RATIONAL Aktiengesellschaft (RAA) Earnings Call Transcript & Summary

So thank you for participating in our IR talk again. So with this -- with me is my colleague, Tobias Stadler, can see here. And at first, a few hints from our side. So this call is on the 1 hand, a follow-up on last week's earnings call. And on the other hand, our last call for Q1 2025. And with this call, we are following the recommendations of the ESMA. So meaning of course, just publicly known information shared, we make the call accessible to everybody who's interested via our website. Any documents that might be shown would also be made available to nonparticipants. And 1 last hint, this call will not be recorded by us. Let me first summarize the most important points of fiscal year 2020 (sic) [ 2024 ] again. So sales revenues last year amounted to EUR 1.194 billion, which corresponds to a growth rate of 6%. The order backlog, which was discussed early in the last years, remained very stable this year, and that's why we now stopped to comment that separately because the book-to-bill ratio is basically close to 1 again. From a regional perspective, the overseas regions of North America on the one hand, and Europe were with growth rate of 7% each, the major growth drivers. So in absolute terms. In relative terms, again, also overseas regions with Latin America and Rest of World grew by around 17% or 15%, respectively, and showed with that the highest growth rates. A look on North America. This was suffering, on the one hand, from the key account sector still hesitating with investments. And on the other hand, challenges that we have been recruiting the skilled salespeople in the magnitude we deem as required to fuel the growth story. In the key account sector, we see that customer projects were put on hold here largely beginning with the interest rates starting to go up again in 2022. And right now, we see, of course, an additional reason for postponing investments in the political insecurity we see in the North American territory. So normally, you know this due to low penetration rates and being very close to the European cuisine, we are expecting North America rates, growth rates of 10% or even somewhat beyond. So let's come to Asia. So here, we were very, very strong in 2023 and in Q1 '24 due to big orders from two bigger customers in China and Japan. So this effect is still fee level in Q1 2024. So we also see it in the comparison now for the coming Q1 figures. When we have a look on the product groups, we saw that the iVario was growing again stronger. And here, we are indeed expecting to continue to come back to double-digit growth rates, which means also 10% plus. So on the gross profit side, we benefited from the costs for components, raw materials and logistics, stabilizing on a lower level and ended up then with a gross margin back on precrisis levels. Operating costs, on the other hand increased disproportionately to sales revenues, as expected, so -- which led in the end to an EBIT margin of 26.3% for fiscal year 2024 and with that was significantly higher. And with this, we also reached precrisis levels earlier than expected. And if you want to read more details or see more details on the fiscal year 2024, please visit our IR website. Here, you find all the documents and in case of questions on that, just give us a call. So now closing 2024, let us now go over to some thoughts on fiscal year 2025. So as already stated, for fiscal year '25, we expect a growth rate in the mid-single-digit percentage area. So from a regional point of view, we think that the trends that we saw last year, they are expected more or less unchanged also for 2025. Let me elaborate a little bit more on the regions. So the U.S.A. is still our biggest growth market, but it is, of course, still suffering from political insecurity, and we feel this especially on the key account side. And you can also see this when you look into competitors' figures that are available. So in the last year, we saw that the major competitors saw shrinking or at least stagnating sales revenues. On the other hand, the street business is doing very well and still looks promising in our eyes. Maybe the most important topic here on the U.S.A. is now the tariffs. I think after the announcement of President Trump yesterday or we saw it this morning, we have now made a little bit more clarity. But after discussing the topic again with our experts in the dispatch