Dear ladies and gentlemen, welcome to the quarterly financial report of Knorr Bremse AG regarding the presentation of the Q1 2019 results. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Andreas Spitzauer, Head of Investor Relations, who will lead you through this conference.
Head of Investor Relations of Knorr Bremse. I want to welcome you to Knorr Bremse's conference call for the Q1 2019 results. As a reminder, the conference call will be recorded and is available on our homepage, www.knor bremse.com in the Investor Relations section. You can find today's presentation there as well. It is now my pleasure to hand over the call to Rolf Hoiving, the CFO of Knob Ramsey.
Please go ahead, Roy. Yes.
Thank you, Andreas, and also thank you, Ms. Sanders. Dear ladies and gentlemen, I warmly welcome you to our conference call for the Q1 results of Knob Ramsey in 2019. Sorry for the background noise. First of all, I would like to present the highlights for the 1st 3 months of the year followed by a more detailed explanation, especially on the divisional level.
Thereafter, I would like to conclude my presentation with an updated outlook for the rest of the year, followed by our Q and A session. Let's start with Chart 3 and our quarterly highlights. Considering the increasing uncertainty in the global economy, Knob Ramsey's start into 2019 was actually very successful. Our performance was also remarkable when compared to other segments in the industrial goods industry such as automotive. We continued to grow profitably and managed to push further ahead with our strategic agenda to broaden and deepen our product portfolio in both rail and truck.
Orders received reached €1,900,000,000 a new record value in a single quarter and an increase of more than 5% year on year, a notable performance. At €1,800,000,000 Euro's revenues were 9% stronger compared with last year's performance. This dynamic development was driven by both divisions and across all major regions. Going forward, the strong book to bill ratio of 1.08 and the record order book of €4,700,000,000 provides good visibility and should support revenue development in the coming quarters. EBITDA margin improved to 19% in the Q1 of 2019 after 18.3% for the same quarter last year.
Despite some cost burdens that we already saw in the last quarters of 2018, our operational performance was solid. In Q1 2019, we benefited from the 1st time application of the IFRS 16 standard, 2, accounting The main objective of these transactions, which are displayed on Chart 4, was to strengthen, complement and expand our strong market positions in rail and truck. We're able to broaden our product portfolio and at the same time improve time to market and access to customers with new solutions and services. It's important to us that we leverage our market leading position in innovation and technology for growth in new products and services, which is the foundation of our business success. Especially the acquisition of the steering business of Hitachi Automotive Systems is an important step to combine steering and braking.
Together, those two systems will be the key actuators for advanced driver assistance systems and highly automated driving technology. The closing of the acquisition was end of March and we will account for the revenues and profits within the CVS segment starting in the Q2 of 2019. In addition, our truck division made a second investment in the field of steering. We took the 50% stake in Sentient, a Swedish company developing software for vehicle motion control and steering applications for trucks. These products assist the driver in avoiding unintended lane departure or resisting disturbances from the road and tires without compromising the steering feel.
On the rail side, I want to highlight first of all rail vision. We acquired 21% stake in this Israel based company, which is active in the field of sensoric vision and creates visibility for up to 2,000 meters ahead of a train. Based on infrared and video technology, RailVision provides obstacle detection capabilities, which are key for realizing automated driving functions. We also bought the U. S.-based company, Schneider, which is an industry leading manufacturer for example, of service equipment for locomotives.
Its know how includes remanufacturing of RBS equipment. With Schneider, we will further strengthen our aftermarket revenues in the North American market of RBS. Last but not least, our Rail division took a 32% stake in Renaultva. This Belgian technology company provides both fleet and maintenance workflow software and telematics solutions for the railway industry. Let me now dive deeper into our results in Chart 5.
Our order intake on group level for the 1st 3 months of this year was up more than 5% compared with the same period last year. Please note that this was predominantly organic growth. The positive FX tailwind contributed approximately 2 percentage points to our order growth. The order book as well increased to a new record level. With €4,700,000,000 we have visibility of more than 8 months sufficient time to respond to any potential market changes in the coming quarters.
Our revenues grew even faster at 9% and came in at €1,760,000,000 for the quarter. All major regions contributed to this development. FX tailwind added approximately 2 percentage points. The strongest growth contribution, Actually with some distance came from North America. Here, the revenue growth of 27% was clearly outstanding, reflecting good momentum in metro freight locomotives for our rail division as well as content growth for our truck division.
