RATIONAL Aktiengesellschaft (RAA) Earnings Call Transcript & Summary

My dear ladies and gentlemen, welcome to our earnings call on RATIONAL's 9 months 2023 figures that we published this morning. My name is Stefan Arnold. With me are my colleagues, Nicole Engelhardt; Tobias Stadler; and of course, our CEO, Dr. Peter Stadelmann; and our CFO, Jorg Walter. So Peter will start the presentation in a few seconds. And as every time, just a hint, all participants are muted. And if you want to ask questions, you can send us the questions to [email protected], and we will give the answers later on. So we already have quite a number of questions, and I say thank you to all those who sent them in advance to us to make us be life a little bit easier. So if we already gave the answer to your question during the presentation or we already had this question, we then might not repeat the question later on. I think you understand this. And at the end, of course, we will make sure that all questions will be answered before we then close the call. So we estimate the call to take less than 1 hour or 1 hour. And with this, I want now to hand over to Peter. The stage is yours.

Thank you, Stefan. My dear ladies and gentlemen, 2023 marks 50 years of RATIONAL, as you probably all know. After several events during the year, we invited more than 800 international partners to Landsberg to join us celebrating in October. We were cultivating our relationships and building trust, also in disclosing important innovations to come to our partners. Let me once again elaborate why we have our partner network. More than 4,000 partners worldwide, with probably more than 20,000 employees, help us to build the bridge to end customers in all locations. They are everywhere where we can't be on our own. Our dealers have their existing customer base within their territory. They also offer cooking live shows, they exhibit our products, they provide training centers, run trainings and of course store units on-site. Our service partners on the other side take care of installing, maintaining and fixing our products. They have spare parts in stock. That means that we at RATIONAL can use these capacities to the benefit of our common customers and remain lean, efficient and profitable. In order to show our trust in the relationship with our partners, we disclosed, very unusual for RATIONAL, innovations which are still to come yet. The first one was iCareSystem AutoDose. Simple, safe, clean. It is best explained in a short movie. [Presentation]

So with iCareSystem AutoDose, we can save time and space. We contribute to HACCP hygiene safety. And also, we are able to reduce plastic since we have probably 50% less plastic with the cartridges compared to the tablets which are packed individually. The price for this option, which is already available worldwide, is, in German list prices, around about EUR 750. During our partner events, we also proudly referred back to the long digital history RATIONAL has. We have been an innovative pioneer in cooking systems for 50 years and also in digital solutions for more than 20 years. The very first digital solution was introduced in 2000. It was called PC Program. Via modem, it was possible to distribute cooking programs and to download HACCP data. Since then, we progressed step by step. And I'm very proud to also inform you that we will have 4 different digital solutions launched early in 2025. For us, it has always been strategically important to use technologies such as digitalization to increase the benefits of our units or to offer additional customer benefits. And the fusion of digital solutions and cooking systems increases customer benefits and customer loyalty. Starting in Germany, Austria and Switzerland, we will be launching in early 2024, first, Hygiene Management Pro. You already know that. We will improve that: offer checklists, temp sensors and increased workflow safety to guarantee hygiene standards. The second field is called Resource Management. With that, our customers get information on resource consumption, equipment usage and cleaning behavior. They get recommendations for better equipment use and resource savings. Number 3 is another world premiere. It is the first interface between ERP systems and our cooking equipment. So planning menus with raw materials will be bridged, where our customers can send the according cooking program to their RATIONAL units and, therefore, guarantee high standards and constant food quality. And finally, a fourth solution will be launched for our technical service partners, which allows them to do predictive maintenance through regular maintenance reports, solution suggestions for troubleshooting and troubleshooting via remote access. That last point saves unnecessary trips of technicians to customer sites. For the grand finale, we announced and displayed our new product category. It has been introduced with a short movie. [Presentation]

