CLIENT CASE STUDY: KNORR-BREMSE


We wanted to have our credit lines ready – effectively as a kind of fire insurance


Kai Gloystein, Head of Corporate Finance & Treasury, Knorr-Bremse AG


assisted by having a single majority owner since the mid-1980s. It has also facilitated discussions with the company’s relationship banks, thanks to the Thiele family’s firm commitment to Knorr-Bremse. A 30% stake in Knorr-Bremse was


floated in 2018 – in what was Germany’s second-biggest stock-market debut that year – securing the company’s future as a steadily growing business. The company followed good governance by bringing some outside parties and other investors on board while the Thiele family maintained a majority stake. Gloystein joined Knorr-Bremse in January 2018 and says that he was immediately struck by the excellent levels of cooperation and dialogue that existed between treasury and procurement, which contrasted with other companies, where convincing the respective teams to sit down together had proved more challenging. According to Müller-Stahl, this close collaboration was greatly helped in 2007 when the two departments worked together to implement Knorr-Bremse’s award-winning supplier finance and purchasing programmes.


Meeting challenges together In recent years, treasury and procurement have cooperated in meeting the challenges of growing geopolitical risk, fragile supply chains and commodity-price volatility. The last two years have also seen higher risks of production shutdowns among suppliers and resulting disruptions, says Müller- Stahl. While securing supply is very much the remit of purchasing/procurement, payments to suppliers is an issue that is regularly discussed with treasury. Gloystein adds that treasury’s task is to communicate the company’s targets to the banks and debt capital markets, and to update regularly on whether these targets can and will be met. He says that 2020 “very much exposed the need for the company to carry higher inventories”, and treasury held discussions with procurement


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on this strategic aspect. Having previously worked in the banking sector for several years, Gloystein was based in Frankfurt in 2007–08 when the global financial crisis swiftly developed, and in the first weeks of the Covid-19 pandemic in spring 2020, there were fears that the banks might once again be in a position where they were unable to provide funding. “We made sure we were ready should the


worst-case scenario ensue,” he explains. “We wanted to have our credit lines ready – effectively as a kind of fire insurance.” However, the company’s business model proved to be one of the most resilient to the impact of the pandemic. Helped further by some early cost-containment measures, Knorr-Bremse was able to repay funding ahead of schedule. Müller-Stahl adds that procurement


reviewed the company’s supply chains and, where needed, initiated proactive risk-management policies, having identified that not all of its suppliers were as resilient to the impact of Covid-19 as Knorr-Bremse. “We implemented tools and processes to give good visibility over potential risks that could result from the pandemic and possibly cause problems for our suppliers,” he explains. “Fortunately, there were relatively few critical cases and our supply- chain teams mostly avoided disruptions.” Knorr-Bremse was also helped by the fact that, unlike much of the automotive industry, it is not reliant on ‘just-in-time’ supply deliveries.


Linking finance to sustainability Knorr-Bremse’s purchasing policy has been shaped by its Global Purchasing Excellence (GPE) initiative, which establishes purchasing principles and procurement-quality guidelines with its suppliers. Environmental, social and


We implemented tools and processes to give good visibility over potential risks that could result from the pandemic and possibly cause problems for our suppliers


Christoph Müller-Stahl, Director Global Purchasing Controlling, Knorr-Bremse Rail Vehicle Systems


€750m In January 2022,


Knorr-Bremse issued its first ESG-linked syndicated loan


governance (ESG) issues, which are of growing importance to all corporates, have long been high on the company’s agenda. Today, Knorr-Bremse’s commitment to ESG is reflected in initiatives such as its Conflict Minerals Policy, which, by constantly tracking its supply chains, aims to ensure that the company does not source from areas of armed conflict where the proceeds are used to finance fighting. Most recently, Knorr-Bremse also issued its first sustainable-finance instrument. In January, the treasury team linked the company’s first-ever syndicated loan of €750m to an ESG rating by ISS Corporate Solutions, which currently rates Knorr- Bremse at C+. Within the framework of a bonus-malus system, changes to this rating have a corresponding positive or negative impact on the loan spread. The transaction was coordinated by Deutsche Bank and UniCredit. Further ESG initiatives, such as a Green Supplier Finance programme, are also being developed across the business. “These are discussed regularly at board level and extend beyond treasury and procurement,” says Gloystein. “On the flipside, it’s still unclear for corporates and banks what the final outcome of the EU Taxonomy will be,” he adds. “It’s very much a moving target, as it hasn’t been fully confirmed exactly what measures need to be implemented. Fortunately, at the present time Knorr- Bremse doesn’t actually need to go to the markets but is doing its homework just in case. And in the absence of a crystal ball, this means expecting the unexpected.”


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