RATIONAL Aktiengesellschaft (RAA) Earnings Call Transcript & Summary

My dear ladies and gentlemen, welcome to our earnings call on RATIONAL's fiscal year 2022 figures, which we published this morning. My name is Stefan Arnold. And with me are my colleagues, Nicole Engelhardt, Tobias Stadler, and of course, our CEO, Dr. Peter Stadelmann, and our CFO, Jorg Walter. Peter will start the presentation in a few seconds. But first of all, just a few hints at the very beginning. So all participants are muted. A few information about the Q&A session. we already have really a huge number of questions in the meantime, where we'll give the answers after the presentation. So thanks a lot for all of you who send the questions in advance. If you have any further questions now or during the call, please send them to [email protected]. And after the presentation, we will then give the answers to all your open questions. If we already gave the answer to your questions during the presentations, we might then not repeat the questions in the Q&A session. And at the end, then we will, of course, make sure to have all questions answered before we close. And if any question is missing, please give us a call after the meeting, so we can discuss this. So we estimate, because of the high number of questions, that it might take now maybe 1 hour or even longer. And with this, I want to hand over to Peter. So Peter, the stage is yours.

Dear ladies and gentlemen, 2022 was challenging for the world, for our industry and for us. We are very grateful and proud about the results we all together achieved. In the middle of very high lead times due to the shortage and due to announcements of price increases, we managed to get our best customer satisfaction level ever. We increased our Net Promoter Score from 61 in 2021 to 64 in 2022. That simply is impressive. It is twice as much as the average in the food and beverage or in the business-to-business industry. This is where we want to be. How did we get there? With our great employees. They make for this unique customer satisfaction. Only satisfied employees produce satisfied customers. 87% of our employees are even proud to work at RATIONAL. 89% are very happy or happy with the employment overall at RATIONAL. That's the newest results we got from our employee satisfaction analysts in 2022. Like in the Net Promoter Score for customers, with these results, we are top employer on a global level. With these requirements highly fulfilled, we were able to achieve more than EUR 1 billion in sales for the very first time. Let me thank again all our U.i.U. for their unique performance, for their loyalty and passion for our customers and for RATIONAL. The top challenge for most of our customers in 2022 and ahead were and are the price increases for energy. So we are proud again to have even more units to be certified with the newest and most severe ENERGY STAR 3.0 label. You may already know this blue logo, the so-called ENERGY STAR. It distinguish particularly energy-efficient appliances. According to an evaluation by the ENERGY STAR authority, certified appliances are on average 35% more efficient than appliances without ENERGY STAR. Our cooking systems exceed ENERGY STAR requirements. We have achieved improvements with 3 main measures: an improved insulation of the appliances; an improved door with now 2 heat reflection coatings on the panels; a completely revised intelligent steam control for lower energy and water consumption. All over, this leads to another 6% increase in cooking efficiency. We also help our customers to optimize their energy consumption digitally. Our digital solution, connected cooking, offers many advantages here. Energy consumption is displayed. Consumption peaks can be read out. Door openings and idle times can be reduced. I will let our customer, [ Martin Wimmer ], explain himself how this helped him dramatically. [Presentation]

Coming to the financial information. Now let me again point out that the highest goal of our action is not sales and earnings, but customer benefit. Only through fulfilling the needs of the customers, financially good results are possible. Let's look at our long-term sales. We achieved sales of EUR 1.022 billion with a growth against previous year of 31%. This is above our adjusted forecast from the third quarter, where we expected a growth range between 23% to 28%. The reason for the even better business performance is the good sales in the fourth quarter due to the good availability of electronic components. If we go back over time, the chart shows that RATIONAL has grown on average in the high single digit to lower double-digit range in recent years. There were only 2 exceptions: In 2009 during the financial crisis, sales fell by 8%; and in 2020 during the corona crisis, sales went down by 23%. With the new sales record this year, we are also leaving these chapters behind us and are around 20% above the previous peak in 2019. Many effects contributed to the good sales development. In addition to volume growth of the iCombi and the iVario units, 9%; price increases, 10%; positive currency effects, 4%; and also a good non-unit sales of accessories, cleaners and service parts contributed to this. Let's look at business development by region. The chart shows the revenues of the financial years 2022 and 2021 as well as a reference value from 2019 before the outbreak of the corona pandemic. We were able to grow in all regions of the world. We were also able to exceed the pre-corona sales figures in all regions of the world. The most important and largest region for our business is still Europe. In Europe, excluding Germany, we were able to grow similarly by 30%, as we did in the group as a whole. This is about 16% above 2019. The situation in Germany is somewhat different. Here, we have a slightly lower growth rate of 22%. However, due to the government support programs, sales in 2021 were already above the pre-corona level. In this respect, a strong business development here as well. Our most important growth regions are in North and South America. Here, especially in the U.S.A., three effects come together. On the one hand, we still have a very low market penetration of our devices. On the other hand, the economic environment was very dynamic. And recently, our sales development was supported by a favorable development of exchange rates and higher price increases than in the rest of the world. Both regions were able to increase sales by around 60%. In Asia, we have a divided business development. On the one hand, China where the 0 COVID policy with lockdowns has led to restrictions on our business activities and economic weakness. Here, we had to cope with sales losses. On the other hand, the other Asian countries without China have also developed positively and together show an increase in sales of 21%. We Overall, however, business development in Asia was subdued at 3%. Finally, the rest of the world region here, too, dynamic growth of 27%, driven in particular by the Middle East and Israel. With that, I'm handing over to Jorg Walter for more details.