It, of course, was also positively influenced by an FX effect amounting approximately to 9 percentage points. The region Asia Pacific delivered a growth rate of 8% and Europe achieved 3% in revenue growth in the Q1 of 2019. Let me continue with the explanation of our profitability on Chart 6. Our EBITDA followed suit with our revenue growth. Group EBITDA came in at €334,000,000 up 13% compared with last year.
This equates to a margin of 19%, 70 basis points higher than during the same period last year. The performance in 2019 provides a solid basis to reach our profitability goal in 2019. This increase in profitability was supported by a change of accounting standards. On a like for like basis, I. E, ex the IFRS 2016 impact, our EBITDA margin was at the same level of 18.3% as the Q1 2018.
Let me highlight though that the Q1 of 2018 EBITDA margin was considerably stronger than the Q2 of 2018, which reached only 16.8%. Main reason behind the margin development in the Q1 of 2018 was the reversal of provisions, which took place in the other EBITDA line, the difference between the group EBITDA and the divisional EBITDA. Normally, the underlying other EBITDA should line should be negative in the mid to high single digit €1,000,000 range per quarter, driven mainly by central costs. In summary, we consider the margin development in the Q1 2019 to be rather strong. On an EBIT level, we're able to increase margins too, driven by lower depreciation.
The Q1 of 2018 had seen an extraordinary write off of assets held for sale, which you will remember actually got sold off in the 4th quarter. EBIT margins increased by 140 basis points with almost no tailwind by IFRS 16. At 15.6%, our EBIT margin continued on the strong level of Q4 2018. Turning to slide 7. Our operating cash flow in the Q1 of 2019 improved by 9% year on year despite the revenue growth driven increase in net working capital and higher investments predominantly in capacity expansion.
In the quarters to come, we expect to strengthen our operating cash flow mostly by improving net working capital. ROCE was somewhat lower at 32.2% in the Q1 of 2019. The decline reflects the first time application of the IFRS 16 standard with approximately 3 percentage points as well as the higher level of trade accounts payable. For the later topic, we expect an improvement in the next quarters. The increase in CapEx reflects capacity expansion for the continued demand for adhes breaks in North America as well as the Munich based site development.
Let's move on to the divisional view, starting with RVS on Slide 8. In the Q1 of 2019, order intake of rail vehicle systems was up 10%. For the first time, we're able to post an order intake of more than €1,000,000,000 in 1 single quarter, a new record level. Drivers for the strong development have been several, the high demand from the metro segment in Europe, North America and Asia. Additionally, we won several orders for freight cars and locomotives in North America.
And finally, order intake in our aftermarket business continued to grow at a healthy rate. Based on the strong demand for our products and services, our order book advanced At the end of the Q1, it reached a level of more than €3,300,000,000 Hence, our visibility stood at 11 months of revenue. Moving on to revenue and profitability for the Rail division On Page 9. In the 1st 3 months of 2019, revenue increased by over 9% to €911,000,000 In Europe, top line growth was supported by the OE development and the segments freight cars, regional and commuter as well as metros. In Asia, we realized good developments in our Indian OE business and in our Chinese aftermarket growth.
There we see that increasing numbers of high speed trains, which we delivered 8 to 10 years ago, are entering the first phase of overhauls. Given that our OE products are often quite captive in the aftermarket business, we expect that our Chinese aftermarket will be an important growth driver for our top line going forward. Currently, we have established 29 service locations in China, which are a clear USP in terms of being close to our customers. Our OE business in China developed solidly. In the region North and South America, revenues benefited from good demand for onboard systems, a strong aftermarket business and a positive development in Trade segment.
The development of RBS profitability in the quarter was especially satisfying for us. EBITDA grew by 27 percent to €200,000,000 and EBITDA margin was 21.9%. Even excluding the positive impact by IFRS 16, the margin was well above 21%, outgrowing last year's figure. The drivers for this strong performance were: 1st, positive volume effects with corresponding operating leverage second, support from our aftermarket business and its impact on mix and third, the disposal of the loss making business of Blueprint and Zydec end of last year. On Slide 10, I'd like to continue with the development of our Truck division.