department, we will need still to wait for more details before we can then act. And so maybe some details. Basically, it still seems in their eyes not to be too clear yet how our different product groups will be affected and whether it will be the 20% on everything or there might be exceptions or different rates for different product groups. And there will be meetings now beginning just now and discussing the situation and the actions based on the different scenarios that were created. One word on Europe. So here, the development seems to be a little bit more dynamic than one would have expected maybe late last year. From country to country, a little bit different, but we see still especially Southern and Eastern European markets looking very promising. But also in the more established core European markets, it's not looking that bad all over. And Asia, -- of course, on the one hand, Asia -- the Asian market is suffering from the weak economic situation in the Chinese market, plus, of course, the high comparison level now for Q1. So this would also affect the Q1 comparison, but should dilute then over the year for the next quarters. When we look a little bit on the seasonality in sales revenues, and those who followed us in the past a little bit, they know the seasonality was last year, again, a little bit flatter than we saw in former years, especially in the pre-corona area, especially now due to a strong Q1 2024. And this, as stated before, was mainly driven by the overproportional growth in the Asian markets due to these 2 bigger orders in Japan and China. When we look on different time frames, then looking at Q1 and also on Q4 later, we see that the Q1 in the past, on average, had shares of at or somewhat below the 23%, whereas in Q4, we rather had higher shares of around or even above the 28% of total sales for the fiscal year. So according to our business models dynamics regarding the incentive structure, especially for customers, dealers and our sales colleagues that rather tend towards year-end or higher sales levels at the year-end, it should in our eyes again come closer to the seasonality that we saw in pre-crisis times. And looking into 2025 in detail, it would mean that sales quarter-by-quarter or the growth rates should go up quarter-by-quarter, meaning that we should see the highest growth rates rather in Q3 and Q4 and lower than the average or the protection for the complete fiscal year in Q1 and Q2. And as already implied in the earnings call due to the price decreases for a part of our cleaners on the one hand and stable cost expectations on the other hand, we expect then a slight decrease in the gross margin. But of course, we do not talk here about percentage points lower, but rather basis points levels. Coming down to the OpEx. So with higher expenses in the sales and service and in the R&D areas, we are expecting then also a slightly lower EBIT margin at around 26%. So the contrary, we will keep the costs in the areas that are not related to sales stable this year. And we started an efficiency program in the headquarter in Landsberg am Lech here where we then also look on savings potentials. So all in all, this means this measure will give us then again a stronger focus on sales functions for 2025. And one question that we had in the earnings call is, does it mean plus/minus 100 basis points around this -- the 26% guidance for the EBIT margin. And I would say, yes, we can -- depending on cost development and earnings development, we can say this is a realistic frame where we can look at. And also in the margin, when we look back in the past, we saw a quarterly development from Q1 to Q4 with margins going up towards the year-end. And this is something that we would also expect to come back to this pattern, which we saw to some extent already last years. And one last topic I would like to highlight here is, as I said before, we want to strengthen the sales functions more. And this means, of course, we will hire more people here. And we already started now to increase the sales teams in the sales subsidiaries significantly and especially in the regions where we indeed see the highest demand, and this is mainly the U.S. and China, we already made quite good progress here. And this is a path that we will continue now also in the coming quarters. So after this short recap, so Tobi and I, we are ready to answer your open questions and feel free to raise your hand.

