 -- 1.05, sorry, not 1.5 is something that we would need going into the future when it comes to achieve our revenue case for the business. And so just not that anybody is worried if there would be a quarter where our order intake book-to-bill is not that fantastic like it used to be. It doesn't have to be. We don't know how to get the production capacity if it would continue with 1.2 going into the future. The split of order intake is roughly in a similar dimension like you see on the revenue side of things between OE and aftermarket. That's also somehow the split of order intake.

Super helpful. Final quick question from me. Obviously, you have seen consistent increase in share in aftermarket and rail, I would say, pretty much since 2019, where new equipment revenue has been broadly flat and aftermarket grew quite a bit in rail. Is that the trend you expect to continue? Or there is a point when new equipment growth starts to outperforming aftermarket growth in rail?

Dear Vlad, there was a bit of a noise in the line. Can you repeat again which trend I see changing or confirming it?

Yes, absolutely, Frank. So the question is on the split of revenues in rail between new equipment and aftermarket. So aftermarket has been growing the share in overall RVS revenues pretty much since 2019, while the absolute euro million level of new equipment revenues in rail has been broadly stable for the past 5, 6 years. So the question is, is there a point when new equipment starts to outgrow aftermarket within the revenue mix or aftermarket will continue to gain share?

Thank you. Obviously, it's a mix -- it's a heterogeneous product mix that we're also having, and we're having also, of course, as you know, the regions. So we have the brakes business, we have doors business, and we have also HVAC business. And we are, of course, strategically striving to grow our aftermarket a bit stronger than the OE business. That's a strategic target that we are having. Of course, OE should grow as well. That's clear, but aftermarket a bit stronger. We have achieved, of course, a stronger aftermarket growth in the past. This will now be the challenge to go into the future to keep the OE business stable is definitely not the strategy to go into the future. It's -- we expect both on the OE side as well as on the aftermarket side with a bit better growth rate on the aftermarket side.

At the moment, there are no questions in the queue. [Operator Instructions] There seem no more questions to be incoming. So with that, I'm closing the Q&A session and handing the floor back over to the host.

Thank you very much.

Thank you very much. We wish you a very nice summer holiday break and looking forward to meet you and talk to you next time. Thanks, and bye.

Thank you. Bye-bye.