Order intake for CVS was €859,000,000 in the Q1 of 2019, which is basically on the same level as the year before. Currently, we assess the demand in the truck division by our customers overall as healthy and solid. In the U. S. Truck production numbers have further risen and we benefit from a high order book from The Chinese market, just by size and nature of the business, is more volatile.
Right now, with the truck production rate down by 1.2% year over year. The market is normalizing from pre buying activities in the past. We The new emission standards, however, which will be introduced next year to be supportive for our order intake in China in the quarters to come. We expect a stable truck production level in the European markets. TPR is still on a high level.
In the Q1 2019, our order intake benefited from increasing content per vehicle across the globe, but particularly in North America, Especially the higher demand for products in the field of driver assistance systems as well as the ongoing migration for drum brakes to air disc brakes were the drivers behind our growth. Overall, we were able to book a solid performance from OE orders across all major markets. The order book for our truck division was at €1,380,000,000 at the end of the Q1 2019. This provides a visibility of 5 months revenue, a comfortable level to adjust capacities if and when needed. Let's move on to Slide 11.
CVS posted €846,000,000 in revenue for the Q1 2019. Compared with last year's figures, this is a strong increase by more than 8%. With this development, our truck division was able to substantially outperform the corresponding global Q1 production rate of trucks, which advanced by a moderate 1.6%. The basis for this outperformance lies in the ongoing growth of content per vehicle and a favorable geographic mix. In Europe, we saw solid revenue development too.
In the Q1 of 2019, CVS achieved over €140,000,000 in EBITDA at a margin of 16.6%. In comparison with last year's rather strong Q1 EBITDA margin, this was slightly lower, but it continued at roughly the same level that we saw in the 3rd Q4 last year. The drivers for this development were like in recent quarters as well, material cost inflation and ongoing supply chain constraints, which the whole industry has been facing. We're working hard to address these issues and hence have initiated a program to improve our European cost structure. In addition, we witnessed slightly lower aftermarket share in sales, which was predominantly driven by our strong OE performance.
Moreover, we are prepared for the eventuality that truck production rates should fall towards the end of the year. For that case, we have designed our costs program in such a way that we can quickly escalate it to the next level if and when needed. On the other hand, we continue to invest strongly in our future, especially we are focusing on the field of highly automated driving and advanced driver This is actually a good moment to talk about our steering acquisition on Chart 12. We closed the acquisition of of the commercial vehicle steering business of Hitachi Automotive Systems as announced on March 29. In the future, it will operate under the name Knob Ramsey Steering Systems Japan.
As you will remember, Our strategic rationale behind this acquisition was, 1st, to strengthen our position in steering, which is coming closer together with braking in a highly assisted and automated driving scenario. 2nd, to gain better market access in Japan and in China, 2 important truck markets globally and third, to expand our product portfolio of CVS and hence Further strengthen content per vehicle. Going forward, KB Steering Systems Japan will be responsible for the development of our global talk overlay system as an important enabler for motion controlling within automated driving for commercial vehicles. For the rest of the financial year, we expect that this new unit will contribute approximately €60,000,000 in revenue, An EBITDA margin of approximately 10% and an EBIT margin before PPA of almost 7%. For the time being, this acquisition will dilute our CVS and group margin to some extent.
On the Slide 13, we put together the main effects on our top line guidance when comparing 2019 with the previous year as well as the bridge towards our updated guidance following the acquisitions. Last year, you remember that we disposed subsidiaries which did not fit to our strategy and were loss making, namely SIDAC and BLUEPRINT. Together, these had posted revenues of €68,000,000 last year. Starting from this normalized basis, we expect organic growth between 3.8% and 6.9% in 2019. This is unchanged compared to what we said in our preliminary results and in our annual reports.
Also for purpose of clarity, it refers to the FX rates prevailing in March 2019. In addition, the acquisitions of the last month are expected to support our top line by €75,000,000 in 2019. This leads us to an updated revenue guidance of EUR 6.875 billion to EUR 7.075 billion in 2019. On Slide 14, following the same logic, we have put together the main drivers for our profitability when you compare 2019 with 2018 as The one time disposal and operating losses plus the IPO costs accounted for in 2018 should add 60 basis points to our 2,009 margin. The first time application of the IFRS The impact on the balance sheet and the respective FDIs has actually been disclosed in our annual report.