First raise came from Craig. So Craig, feel free to unmute yourself and we'd be happy to hear your question.

Yes, good afternoon, Thanks, Stefan, and Tobi for doing this call. Two questions from my side to begin with. First of all, could you remind us or could you please quantify for us roughly how much that large accounts affect was in Q1 last year from the Japanese and the Chinese customers. And the second question is in your U.S. business. Can you give us an update on how the sales split there is currently between your key account sales and your so-called street business sales?

So maybe I'll first start with the question regarding key accounts sales in the United States. Last year, we've seen the key account share, basically focusing on the repetitive business. So if the key account opens a new store or if there's a replacement business in the existing stores, they order units on a more or less repetitive base, and this is the key controllers we've seen. This amounted to around 15% of total U.S. sales whereas in normal years when there's a lot of key account openings or when we are successfully acquiring new key account customers, then we rather see key account shares of 35% to 40% of total U.S. sales.

And should I take the second question?

Yes. So maybe I can kind of follow up on that. Can I just ask you -- I understand that your customer suddenly at the moment to somewhat complex, they're just putting projects on hold until they can get more visibility on almost everything at the moment. Looking beyond that, I would just say you still see a very healthy pipeline from your customers for this going forward in the next couple of years.

Of course, we are talking to fixed key accounts. We are in discussions also with the Hexagon. We maybe have a foot in the door on the one or the -- one or other key account customer, and there's constant development in there. But as you correctly mentioned, there is currently more projects on hold as people are waiting how the future development of the economy, et cetera, will be, but the pipeline in general looks pretty promising.

So maybe I take the second question, so how much what we see that we can't quantify that. I think it's -- what we can do, there's an excess as we can look in the quarterly figures for the Asian markets that are public. And we see that in Q1, '23, for example, we had EUR 36 million. This went up step by step to Q4 to EUR 45 million and then in Q1 last year, we had EUR 42 million, so slightly down then EUR 37 million, EUR 35 million, and EUR 38 million. So we see maybe it was on average, I would say, EUR 5 million to EUR 8 million higher than we would have initially expected looking on the complete year when we look at the seasonality.

Nicolas, I see you got your hand raised.

Maybe if we talk a bit more about the top line. So we discussed the U.S. But you also mentioned in the results called China that the Street business is rather flat there. Can you maybe elaborate a bit? Is this a demand issue? Or is it more competitive issue that you're facing there?

So I would say this is more or less an economic issue. That's the Chinese economy, also, let me say, faced some challenges in the last year. Of course, the investments into let me say, new corporate canteens, et cetera, were also put on hold or maybe one of the other factory wasn't opened in the Chinese area. So this is something we also feel. So we maybe are not debt cyclical, of core, of course, when these bigger projects are postponed, we also can see this. So this was 1 reason why the Street sales in China were more flattish, whereas the key account business with [indiscernible] China was developing very well in the last 2 years. But then, of course, a definite mentioned led to the base effects that in Q4 2023 and Q1 2014 were positively affected by that. Should we go to Roberto?

Just a clarification. I mean all the 2025 targets are still not including the potential impact of the most recent tariff. Is it correct?

So the news last night or this morning, of course, this is something which just seen in the very short term. But when we initially guided for fiscal year 2025, of course, there were some minor uncertainties. We also went in there. But now with the latest development, as Stefan said, we are closely monitoring this. We're doing our homework on that and we will see it in what magnitude, we will see any potential effect coming from it.

Just 1 thing to add. Of course when they did the budgeting in the U.S. last year, the discussion on tariffs was already there and everybody knew that would come something because this is incorporated in the end. But of course, as Tobi said, the magnitude was not normal and the time frame was not known. So yes, this is just to add that.

Okay. And if I remember that during your latest conference call, you mentioned to the fact that if those tariffs were to come, you didn't think about the clear strategy and -- but you would have done the most basically to pass what you believe is an unfair extra duty and to protect margins basically for the full year. Given the circumstances and the fact that, of course, you know that one of your fast-growing competitor has established its production in the U.S. How do you think this is sort of feasible? Or is -- do you think there is a potential risk that you need to adapt to current circumstances? I mean in terms of pricing policy and something like that.

So we've seen in 2021 and 2022, the price adjustments are accepted in the market if they are justified. So back then, competition increased price by 40% or 50%, which was seen by customers, so they've recognized that they probably over did the price increases of some of the competitors, but we would estimate or we would think that price adjustments according to tariffs will probably be accepted. We also had it at our CMD in November last year. If there would be a tariff of around 10%, then we wouldn't have to increase prices by 10% as the intercompany transfer pricing allows us to maybe slightly lower price increase or less price increase in year. But yes, nothing is clear yet. We would rather wait with final decisions as we want to have clarity. And then once there is clarity, we can then decide on what to do or how to how to go in the situation.

Perfect. That's fine.

