Knorr-Bremse shares boosted as company enhances revenue expectations post successful quarter
Knorr-Bremse Strengthens Market Position with Hitachi Acquisition
In a significant move, German braking systems and rail technology company Knorr-Bremse has acquired Hitachi's truck brake business, bolstering its position as a global market leader. The acquisition, which took place at the end of March, is expected to positively impact Knorr-Bremse's operating results by expanding its product portfolio, technological capabilities, and customer base in commercial vehicle braking systems.
Ralph Heuwing, Knorr-Bremse's Chief Financial Officer, made the announcement to news agency Reuters. He stated that the company aims to stay ahead and integrate Hitachi faster than ZF with Wabco, a significant competitor that is being acquired by ZF Friedrichshafen.
The acquisition has reinforced Knorr-Bremse's position in the market, as it continues to secure new business, such as advanced autonomous truck braking and steering systems for a major Japanese manufacturer. This move comes as the brake components market, including brake yokes and brake-by-wire systems, is growing steadily with a CAGR around 6%, driven by safety regulations and the adoption of advanced driver-assistance systems (ADAS).
Knorr-Bremse's ongoing investments, such as expanding its truck manufacturing facility and AI capabilities, indicate a strategy to capitalize on increased scale and innovation following acquisitions like Hitachi’s brake business. The company's high market shares in the truck business have prevented it from making moves in response to the Wabco acquisition, but the addition of Hitachi's truck brake business is expected to increase Knorr-Bremse's operating result (Ebitda) by approximately 50 million euros.
In the first quarter, Knorr-Bremse's sales grew by nine percent to 1.76 billion euros, and its order intake grew by five percent to 1.89 billion euros. The operating profit margin (Ebitda margin) in the first quarter was 19.0 (18.3) percent, which falls within the expected range for the full year.
However, a dispute over Bosch's exit has been referred to arbitration. Bosch, a current partner of Knorr-Bremse, wants to sell its 20 percent stake in Knorr-Bremse's commercial vehicle subsidiary due to its entry into the steering systems business. Knorr-Bremse has not yet commented on how the potential departure of Bosch will affect their business.
Despite the potential slowdown in the second half of the year, Knorr-Bremse aims to offset it through larger delivery volumes per vehicle. The company also benefits from the growing aftermarket business in train brakes. The cooperation with sensor supplier Continental is gaining importance for Knorr-Bremse, as brakes and steering systems are becoming more integrated in trucks.
The decision regarding the dispute is not expected until the end of the year at the earliest. In the meantime, Knorr-Bremse's share temporarily increased by two percent due to the improved outlook. With the acquisition of Hitachi's truck brake business, Knorr-Bremse now predicts an operating result (Ebitda) of 1.27 to 1.38 billion euros for the year.
In the strategic acquisition of Hitachi's truck brake business, Knorr-Bremse seeks to leverage opportunities in both the finance and technology sectors, aiming to stay ahead of competitors in the industry. The incorporation of Hitachi's capabilities is anticipated to bolster Knorr-Bremse's product portfolio, particularly in advanced autonomous truck braking and steering systems.