After inventing the combi-steamer in 1976 and the iVario in 2005, this is another technological breakthrough RATIONAL brings to the market. Let me explain what is special about our newest innovation. To put it in a nutshell, it's the speed of the unit. We guarantee the shortest possible cooking time for a bigger volume without compromising the quality of the food, thanks to intelligent and adaptive control of an additional microwave technology. This technology totally differs from speed oven or a combi microwave oven since they are only usable on a single rack, which, in addition, is quite small. We are the only ones able to add the power of the microwave to all 6 levels; full gastro norm, by the way, of our new cooking system. This is really revolutionary. It was developed with a clear focus and as a supplement to the existing product range. It is geared to the special requirements of selected businesses. The iCombi and iVario continue to be the best solutions on the market for most customer requirements. The launch is planned for spring 2024, and more information to come at the launch. Before coming to the financial information, now let me again point out one important difference of RATIONAL to many other companies. Our highest goal is not sales and earnings and growth, but customer benefit. Only through fulfilling the needs of our customers we will be able to deliver financially good results. Also here, we would like to show you a short movie about a small operation in Canada. [Presentation]

It's great to hear customers saying that RATIONAL is the gold standard. With that, let's go over to figures, facts and data. A short recap of our last year's sales development. On this chart, we see the sales revenue since 2017, in gray, and the expected sales in Fiscal Year 2023 in red. COVID-19 in 2020 set us back even below 2017 level. Fortunately, since then, we could recover fast. We achieved sales of EUR 1.022 billion in 2022, with a growth of 31% against 2021. The reason for this good development was the good availability of electronic components since the second half of the year 2022, with an especially strong fourth quarter, and RATIONAL catching up in reducing order backlog and lead times. Also, price increases due to higher input costs were driving our sales revenues to an unusual level of 31% in 2022. During 2023, we aim to come back to our normal business development that is a reliable and steady sales growth with high-single-digit rates overall. Let's look at the business performance in the first 3 quarters of 2023. With EUR 272 million sales revenues in Q3 2023, we are at the level of the previous year's third quarter, as expected. This year's quarters are against our usual seasonality slightly declining towards year-end. That is due to the fact that Q1 and Q2 were positively impacted by reducing the high order backlog and lead times as fast as possible. Q3 benefited with EUR 30 million from the reduction of order backlog. As underlying orders grow quarter-by-quarter, we should see further progress in coming back to our normal balanced business. Q4 sales are expected to be around Q3 levels, below previous Q4 2022, where we also went for fastest and greatest possible order backlog and lead time reduction. Regionally, we once again see our overseas areas, especially North America, boosting our growth. 30% of growth in 9 months 2023 speaks for itself. North America remains the #1 growth market in street sales; especially, good business with smaller restaurants in the United States helped in this region. Sales in Germany are on a similar level to previous year. U.K., Spain and France supported growth of 7% in Europe. Sales in Asia were supported by Japan, China and Southeast Asia. Growth rates in Latin America and Asia were similar, at 24% and 22%, respectively. Latin America grew thanks to Brazil and Mexico. Rest of the world grew by 11% due to strong sales in near Middle East. With that, I'm handing over to Jorg.

