RATIONAL Aktiengesellschaft ($RAA)

So now let's start. So good afternoon, everyone. So thank you for again participating in our IR talk today. A lot of well-known faces and some new persons, quite nice mix. With me is my new colleague, Laura Deininger. Maybe some of you already met her. She just started in -- yes, in January this year at IR, but is not new to RATIONAL. She's there for, I think, 13 years now or so. So a few hints at the very beginning, as always. So this call, on the one hand, is this maybe a follow-up on our earnings call that we had 2 weeks ago. And on the other hand, the last call or some guys would call it pre-close call for the Q1 2026. With this call, we are following the ESMA recommendations, meaning it's -- we just talk about publicly known information. The call was made accessible to anyone who's interested via our website. And we would not -- presumably not share any material, but if we would do so, we would share with anybody. And another hint, the call will not be recorded by us. So with this, let's start and we first start to summarize a little bit the most important points of fiscal year 2025. So sales revenues amounted to EUR 1.26 billion in the last year, which corresponds to a growth of 6%. And adjusted for the negative FX effects, our organic growth amounted to 8%. And with that, I think that's a very, very important message. We are back on our average historic growth levels that we saw before this crisis years. So from a regional perspective, North America, again, was one of the major growth drivers with a growth rate of 8%. Organic growth adjusted for the really significant U.S. dollar-euro effect was around 14%. And then again, Europe was quite successful last year with a growth rate of 9%, really with the broad growth we saw over the different countries. So from that point of view, very pleasing result in the European markets. Asia was sort of a negative outlier for 2025 with a decrease of 11% compared to 2024. But from an operating perspective, it is really important to know that in Asia, we have a few big customers who have very big shares of the sales volume. And we had very strong years in 2023 and also in 2024 as we had the one-off effects due to the big orders from these bigger accounts. And eliminating these effects plus the negative FX effect, we saw our growth rate was at around 6%. So that's what we call the street business with the smaller customers was growing by 6% in Asia. To be honest, that's still below our midterm expectations we would have there, but at least it's a growth, and it's not so far away from the expectations. When we look on the different product groups, again, iVario was very strong or stronger double as in growth as the iCombi segment with around 10% growth. And -- yes, this is indeed a growth rate we would expect also for the future. So 10% plus growth is the midterm expectation for the iVario. When we now come to the gross profit side, we benefited last years indeed from costs for components, for raw materials and logistics that were stabilizing on a lower level. And with that, largely compensated for the additional tariff expenses we were facing in 2025. And with that, the gross margin ended up on a level slightly below previous year and better indeed than expected. The operating costs, yes, they were growing a little bit over proportional to sales revenues as expected, mainly due to higher investments on the sales-oriented or customer-oriented positions as we increased numbers of people in sales and invested more in sales-related functions. And in the end, with a little bit lower gross margin, with a little bit over proportional costs -- operating costs, indeed, the help of the positive or less negative FX result we need to say, compared to previous year. The EBIT margin was in the end with 26.4% in 2025, slightly higher than we saw in 2024. And with that, a little bit above our expectation, which was at around 26% initially. What is important to say before we start to think about 2026, it is not only the figures that we saw that give us a good feeling and a confident look into the future, it is mainly the foundation of this success, which is the development of the sales organizations. So once we had left the crisis years behind us, so approximately by the end of 2023 or so, this means we again started hiring more salespeople, meaning we met more customers with these more salespeople. We were triggering more demand with that. And with that also the sales revenue growth came back on a path we think we could manage also for the future. So this means the mid- to high single-digit growth levels. And this is now management focus number one. So -- and we will continue on this path of building up the sales capacities driven, of course, by the growth potentials we see in the respective markets. So not everybody can increase deliberately what he wants, but it needs to be potential oriented in the markets where we see the biggest growth potential. Of course, we will add more than in more mature markets like in Germany, for example. And for more detailed information, I think there is now plenty of information on the website. So then please go on the website and look there. Closing 2025 now, let me now go over to some thoughts on the fiscal year 2026. Of course, this is, yes, no detailed information on the first quarter. This is something we will not do, but to give you some thoughts what might drive the business, what is our thought on the outlook. So we announced with the annual report 2 weeks ago, a sales growth guidance in the mid- to high single-digit percentage area. And I think there is no reason after 2 weeks why we should change that. We know already there will be, again, a burden this year coming from the currency effects, especially in Q1. And if you look -- if you have a little bit of closer look at the currency movement last year and this year, you see that this should be of a minor importance in Q2, Q3, Q4, then it will go down or be neutral presumably. So from that point of view, this is indeed, yes, fading out throughout the year, so that we will be less affected by negative FX result throughout the quarters. And Q1, of course, was -- there was still a significant impact maybe comparable to Q4 or so that we had in the last year. And FX rates, of course, are a burden for us. You know this. But when we look into the last year's developments, we were able to compensate the FX effect with good growth rates. And we are confident that with this foundation that we talked about before with the sales team development and if we should be -- or if we could be able to bring this into the new year, then of course, we would be able to compensate also the FX effects with the better business development. So again, to go on a regional view, all over, we see more or less continued trends as we saw it last year. Of course, there will be some minor changes here and there. So the U.S.A. is our biggest growth market. You know this. And we are expecting continued organic growth, but also significant negative FX impact, at least for the Q1 and then this as said, will fade out. And I would say, looking at our competitors' figures for the last year, this is indeed a good success and also a very positive outlook. So we are, let's say, yes, good development in a weaker market environment. And still, the street business is doing well and still looking promising. But also we had this in the call regarding the key account business, we still see a good pipeline, and we are expecting to be able to grow now maybe from a lower starting position than maybe we would have talked about a few years ago. In the U.S., of course, the tariffs are the most important topic many guys are talking these days. And as it looked like more clarity in the end of last year, now there again are a lot of question marks again after the Supreme Court decision. And so as Peter said in the call, we will claim back tariffs as much as possible. But whether we will be successful there, at which amount and when, this is another open question, I think we need to look. We do not include or we did not include these figures into our guidance, into our planning for the next year, which we announced with the earnings call. And on the other hand, there is a discussion on the calculation base of the steel part of the products, which could lead then to higher tariffs. This would change. So here, there is really a big clarity in which direction it can go. Europe, after having a good development last year with maybe a little bit more dynamic development than initially expected. We also see here continued trends. There is no reason for the most markets to think that there might be a significant change. So we will be following this path with hiring more people here as well, and I think we can stay on this successful road here. In Asia, right now, the Chinese model is, of course, the most important topic we are talking about. We just launched I think 2 weeks ago now. The Chinese model produced in China for the Chinese market, and we are here expecting support for the sales side. And on the other hand, we know that China is still affected by a sort of negative consumer sentiment. And on the other hand, looking at this product launch, we know there is always some hesitation ahead of a new product launch, which might then dilute the situation and the figures to some extent so that we do not have clear figures after these 2 weeks on the short-term impact on our sales figures. In the other markets in the region, we see sort of a normalization. We talked about this high volatility due to big orders from bigger customers. I think here, we are getting to more normality, but also with some usual fluctuations we have in these markets. And maybe another elephant in the room these days is, of course, the Middle East. Of course, our Middle East markets are also suffering sort of from the Iran war effects. The impact on sales is limited as this is just around 2% to 3% of our sales volume. And I think the most important for us is that our people there are healthy and safe. So all over, it's a burden for us, but it's manageable. A look on the margins for next year, what is impacting the margins. Of course, the price increases we introduced in February will, of course, positively impact sales growth and margins, but they just get effective step by step beginning in early February because there were some level of preordering. There were longer-term contracts, for example, with key accounts. And so step-by-step, the new price level will then trickle in. And from that point of view, we see, of course, a positive impact on the margin, but to what magnitude, difficult to say in detail now. On the other hand, we are facing now, again, higher alloy surcharges. So we benefited from a lower level last year, but they are going up again. Same is true for logistic costs and of course, higher tariffs we are facing this year because now it's fully effective, even if the Supreme Court decision is maybe putting some question marks on the height of the tariffs, but the base tariff of 10% that we know will always stay and the rest is something we need to look at. But still in our planning, as I said before, the tariff level -- the tariff regime that we had before is valid. And this is, in the end, of course, causing higher COGS. And therefore, the gross margin will be presumably lower this year compared to '25. And I think the guidance, 25% to 26% for the EBIT margin is mainly coming from the gross margin. So this is around 1 percentage point. If we go from the level this year, 1 percentage point plus/minus whatever basis point level will be a negative impact on the gross margin. And with the continued investments, especially in the sales and service and the R&D we are expecting now for this year as well. So we continue this. Also the EBIT margin will be lower. And here, the guidance was a level between 25% and 26%. So from that point of view, we think this is still a valid range we are expecting. And all over, we want to keep the costs, let's say, in admin areas, everything that's not sales related stable or at least increase disproportionately slower than the sales so that we get a positive contribution. But all over, a range of 25% to 26% is valid. Okay. And from that point of view, I think that's now all from my side. I think a quick overview.