Yes. Thank you, Peter. 2022 was a really very eventful year for us, which challenged the entire organization, the processes, our flexibility and the commitment of our employees to the greatest extent. And in the end, this is also reflected on this chart where you see the sales development by quarter. We had a good start in the first quarter, the best first quarter in the company's history. And we were quite confident that the measures we initiated at the end of 2021 with the setup of a second CPU supplier would take effect and help us throughout the year. However, the second quarter was again marked by the shortage of electronic components, and the predictability of the supply chain remained difficult. In the second quarter, therefore, our growth was only 10%. In the third quarter, the situation improved noticeably, and we were already able to report a quarterly growth of 33%, and that was even better in the last quarter where we reached another quarterly sales record of EUR 290 million and to further increase year-over-year or quarter-by-quarter of 50%. However, the weaker prior year quarter must be taken into account here, where in 20 -- in Q4 2021, we were confronted with restriction of the supply chain on a larger scale for the first time. And now our last slide to the sales development. Let's have a look at the product groups. Both product groups contributed to the positive sales development. The larger one, the iCombi business, is of paramount importance for the development of the whole group. And here, our sales were growing by 28%. I would like to highlight on the right side, the iVario where we also had a new sales record. We exceeded the EUR 100 million mark for the first time and reached the sales level of EUR 128 million, with a very high growth rate of plus 57%. Now this was possible because the product group was less affected by the delivery restriction of the processors, where we had a special type of processor. We had higher restrictions in 2021 here with the iVario, and therefore, also the year-over-year change was -- there was some sales shifted from 2021 into 2022. And additionally, the development of the product group iVario was supported by the successful introduction of the iVario also in the United States. Now let's take a look at our order backlog and our delivery times. Until 1 year ago, we did not talk about incoming orders or the order backlog at all because, and this is shown by this chart clearly during the period 2018 until the Q1 2021, there was no significant difference between order intake. This is a light gray column, and the sales, the dark column. The order backlog was constant around EUR 70 million, and our delivery times at that time were on average between 1 to 2 weeks. Now starting with the supply problems from -- starting in Q2 2021 until Q2 2022. The order entry for 5 quarters was, in some cases, significantly higher than our sales level. And then in effect, the order backlog grew to EUR 400 million by the half year of 2022, and thus has led to dramatic extensions of our delivery times. Long delivery times are a very bad situation for everyone involved. First and foremost, of course, for our customer who had to wait up to 6 months, in some cases, even more for their products. But also, it is very difficult for the predictability of the supply chain situation that has challenged our processes and our employees to the greatest extent. Therefore, we are now pleased that since the third quarter of 2022, we have been able to reduce the order backlog and thus also the delivery times. At year-end, the order backlog was still high at a level of EUR 245 million. Nevertheless, in many markets, and depending on the size of the unit, we can already deliver new orders within 3 to 4 weeks. And shorter delivery times lead to lower order intake as dealer no longer have to place stock orders in advance. We expect delivery times and the order backlog to largely normalize over the course of the year of [ 2022 ] mainly have a normal situation also by half year. Now let us turn to our earnings. Earnings before interest and taxes, EBIT, reached a new all-time high of EUR 238 million last year, in line with our new sales record. Also a new EBIT record compared to the previous year, we were able to increase EBIT by 48%, and the EBIT margin increased to 23.2%. The main driver of the good earnings development was, of course, primarily the good sales situation. At the same time, we were able to increase or to keep our gross profit on the same level. I think we can now change already to the next slide. So we see here that we have the sales revenue growth by 31%, and our gross margin with 55.3%. We were able to keep that on the same level like in 2021. And this is a very important point because in the end, that means that we're able to pass on the dramatic increases for raw material, all components, plastics, steel and chemicals on to the market through our own price increases. And also, we had some positive effects here also from the currency side. Now looking at the operating costs. The operating costs increased less proportional compared to sales only by 20% to EUR 328 million. And we had the strongest increase in the sales and service functions. And here, again, a high effect was higher freight rates and higher logistic costs. So also here is included a pricing effect, but also higher marketing costs in the course of the normalization of our sales activities that were 1 year before in 2021, partly corona-related. We had no still restrictions, and we -- they were not on the same level, and this already normalized in 2022. I would also point out R&D development. We see here an OpEx of EUR 45 million, on the same level of the last year. However, we also -- if we include the expansions for the capitalization of the development costs, we increased our expenditures by 10% against previous year, and therefore, we are also investing into the future of RATIONAL. Overall, we are very satisfied with the earnings situation against the backdrop of many challenges and turbulences we had during the last year. So I think the EUR 238 million is a very good result for the full year. Let's have a look at the balance sheet. Especially in economically volatile times, a solid balance sheet is very important. And historically, we are well positioned here, and that has not changed during the last year. We have an equity ratio of 75%, and a liquidity ratio that is bank deposits and short-term investments combined of 38%, and we continue to be very well positioned and robustly positioned here. Looking at the total assets, they increased year-over-year by EUR 115 million to nearly EUR 900 million last year. The main reason for this increase is in our working capital. There are 2 effects. One is the inventories. They increased by EUR 19 million. This is due to higher overseas inventory levels and also higher raw material levels in Landsberg and Wittenheim. We have, intention by intention, increased the inventory level in order to get our supply situation a bit more stable. The second important effect for increase of the balance sheet is the receivables. They basically increased EUR 66 million, which is due to the high sales level we have seen before in the fourth quarter. Looking at the DSOs, days sales outstanding, our KPI is unchanged at 45 days. I mentioned earlier with regards to the expenditures on R&D that we continue to invest into the future of RATIONAL after 2 years with a volume -- investment volume of around EUR 30 million, on the same level of depreciation. Now we increased our CapEx last year to a level of EUR 37 million. Around EUR 8 million was due to the capitalization of R&D costs, and a further EUR 29 million relates to pure investment in property, plant and equipment. The largest position here are our construction projects, and I would like to highlight 2 of such projects. On one hand, we have our new plant in Wittenheim for the iVario where in total, over 3 years period, we are investing EUR 31 million, and we are expecting to finish this project during 2023. And the second project I would like to mention here is our expansion of the office capacities in Landsberg. We opened in 2021 a new logistics center in Landsberg attached to this logistics center. We also have new offices. And during the corona crisis, we decided to stop this. And now, where we already see that our employee base is growing again, we decided with 1 year delay to continue this project. And also, this new office building will be ready in 2023. In our dividend policy, we generally distribute approximately 70% of our earnings per share to our shareholders over the long term. In 2019, or for the 2019 fiscal year, we broke with this principle, and we reduced the dividend by EUR 5 per share at the beginning of the corona pandemic in order to have more cash buffer and secure the company. For 2022, we will propose a regular dividend of EUR 11 per share to the general assembly. This corresponds to the payout ratio of the -- just of the 70% I just mentioned. In addition, like last year, we will propose a special dividend of EUR 2.50 per share, so the overall payout ratio will then be 83%. And with this special dividend, or with the 2 special dividends for 2021 and 2022, we finally offset the corona-related dividend cut of 2019. So like with sales and our earnings, also the dividend payout will reach a new record high, but also after this record high dividend payout, we will have enough sufficient liquidity within the company to finance our investment in the future. Yes, let's have a look at the development of our employee base. With 2,401 employees we have, we can welcome 150 new employees inside our company. We already mentioned several times that our employees are the foundation of our success, and we know that only satisfied employees have satisfied customers. Therefore, we measure the employee satisfaction regularly. Peter already mentioned, we have very positive result with 87% of the employees are proud to work for RATIONAL. And also the second KPI for us, very important, is the staff turnover that remains even in difficult and tough times on our usual low level of 8%. One building block of satisfaction of our employees is how we remunerate, how we pay our employees, taking also into account the difficult economic conditions with the rising inflation. In this context, we increased the wages here in Germany by 5% already in the middle of last year by July, starting in July by 5%, and in many other countries in the world, even on a higher rate, higher than this 5%. And in addition, at the end of the year, where we saw that we will have a very good financial result. We paid out an inflation compensation premium of EUR 2,000 per person per head. And these 2 elements were very much appreciated by our employees. They don't take this for granted. Now we come to our sales and earnings forecast for the current year 2023. Overall, we have cautiously positive expectation. The effects of the price increases that we initiated and a stable material availability together with a strong customer demand, this gives us a positive outlook for 2023. And therefore, we expect sales growth in the high single-digit percentage range. And with this, we are returning to our long-term historical growth trend. At the same time, looking at our OpEx, we will increase certain operating costs element, overproportional in relation to our sales. This is especially true to our sales function during COVID-19 and also during the supply disruptions. We did not invest in much in new sales employees. And now since both we left behind us, we are now -- we'll invest more into salespeople on the street and salespeople in the key account processes. In addition to that, we also expect cost -- higher cost due to the general higher inflation that we see everywhere. And last but not least, we will continue to go ahead with our strategic projects for site expansion in 2023. Wittenheim, we already mentioned, and Peter will, in a minute, talk a little bit about another very new project for us. So all in all, we expect operating costs to rise slightly overproportional, and that means for EBIT, we expect an increase slightly below the level of our revenue growth. And cordially, we expect the EBIT margin to be slightly below the high level of 2022. And with this, I'm handing back to you, Peter.