At the same time, we expect that the acquired companies are not or not yet contributing at the same level of profitability compared with our existing business. And therefore, We expect a small dilution of 20 basis points. We do, however, expect them to catch up and improve their profitability in the coming years. Putting all these topics together, we expect now an updated EBITDA margin of 18.5% to 19.5 percent in 2019. In essence, our underlying guidance for top and bottom line is confirmed and just updated for accounting changes and acquisitions.
Last but not least, I want to mention that despite the fact that almost all of our business units Show a strong financial performance, we are diligent and decisive in addressing signs of weaknesses or underperformance. In this spirit, we announced the closure of our steering plant production operations in Wolfhard in Germany last week. We had already flagged potential restructuring efforts in the IPO prospectus. Following The early termination of a large passenger vehicle steering order, the Hitachi acquisition and a redesign of our global production footprint, it became evident that this step became necessary. We expect a low double digit €1,000,000 restructuring charge to be recognized regarding Wolfhard in the Q2 of 2019.
Against this, however, we expect to benefit from avoiding losses also in the tune of the low single double digit €1,000,000 figure from 2020 onwards. Let me stress, however, that we plan to retain the engineering With this final comment, I would like to thank you very much for your attention. I'm now handing back to Mr. Sanders and look forward to your questions.
Question. Please lift the handset before making your selection. One moment please for the first question. The first question is from Ingo Schachel, Commerzbank. Your line is now open.
Yes, thanks very much. I would have two questions. The first one would be on your North American business in Commercial Vehicle Systems. I think in terms of Top line growth was really very impressive performance, not only compared to end market growth, but also compared to competitors with similar product mix. You had a much, much stronger organic growth rate.
Of course, you elaborated on certain factors that contributed, but it still sounds to be higher than one would have Even taking into account some of the technology points you mentioned, I was just curious whether you had any, say, special effects, So one off client wins or short term market share gains because of your ability to deliver, which have impacted Q1 outperformance specifically or whether we might hope that This performance is really sustainable also for at least the next quarters. And the second question would be on your cash flow or net working capital build up specifically. Of course, it's clear that net working capital goes up in the Q1. But I think it's This year, euros 50,000,000 more than in the last year. And I think even last year, you were saying you were not entirely happy with the first half net working capital buildup or was impacted by specific factors on Rail Vehicle Systems.
Just curious whether you could talk about the, let's say, EUR 50,000,000 or EUR 100,000,000 Higher net working capital than normal that we saw in Q1 2019 and then quantify a bit maybe how much of that is related to commercial vehicle systems inventory buildup versus rail vehicle
Yes, Ingo. Thanks for your questions. We are indeed happy about the North American CVS revenue development. I can't really point to any special effects that accrued in 2019 Q1. But I will say that the Q1 of 2018 was relatively speaking weaker.
If you now look at the developments over the 4th quarters of 20 2019 2018, I'm sorry. Then 2nd, 3rd and 4th quarter were quite similar in revenue, But Q1 was actually a bit weaker. So we are comparing a particularly strong Q1 2019 with a weaker Q1 2018. But if we push individual quarters aside, I can just confirm that Growth momentum is keeping on, and we are particularly happy that this is not just driven by truck production rates, but by content as well. On the working capital buildup, yes, you put the finger in an area for improvement.
The Build up of working capital has been almost exclusively on the rail vehicle side, only to a small extent from CVS. And there, it's a combination of receivables and inventories. Clearly, with the strong growth, It has at least its mark also on the working capital. You have Seeing that our growth rate in RVS was stronger than in CVS and our average working capital days is actually higher on RVS. So there is also a mix effect that is coming to play here.
But we have initiatives underway, which are both addressing receivables and inventories. And As we have shown last year, we hope that we show over the next quarters a gradual improvement In our working capital ratios.
Okay. And so maybe just a quick follow-up on the U. S. Market question just on the adisk break that you disclosed in your CapEx number for Q1. Can you remind us what the total planned investments and also timing of those is going to be?
Yes. We remind is a good word because We didn't mention it earlier, how fast that would
be. We
had told the market that Our air disc brake capacity is actually at its limits, and we needed to expand following the increasingly growing transition from drum brakes to disc brakes. And for that purpose, both in the locations In Huntington and Bowling Green, we're expanding our capacities. The total Amount will be something like €40,000,000 in those locations. And We have recognized maybe 30% of that in the Q1.
Okay. Thanks very much.
The next question is from Akash Gupta, JPMorgan. Your line is now open.