And now we already have the first question coming from Craig.

Stefan, I just want to follow up on the U.S. price increases, 4% to 5% going into effect from February. If you could just give us some color on how the customer acceptance of those price increases has been.

So all over, I think 4%, 5% is not really a big price increase when we compare it to what competition did. So I think the feedback and also when we look into the first -- let's say, the first figures, I think the price level is well accepted, and there is no big discussion about this price... Olivier?

Stefan, maybe just the first one on any moves from competitors on U.S. price after the Supreme Court decision that you've seen? No, still no?

No, no change until -- I think you had the same question maybe 2 weeks ago, and I think still no change that we really see.

Okay. And then just maybe a follow-up. Yes, 2 weeks ago, you mentioned sort of the U.S. share of kitchens running on gas versus electricity. Can you maybe give us a sense of the share of addressable kitchens that work with gas versus electricity elsewhere maybe as well?

So the U.S. is in terms of share of gas units, really the biggest one. There is, I would say, every second kitchen, approximately 50% or so of our kitchens or of our units are running with gas and the rest with electricity. In other markets, it's way lower. I think in the European markets, we are below -- so we are on a level of 10%, 15% or so. I think the U.K. and Europe is a little bit higher, but the Americas are having the biggest -- way bigger than -- share way bigger than in any other market. All over, when we look at group-wide, we are at some 18% or so, slightly below 20% total share of gas units.

Okay. Okay. And then maybe just one more on the sales force. Is there a target level you're looking to reach in terms of salespeople by year-end?

There is a target level. To be honest, I don't have the exact figure now. But in general, the rule is if we want to grow by, let's say, let's take the 8%, then I think the rule of thumb is we need to add approximately 8% new salespeople because it's total business. We need to visit the people. We saw this. We need to have the direct contact that's very important. And that's why we then need to approximately add this number of people on the sales side, yes. So I think the next one is Opey.

Stefan, you mind just sort of talking to, I suppose, Europe seems quite strong, especially Germany, quite interesting, obviously, given it's one of your more mature markets. So do you mind giving any color on what's happening there and sort of [indiscernible] extrapolate into 2026?

If we look on the growth figures, I think we need to look a little bit more longer term. As we know, I think we pointed out that quite frequently in the last weeks that sales figures are a function of starting with the salespeople activities, contacts. And then with this, we trigger more sales. And that's true for higher penetrated markets like Germany, where we then need to trigger guys adding a new unit or changing the unit or for less penetrated markets where we need to show that the potential customers or the advantages with more people, with more activities, we trigger more sales. And in the European markets, I think the -- let's say, the building up the sales organizations after this crisis period was quite good. And after a few months, maybe 1 to 2 years, this translates into sales. So from that point of view, sometimes it's difficult to say whether this measure was successful or was responsible for a development that was 1 year later or it comes from another source. It's important for our sales organizations to continuously develop the sales capacities so that they continuously increase their contacts. And so from that point of view, if you would ask now maybe -- and I did it last year in the late -- when we would ask our U.K. colleagues, they could say there is no special reason I could tell you which was causing this good development last year, but it's, in general, a good, I would say, foundation they were building up in the past years. But of course, if there would be significant crisis scenarios, then in the short term, even this would maybe not help. But in the long term, then it would persist. And after the crisis is gone, we would then be able to continue. So is there more questions? Christian and then Rory, I think.

I have two actually. So first of all, you've had a very pronounced increase in the revenue momentum in Q4. To what extent was this possibly driven by prebuying effects in light of the price increases you announced for February? So is there prebuying in Q4 and potentially then a softer trend in Q1? That's a question -- that's the first question. And the second one, to what extent are you exposed to any possible material shortages that might arise in the context of the Middle East conflict? So we hear about aluminum, for instance, and also certain alloys that could be -- where supply could be affected short to medium term?

