Knorr-Bremse ETR: KBX reported higher second-quarter revenue and profitability, driven by growth in its rail business and improved execution in its commercial vehicle systems division. The company raised its full-year 2026 outlook and introduced its “Growth Beyond” strategy, which targets approximately €10 billion in organic revenue and a 16% operating EBIT margin by 2030.
CEO Marc Llistosella said the quarter was “very strong” for the company, with both Rail Vehicle Systems, or RVS, and Commercial Vehicle Systems, or CVS, contributing to the performance. Group order intake exceeded €2.2 billion, while revenue totaled €2.1 billion, representing organic year-over-year growth of more than 6%.
Operating EBIT margin rose 110 basis points from a year earlier to 14.2%, which Llistosella described as the company’s highest quarterly result in five and a half years. He said the result reflected not only supportive markets but also structural improvements made through the company’s BOOST transformation program.
Rail growth and truck profitability improve
RVS revenue increased 7% to €1.18 billion in the second quarter, including organic growth of around 5%. Original-equipment revenue rose 24% to €557 million, supported by project execution and demand across regions, while aftermarket revenue increased slightly to €628 million and represented 53% of division revenue.
RVS operating EBIT margin improved by 100 basis points to 17.5%, supported by operating leverage and BOOST efficiency measures. The rail division’s order intake declined 12% to approximately €1.14 billion, producing a book-to-bill ratio of 0.96. CFO Frank Weber said rail is project-driven and quarterly ordering patterns can be uneven, while its order backlog grew 6% to more than €5.9 billion, near a record level.
For the current quarter, Weber said RVS revenue should remain broadly in line with the second quarter, with profitability increasing slightly. The company expects the rail division’s full-year operating margin to reach around 17.5%.
CVS revenue rose to €959 million, including 8% organic growth. Original-equipment revenue increased 5%, and aftermarket revenue grew 12%. Weber said both businesses grew in every region, including China, while North American revenue rose 6% despite challenging truck production levels.
CVS operating EBIT increased to €114 million, with margin rising 150 basis points year over year to 11.8%. The company attributed the improvement to transformation measures, operational discipline, a favorable business mix and a lower cost base.
Knorr-Bremse expects CVS organic revenue to grow at a low- to mid-single-digit rate for full-year 2026 and anticipates an operating EBIT margin of around 12%. Management said current-quarter revenue is expected to be flat sequentially, while profitability should increase slightly.
Guidance raised as cash flow strengthens
Based on first-half performance and its outlook for the remainder of the year, Knorr-Bremse increased its 2026 guidance. The company now expects:
- Revenue of €8.1 billion to €8.3 billion;
- Operating profit of €1.4 billion to €1.45 billion; and
- Free cash flow of €750 million to €850 million, with management expecting results toward the upper end of that range.
The outlook assumes geopolitical and economic conditions remain broadly stable and that the Middle East crisis does not escalate or cause extended supply-chain disruptions.
Weber said second-quarter free cash flow reached €262 million and first-half free cash flow totaled €294 million, supported by higher earnings and somewhat improved working capital. Net working capital included a roughly €20 million positive one-time effect from reimbursement of previously paid U.S. tariffs. Return on capital employed rose 250 basis points year over year to 23.8%.
Portfolio restructuring and Growth Beyond strategy
The company said it signed an agreement to sell its HVAC business and expects the transaction to close by the end of 2026, subject to antitrust-related timing. Llistosella said the sale completes the divestment program announced under BOOST. Knorr-Bremse has sold five companies with combined annual revenue of approximately €750 million.
Management said BOOST helped reduce fixed costs and streamline the organization. Headcount declined from 33,000 to 30,500 including HVAC, or 29,200 excluding HVAC. The company said its “Sell It and Fix It” actions improved operating EBIT margin by more than 200 basis points.
Under Growth Beyond, Knorr-Bremse plans to prioritize margin-accretive organic growth, selective acquisitions, ongoing cost efficiency and artificial intelligence as an operational enabler. The company will direct capital toward businesses with higher growth and margins while maintaining financial discipline established during BOOST.
Energy technology is one area of focus. Knorr-Bremse combined its Microelettrica and Zelisko activities into a single business unit within RVS. Weber said the businesses currently generate approximately €250 million in revenue and the company aims to double that figure organically to about €500 million by 2030 while maintaining margins that are accretive to the group.
2030 targets emphasize organic growth
Knorr-Bremse’s 2030 targets are based on organic growth and exclude potential value-creating acquisitions. The company aims for approximately €10 billion in revenue, around a 16% group operating EBIT margin, cash conversion above 90% and return on capital employed above 25%.
RVS is targeted to deliver average annual revenue growth of more than 7% through 2030 and an operating EBIT margin of about 20%. Management cited aftermarket expansion, signaling, smart electronics, power and grid applications, freight and renewed opportunities in China as growth platforms.
For CVS, Knorr-Bremse sees operating EBIT margin potential of roughly 12% to 14%, depending on market conditions in Europe, North America and China. Weber said the division expects to outperform underlying truck markets through aftermarket expansion and increased vehicle content, including longer-term opportunities in electrification, autonomous driving and software.
Management said acquisitions remain an additional source of growth but must meet requirements for value creation, profitability, cash generation and capital efficiency. Weber said the company has theoretical acquisition capacity of about €5 billion while maintaining an investment-grade credit profile, though he added that Knorr-Bremse has no current plan requiring that level of funding.
About Knorr-Bremse (ETR:KBX)
Knorr-Bremse AG, together with its subsidiaries, engages in the development, production, marketing, and servicing of braking and other systems for rail and commercial vehicles worldwide. The company operates in two segments, Rail Vehicle Systems and Commercial Vehicle Systems. The Rail Vehicle Systems segment offers braking systems, entrance and HVAC systems, sanitary systems, coupling systems, digital solutions, smart services for optimizing rail traffic, power electrics, rail computing and communication (RCC)/TCMS, signaling systems, stationary and mobile testing equipment, windshield wiper and wash systems, and extensive aftermarket solutions.
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