Thank you, Peter. Also from my side, a warm welcome to this call. We look now at the product groups, and the situation here is generally unchanged to the situation that we saw in the first half-year. That means the bulk of our business is still the iCombi. And here, we grew in the first 9 months by 18%, to EUR 746 million. Especially Q1 and Q2, like Peter just stated, we had a lot of catching up and working down the high order backlog from 2022. On the right side, in contrary, you see the iVario. Here, we are declining by 11% compared to prior year. And the reason for this, we talked also about this during our previous calls, is the different availability of the CPUs for the iVario in 2021 and 2022. The situation was we were less limited in '22. And therefore, we were showing last year already a tremendous growth. By the 9 year (sic) [ month ], that was 63% growth compared to the year 2021. And based on this extraordinary achievement last year, the current numbers are rather a normalization than a critical situation. Let us now look at the order backlog. This is here on this chart at the red line. Our order entry is the light gray left column. And the sales level, this is the darker gray right column. Looking at the order entry in Q3, we are still below the sales level, which brought the order backlog down to around EUR 130 million at the end of September. You see also that the order level, the orders of Q2 and Q3, they are on a comparable level, which means further stabilization of our business situation. And this fits perfectly to our historical seasonality, where, Peter just also mentioned this before, Q1 is normally the one with the lowest orders, then Q2 and Q3 are on a similar level and the highest order entry we typically expect in Q4, that is the strongest. Now when you look back to the years compared the order level in Q3 2019, so before COVID-19, we are with the current order entry situation around 20% up versus prior COVID. The level of the order backlog, we discussed about this also very often and in detail during our previous calls, we think it's now close to normal. Whether it is EUR 100 million or EUR 130 million, it is really difficult to say. And it is not so critical for us, as we have anyhow a quite low level of order backlog in relation to our monthly sales on hand. For us, more important is our flexibility and our low and short delivery times. And here, we can repeat the good news that we also stated before: we are in all areas of the company and with all product groups back to our normal and short delivery times. So how are earnings? It's clear that a good sales level leads to a good EBIT. EBIT reached EUR 202 million in the first 9 months, and this is an increase, an overproportional growth of 24%, compared to the sales increase. As a result, the EBIT margin increased by 1.9 percentage points, to 24.2%. Now also in this chart, we can look back to the time before COVID. So looking back to 2018 and 2019, we are now -- the EBIT margin, we are nearly back to the normal level that we had before COVID. And when we take into consideration also our sales price increases, which inflates our sales, so without a 25% margin effect in the bottom line, we are already back to a comparable level to pre-COVID. Now let's have a look at the P&L in more detail. We see that the main driver of the good EBIT development was the good gross margin. The COGS rose underproportionally, by only 8%. We benefit from falling freight charges and falling material costs, especially for chemicals and for stainless steel. At the same time, we have the higher sales prices for our own products that we put into place last year. As a consequence, our gross profit margin increased to 56.5%, which is up by 2.3 percentage points versus last year. Our operating costs rose in totally underproportionally compared to the sales, by only 12%. And on the downside, also we have the currency result. Here, we had a noticeably negative impact on our EBIT margin, by minus 0.8 percentage points; or in absolute value, minus EUR 5 million. So overall, we are quite satisfied with the earnings situation and especially the stable situation of our gross margin. This is one very important driver for our solid bottom line results. Our balance sheet remains very solid. We have no relevant topics here. Total assets are at EUR 980 million, up EUR 19 million against December 2022. We have a working capital, so inventory and receivables, slightly below the December value, and this is mainly due to a lower quarterly sales level that we had in Q3 versus Q4 last year. Our liquid funds are down against last year due to the increasing short-term investments. And there is a positive effect certainly in there because due to the higher interest rates, we now earn also interest on these short-term investments. And you will see this in the shift between the 2 balance sheet line items: liquid assets and other assets. Now looking at the equity, we are at EUR 681 million after 9 months. And when you compare that to the December number, then we made up for the dividend payment that we paid out in May of EUR 153 million. We continue to invest in the future of RATIONAL. So the CapEx are expected for this year to be around EUR 30 million. We adjusted the CapEx expectation for this year against the previous calls due to delays in some of our projects. Some of the biggest projects for 2023 are the expansion of Wittenheim. Total investment volume will be around EUR 35 million, and the completion of the project will shift into 2024. Then we have the CapEx project for Road to China. And other important topics are the site developments, some minor site developments for our sales offices around the world. The biggest one we are just doing in Japan, but also Spain and Poland are on our list. We are investing into photovoltaics and [indiscernible] in Wittenheim. And we also finished our office expansion in Landsberg also in April this year. So these are the most important projects with relevance with regards to CapEx. You know that we care very much for our employees. They are the building block for creating real benefit at the customer level and, therefore, enable us to grow in a sustainable way. We monitor all relevant KPIs. I would like to highlight here on this chart the staff turnover that reached, with 6%, the lowest value since the last 6 years. And with a growing business, we are continuing to invest into our workforce. For the first time, we are now above a level of 2,500 colleagues at RATIONAL. And the structure of the new hires is quite balanced between the different functions. One focus is certainly the direct sales employees in our subsidiaries. Nearly 50% of the new positions are in this area. But on the other hand, we also strengthened, for example, our capacities and our strength in the area of research and development. Finally, we come to our sales and earnings forecast for 2023. Overall, we have positive expectations. The price increases and the stable material availability, together with the continued strong customer demand, gives us a positive outlook for 2023 and beyond. We expect sales in Q4 to be slightly below last year's Q4 due to the normalization of the order backlog. Peter also mentioned that. As a result, for the full year we expect sales growth in the high-single-digit percentage range. And with this, we are returning to our historical growth trend. EBIT-wise, we have seen the positive trend in the gross profit in Q3, especially due to a positive situation on the materials side. Regarding the FX exchange rate, especially the U.S. dollar, we are now on a more favorable level than we were originally expecting. So if these trends continue in Q4, this will continue to strengthen our gross margin also in the fourth quarter. On the other side, in Q3 alone, we had an overproportional OpEx increase compared to sales. This will also be the case in Q4. All in all, we expect operating costs to rise slightly overproportionally for the full year 2023. And based on the latest strength in figures, we therefore expect the EBIT margin at the previous year level. And depending on the magnitude of the positive effects mentioned before, we could also reach an EBIT margin slightly above the last year's level that was 23.2%. And with this outlook, we are at the end of our presentation, and I'm happy to hand back to Stefan.