Yes. Hi, good morning, Ralph. Thanks for your time. I have a couple of questions as well. My first question is on China and Clearly on rail vehicle system side.
So maybe if you can talk about book to bill that you have seen there in Q1 and how Is the pipeline they're looking for the rest of the year? And also if you have seen any change in customer behavior there? So that's question number 1. Question number 2 is about financial impact that you mentioned that you will take double low double digit restructuring charge in Q2, whether that will be taken above the line or below the line, just to get some clarity on how it will be treated in financials? And my final question is on given we are towards end of May, if you can comment anything about Q2 trading that you have seen in 1st few months past few weeks of Q2, particularly on order intake side?
Thank you.
Yes. Akash, Firstly, on Rail China. Our revenue development And let me be a bit more general, if you allow that, was positive from the Q1 of 2018 to the Q1 of 2019. And we grew by roughly Yes, by double digit figure actually in revenues. Our book to bill for the region was somewhere around 1.3 actually.
So it's been rather positive. But within that, I would say, aftermarket has shown a particularly dynamic development, And Metro would be the 2nd in line and Icefield would be the 3rd in line. So our composition over the years We'll probably shift more towards aftermarket and more towards the Metro segment. Change in customer behavior. I mean, everybody is always asking about level of competition.
Yes, we are experiencing competition, no doubt. But on the other hand, We are also well entrenched, and we are participating in the China investment phase that everybody is experiencing. On your second question, restructuring charges, to be very honest, we haven't fully decided the way of disclosure yet. It also depends a bit on the There are some negatives and some positives, which we are still in the process of negotiating. And in order to protect that negotiation, we don't want to get into a deeper level of disclosure at the moment.
It will, however, be shown in the Q2. And then in terms of the Q2 trading, Of course, I cannot talk too much about it, but April May have felt like good months. So We are continuing to experience positive development. No change in sentiment, let's put it this way.
Thank you. And just a follow-up on CVS segment. So if I look at your And if I look at your revenue development there, 8.4%, if you can say how much of that is driven by your volume against and also content growth? I mean, you say truck production is up 1.6%, but your volumes might be different than global truck production.
Yes. This is, of course, mostly a question of exposure to the different end markets. The 8.4% growth It also benefited frankly from FX. Yes, as you know, we have a stronger exposure in North America in the CVS segment. And if you sort of normalize for FX developments, The organic growth would have been 5.6% and not 8.4%.
So this is maybe one important aspect to consider. Other than that, I would say the outperformance has been pretty much in you can just take the 5.6% and the 1.6% and you get roughly the outperformance in terms of content per vehicle.
Thank you, Ralf. I'll go back in the queue now. Thank you.
The next question is from William Mackie, Kepler Cheuvreux. Your line is now open.
Yes, good afternoon. Thank you for the time, Ralf Andreas. Can I go back to the organic growth first as the first question? I mean, you've achieved good growth in both divisions. But can you perhaps walk through the core assumptions in each division that you're thinking that put you in the range of your 3.8% to 6.9% organic growth for the full year in terms of what are you thinking in CVS related to TPR levels in each of the regions?
And in Rail, when we look at the OEMs have record backlogs and in many cases ramping up activity levels. So what are your thinking with regard to volume growth in rail versus CVS this year? And looking at such a strong quarter and having had a good start in Q2, Should we think that it's more likely you'll be to the top end of that guidance within organic growth? That's my first question around that area. The second is within CVS, perhaps more detailed.
But when I look at the relative growth of the aftermarket within CVS On an absolute basis reported compared to the OE business, it almost seems as if the aftermarket business was flat year on year when you the way you've split The revenue disclosure, can you perhaps explain a little bit more of why that's flat and where the trends are with regard to perhaps growth in CBS aftermarket versus perhaps contraction? Where are the puts and takes? Thank you.
Yes. Well, as always, sharp questions. So let me first say that the developments year to date haven't caused us to change our guidance with Respect to organic revenue growth. So we and it is, of course, early in the year. Things can happen.
Therefore, we have basically said, however, the Q1 has gone, we will stick to the Full year guidance from an organic perspective, yes? The second point is, if you take the midpoint of our growth in RBS and in CVS for the full year. Then we were indicating that RBS would grow by 5.4% and CVS by 2.8%. So there is a clear growth differential. And this is, as you remember, without any FX changes.
