Rational AG: 2020 overshadowed by the COVID-19 crisis - practically all customer groups under strain - preliminary key figures for the first quarter of 2020

- 7 percent drop in sales revenue in the first quarter

- 14 percent EBIT margin

- Slump in orders since March 2020

- Uncertain times - still no forecast possible for 2020

- In May 2020, RATIONAL will start into the "Innovation Journey"

- Business model remains intact - positive long-term outlook
 

Rational AG / keyword(s): provisional quarterly figures, forecast

Landsberg am Lech, 30 April 2020

The Rational Group is currently severely impacted by the COVID-19 crisis. The stay-at-home restrictions make active market cultivation in street business - one of its strengths - nearly impossible. Many customers have been hit badly by imposed closures and will probably be reluctant to invest. The sales team is currently unable to visit customers in many places and unable to hold product demonstrations. There were 30 percent fewer CookingLive seminars than planned in the first quarter and 60 percent fewer just in March alone.

7 percent decline in sales revenues in the first quarter - EBIT margin of 14 percent
This has had a perceptible impact on sales revenues and orders in the first quarter. Rational generated sales revenues of 181.3 million euros in the first quarter of 2020 (2019: 194.3 million euros), meaning a 7 percent decrease over the previous year. The markets mainly hit by the COVID-19-related restrictions were Asia and Germany, which contracted by 13 percent and 14 percent respectively. Sales revenues in North America in the first quarter also fell sharply by 9 percent year over year. Sales revenues in the other regions were at the same level as the previous year or slightly down.

The EBIT in the first three months reached 26.0 million euros, 44 percent less than the previous year (2019: 46.7 million euros). The EBIT margin was thus 14.3 percent (2019: 24.0 percent). Adjusted for currency effects, the EBIT margin after three months was 15.8 percent.

The main reasons for this sharp fall were the lower gross profit margin amd the fact that - coupled with the decline in sales revenues - operating expenses were around 4 percent higher year on year at 72.5 million euros (2019: 70.0 million euros)

Following one-off effects have led to higher costs:

1) COVID-19: In order to alleviate potential restrictions in the supply chain and thus ensure the availability of all components for production at all times numerous overtime hours, higher logistics costs and material prices as well as increased inventory levels were necessary.

2) Preparation and modification of the worldwide introduction of new device generations planned for March 2020 and postponed to May 2020: Because of the outbreak of the pandemic, numerous already complex and cost-intensive processes had to be revised or completely changed. The intensive preparation for the market launch and, above all, the time-consuming adaptation of the launch concepts, marketing documents and schedules led to a significantly increased workload for the employees. Another consequence of the upcoming product change was a warehouse build-up for components, but also for finished goods, especially for the overseas business.

3) Significantly negative currency result: Moreover, the fact that the currency result fell sharply to -2.9 million euros due to very weak emerging market currency developments was negatively affecting the EBIT. This compares to a positive figure of 2.2 million euros in the previous year.

Slump in orders since March 2020
Until the end of February, the Rational Group's new orders were slightly up on the previous year. Only in China and Italy emerging signs of the first consequences of the COVID-19 shutdown were there. From the start of March, the measures to control the spread of the virus began to have a growing impact on orders in practically all markets. Group-wide order intake fell by 30 percent in March and 60 percent in April compared to the previous year.

Uncertain times - currently no forecast possible for 2020
Orders began declining- dramatically in some cases - at the beginning of March and will mainly be reflected in sales revenues for the second quarter, since the average time between placement and shipment of an order is around three to four weeks. The Executive Board of Rational AG therefore expects sales revenues and earnings to drop significantly in the second quarter. The COVID-19 countermeasures have caused markets to collapse overnight; and they have paralysed the sales process. The further impact of the COVID-19 pandemic cannot be assessed. The respective time frames for the pandemic and, of even more serious consequence, for the countermeasures are unknown. That makes it impossible for the management to make reliable forecasts for the next quarters and therefore for fiscal 2020 as a whole.

Many of the COVID-19 countermeasures have an impact on Rational customers as these measures threaten their existence and, the longer they last, will result in irreversible changes to the industry. Positive signs from customers from the supermarket sector and restaurant chains give the Executive Board confidence that the structural changes in the industry, alongside the obvious risks, will also offer opportunities in the short and medium term. These may be all the greater the more money from the record aid programmes reaches the restaurants.

In May 2020, RATIONAL will start into the "Innovation Journey"
At the beginning of May 2020, RATIONAL will start the so-called "Innovation Journey" and will present new product generations as well as further innovations in the coming months. The introduction of the new products in Germany was already planned for the Internorga trade fair in Hamburg in March and then gradually for all markets worldwide. These trade fairs and events were cancelled due to the restrictions and ban on events that have applied since then, and the innovative new products could not be presented at customer and dealer events as usual. That is why Rational will introduce the new products to its customers in a completely newly developed digital marketing campaign from the beginning of May.

The new ConnectedCooking platform was already presented in February. It offers greater customer benefits in its free basic version and, for a charge, new functions such as hygiene, asset and recipe management under the name ConnectedCooking Pro.

Business model remains intact - positive long-term outlook
The last customer satisfaction survey revealed that the large majority of customers of Rational would be happy to purchase products from the company again at any time and also recommend them to friends and colleagues. That assessment also applies to the current crisis situation. The COVID-19 crisis is having a severe temporary impact on Rational's business model, but is not calling it into question. The Executive Board still sees great untapped market potential. The company from Landsberg believes that the lessons learned from the pandemic will speed up the switch to state-of-the-art, efficient and hygienically better cooking technology and so open up big opportunities for it. Accordingly, the Executive Board expects the company to slowly return to growth after riding out the crisis. A concrete outlook for growth rates and earnings in the coming years is not possible from the current perspective.

The company will publish its detailed business figures for the first quarter of 2020 and further information on the introduction of new product generations in the coming months on Wednesday, May 6, 2020.

Contact:

Rational Aktiengesellschaft

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 2,300 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.