Thank you, Jorg. Thank you, Peter, for your presentation. And now let's go over directly to Q&A. And I see we have now in the meantime more than 40 questions. So I hand it over to Nicole. So the stage is yours.

Thank you, Stefan. Yes, we have received quite a few questions, and I will start with asking you some questions, Jorg. Backlog. You say order intake is increasing. What was order intake in Q3?

So in Q1, we had an order intake of EUR 220 million. In Q3, it was around EUR 240 million, the same number as in Q2. And so -- Q3 was slightly higher than Q2, actually. And usually, as I said before, we expect a little bit higher trend in Q4. We also see that the first indication of our order entry in October that would underline our expectation for this.

How can we think about revenue in Q1, Q2 next year if backlog may end the year close to historical levels, EUR 100 million, and orders at around EUR 240 million, EUR 250 million versus sales of EUR 270 million to EUR 280 million per quarter? How is Q4 going forward so far?

I just can repeat what I just said before. So we have a positive indication that the Q4 order entry level is rising, which then gives also a positive outlook to the first 2 quarters next year. What that means for the whole year 2024, we are not commenting now on the guidance for the full year. That we will give in March next year when we open our figures for 2023.

Okay. The next couple of questions are for you, Peter. Which are the positive market and appliance mix effects?

After 9 months, we see strong sales in the U.S.A. The mix effects are also driven by bigger units, the floor units. We have an effect of sales prices in the U.S.A., which are higher than on group average. And the U.S. dollar, the exchange rates is less negative than previously expected. So these are the positive impacts on gross margin.

Could you color current order trends by region and product?

I'll repeat what I said. We have comparable sales development in Europe. And Germany, we are at previous level or slightly below, but in line with our expectations. All the overseas markets are above previous level. And overall, order develop is like expected.

Are you seeing any increased pressure on prices heading into 2024? Any meaningful changes you're observing regarding the competitive environment?

No, we don't see that pressure. We extended our leading position with regard to innovation with the iCareSystem AutoDose. Also the digital solutions will help us, and especially the new category of a 6-level high-speed device will help us.

