Rational AG: Encouraging business performance in March results in EBIT margin of 19% - another investment push in Wittenheim and U.S.

Business performance in the first quarter of 2021:

- Sales revenues of 167.7 million euros, down 7% year on year

- Improvement in EBIT and EBIT margin to 32.2 million euros and 19.2% (2020: 14.3%) respectively

- Faster recovery possible than previously assumed

- Investments of around 55 million euros expected for 2021

Strong final month for sales revenues and new orders in the first three months
After a business performance at RATIONAL AG as expected in January (sales revenues down 13% on the same month of the previous year) and February (down 22%), sales revenues for the first quarter as a whole benefited from a sharp rise in sales figures in March (up 14%). In March, there was also a positive trend in new orders, which were down 21% in January, 23% in February and up 39% in March (2020: down 32%) compared to the respective month of the previous year.

"We see the growing number of customers no longer suffering or suffering less from coronavirus restrictions, the catch-up effect of investment, the in some instances massive stimulus packages and, as the base effect, the fact that March 2020 was the first month to be affected by coronavirus as reasons for this recovery in March", said Rational CEO Peter Stadelmann. In the first quarter of 2021, the company generated sales revenues totalling 167.7 million euros and was therefore around 7% (currency-adjusted 5%) below the figure for the prior-year quarter (2020: 181.3 million euros).

Sales revenues in Asia grow by 27% compared to Q1 2020 - the other regions are still down year on year
Progress in combating the pandemic varies worldwide. Accordingly, performance in the market regions in the first quarter of 2021 also varied greatly. Asia, which was the first region to be affected by coronavirus in 2020, is displaying a trend towards getting back to normal: quarterly sales revenues here are 27% above the prior-year quarter. This positive development benefited additionally from the good street- and strong partner business. North America, where daily life is also rapidly getting back to normal thanks to an effective vaccination strategy, is now only down by 7%. In Europe (excluding Germany), sales revenues are 16% lower than in the previous year, and 12% lower in Germany. Latin America continues to be heavily affected by the coronavirus crisis with a drop in sales revenues of 20% compared to the same period last year.

iVario growth of 6% - iCombi 9% down year on year
Sales revenues in the iVario product group in the first three months of 2021 were 6% up year on year at 17.8 million euros (2020: 16.9 million euros). The product group benefited in the first three months from last year's market launch in China and North America. Sales revenues in Japan also performed well thanks to strong partner business.

Sales revenues in the iCombi product group in the first three months were 9% down year on year at 149.9 million euros (2020: 164.4 million euros). "The decline in sales revenues just for appliances was relatively low, which underscores the appeal of the new appliance generation. Due to the coronavirus-related restrictions on our customers' business activity, the drop in sales revenues from cleaning products and spare parts was somewhat steeper", adds Jörg Walter, CFO of Rational AG.

Investment push in Wittenheim and U.S.
In Wittenheim, the production site for iVario appliances, construction of a customer centre, an administration building and a production facility began in mid-April. The total investment volume here is around 25 million euros over the next 24 months.

In addition, RATIONAL is in the process of acquiring a plot of land in the greater Chicago area. In the first step, a customer centre, an administration building and a warehouse are to be erected on a generous plot and will replace the current leased properties from mid-2023. The plot should also offer the option of erecting a production facility in a later step.

RATIONAL anticipates an investment volume of around 55 million euros for 2021 as a whole.

56.0% gross margin in the first quarter of 2021
The gross margin of 56.0% is at the prior-year level (2020: 56.0%). The past fiscal year was still dominated by the conversion of the production processes in Landsberg and Wittenheim due to the roll-out of the new product generations and dealing with the crisis-induced logistical constraints. Jörg Walter continues: "In the current year, we are benefiting in the production process from improved productivity. Adjusted for negative currency effects, the gross margin reached around 57%."

The cost of sales was successfully adjusted to the new sales revenue level and at 73.8 million euros was around 8% below the prior-year level (2020: 79.8 million euros). Personnel costs in production, in particular, fell significantly, since RATIONAL managed to achieve considerable savings for auxiliary and temporary staff.

EBIT margin up 4.9 percentage points to 19.2%
EBIT (earnings before financial result and taxes) in the first three months of the current fiscal year was 32.2 million euros, up 24% on the prior-year quarter (2020: 26.0 million euros). The EBIT margin was 19.2% (2020: 14.3%).

The EBIT margin for the previous year came under strong pressure due to the emerging coronavirus crisis, the resulting sudden slump in sales revenues in March and the related uncertainty at a still unchanged cost level. This year's EBIT margin for the first quarter benefited from the above-average drop in operating costs in relation to the decline in sales revenues. "The unexpectedly high sales revenues in March alone with a still comparatively low cost base were the main driver for the significantly better than expected EBIT margin", explains Peter Stadelmann.