Thank you, Jorg. One of the strategic projects we are investing in the next future is a local entry combi-steamer for Chinese markets, which we are currently developing. It is aimed for lower-tier cities, these Tier 3 and Tier 4 cities, which our experienced sustained income growth are home to a round of 70% of China's population or almost 1 billion people. While wages there remain lower than in Tier 1 cities, such as Beijing and Shanghai, rental and real estate prices are also lower by Chinese standards, making more disposable income available for the people living in those cities. Some of this disposable income will end up in out-of-house eating. To ensure a price-performance ratio in line with the market, the new entry-level unit will have a special local configuration with a smaller range of features than the iCombi Pro or iCombi Classic. In addition, it will be manufactured in China in the Greater Shanghai area close to our China headquarters. Only this entry-level unit will be manufactured there. All the other combi-steamers will be manufactured as they are in Landsberg. With this step, RATIONAL will satisfy an additional and exclusively regional demand from customers in the lower-tier cities, which can only be met cost effectively through local production. The first units are expected to be installed at customers in China as early as 2025. For competitive reasons, we are not disclosing any further forecasts or details on market entry or product or pricing at this time and hope for your understanding. So we will not answer the many questions we already got regarding more details on prices, margin, market entry, channels and so on. 2023 means we celebrate 50 years of RATIONAL. When it all -- when it tastes great, we all speak the same language. This is the motto under which RATIONAL is celebrating its 50th anniversary. Throughout the year, customers, partners and employees will be thanked and shown appreciation through special events and special communication campaigns. With that, I would like to once more thank everybody contributing to those great achievements in 2022, and hand over back to Stefan for many, many questions that I saw.