Is AutoDose already available? And what's the premium for the AutoDose add-on? What's the margin?

Yes, it is available since October in all our markets. The price is depending on the market. As I said, in Germany, the list price for this option is around about EUR 750. Gross margin is on the same level.

What is the reaction to the new innovation combining steam, hot air and microwave?

The partners here in Landsberg were amazed by the new category of equipment, which is unknown so far. We got very positive feedback. Dealers on the events were enthusiastic. And we will, as I said, give more information on it when we launch it early 2024.

What is the addressable customer of the new speed combi oven? Does this expand or consolidate the existing market? What has been the initial feedback from dealers?

A very good question. This product aims to different customer groups. So it is not part of the 4.8 million kitchens potential for iCombis. It is new potential. That is why we announced it before launching, which is unusual for RATIONAL, because there should not be any cannibalization with iCombis coming from this new category. Especially when speed is crucial for a big amount of food, that unit will be perfect for these customers. And as I said, dealers were very much delighted.

What is actually cooking in R&D?

We cook a lot in R&D. But as you know, we will not disclose any details of other R&D projects than those we announced during our partner events.

Thank you, Peter. A couple more questions for you, Jorg. What's the current outlook for iVario sales in Q4 and behind? Should we expect that product segment to develop flattish sequentially in Q4? What's the outlook going into 2024?

Well, first of all, like I stated in the presentation, we see, let's say, a stable development in the iVario throughout the whole year because the previous year was so high that it looks like it's sluggish. But I think when you look in a 2 years row, then it's not so sluggish. And this is also the outlook for the future. The long-term potential is huge, and the growth perspectives are high. Just for an example, in North America, also in this year, we have a more than 80% growth rate in the first 9 months 2023, because we are expanding there the sale of the product. For a short-term perspective, the main markets currently or the biggest markets currently for the iVario are Germany and France. Both countries are in a rather more difficult situation. This is also the reason why, let's say, iVario is a little bit more affected. Nevertheless, from a growth perspective view, we expect the iVario to have at least the double growth rate compared to the iVario business due to this early stage of development.

How much will you invest in the development of the international locations?

Well, first of all, I mentioned already Wittenheim. We are investing there around EUR 35 million. China is an important topic for us. So Road to China, the Chinese product, the total project volume is EUR 25 million, but related to capital expenditure we have EUR 2.5 million included there. And also the current international office expansions, they are currently running in Japan, Spain and Portugal. The volume of these 3 projects also is around EUR 2.5 million.

How do you progress with the new production in China?

The project is in line with our expectation. It is from a timeline slightly delayed. So go-to-market expectation, we have now for late 2025. It's basically unchanged.

Is there any update on the new iVario plant investment program?

Well, we are following our initial program. As I said, we have a delay in putting everything in place. Now our plan is to move in 2024. So the offices, the trading center and the operation of the local canteen, that will start in Q2, and we are planning to start production in Q4.

Do the defaults on accounts receivables increase, remains stable or decline?

They are very stable, and they remain on a very, very low level. So we have literally no losses on accounts receivable at all since years. So they are very, very good organized here.

What percentage of the trade receivables are insured?

We have an insurance level of around 90%.

What would EBIT margin slightly higher than that of the previous year look like?

So 2022, the EBIT margin was 23.2%. And when we gave our guidance to this year, we said slightly below is around -- between 0.1 and 1 percentage point. So slightly higher would be in the same range. So it's between 23.3% until 24.2%.

How do you see the further development of the input prices?

Currently, we have a very stable situation. We have no signals that prices are rising. So it's very stable for the freight rates. At least for the sea freight, it is rather declining. On the other hand, the freight for local shipments here in Europe are rising a little bit. But overall, this is a wash. So we expect to have stable rates there. Raw materials, chemicals are rather a little bit going down. And also the alloy surcharge is on a stable and rather declining rate, and we don't see any problems from that side for our profit development.

Will you continue reducing your inventory and accounts receivables?

