17th March 2006 - Successful Centenary Year for Knorr-Bremse

KNORR-BREMSE GROUP

In fiscal 2005, the firm’s centenary year, the Knorr-Bremse Group posted further growth and continued its positive development. Sales were up 13.2% at EUR 2.7 billion (2004: EUR 2.4 billion). The major contributor to this increase was the commercial vehicle sector in the Americas. The rail vehicle sector in the Americas and in Asia also showed strong growth and was able to offset the sharp downturn in demand in the European rail vehicle market. In Germany in particular, orders from rail operators continued their marked downward slide, with an ongoing negative impact on the state of the market.

Valued at EUR 3.0 billion, incoming orders moved ahead positively. The size of the Group workforce increased 9% over year-end 2004, climbing from 11,143 to 12,119 employees. The rise was due on the one hand to the recruitment of additional staff in response to the higher volume of business in the commercial vehicle sector, and on the other to new acquisitions and the initial consolidation of Group companies, although the majority of their sales revenues will not be taken into account until 2006. At year-end, 3,083 people were employed at the Group’s German plants (2004: 3,059).

In different ways, all three main regions into which the Knorr-Bremse Group divides its activities – Europe, the Americas, and Asia-Pacific – contributed to the growth in sales revenues.

EUROPE

In Europe, sales moved ahead to EUR 1.8 billion (2004: EUR 1.7 billion). The increase came on the back of a particularly strong performance by the Commercial Vehicle Systems division, which in turn benefited from a further rise in European output of commercial vehicles. In the rail vehicle systems sector, a depressed and stagnant European market led to a drop in sales in the brake segment, which was only partly offset by growth in on-board business. In Germany in particular, the sharp downturn in demand continued.

THE AMERICAS

In both North and South America, Knorr-Bremse’s strong market position enabled the company to benefit from a marked increase in the output of commercial vehicles, freight cars and locomotives. Overall sales in the region rose 44 % to EUR 873 million (2004: EUR 608 million), with a substantial part of the increase being accounted for by the initial consolidation of Bendix Spicer Foundation Brake LLC.

ASIA / AUSTRALIA

In the Asia-Pacific region, sales increased 17% to EUR 179 million (2004: EUR 153 million), although there were major differences between developments in the two divisions.

The rail vehicle market in Asia continued its positive development. In China in particular, Knorr-Bremse is very well placed in the entire rail vehicle market, and in 2005 was able to secure a large number of major orders in both the mass transit sector – not least against the backdrop of the 2008 Olympic Games in Beijing – and for the equipment of locomotives and multiple units. Along with sales successes in the braking systems sector, further orders were also received in the door systems segment and the division’s recently added specialism: air conditioning. In the commercial vehicle sector, the output of commercial vehicles in the key Japanese market remained at its prior-year level with the outcome that sales at Knorr-Bremse also remained at their 2004 level.

OUTLOOK FOR 2006

For fiscal 2006 the Knorr-Bremse Group is anticipating further positive overall development. This presupposes the stable development of the global economy, although with regional differences. Sales will again increase, supported by organic and external growth. One focus of activities will be China, where deliveries will commence in 2006 under the major orders acquired in recent years. Knorr-Bremse has every chance of consolidating its established position in this high-growth market. Rating agency Moody’s also takes a positive view of future business development at Knorr-Bremse and on January 25, 2006 upgraded the company’s rating from Baa2 to Baa1.

In the rail vehicle systems sector, at the end of 2005 Knorr-Bremse also secured a contract of strategic significance for the supply of equipment for the Coal Link belonging to South Africa’s national railway operator Spoornet. The first ever standard equipment of 58 locomotives and some 3,000 coal wagons with electronically controlled pneumatic brakes, supplied by the Group’s North American subsidiary New York Air Brake, represents a major success and a signpost for the future, and is sure to boost interest in the EP-60® and WireDP® electronic systems in AAR markets – notably the USA, Canada, Brazil, Australia, and China.

In the commercial vehicle sector, the introduction of the disc brake on the North American market will enable Knorr-Bremse to build on its existing lead in this field. The company is well placed in the North American mechanical foundation brake sector through the Bendix Spicer Foundation Brake LLC joint venture.

Rising material and energy costs on the purchasing side and inevitable price reductions on the customer side mean that improvements in productivity will remain essential in the future. As in the past, Knorr-Bremse will face up to these challenges and take the necessary measures in good time to ensure the long-term success of the company.

The Financial Statements Press Conference will be held at 10.00 a.m. on April 4, 2006 in the newly built Knorr-Bremse Forum, Moosacher Strasse 80, 80809 Munich. This will also be the first opportunity to view the new facilities.

The Knorr-Bremse Group is the world’s leading manufacturer of braking systems for rail and commercial vehicles. For 100 years now the company has pioneered the development, production and marketing of state-of-the-art braking systems. Other lines of business include automated door systems and air conditioning systems for rail vehicles and torsional vibration dampers. To find out more about Knorr-Bremse, visit www.Knorr-Bremse.com.

Source: Knorr-Bremse Press Release