And the second around effect questions that we had in the call is, of course, really as important what would that mean to the investment or the willingness to invest of customers and of course, the let's say, the purchasing power for the end customers for the gas? And how would that affect the complete situation? This is something we need to look at as well.

So then I think Nicolas is.

Sorry, just because my connection was bad. So is it a competitive issue in China or not?

No. It basically is on the economic development in China. There bigger projects were put on hold there. For example, when the company canteens did not be open, and it's not a competitive issue. It's just really maybe more or less cyclical.

And I remember during your CMD what you just mentioned, the 10% tariff would mean 5% price increase to basically keep it neutral. So we can basically just double this company basically so..

So it's more like 6%, so in this magnitude, and this would be basically double so always with a disclaimer that until nothing is decided, we would rather wait a bit longer also for the customer benefits that we don't overdo it and don't act too fast.

Understood. Maybe just pricing in 2024, was that roughly 1.5% on group level for the full year? Does that -- because I think you mentioned in your annual report volume was 3%. And obviously, it looks like we won't have any pricing this year. So...

So I would say even a little bit less, maybe a little bit more than 1 percentage point. It's something that we would attribute to pricing, so price increases, yes.

Okay. And I mean, your installed base, I think your CEO mentioned 900,000, so 830,000 iCombi and then the rest iVario. Can you remind us how many units have you sold of the 2 product groups in 2024?

So it was around 83,000 iCombis and then another 9,000 iVarios, Nicolas.

Okay. And I mean, -- is there a scenario where, obviously, I mean, if you listen to Mr.Trump, you could imagine that a lot of factories will be built, they need canteens, et cetera? Is there -- could there be kind of a bolus of demand at some point? And would you be able to serve that then with the capacity that you have in Landsberg.

So definitely, though we do not see any capacity issues soon. So we've got a lot of things to grow, both in Landsberg and is the production of the iVario in Wittenheim will be opened in the second half year of 2025. We also have a lot of room to grow there. So in Landsberg we can currently produce maybe 120,000 iCombis a year, and in Wittenheim, we will be able to produce around 25,000 iVario with the newest expansion. So a lot of room to grow, and we are not in risk of any capacity issues.

And maybe just 1 final question. Your aftermarket business grew 10%. That's pretty impressive. Was that driven by Auto-Dose, by the new iCareSystem, where you're now taking down prices? Or what was the key driver here for that high growth?

So the underlying key driver for the demand has always been the installed base as these 900,000 units need to be serviced, the iCombis or the 830,000 units need to be cleaned and taken care of -- and this was the underlying demand driver. And we see also in the past that the non-unit business grew over proportionally when we compare this to the unit growth, and there was also some pricing still in there. So with the chemical prices increasing faster than the component prices, for example, we have 1 price increase more on the non unit side also for the cleaners. And that's why we then now until early 2025 we decreased prices in order to it still have a fair offer to end customers and that we give back the cost reductions we see from supply side.

And chemicals is how much of that 31%.

It's around 1/3 -- around 1/3 of the non unit business is cleaners .

Apologies in advance for having to tackle the elephant in the room as well. I mean, from time to time, your management thinks about opening a U.S. plant. I know it's on the table, off the table, on the table, off the table. And you will tell me you're missing details to come to a final decision. But could you imagine that the status quo if the 20% are applied would make management rethink the investment idea in the U.S.

So let's say that way, the on the table, off the table that's just partly correct. So it's on the table every 2 to 3 years where we do an assessment whether it would make sense depending on different reasons, not only financial reasons, but also the non-financial reasons like availability of personnel like supplier network, et cetera, whether it would make sense to produce in the U.S. rather than to export. We already had this at the IPO in the prospect. So you'll see this is really a long-term thing. And the decision was always no, it does not make sense. It's better to do it in Landsberg from an economic point of view, at least because it's much cheaper to do it that way of course. Now with the changed situation nobody knows how sustainable this situation will be here. This is again a thing why we say we do not act too fast here in order to maybe have more clarity on how long would it last? Might be taken away after a few months again because it's just bargaining here a little bit. So -- but of course, it could be one of the factors that might change the view here that it is then sensible to do it to build up a production facility in the U.S. and to produce in the U.S. Presumably, I don't know when it will be, but there will be sooner or later the next assessment. And if this is still valid, then it could be a factor that changes the view here.