So the accounts receivables, we are quite stable for many, many years. So we have DSOs around between 45 to 50 days. It really very much depends on our business development. So when we further grow, also our accounts receivables they will grow. But our goal is to keep the DSOs stable. When it comes to inventory, we have compared to the long-term trend slightly higher inventory level. I think in the light of the supply chain crisis, this was also a smart thing to do. And as we continue with a further normalization trend, we will also look again at those stock levels, especially at the international locations. However, for us to be flexible and to be able to deliver is a high value. So we'd rather have EUR 1 million or EUR 2 million more stock on the balance sheet and be flexible with customer demands than trying to optimize the financial balance sheet position.

By how much will you increase the operating costs in the future for [ AG ] sales and distribution?

This is difficult to answer in general. It really depends on our growth expectation. I mean, we will invest further in direct sales employees. Especially when you look at the U.S., we have a huge free market potential. And in order to tap this market potential, we need to invest into more people, feet on the street. We will invest there. We also will increase our marketing expenses in line with the sales development. On the other hand, we have, I would say, let's say, mature markets like in [indiscernible] organization where we look with a closer look. And we have no, let's say, plans to further increase our financial costs in order to operate in these markets. So it's a mixture out of the, let's say, international expansion plans that we have in the next years.

Will higher OpEx now be aligned to order intake (e.g., is lower investments in service/sales in Q3 a function of weak demand or something else)?

Well, we generally have the trend where we really very carefully watch what we see on the top line growth. We have -- that our OpEx growth is fitting to that number, that this is in line. I would like to exclude a little bit our strategic initiatives that we do have; namely, Road to China. So we have additional OpEx on our P&L that have no direct impact on the sales level in these same periods. And that's why we might also have a higher OpEx growth related to sales, depending on the phase of these projects.

What is the reason for the increase in the current provisions by 23%?

The higher current provisions by 23%, that is a number compared to the year-end level of 2022. And the major reason here is that during the year we are building up provisions, for example, for our staff bonuses, our dealer bonuses, throughout the year. And once the year is over, we pay out those bonuses, and then the provisions go out and they then influence our cash position. So that's why it looks like during the year that provisions are on a higher level, but that's a normal, let's say, operation during the course of the year.

Thank you. Now back to you, Peter. How do you see the further development of the wages?

In 2022 and 2023, we had very high increases due to the high inflation. So far, we see inflation easening and expect lower rates. So lower increases are also expected for the coming year. And the year after that, we think we go back to a normal development.

What is the outlook for the gastronomy industry in your markets?

I think fundamental trend is unchanged. The hospitality sector will grow due to higher standard of living, due to more people having more disposable income to spend for out-of-home eating and drinking. Maybe in details, it is also depending on the different regions. So at the moment, some of you know that Germany has a discussion, an ongoing discussion, with regard to the expected VAT, whether it should go back to the normal level we had before COVID or it will stay as it is now. We have additional CO2 taxes and so on, which make life more expensive for everybody. In Europe, I think it's different from country to country. And still, we see our overseas markets, which are most important for our mid- and long-term development, optimistic.

Do you expect the return of normal seasonality in 2024; meaning, Q1 is the weakest and Q4 is the strongest?

Yes, we do. We already see this trend in order intake. And we assume that 2024, I would say the whole industry and also RATIONAL will be back in a balanced and normal development.

Any early thoughts on likely sales momentum in 2024 with relation to RATIONAL's long-term average growth rate?

Yes. Long-term growth path with high-single-digit growth rates remain our base scenario. Planning process is started and is coming to an end soon. Final picture will be available beginning of 2024. And as stated earlier, we will publish this with our financial year 2023 numbers in March.

Is the guidance on the 2023 just deliberately prudent? Or is there something specific to think about when it comes to revenue or cost in Q4?