So first question on the prebuying effect, there was some prebuying, but no big extent indeed. So I think Jorg was talking about around EUR 5 million or so in the call. So this was really limited. And from that point of view, there should not be a significant impact on Q1 coming from that. Maybe rather the other way around, there might be -- or could also be a slight impact that we see some prebuying that was in January. And so that people ordered and this will now be delivered in the coming -- in the weeks after or in the month after. So from that point of view, maybe this is compensating for each other a little bit. Looking on the material supply, up to now, there is no indications that we might be affected. So our purchase department is always quite heavily looking on this. But right now, we don't see any potential impact. But you never know. So I think we could not rule out. We saw it in the chip crisis in -- yes, I think 3 years ago, we were affected then as well, and we had then to bypass. And I think we were quite positively reacting on this with the semi-finished goods. I think you followed this, and it was quite -- managed quite well from our colleagues. But right now, we don't see a scenario that this would happen, but we could never rule out for sure. Rory, I think you were the next and then Opey.

Yes, I raised my hand. There was nobody in the queue, but I'll ask the question anyway. You may well have covered this in detail on the results call, so apologies in advance. But can you talk about Combi One e and the product for China in terms of how RATIONAL approaches the ramping of that facility? What is its capacity? I don't think you're going to answer that question. What's the size of the addressable market? How many people have you hired so far in assembly? But just give us more of an idea, if you can, if you haven't done already about the speed with which that business will develop? Or should we be very patient and this is a long-term approach to the street market in China?

So I want to start after your [indiscernible] So we will -- for the time being, we do not talk about these figures because I think it's too early. And we need to -- I would say everybody needs to be patient. We will closely monitor the market. I think -- as always, when you start with a new product line, it might take some time until the customers do their assessment whether this technology is fitting in. Maybe here is even a little bit different. Now they need to compare different groups. They say, okay, the new one, the old one or the Pro versus the one, and we look what fits better for us in terms of price and performance. And from that point of view, we need to monitor closely the market. But we will not -- for the moment, sorry for that, we will not give out figures from the first part of your question.

And presumably, in your guidance for this year, you're not assuming much of a contribution either from the iHexagon or the Combi One product in China. Is that's right? So it's kind of business as usual ex those two, it's really all about the [ iBarrier ] and the iCombi?

Yes. So there is not a significant impact from these two product groups. So that you would feel that on a group level, I think this is not the case yet. So I think, Opey was the next one?

So just to clarify on the margin piece. So to what extent does the pricing this year sort of offset the tariffs, do you mind just giving like a rough percentage, I suppose is the reason gross margin is higher -- sorry lower than sort of the remain sort of the FX -- and how much like operating leverage we expect? I suppose I'm just trying to understand the different buckets of like a margin bridge where how much tariff headwinds versus price, how much FX, how much operating leverage might RATIONAL potentially benefit?

So on the cost side, I would say the biggest burden is coming indeed from the additional tariff bucket. If it stays as it was assumed until this new discussions that were opened. We were talking about, let's say, an incremental increase from '25 to '26 of around EUR 12 million, EUR 13 million, always assuming we at least potential changes are not included here. From that point of view, this is the major impact. FX, as I said, will be a negative impact, difficult to say the exact magnitude, especially in Q1, but not from Q2 on. So there will be an impact, whether this is EUR 5 million, EUR 10 million, I think that's quite difficult to say now. On the other hand, the price increases in the U.S., you could calculate yourselves. We are doing around a little bit less than 5% for approximately 90% of the sales volume because we don't increase for cleaning products. And this is starting in February or was starting in February, and I would say it gets effective to a level of 100% step-by-step somewhere during the year. So this is always also a difficult calculation now to look forward. So from that point of view, you could calculate maybe a little bit the positive impact coming from the price increases. But this will help. And then on the other hand, difficult to really forecast is what impact will come from the alloy surcharge, what impact will come from the logistic cost that will go up. But all over, I would say, the guidance that we gave is say we come out with a margin level on the EBIT side, 25% to 26%. We come from 26.4%. And I would say, if you go down this magnitude approximately also from the starting point of the gross margin because the major impact comes from the gross margin, mainly from the material costs. This is then the same level of reduction in the margin. And operational leverage, to be honest, is something -- yes, operational leverage is always happening. You are getting increasing productivity. But on the other hand, you have inflationary effects. And if the productivity gains by growing in numbers are compensating for the inflation effects like higher wages or so, then this is something we deem as, let's say, look -- or we deem as realistic so that we cover inflationary effects. But in the long term, there is not really an operational leverage we are seeing.