Yes. So thank you very much, Peter, and thank you very much, Jorg, for your presentation. As said before, there were already a lot of questions, I would say, already answered during the call. So we might not repeat all of the questions and what Peter said about the China questions. Anyhow, so now I want to start with the Q&A round. And with that, I hand now over, first of all, to Nicole. She will read the questions, and then Peter and Jorg will answer them.

Thank you, Stefan. I'm going to start with the first couple of questions for you, Jorg. Can you talk a bit more about the demand trends in Europe and North America? What do you expect to be the biggest driver of growth this year?

Well, first of all, the demand trends are everywhere the same in the whole region. That is the need for efficiency when it comes to professional cooking, so the need for efficiency of personnel, energy, water, et cetera. However, the growth overseas, we have a better growth rate because we have just there a lower market penetration, and therefore, there is more possible, let's say, free market potential for us to exploit.

What are the reasons for the especially strong growth in the Americas.

Yes. It's just what I said. First of all, 2 reasons I see, it's a lower penetration that we have in the United States. But on the other hand, since we are now active already over 20 years in the U.S., and we are more and more successful, our USP regarding energy efficiency, lack of skilled labors, they are even better known in the market, and that is also, let's say, a positive spiral for us. And therefore, we can also keep the growth rate at a higher rate compared to other regions.

A question on delivery times. What are the actual delivery times compared to normal?

Well, normal, I said before the supply chain disruptions, it was 1 to 2 weeks. Today, if we talk about similar units, we are also able to match this. So if you need, I don't know, 5 units excess, it's possible to deliver those at 1 to 2 weeks. But it depends really. Large orders takes a little bit higher. And also, especially this is true for gas units. And the higher models, there, we still have higher lead times. And in general, we are expecting that, let's say, end of Q2, we are also here overall back to normal.

A couple of questions for you, Peter, on the new Chinese model. Do you expect the new Chinese model to be margin accretive or dilutive?

As said, we do not disclose more information on that today, but you can assume that we did our homework.

Will the new Chinese combi-steamer model with local sourcing and production allow you to optimize components for the XS Combi as well, which is currently margin dilutive?