As you know, we are quite the conservative company in general and rather want to surprise positively than in the other direction. So there will be some cost effects that come on top in Q4 (e.g., personnel expenses, valuation of inventory and classic year-end closing effects).

With order trends now gradually picking up sequentially, would it be realistic to expect the book to bill in Q4 to return to 1.0x, perhaps even exceed it?

Yes, it should be realistic that we are at least close to 1.0x.

What is your outlook for the markets in North America, Latin America and Europe?

We should be able to go back to pre-COVID sales growth. There is no question about that. Group level sales growth, high-single-digit percentage, as stated just before. Europe and Germany, slightly underproportional in Europe. Germany, a little bit more because it is the oldest market we are in. It's highly penetrated, highly saturated for the iCombi, not yet for the iVario. Overseas markets should be growing overproportionally. As you all know, European Union economy is currently difficult; some projects might be postponed. But we see North American territory to currently offset the weakness of the European markets. And I think also Asia will help there in the future.

Thank you, Peter. So we have about another 14, 15 questions. I'll come back now to you, Jorg. How should we expect gross margin to trend in Q4 and beyond, especially in the context of your guidance for flattish or slightly higher EBIT margins in 2023?

So as forecasted, our gross margin is higher than the previous year. We did a good job on having our own sales price increase and, on the other hand, have the comfort level of rather stable or falling prices. So therefore, the outlook for Q4 is that it is rather stable. And then you have always in Q4 some year-end effects when it comes to inventory valuation that is difficult to predict. So therefore, we look with a quite optimistic and stable outlook to the Q4 gross margin.

By how much would you expect the different lines of the SG&A and R&D costs to grow sequentially in [ Joy ] in Q4 '23 and [ Joy ] in Fiscal Year '24.

Well, the SG&A, the different -- well, our focus of investment, OpEx investment, is definitely feet on the street. So it's the sales areas, the subsidiaries. This is something that we did not push too much during COVID-19 for known reason and also during the supply crisis. So therefore, this is one investment focus of us. And the other investment focus for us is R&D. However, when you look at the other areas, also for example, like IT costs, it is something that we need to expand also. So I think the year-over-year growth rates are more or less quite balanced. As a growing company, we not only can invest in one area without investing also in the general organization. But as I said, focus is direct sales and R&D.

Sorry, I didn't know this abbreviation, and I learned something again. Next question. The backlog in September of EUR 130 million was very close to the new normal backlog. Does management expect further contraction in Q4? And what is the impact on production planning for Q4?

As I stated in the presentation, whether at EUR 130 million or EUR 100 million, it's difficult to say. I think the current level, it is the normal level for us to operate with. And regarding what is the impact on production planning for Q4, there is no impact. So the current order backlog that we have in production is just on a normal level, a little bit higher than pre-COVID. So we can operate with that. No need for any special planning topics that we do have to fulfill.

Could you provide some color on the delays and the impact on iVario production ramp-up in 2024? Does management expect extra costs from the dispute with the construction firms?

So maybe the topic -- one reason for the delay is a quality topic with our concrete in the production plant. We are fully covered from our insurance and with the liability of the supplier. And also the, let's say, current [ court rule ] is in our favor. So we currently do not expect to have a negative financial impact from this topic in our P&L. Overall, it is not a critical topic for us because the unit development of the iVario, as we have seen, is not growing as much. And therefore, the current production capacity at our old site is sufficient to fulfill the current demand. And also this will also be the case in the first part of 2024.

How many staff does RATIONAL plan to add for their marketing and sales activities in 2024? And what are the costs per sales employee in the U.S. compared to Germany?

So on 2024, we wouldn't -- we do not provide such specific insight currently right now. I just can't say so, but it's a 3-digit number of salespeople that we currently plan to add next year. And the cost, the sales cost per employee are, not surprisingly, in the U.S. higher than they are in Germany.

Orders have been stable at approximately EUR 240 million per quarter in Q1 to Q3. Is demand simply not any higher? Or are you actively managing orders to stay at this level?