So we would basically see a clear differential in growth between the two segments, which if you normalize for FX, we also saw in the Q1. So From that perspective, I think we are in line. Now your question about the core assumptions behind RVS and CVS, I would just say that we are not expecting a big push or tailwind from truck production rates this year. They have started strong, but they have the potential of weakening over the course of the year, Not confirmed, but this is also what other industry participants are expecting. And therefore, we believe that The full year growth rate might currency adjusted be in the range that we guided.
So on top of the TPR projections, we assume that we will benefit to the tune of 3% or 4% from content per vehicle. On rail, I would say, again, our outperformance that we have demonstrated historically, plus the underlying 2% to 3% market growth leads you to where we have guided. Now Again, it may turn out that actually the full order books of our customers also provide further potential for us. But we feel it's too early in the year to correct our guidance in this respect. On aftermarket CVS, yes, you are actually right.
We have seen flattish aftermarket development. This is quarter on quarter 2018 to 2019. I have to, however, say that we had some pushover from last quarter 2017 To Q1 2018 because of some supply chain constraints on the truck side, where we couldn't deliver in the first In the Q4 of 2017, and therefore, we had an increased revenue in aftermarket in the Q1 2018. And we are comparing now 2019 with that reasonably strong Q1 2018. That's why it was basically flat.
And on rail, we actually had quite the opposite development, a very strong development in the aftermarket is clearly double digit growth.
Thank you for confirming that. Just one short follow-up. When I look at the P and L, You highlight a 220 basis point increase in the cost of materials, which you have been able to offset with personnel costs And other expenses. Firstly, perhaps you could explain a little more of what was driving the cost of materials. Is it across the group?
Or is it concentrated in one of the divisions? And really how sustainable the personnel savings or relative or the other cost allocation savings are to continue to offset that as the year progresses? Thank you.
Yes, to be honest, a lot of this Development goes back to mix effects, both in terms of aftermarket 2oE In truck, but also in rail, you see that aftermarket and truck went down. You see that aftermarket and we went up and those basically shifted the cost structure in terms of consumption of material on the one hand and The use of labor on the other hand. This is actually most of the reason. It is not really structural, except of course for the disposal. That is a more structural change.
And you could also see at the end of last year that we reduced our headcount in a sizable way Because of the disposal. So that came to bear as well. But I want to over interpret Quarterly cost compositions to be fully understood as structural changes because a lot of it is, as I said, mix driven.
Excellent. Thank you very much.
The next question is from Ben Yigalow, Morgan Stanley. Your line is now open.
Good afternoon, Bill and supubni. Afternoon, Ralph and Andreas. Thank you very much for taking the question. I had 2. The first is On the RVS margin, if we look at it, it's gone from 18.8 to 21.9.
If we adjust for the IFRS, it's about 2.40 basis points. Could you give us a rough sense and really I don't As rough as you like, on how big the mix effect is in that margin improvement. What I'm trying to understand is mix versus volume And how they kind of shake out in that healthy RVS margin. So that was question number 1. Question number 2, On China, if we look at the development of the aftermarket, you mentioned that there was a sort of, If you like, some of the OE sales of a few years ago were beginning to come to fruition.
Am I right to assume this is retrofit and basically upgrade on some of the high speed contracts we were seeing A few years ago, 3, 4, 5 years ago or is this something more broad based? Those are my questions. Thank you.
Yes, Ben. The impact of mix effect on the margin environment. I mean, it is actually quite consistent with what we even said back At the IPO, what are the drivers for margin expansion going forward? It is, of course, to a good extent, a growing aftermarket And this is a fact, but at an organic FX adjusted And also disposal adjusted growth rate of 10.7%, you can bet that there is also operating leverage at work. And yes, I'll stay at that level.
We have You may just say, well, we sorted our arguments in that order. 1st, operating leverage and performance improvement 2nd positive OEM effect. I think they are roughly similar in size. It's not a huge difference between those 2. On the aftermarket in China, there is yes, I would rather call it overhaul than retrofit, But maybe it's the same thing in your language.
It's basically more trains actually getting in Becoming of age in a way, so that you have to take them back and completely overhaul them before you recommission them. And this is always a chunkier business than just the replacement of consumables or repair and maintenance work, Yes. And we have always said that this will be a growth driver, and we are experiencing that it is. By the way, There's even a nice study that you will know, I'm sure, which actually As some more detailed description of what is happening in the Chinese aftermarket and also What to expect? Of course, everybody has their own opinion on the future development of those.