And thinking about capacity utilization in Landsberg, of late, I guess we're not even at 70% after the enlargement, right? So that would also be okay for you because capacity utilization in the area would then significantly come down and you could live with that and feel within a couple of years, you can utilize the capacity given the growing markets.

Yes, of course, it takes maybe 2 to 3 years until production is set up and running. So from that point of view, and if we then continue to grow, we might come to the capacity -- to the end of the existing capacity and this might maybe rather be then a relief for the Landsberg facility because then there would be a part of the production being transferred to the U.S., but this is maybe too much speculation right now on -- yes, on the future.

Then we've got Nicolas.

Yes, can you maybe elaborate a bit on the efficiency program because you say gross margin down, OpEx growing faster than revenues, but margins still around 26%. So somewhere, you must take out cost to get there. Yes. Obviously, all disregarding terms.

So basically, the efficiency program is -- the biggest leverage will be in Landsberg em Lech as the headquarters with the most employees. Of course, there's also some costs that maybe could be questioned. So management decided that every manager of these bigger processes need to have a look and look for potential cost cutting or potential cost-cutting and then this was reported to the Board. And we also looked at numbers like how did units, sales and developed for the future through the past years and how did certain admin processes hire personnel and if this is still in line. So we're basically questioning the status quo as of today and compare it also against the precrisis years, then to look for the potential to maybe be more efficient in certain tasks and maybe also to maybe shift the focus back to business as usual. As in the last few years of all these crisis with supply chain crisis with COVID, et cetera, we were firefighting all these topics and maybe now need to refocus or recenter ourselves and to hiring more salespeople and be more active in the markets.

Did management give a target to all the line managers? Or just asking, can you cut costs and I'm hoping that someone says yes.

So let's say it that way. There is, of course, the ambition to not add people in central functions right now. So if somebody is leaving, maybe we look at do we need to replace this position? Or is there a way to find a more efficient way to share a task et cetera. We had some examples in the meantime. And importantly, in the planning for the whole year, of course, this is included, but it's not. So that's, for example, one of the managers gets a clear function, a clear goal you need to save now this and that amount. That's not the case.

Okay. And I saw you added 47 R&D FTEs, if my math didn't play tricks on me. That's a hell of a lot of people. Can you maybe explain about what drove that?

So the focus on R&D is basically also an investment in the future operations. So we got our 3 product categories. We've got the iCombi, the iVario and the iHexagon. And if we are not maintaining -- not remaining the clear quality and innovation leader in our niche, then we won't be the 1 successful in the long-term future. That's why there is the need to invest into these specialists and the new hires, they also represented more the software side of the business as they are further developing the cooking intelligence. They are working on new digital offers that to really bring the -- our cooking systems to the next level and make a better connection between the intelligence and the hardware and with that maintaining or that remaining the clear leader in terms of the innovation in the market.

Okay. And sorry, Craig. Just 1 more. Because you just mentioned connected cooking, you mentioned 100,000 connected devices. I assume that's not connected RATIONAL devices, but more mobile phones and computers included in that -- or is this ovens, 100,000 ovens. Okay, that's quite a lot.

It would not be a lot because every user maybe has an iPad, a laptop and then iPhones and then you would really take it divided by 4 and then it will be just a few. I think 100,000 doesn't sound very impressive if you look compared to the installed base. But if we know there is mainly, I would say, the most advantages out of connected cooking is for key accounts. And with a key account share of, let me say, 15%, I would say, this is then quite a good share of the units that is already connected. And that's why we are, let's say, sort of proud of this threshold we reached.