No, since the iCombi products, including the XL continue to be produced in Landsberg.

Another question on the China plant decision. Is there any risk of flowback to other markets?

It is completely configured for the Chinese market needs and admission requirements. So no flowback is intended.

Now a rather long question. China's strategy with entry market product. Is it because of the relative weakness of Asia? Asia was only flat in sales in 2022, whereas the rest of the world was significantly up. How much of that relative underperformance of Asia is China and lockdown related? What are the targeted price points and volumes for this new product range? Will it also be rolled out in other countries? Or is it exclusively for China only? If yes, how to control the inventory not going in other markets, too, in order to avoid dilution?

The entry model for China is not driven by lower growth in 2022 in Asia. The region Asia in 2022 was less growing due to China, which was still heavily impacted by the pandemic. The other Asian markets were growing by 21%, especially India, Japan. The decision for the China entry model was taken earlier late in 2021, for the reasons I explained earlier. And we do not disclose more information on that today.

Now a question on the iVario, what are the reasons for the stellar growth in the iVario segment?

First, it was the better availability because it uses other electronic components compared to the iCombi. So we were able to deliver more earlier than with the iCombi segment. Second, it is the high demand in overseas markets, and the increasing customer awareness about the huge benefits it offers compared to a traditional tilting pan.

Are there any new products in the pipeline?

As usually, we do not publish any further information on our research and development projects. As you heard, we disclosed the Chinese local products, but don't have to say more with this regard.

Thank you, Peter. Back to you, Jorg. What is the actual situation with regard to electronic components?

Currently, we have enough components on hand. So we have done -- we don't have any supply disruptions. However, it is hard work for our purchasing team to keep that on that way. So it's not the same situation like it was pre-COVID.

What is the expected development of the input prices in 2023?

Well, we have the, let's say, usual inflationary trends that we see. So we have increased energy costs. We have increased labor costs that we have everybody. What we do see is quite a stabilization when it comes to raw material prices, Currently, we also see a stabilization of chemicals. We also see that many components that we use to pay broker prices for. It's not necessary right now, but we don't see any relief here. So it will still be a challenge on that to work very hard to avoid higher -- even higher increases.

Will you be able to decrease inventory somewhat in 2023?

Well, I said it earlier, we intentionally increased our inventory level to a little bit higher level. So we will do so. We had, in some parts, those semi-finished goods products that we are now fully assembled, and we will, let's say, a little bit run our units in our stock locations down, but not on a high extent.

What is the target for your accounts receivables? They increased by about 60%.

We have a target on CSO -- DSOs, which is between 45 and 50 days, and accounts receivables also depending on our sales volume, so with the 45 to 50 days, this is a good number.

What is your CapEx expectation for 2023?

We are expecting CapEx level between EUR 40 million to EUR 50 million for the coming years for 2023 and also for the coming years. So this is our long-term average that we see, so also before COVID-19.

For fiscal year '23, you should start to be getting a better return on your net cash holdings. I have assumed approximately 1.5% to 2%. Would you disagree?

No, around 2% is correct. Actually, we are getting also for short-term investments a little bit higher rates, around 2.5%. Also depending on the currency in the U.S., we get also higher percentage rates, but the 1.5% to 2% on the general cash holding is a good assumption.

What are your depreciation expectations for '23 and '24?

We had EUR 31 million of depreciation in 2022. And since our investment level is on a higher level between EUR 40 million to EUR 50 million, we expect that our depreciation year-over-year will be increased by EUR 2 million to EUR 3 million per year.

Do you expect returning to an EBIT margin of approximately 26% in the not-too-distant future?

Well, we talked about this many, many times. It is our long-term, I would not say goal, it is a result. Our long-term result will be that our EBIT margin, we're getting back to this 25 percentage level. I think it's an important topic maybe to tap on right now because if you take out the inflationary effects that we already saw in 2022, and we talked about, let's say, 10% price increases that we did on our end, and also, let's say, the magnitude on higher input prices and also higher OpEx from inflation is around on the same level. If you calculate that, then we already achieved in 2022 an EBIT level of around 25%.

How should we interpret slightly below for the EBIT margin?

Yes, it's up to 1 percentage point.

In Q4, EBIT margin was 25%. If we expect EBIT margin in '23 to be below 23%, what is causing the sharp margin also given that input costs for several items such as freight has come down year-on-year?

Yes, first of all, I think it's not correct to take just a single quarter. We saw that the sales level in Q4 in 2022 was on a very, very high level. So -- and that in relation with the cost level that we have was able for us to achieve the 25%. Now if you look at the sales distribution during the year, we can expect not to stay the whole year on this EUR 290 million level. Therefore, we have, let's say, an average for the full year, which is lower. And then what I said in the presentation, we will invest in future projects. Peter just mentioned the China project, but also other projects and also the inflation trend. We talked about the, let's say, increase of our salespeople in the field. This all will lead to this lower EBIT margin in this year.