But it will be a key driver of growth for us.
And this is obviously, I mean, you would assume that this is something that's going to continue for the next couple of years. This isn't a sort of one time effect in the next 6 months?
Yes. And not just a couple of years. Both trains will be there for 3 or 4 decades.
Yes.
And they will go through these cycles again and again. And so As long as we add additional volumes, we'll see that growth.
Great. Thank you very much for the time.
The next question is from Sven Weier, UBS. Your line is now open.
Yes. Good afternoon, gentlemen. Thanks for taking my questions. Actually, 4 quick ones, if I may, and take them 1 by 1, if that's okay. The first one is just referring to your content per vehicle mentioned on the U.
S. And I was just wondering if you could give us a sense where we are now on the This brake penetration rate in the order intake that you see and how quickly you see that going to a high double digit level maybe. And you haven't mentioned AMT trucks as a driver. So I was just wondering if that transition you think is already completed. That would be the first one.
I think both trends still have a nice runway. I would Say the runway is even longer by quite some distance on the Aedes break. What we see is that maybe 25% penetration has been reached and it is continuing to rise, Which has caused us our investments that we described. And this even in a scenario where maybe Volumes truck numbers would be flat or even slightly decreasing, yes. So we do see a continued demand for Andres Brakes That's why we're building this capacity.
And on the AMT side, where do you stand there?
I think this is, if I'm not mistaken, beyond 50%.
Okay. Good. The second question was just on the book to $1,000,000,000 CVS. You mentioned, obviously, it's On 1.02 for the division as a whole. I just was wondering if you could share the number for us just for the OE business Because we spoke about the sales trends on between OE and aftermarket, but not in the order intake.
So just wondering if that one was also above 1 for the OE side.
Yes, I would say so because as I mentioned, the aftermarket actually went down. So If you consider this, we may have 1.04 or something like that. Yes, roundabout 1.04 on the OE side.
Okay. Thank you. The next one was just Obviously, now closing the Wolfrat site, I was just wondering if anywhere in CVS or RVS you still have other loss making units where we could see further restructuring action this year or next?
Let me answer more generally. We do rigorously and with diligence Review every single unit to make sure that we are always staying ahead. And as any portfolio, you have The stronger ones and you have the weaker ones. And I cannot disclose any particular candidates for the moment, but I wouldn't exclude the possibility that we will find 1 or 2 more such candidates.
Okay. And the last
question Which you consider sorry, which you should consider as good news, yes? Because you're always the question, where does the additional potential come from?
Yes. I was just wondering if there's any obvious things, right? That's Not sure how obvious Wilfred was to the market, but was just if there's anything really imminent maybe as well.
Not to a level of concreteness where I would like to disclose it right now.
Okay. And then the last question is just on the CEO departure. Sorry, I wasn't on that call back then. But I was just wondering in terms of the job description of the CEO, I mean, you see also a possibility that the job allocation within the Board Changes a bit because as far as it is now, obviously, all the divisional responsibilities rest with the divisional board members and it seems that It's a bit an uneven allocation. So do you think that's potentially changing or is it completely flexible?
I mean, firstly, this is at the end of the day a question that It needs to be directed to Professor Mangold, but I would just like to clarify, HR actually has been allocated to Doctor. WILDA, who is otherwise in charge of the Rail division. And our initiative Knorr Excellence. So for example, the Knorr Production System, but also the initiative, The cross divisional initiative on digitalization has been allocated to Doctor. Leier.
So it is not just a, let's say, central versus Divisional setup. And I think as always, There is a profile that is being looked for and then there is a candidate and then there is specific capabilities and then one would look what is the best Team setup, yes, like in any other sport.
And there was obviously an article in the manager, Margot Singh, last week that Mr. Thiele is now more actively seeing clients again. Would you confirm that or?
I would not say that Mr. Thiele's interest Our activity has changed because of the departure of the CEO. Mr. Thiele has a consulting relationship with our company, in particular with the executive board. And there are as has been in the past, there will be in the future opportunities where he can add value to the best interest of both The value of his stake in the company as well as the value of anybody else's stake in the company.
Okay, understood. Thank you.
At the moment, there are no further questions. There are no further questions. I would like to hand back to you gentlemen.
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