So -- but just to clarify, so the 100,000 includes the iPads and the laptops and stuff. So it's 100,000 ovens.

Connected ovens.

Just turning now back to Europe, which is still obviously your largest end market region. Obviously, in most European countries are now committed to major rearmament over the next years. And obviously, there'll also be an additional technology investments on more manpower will be needed that we said. So obviously, there have also been quite a bit of investment in canteen stuff related to military personnel as well, which has obviously been one of your traditional customer bases, public hospitals and prisons and so forth. But can you remind us how -- did your market share in those segments like exceed your normal market share? And do you have any thoughts you can provide at this very early stage on what kind of potential you might see there?

Yes, let's say it that way, we were always a supplier for the military in different countries. I think we maybe have discussed this a few times that, for example, in the -- I don't know the english word for the aircraft carrier or do you call this in the U.S. Navy. I think we are there. We are in a different military basis, like this is just, let's say, more or less normal community catering segment, there are canteens in there that we are -- where we are suppliers. So from that point of view, I do not know the exact market share to be honest, in this segment, but I would say this is quite on average with another customer groups. And so from that point of view, of course, if there is more investment, we might benefit from that in the future, we will see how this will work. But I think we don't have more details on that compared to any other industries. Did I forget something, Craig?

Then we got Nicolas again raising hands.

Yes. I mean maybe 2 questions. One, CapEx, EUR 40 million this year. I assume a lot of it will relate to the distribution center that you're building in Landsberg which will be this year and next year. But is it fair to assume that after then, your CapEx will come down maybe again to the EUR 30 million or do you think it will stay on that higher level?

I would say a fair range to assume is that we maybe have CapEx in the magnitude of 3% to 4% of sales or 2% to 4% could be that there may be the 1 or the other year where it's a little bit lower and another year that's when it's a little bit higher. When you remember back, maybe 15, 20 years or so, we had years with almost or even 10% of sales. And then we had years with less than 1% of sales. So it was very volatile. I think we are more stable now. But of course, there is some fluctuation maybe between as I said, EUR 30 million, EUR 40 million, maybe the 1 year it's a little more and the other it's a little bit less.

Okay. And then the analysis that you do every 2 years on your competitors or on the market. Will you share the results with us? I mean, when do you expect to finalize this?

So the project is currently up and running. And this is a very big project, there's no official data. I'm pretty sure every one of you analysts already got into same position as looking for official data and not finding something. So our market intelligence team is closely looking at this, closely analyzing this, and they are probably finalizing this in the first half year of 2025, maybe a little bit later, but I would say in summary, this is being finalized and then with the 9M call we can then publish further infos in that regard.

And I think the KPIs, you already know that we normally share that is the market structure. The total amount of addressable customers for different product groups, such things when the change or did they change or not, is there a transfer from 1 customer to the others like we saw, for example, with the more trend to snacking, so that the key account business in the supermarket or in the retail segment grew significantly. So this is something that we, of course would disclose as Tobi said, presumably with the 9 month.

Okay. Okay. And I mean on your sales reps investments, you mentioned at the beginning of the call, it's quite difficult to find people in the U.S. Over the course of the last 2 years, how many additional people have you added in the U.S. and China? And how much more are you looking to add in 2025? And then also with regard to China, are the people for the Road to China project, are they all in place? Or is there even more to come?

Maybe before we go to the number of hiring. The reason behind us being a little bit slower in the hiring as we initially planned is that we don't want to hire the wrong people before if they are not 100% qualified for the job. So for us, it's the most important thing is that we have a good consulting towards end customers and the people -- the people we are hiring that they are specialists in the things they do. And of course, they need to be good at cooking, but a perfect an employee would be -- would have been working in the company canteen maybe in a star restaurant, in an a la carte restaurant and maybe has some experience as managing the kitchen on the admin side. This would be 1 of the perfect candidate for us as they or our colleagues will also work with these different customer groups. So this is the reason why we are slower or we have a closer look at potential candidate, and we also invested into active recruiting that we have people in the United States for example, actively talking to potential candidates and maybe making sure that they get aware of us, and then we can try to hire them. So this is definitely on the table, and we are looking for measures to really become more successful with this.