So we are not actively managed orders. We manage orders in terms of doing activities in the field to get higher orders. This is what we do. But we are not putting them down; this is not the case. I think it's just what we discussed before. It's still a topic that in Q1, Q2, we still had a high order backlog. And with all the topics of shorter lead times, stock in the markets with dealers and all these effects, that's the reason why the current level is on a little bit lower level. And we expect this to pick up now in Q4 and to have a book-to-build ratio close to 1.

Sales are about 10% to 15% higher than orders, and lead times are back to normal. Will you push for expanding order levels again now?

We are -- well, we perform, just continue what we did pre-COVID. So we will perform our activities in the field. We will provide customer benefit with our cooks in the market. And therefore, then this is the reason -- this is the form, the measures, how we will increase the order level in order to have also a growing number of sales next year.

Thank you, Jorg. Now a couple of questions again for you, Peter. How do you view the competitive landscape, as one of your competitors appears to have gained market share?

That's hard to answer because it's unclear which competitor it is referred to. If it should be Unox, they took share from manufacturers in the lower and middle segment of the market in terms of quality and pricing. And so the competitors which are in that field of the market might have market shares lost to Unox.

Can you comment on pricing when it comes to new orders? Is pricing stable? Or do you see scope to further increase prices? If so, by how much ovens versus service?

We plan no further price increases, whether to units nor to services.

Sales in North America were down slightly sequentially in Q3 despite tailwinds from FX. As there was a high base in Q4 '22, should we expect a weaker Q4 this year? Or do you expect again a seasonally strong quarter? Do you see any impact due to higher interest rates?

In North America, the sales are a little bit more volatile due to the higher key account share compared to the rest of the market. But still, a single quarter, for us to look at only a single quarter is not meaningful and not helping. Interest rates may have an impact on project business as higher interest rates make financing more expensive compared to building a house in the residential area, or the return on investment calculation, of course, is then less favorable.

Sales in North America are stagnating. And while peers have been constructive on volume, they point to more discounts. What is your view on the U.S. market?

The potential for our cooking system in North America is still huge. Penetration is around about 10%, maybe 12%, maybe 8%. We can't say exactly. We would not call a temporary small decline in sales stagnation. All over, we have a very positive view on North America. It's a growth market #1 for us. It is not clear to me what the author is referring to. Some U.S. manufacturers were more aggressive on pricing and might, therefore, have to work with more discounts to their dealers, but this is not our problem and not a problem for us.

Do you know how the inventory situation at partner dealers is developing?

No. Unfortunately, we do not know that in detail.

Okay. Now I come to the last question. Will the introduction of the new product category have an impact on the gross margin and EBIT margin? Is the cost structure for that activity dilutive at group level?

In the long term, it should be margin-neutral. We capitalized a third part of R&D costs in the last years. This will be depreciated over the coming years.

Thank you, Peter. Thank you, Jorg. And I hand over back to Stefan.

Okay. Thank you, Nicole. And of course, thank you, Jorg and Peter, for the comprehensive insights. And so this was the last earnings call this year. So with this, we can, yes, complete the earnings calls season for this year. I want to come to a few announcements for the remainder of the year for coming events. So next week, we will be organizing an IR follow-up meeting. So if you have questions arising in the meantime, we will have the opportunity to discuss them then next week. So you can find the registration link on the homepage in our IR calendar where you already registered for this call. And last but not least, of course, this is then the current call or the last call for our Capital Markets Day, which will take place on 30 November at Munich Airport. So we will have guest speakers from Munich Airport and from Gategroup, who will give us an insight into the business of the airport gastronomy and airline catering business. So we sent out the last reminder with registration form last week. And so if you decide to attend last minute, then please use the registration form and register by the 15th of November, at latest. So we would really be delighted to welcome you to this event. And so with this, I would like to close the call. I thank you for your participation and wish you a good time until our next meeting. So goodbye, and take care.