What is the size of the positive FX effects with regard to sales and to EBIT?

When we look to the sales, our sales growth was positively affected by 4%. When we look to the EBIT growth was 48%. The positive effect when we calculate that with comparable FX rate to 2021, the positive effect is around 10%. So the EBIT margin, I'll talk a little bit in a different -- COVID in a different world, EBIT margin had a positive turn of 1.3 percentage points compared to 2021.

Which portion of the growth came from pent-up demand?

That's very difficult to say. So we saw in 2020 that many projects were stopped, and we had a special situation in 2021 with the government subsidies, so new projects were started again. I think now 2 years after the COVID-19 -- start of COVID-19, it's difficult really to say in detail which is pent-up demand. And also, we saw the high order entry due to longer lead times. So it's very difficult to say. I think we cannot really answer this question seriously.

What was the growth in aftermarket sales. What percentage of revenues does it represent now?

The revenue percentage share is 29%. The non-unit grew slightly better than the unit sales -- the non-unit sales, sorry. And the share of the non-unit grew about 40 basis points.

Thank you, Jorg. Now again, a couple of questions for you, Peter. Is your order backlog back to normal now?

No, not yet. We expect that to be the case at the end of Q2.

Can we have a rough idea of orders in Q1 versus Q4? And what is your current book-to-bill?

We will not comment Q1 figures now. But in May, you have the Q1 figures released. Book-to-bill is below 1, which means that we are reducing our order backlog step by step. As already said after Q3, this will lead to a normal level of around EUR 100 million or below EUR 100 million, presumably at the end of Q2 or so.

How has the lead time of orders evolved throughout Q1?

Lead times are more or less back to normal. So if you would order a unit now, you would not have any delay to your expectations.

With orders at the level of EUR 190 million in Q3 and Q4, what order expectation do you have for to be able to reach your growth target?

We had an order book of around EUR 245 million at the end of 2022. So around EUR 150 million above normal. These orders are already in the books and ready to be produced and shipped.

How is the actual development of the incoming orders?

I repeat, we will not comment Q1 figures now, but in May with the Q1 figures being released. And again, we need to have sales higher than orders to get order backlog down. Expect order backlog situation to normalize at the end of Q2.

Another question on Q1, how was order intake in Q1?

I've stated before.

There was a relatively low order intake in Q4 at approximately EUR 200 million. Can you please elaborate why relatively low? Is it due to normalization of demand given supply chain normalization or structural reasons? How about the start into 2023?

Since the order book peaked in half year 2022, book-to-bill is below 1. And if you continue until we reach a normal order book level at around 3 to 4 weeks order reached, expect that to happen by the end of Q2 2023.

A couple of questions again for you, Jorg. Other assets increased from EUR 150 million to EUR 208 million. What are the reasons for that?

There are 2 reasons. The first one, and this is the most important one, we have increased short-term investment in fixed deposits. So this is equivalent to cash, I would say. And the second reason is that we have a higher position of VAT refund claims that we can expect payments from.

Are there any more price hikes planned for this year?

No. There are no further significant price rounds planned for this year.

What was the average price increase in 2022? And what is the expected price increase for 2023? What is the corresponding volume assumption for '23?

So around 50%, we had around -- well, it's on average, a 50% price increase done last year. Thereof, around 10% were already effective in 2022. So we are expecting another 5% spillover effect into 2023. And regarding to the volume assumption in 2023, we expect a mid-single-digit growth rate.

A couple of questions on taxes. Why are the tax rates so low? What should we assume for '23, '24?

We had a good development in countries with lower tax rates, and we had a special effect because of the [ Par ] tax-free intercompany dividend payments from our subsidiaries, which were significantly higher in 2022. And I think we had quite stable tax rate for the -- during the last year, and that's what we would also expect for the coming years in '23 and '24.

Why are cash taxes consistently lower than statutory taxes?

We have in markets with lower tax rate than Germany that have a significant share of our business.

At what rate do you estimate the tax rate for 2023?

For 2023, we expect a tax rate of around 22% to 23%.

A couple of questions on revenues. As Combi sales were curbed in the first half year of 2022, it implies the comparison base in first half year of 2023 is easy. So this would indicate solid revenue growth, at least for the first half. Is this assumption in line with how you see the iCombi sales developing?

Yes.

That's a short answer. Thank you. Can you please split out the 31% revenue growth in units sold, 12% price increases and currency effects?