In total, the operating costs in the first quarter were successfully cut by 12% to 63.6 million euros (2020: 72.5 million euros). The operating costs in sales and service in the first quarter stood at 42.5 million euros (2020: 50.3 million euros) due to a reduction in expenses on trade fairs, travel, personnel costs, and transport and logistics costs of around 15% below the prior-year level. Major reductions in research and development expenses were only consciously made. They fell by 4% to 11.4 million euros (2020: 11.9 million euros). Administration expenses went down by 6% to 9.7 million euros (2020: 10.3 million euros).

In the current year, the currency result of 1.5 million euros had a positive impact on the EBIT margin, while it fell sharply to -2.9 million euros in the prior-year quarter. Adjusted for all currency effects, the EBIT margin after three months was 19.4%.

13.5 million euros in operating cash flow in the first quarter
In the first three months of the current fiscal year, cash flow from operating activities was 13.5 million euros, while cash flow from operating activities in the prior-year quarter was around minus 22.3 million euros. This particular situation in the previous year was due primarily to low pre-tax earnings and a temporary build-up of inventories in connections with the converting to the new appliance generations. The improvement in the first quarter of 2021 is mainly due to the higher pre-tax earnings in conjunction with lower advance tax payments and a less extensive build-up of inventories.

The cash flow from investing activities includes investments in property, plant and equipment and in intangible assets. In the first three months of the current fiscal year, these investments amounted to 4.0 million euros (2020: 7.5 million euros).

The cash flow from financing activities of -2.9 million euros mainly reflects the repayment of principal and interest in connection with bank loans (-0.8 million euros) and payments for lease liabilities in accordance with IFRS 16 (-2.1 million euros).

2020 dividend back to a payout ratio of around 70%
A high level of liquidity and the resultant independence from capital markets and bank loans, preserving entrepreneurial freedom and a high payout ratio to the shareholders have always been vital for RATIONAL. To continue to maintain this independence and freedom, while returning to a payout ratio of around 70%, the Executive Board and Supervisory Board will propose a dividend of 4.80 euros per share for fiscal year 2020 to the General Meeting of Shareholders on 12 May 2021, which corresponds to a total distribution of 54.6 million euros.

Slight decline in number of employees
As in fiscal year 2020, RATIONAL also pursued a cautious personnel policy in the first three months of 2021. The RATIONAL Group had a total of 2,174 employees worldwide as at the end of March 2021, compared to 2,310 at the same time in the previous year. Around 1,200 people were employed in Germany as at the balance sheet date.

Good first quarter provides slightly positive outlook for the year as a whole
The company published the last forecast on 24 February 2021. The positive development in new orders and sales revenues in March was above the February expectations of RATIONAL and the entire commercial kitchen appliances industry. Since the market environment continues to be volatile, it remains, however, to be seen whether this positive development in new orders and sales revenues lasts or is a case of short-term catch-up effects.

General factors indicating that the recovery among customers will continue are the rising vaccination successes, the spread of tests, the decline in positive cases in more and more regions and the milder summer temperatures. On the industry side, the factors are the in some instances massive financial aid packages, as in the U.S., for example, and the dealers' depleted inventories. Risks that remain are new virus mutations and further waves of the pandemic that could lead to renewed lockdowns.

The company's management currently still expects growth in sales revenues in the medium single-digit range. "Based on the assumption that other markets will benefit sooner or more strongly from catch-up effects among restaurant and communal catering guests and our end customers, sales revenue growth for the fiscal year could turn out to be somewhat better than previously expected", said Peter Stadelmann.

The risk of supply shortages for electronic components and production stoppages as a result still remains. There is also the risk of rising costs in material procurement. "There are already signs of price increases for some raw materials and especially electronic components, as well as rising transport and logistics costs. In addition, operating costs for trade fairs, customer visits and travel will rise again as things continue to get back to normal", notes Jörg Walter.

If the positive trend in sales revenues and the favourable cost situation of the first quarter continue and the risks described do not materialise in full, then the EBIT margin will be higher than the previous year.

Contact:
Rational AG
Stefan Arnold / Head of Investor Relations
Tel. +49 (0)8191 327-2209
Fax +49 (0)8191 327-72 2209
E-Mail: [email protected]
www.rational-online.com

Editorial note:
The Rational Group is the global market and technology leader for thermal preparation of food in professional kitchens. Founded in 1973, the company employs around 2,200 people, over 1,200 of whom are in Germany. Rational was floated in the Prime Standard of the German stock market in 2000 and is currently represented in the MDAX.

The company's principal objective is to offer maximum customer benefit at all times. Rational is committed to the principle of sustainability, which is expressed in its corporate policies on environmental protection, leadership, job security and social responsibility. Numerous international awards bear witness to the high quality of the work done by Rational's employees year for year.