And maybe on the figures, I think we do not give out sales people the numbers per country. But of course, when we look into the development, we see that we had the biggest lag from people that are there that we would deem necessary to fuel the growth story. We saw the biggest lag in the U.S. and in China. But of course, as well in other markets because in the COVID times or in the supply chain crisis, I think it was not priority #1 here to look on the sales organizations that much. So from that point of view here we have maybe some homework to do to then cover what we did not do in the last years.

Okay. And then I don't -- I mean stop me if you see another hand. I can't see 1 right now, but maybe iHexagon we haven't really talked about this yet. And maybe you can share a bit more details on this new exciting product and maybe also on unit numbers, I'm been talking a couple of hundreds. Are we talking kind of 20? I mean, how far are we in the commercial launch? And do you really see like a nice pickup of pace when it comes to the units basically people spreading the word about this amazing new machine?

So we're very happy that in the earnings call on the fiscal year, we were able to present one of the customer success stories because I'm pretty sure it makes it easier for you and also for the whole market to really see a benefit of iHexagon. We are still very, very convinced on the iHexagon as it brings enormous benefit and enormous speed into commercial kitchen, and we just started the second period of the launch. So the first phase of the launch was to present it to customers on invitation or that we directly contacted potential customers. And now with the experience we gained by doing this, we then said we want to present it to every customer within these 3 key markets, Germany, the United Kingdom and the United States. And from now on and on, we will see more customer examples like a petrol station for example, we will show you or we will probably present in the Q1 earnings call. And this is then step-by-step being -- putting more into the market, but as Peter always said, this is the beginning of a new era and a new era doesn't happen in 1 or another month or quarter. So we need to be close at the customer. We need to present the benefits of the iHexagon and we're not in a rush for this is a for us, so we are happy with the development and we are keen on working on new projects with more customers.

And 1 thing I want to add what we need to understand is because also internally as externally there's guys that are like Tobi said, we are quite happy with the development and others maybe are a little bit impatient. But we need to understand, we have 1 statement from hotel chain who is already testing it. They said it lasts. These projects last up to 5 or even 7 years until we then get the decision to really implement it on a broader basis. And so this is the same as we saw with Kentucky Fried Chicken 25 years ago. I learned from my colleagues when I joined RATIONAL that it took them 7 years until they were able to translate the first interest of KFC to the first project when they then rolled out a bigger amount of units and so this is why I think we do not feel that uncomfortable and are patient. It's important that there is more and more people testing it and that's happening and then soon or later. And there are others, the success stories Tobi said this is maybe a no-brainer. If you have a football stadium and you have 15 minutes time to bring out as much food as possible, then it's a no-brainer that the faster cooking process, freshly prepared food is increasing sales. But for bigger customers it means a reconstruction of the kitchen, it means a reengineering of the processes. And so that's why it takes time for them to make this decision.

Then we've got another question from Lars.

Very quick 1 following Nicolas' questions, and as we're discussing the iHexagon. I mean listening to you breakeven rather 3 years, 4 years out for the product group?

Yes.

Thank you, Lars. So there's any more questions. Still got some time left.

Yes, actually, if I may, but 3, 4 years out or the breakeven, but I remember in the call it was said that none of the 2 new products will be dilutive to the group margin, is that correct?

So in the mid to long term, of course. So when we ramp up when we launch these is, of course, in the first few years, there is more marketing and less units sold. But we always look at this in the mid- to long term, and then we will -- then there's a clear go that we maintain the group margin and do not dilute it.