Yes, I can repeat that. We have volume growth, which makes out for 9%; price increases, 10%; positive currency effects, 4%.

Which regions will benefit most from the investments into sales in 2023?

We are investing potential oriented. This means in markets where we see the most potential, we invest the most in new capacities. So the Americas and Asia will be the major regions where we are investing in. But European markets are still important in terms of number of existing customers with all the need for aftersales business, new customer groups and the existing potentials, the existing potential for the iVario.

Back to you, Jorg. Regarding the revenue guidance, how much price volumes? What are the FX assumptions?

So FX doesn't seem to work in our favor this year so far, but we don't have a big expectation that we have big effects compared year-over-year. Coming to pricing, price effects, we talked earlier about it, that 4% to 5%. This is coming from pricing effects, and the rest is volume.

For your guidance of high single-digit revenue growth, what is your expectation on volume versus pricing for '23? And what are your expectations on volume, pricing by geography?

That's what I just answered. So coming from the pricing spillover effect, this is around 4 to 5 percentage points. And the rest is the volume effect. The expectation volume by pricing by geography, I think this is a little bit more into detail here, but we don't expect -- let's put it this way, as a company with a growth track record in all regions of the world in a certain range, we are expecting also rising sales in all regions also this year.

Asia has an easy comparison base versus last year, implying good growth in the year ahead, and the full effect of significant price increase, it appears the high single-digit revenue growth guidance looks conservative.

Well, I think there is still a lot of uncertainty in the market. I mean we can now talk about we said we have a very robust business model. We have a stable demand. This is for sure. So our long-term growth perspective is not affected at all from our perspective. However, we all know that we have, on short term, many, many turbulences. Lately now, we have the bank situation. We talked about the supply chain that is not, let's say, currently, it's not a topic, but you never know what's coming. So in that respect, we think that our guidance is a well-balanced outlook for the full year 2023.

Peter, the next question is for you. On pricing, could you please recap on price increases in 2022? And should we expect further price increases to come in 2023?

Yes, we don't intend to have any significant price increases planned in 2023. We will have a normal increase on spare parts, which becomes due on 1st of April, but that's the normal thing we always did every year. Looking back in fiscal year 2022, we had an increase in March, which was 6% for units, 9% for accessories and spare parts, and 15% for cleaners. Then we had another increase of 9% on everything, but just in the U.S.A. in May, as I said. And we had a last increase for cleaners in December '22 by 15%.

Could you please give us colors about availability of components? Do you see the situation easing? Do you think that we are at pre-crisis level?

Yes. The situation, as Jorg said earlier, is good. We are still fighting for some minor things, but there is not at all a situation as we had it since August '21 to maybe summer '22. We are monitoring that very closely and see that it is almost back to pre-crisis level.

A question on current trading. Could you please give us an update on recent business developments, trend and demand?

No, we don't. As stated before, yet published anything on Q1. As I said, orders are below sales, but that's what we have to have, and we are not worried about that.

Outlook for gross margin in fiscal year '23, fiscal year effect of price increase is positive, but please comment on cost situation and mix influences on fiscal year '23 gross margin.

Yes. Overall, for the full year, we expect 2023 to have a gross margin comparable to that of 2022. We saw many special costs that we had in 2023. For example, like this broker for electronic, we don't expect that to repeat on the same level in this year. We have positively the full year effect on the pricing side from our own price increases. On the other hand, we still see that we have also higher costs, for example, for energy and also for suppliers that have higher energy costs, for example, or higher inflation, higher wages. And that is why we think that the gross margin 2023 will be on a comparable level of 2022.

If operating margin is down slightly in fiscal year '23. And if so, where is OpEx investment focus.

Yes, I said that in the presentation, our investment focus will be the sales force in the street. And other than that, our strategic investments in Wittenheim in China, for example.

Two questions on China for you, Peter. Please quantify the T3, T4 city opportunity, for example, of global 4.8 million professional kitchens. What percentage of sales was China in fiscal year '22?

So the share of sales in China was 4% in 2022. It was higher earlier. But given the fact that, as I said, COVID had a high impact on China in 2022, it was lower. The question about the potential is interesting. Those cities are not part of the 4.8 million kitchens with that special entry model, we add kitchens to that overall potential.

Will the entry-level oven for China be connected cooking ovens?

At the moment, we do not disclose any more information on that.

How should we think about R&D in '23, '24 in light of your Chinese entry machine endeavor?

So our R&D in Landsberg and of course, also our application center in Shanghai will support this project. But of course, the rest, and this is the majority of the people and the capacities we have, will keep working on future product improvements.

In fiscal year 2023, EBIT margins is expected to be slightly below previous year's level. Could you provide a more precise definition of slightly?