Okay. And maybe just one more to piggyback on Rory's question. I get the main thing in China is the iCombi One, sort of what else are you seeing in terms of expansion into Tier 2 to 4 cities? Is that something that happens this year, sort of later on, therefore, this year or next year?

Sorry, I didn't understand the first part of the question.

Sort of iCombi One on China, in general, I suppose the bigger point is the new offering, the sort of how should we think of upside from sort of expanding into sort of more cities, so I suppose Tier 2 to Tier 4 cities, I suppose, just staying in Tier 1. Is that something that happens this year or next year?

You mean the expansion of the market or...

Yes, yes.

Okay. Yes. So right now, for the time being, we are working in the, let's say, existing network that we are having in China. So meaning there is a dealer landscape we are having. We are in the cities we are going a little bit. Of course, that's a major aim of it to go a little bit beyond the big cities where we see this huge potential with lower purchasing power, but the need for this kind of technology. And so from that point of view, I think it's a step-by-step approach. We will increase here the footprint, but we will stay within China as this is really a Chinese product with all the Chinese licenses, all the things you need to fulfill for the Chinese market, but not for other markets. [indiscernible]

Two quick questions, if I may. I mean we already discussed potential supply chain bottlenecks. But when it comes to memory chips or the chips you need in your iCombis, iVarios, could that threaten your margin and put some pressure on the margin seeing chip prices having rocketed recently? Or is that manageable?

No, I would say in the, let's say, input costs that are going up, this is maybe one of the parts that we are looking at. And indeed, yes, they are going up, and they might have an impact on the margin as well, but difficult to say how much. So there will be a negative impact. But I think the alloy surcharge might be even more important for us with a really big share in the costs -- in the COGS.

Okay. Understood. And then based on all what you said, shall we expect the seasonality of your fiscal year to be as it was last year, i.e., a slightly weaker Q1 with 23%, 24% of sales and then Q2, Q3, I don't know, 24%, 25-ish and then 28% or something in Q4? Or are you seeing any differences for this year?

Very, very good question. So in general, of course, we don't know ahead of a year, whether the seasonality will be the same. If there would not be, let's say, a shock event or so that would slow down markets completely at whatever time, we would say that we are back in the normal seasonality pattern again. Whether this is then 23% or 24% or 23.5%, in detail, we can, of course, not say. But that we say Q4 will be the strongest or the highest level, Q1 will be the lowest level presumably and the Q2 and Q3 will be somewhere in between approximately on the same level. This is a normal pattern that we know. And I think we are expecting this again.

Maybe, Stefan, just a quick follow-up on China. I know it's early days, but how do you manage the sales launch? Are you hiring additional folks to cover the additional cities you're targeting? Can you talk a bit about that maybe?

Yes. And we hire additional people, that's for sure. So we already started this. I think in China, we are in a very difficult phase, let's say, that we said it before, also the Chinese markets are facing sort of a negative consumer sentiment these days, which makes it sort of more difficult maybe to start in this -- in such a market. But on the other hand, I think maybe it's also a good point to start now with the product. And we manage it in a way as we did before. We have big dealers. We invite them to events. And there was -- I think 2 weeks ago, there were big events or 2, 3 weeks ago, there were big events starting in -- or that they did it in Suzhou in our -- and in Shanghai, in our headquarters. Now I think is the [ Hotel X ] trade show. This is the next step where we show it to the markets. And then we work at first with the existing, I said before, with the existing network, and then we are increasing this step by step.

And are the salespeople selling only Combi One? Or is that also...

Both, both. That's what I meant before. For customers, there is now not only the decision, do I buy an iCombi or do I buy iCombi -- at all or not? If I decide for iCombi, do I decide for a RATIONAL or for a competitive product? And now I have two RATIONALs, where I say, okay, this one is fitting better. I need, for example, 300 degrees, then I need the iCombi Pro or I want to have the intelligence, then I need it say, for me, a simpler one is okay, then they would maybe go for the iCombi One. So here, both units are shown to our customers there -- in order to make a decision which one they prefer. Perfect. So if there are no questions anymore, then let's close the call. If there is any question that's mainly related, you know our names and our numbers. You know where we are living. And then we close this call. We hope to have you on the Q1 call on 6th May. And I think we cannot find the link to register right now, but we will add this in the next weeks. And if there is any feedback that you're having for us, we're always happy to get them. And then I wish you a good time until 6 May and see you then. Bye-bye. Take care.