And the China product, do you expect a similar ramp up to the iHexagon or because it's a smaller product for, let's say, more fragmented customer, this will be much quicker in terms of ramp up?

It's difficult to say. I would say we do not want -- at least, I do not want to give any outlook now for the Chinese products. Yes, it is new. We need to wait how the first perception will be. And -- but it will also take maybe some time in the very beginning but of course, as it is a known technology because it's a combi steamer with just maybe less feature or little bit less intelligence, et cetera, it's a known technology that's why it should go a little bit faster, the iHexagon is completely new. And from that point of view, it should take a little bit longer than known technology, yes.

Thank you, Nicolas. I can see Craig raise hand.

Just coming back to the questions on the breakeven on iHexagon. First of all, I remember, when we all took the plant tour there during CMD last December the gentlemen showed us that where the iHexagons were being assembled, we're at the front of the plant. And he emphasized that it's very simple, we don't need to allocate any additional space or I know you used item production process to probably to have people specialize in the assembly of these products. But my impression was that the additional -- certainly on the production side, I appreciate the sell side is something very different, but was really marginal. So I would have thought that your breakeven point would be pretty low. That's the first point on that. And I'll come back to the second.

So it depends on how you look at it, of course. So a breakeven in a way, let me say there is on the 1 hand, cost for production, or there's fixed costs for the amortization of the capitalized R&D expenses depending and on how you look at it. So basically, for us, we think most of the costs are expensed that were already spent for the iHexagon, there's some capitalized R&D that will be then amortized in the next years. And then of course, as you said, the breakeven for just the running costs that would come on a daily basis would maybe be if there is just to make it more and more imaginable if there is no production then there maybe no cost because there is no space needed, no additional CapEx allocated so from that point of view, you're correct, Craig, yes.

Okay. And just to be sure, I mean, looking beyond '25, in general, I mean barring any major shock effects, obviously, but the group EBIT margin target, I just want to confirm this again, I third Mr. Walter mentioned this in the con call as well but it's still around that 26% level not just for this year, but in general, in the coming years as well, right? No deviation from that based on the ramp-up of the Chinese plant and iHexagon, correct? So your target -- your margin target for the group next year is beyond 25% also, is around that 26% point, EBIT margin?

We always said in the 25%, 26% EBIT margin levels anywhere right there, but I would say, yes, this in the...

I asked if you would take 25%.

25% to 26% is a midterm guidance. We will be able maybe to hire the people in the magnitude that we would see necessary to fuel the future growth then faster that it maybe goes down to 25-point something and all the other factors that are playing a role so 25% to 26% is a level we feel comfortable.

Okay. But my question was specifically -- that's also including the ramp-up related to iHexagon and the Chinese plant opening. That;s what I want to confirm.

Lauri?

If I could sneak a question quickly for the call, thank you very much for the call. Just on the Road to China product, you can't talk about it yet. We understand that. When will you be able to talk about it ahead of the launch? And will we get a bit more information about the target market in terms of potential than we did on iHexagon. iHexagon is addressing a genuinely new market for you, arguably and more difficult to quantify, but can we expect a bit more information given how difficult the street market is in China at the moment, presumably, you're more enthusiastic about this product, not less enthusiastic about it? Or is that the wrong logic?

Yes, we will, of course, do, let's say, more analysis on that in the coming month and of course, there will be some more information also for you. But I would say right now, it's too early to give that out.

No, no, I appreciate that. My point was ahead of the launch, are we likely to get more information about your ambitions with that launch? Or is it going to be kind of post the launch that we learn more about the opportunity?

To be honest, I don't have the schedule now in mind of the teams. I think we are doing the planning process again by the end of the year for 2026. And I would assume that with that in early 2026, we have more detailed information that we then also can share with you. As the launch will be -- I don't know the exact time of Chinese New Year in 2026, hopefully, everything is ready until then, but I would assume that until then we have more detailed information, so even pre-launch, yes. All right. Completely on time. If there's no question anymore?

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