Yes, we had this question also earlier. This is around 1 percentage point.

Peter, order intake in Q3 and Q4 seem to be below EUR 20 million. Do you assess this level as the new normal going forward?

We expect to be back at normal levels by the end of Q2 regarding order levels and order book size.

Do you estimate you will enjoy similar type of pricing power and profitability in China with the country-specific combi-steamer?

We do not disclose more information on that today. Our policy always is and will be to exceed customer expectations and needs for a reasonable price.

Given declining raw material and energy costs, what is preventing the group from delivering 24% to 25% EBIT margin in 2023?

First, not all, raw material are declining. And energy costs, we will see what will happen later in the year. Next to that, of course, it is overlapping higher material costs, ongoing investing into strategic projects, higher depreciation due to higher CapEx in the last years, and in the coming years, higher costs for components due to double sourcing. As you might know, we were very much single sourcing pre-COVID. That has been changed. And finally, maybe also the dilution we have by the XS iCombi and XS iVario and higher labor costs. I hope I didn't forget anything.

What does RATIONAL do to prevent cannibalization of its existing business with the new oven?

Again, I think that's focused on. China since it is an additional market, we do not see a significant risk of cannibalizing.

Another question on China for you, Jorg. What is the incremental CapEx needed to develop the new assembled plant?

So our total project budget is around EUR 25 million to EUR 30 million that we will invest until the end of 2025. However, not everything on that will be capitalized. It's also some costs involved in that.

Another question for you, Peter. in which segment was the 8% staff turnover? Was it in sales and marketing?

No, the 8% is on group level. We have a very low turnover in Landsberg. Usually, it's 3% to 4%. And we have a slightly higher turnover in sales. As usual, sales processes are the most fluctuated. The number there is probably 14% to 15%. So 8% is group in total.

How many work in sales and marketing, direct sales? How many have you hired?

As per end of 2022, we have around 940 heads in sales and marketing around 450 or so in direct sales. This is, since 2022, more or less flat.

Now we have 4 more questions for the time being. Jorg, why was research and development flat and did not increase?

Yes, as I stated in the presentation, we -- it was flat because we capitalized part of our R&D expenditures that was EUR 8 million. And if you take all payout for R&D together, so what we capitalized, but also what we had in the OpEx, then we increased our expenditures for R&D year-over-year by 10%.

Why can price increases not offset the higher cost?

Well, I think it's a fair statement at this point that we were able to weather the price increases that we saw in 2022 for the full year. So I mean if we calculate higher costs for raw materials, the higher inflation also in wages, the higher expenses for delivery and shipping and freight rates, and we take into account our effect on our own price increases, the absolute number is quite on a comparable level. So I think we were quite good in order to, yes, compensate. But what we did not do is we did not achieve a 25% EBIT margin on our pricing increases. And this is the effect why we had not a 25% EBIT margin, but a 23% EBIT margin.

A couple more questions for you, Peter. What is your penetration in North America versus previous 30% combi-steamer penetration?

30% seems much too high for me. I don't know where that number is coming from. We rather think the penetration of combi-steamers in the North American territory is about 15% to 17% Q2, or based on our information, which is not official data, as you all know.

How has your market share in North America changed? Who are the main competitors?

Main competitors are all the international companies plus a local family-owned company called Alto-Shaam. We estimate our market share has increased to around 40% to 50% in the North American territory.

Last but not least, a question on orders. What is your assessment of the current demand by regions, not least in wake of the very strong growth in the U.S. in fiscal year '22, up about 60% year-on-year.

Again, a nice try, but as I said before, we will not comment on Q1 yet.

Okay. Thank you very much, Nicole. Thank you very much, Jorg and Peter for a very, very comprehensive Q&A round. I think maybe this was a new record in numbers of questions. I hope everybody got the answers you wanted to get. Otherwise, of course, as I said before, just give us a call or an e-mail afterwards or -- on the next days. With this, I also want to make some marketing. So we do the IR talks from the last year. We started this, it was quite successfully. We start newly the so-called IR follow-up talk. This is about 1 week after each call. So this will be next week. So you will find the link on the homepage and the financial calendar. I think by the end of the week, you can, if you have follow-up questions, just call us, or just subscribe for that. And then we will do so-called IR-focused talks, where we will put a little bit more detailed information on the iVario. This is in the end of April, I think the 20th of April or so where we will have this. And also for this, you will find the links for subscription on the financial calendar by the, I would say, end of the week. With that, thank you very much for your interest, for your -- yes, the long time you invested now in this call, and we hope to see you maybe also at the AGM in May. And of course, at the Q1 talk or Q1 telco at 4th of May when we publish the Q1 figures. Thank you very much, and bye-bye.