RATIONAL Aktiengesellschaft (RAA) Earnings Call Transcript & Summary

So I would suggest we start. So again, thank you for participating in this IR talk. And again, good afternoon, morning or evening from wherever you are listening today. So this is now our last call for Q2 or half year 1 2026. And as always, some notes at the very beginning. So this -- with this, we are following the recommendations of the ESMA. This means we are just sharing, of course, publicly known information. The call was made accessible to everyone who is interested via our website. And if we would maybe show any documents later on, which I would expect not to happen, then this will be, of course, made available to all nonparticipants as well. And another hint, this call will not be recorded by us, but I think there will be some transcripts produced by service companies. To start with, let me first summarize the most important points of Q1 2026. So sales revenues in Q1 amounted to around EUR 318 million, which corresponds to a reported growth rate of 8%. Adjusted for negative FX effects, the growth amounted to more than 11%. Here, it is important to know that looking at the development of the past month, we see that there is a stronger prebuying effect than we initially expected. To be honest, we cannot, of course, quantify that in detail. But looking at the strong organic growth in Q1, we would estimate that 2 or 3 -- between 2 and 3 percentage points of the growth in Q1 were coming from prebuying effects, mainly due to the announced price increases in the U.S. So this would mean a bandwidth of between EUR 6 million and EUR 8 million, which might be put forward from Q2 or later into Q1 for saving old price levels. From a regional perspective, the overseas regions of North and South America and Europe were the major growth drivers. Asia was again a negative outlier in Q1 for us with 3% lower sales revenues compared to Q1 2025. And here, of course, you know that still China is one of the most important driver of the lower performance, while the other markets overall did quite well. A look at the product group shows that the iVario was growing extraordinarily strong in Q1 with 18% compared to plus 6% for the iCombi. But in the long term -- so this is not a run rate. In the long term, we are expecting for the iVario growth rates between 10% and 15% and some middle-digit growth rates for the iCombi product. Looking on the gross profit side, we benefited from some lower warranty levels and productivity gains in production. This amounted to a positive effect of around 80 basis points. But on the other hand, of course, the most important part were the tariffs, which had a negative margin impact of around 240 basis points. So with some smaller effects in Q1 coming from components, steel and logistic costs, this led to a gross margin reduction of around 150 basis points compared to Q1 last year. Operating costs, on the other hand, increased slightly disproportionately to sales revenues, approximately in the range that we expected. And supported by a little bit less negative currency result effects, the EBIT margin was then at 23.9% in Q1 2026. And with that, around 50 basis points lower than in Q1 2025. Before we start to look at the remainder of 2026, it is important to say again that not only the figures give us a good feeling and a confident look into the future, but also the foundation of this success. So this means that the development of the sales organization is going on, started since we had left the crisis years behind us by the end of 2023 or so. And this means that we are continuing to hire more salespeople. We see a growing activity figures. And with that, we trigger more demand and increase then the sales revenues. And as said in many occasions before, there is one exception, and that is China. But with all other markets, we see we are on a good way. But of course, in total, it's an ongoing process, and we need to continue developing the sales organization. So of course, we are not yet there where we want to be. And this will, of course, then go up in the next years or from year-to-year. In China, after a management change last year, we are now about to reestablish, let's say, the RATIONAL way of selling, of marketing. And for the team, this is quite a challenge right now together with this process also of establishing the new product series in the market, including also the sales activities, which are now not only for one product, but for two different products from -- where one is really new. In China, in addition, we see still a very low consumer sentiment. And in the latest months, indeed also some changes in the purchasing behavior of our biggest key account customers toward a little bit more local China content. So regarding the local competition, this is an important topic. So all over, China remains the most challenging market for us, and we are putting a lot of effort on the development there, which might take some quarters, as already said earlier. And these are the management topics #1 now, and we will continue on the path of building up sales capacities driven by growth potentials in each market and of course, working on the Chinese market with a little bit more pressure than before. For more detailed information on Q1, please visit our website, so on the IR section. Closing Q1, let me now go over to some thoughts on fiscal year 2026. So for '26, we expect sales revenue growth in the mid- to high single-digit percentage area. So this is unchanged. We saw there was a significant currency burden in Q1 with around EUR 12 million, so on the sales line. From Q2 on, looking at the development of the FX rates, this will be of minor importance. And according to the latest FX movements, approaching year-end, may even turn to positive, always, of course, assuming constant FX levels from now on. On the other hand, we see continuing positive trends on the sales development so that we can confirm our guidance. From a regional point of view, all over, the trends are approximately as we had them in the last quarters with some specialties for Q2, which we discuss now. So as I said before, there were prebuying effects in Q1, and this will, to a certain extent, of course, be a negative impact for Q2. So there is a certain shift I mentioned before that we estimate it to be in the 2 to 3 percentage point area, so in the range of maybe EUR 6 million to EUR 8 million. And that's why there was a slowdown in order intake after Q1, so in April and May. And in June, we saw, again, a very strong business development approaching the quarter end. And therefore, there is another effect in Q2 now. So the order backlog is now around EUR 10 million to EUR 15 million higher at the quarter end compared to the past quarters, and this will be then presumably shipped in Q3. Some thoughts on tariff situation. At first, there was a refund of tariffs that we paid until February this year, amounting to around EUR 14 million. This was booked entirely in the operating income line and therefore, is impacting the EBIT margin in Q2 positively. So this is really a one-off for this quarter. And we just learned that it is not only booked now, it is also paid. So we got that money. On the other hand, the tariff rates for cooking systems were again changed. So from June on, they were lowered from the 25% rate that we had before to the 15% from -- now from June on. And this will lead to lower tariff costs for 2026 compared to what we announced in the last calls. We now estimate them to be in the, let's say, higher EUR 20 million range, so maybe EUR 28 million, EUR 29 million or EUR 27 million to EUR 29 million area compared to the EUR 30 million, EUR 31 million that we assumed until this reduction. And this means year-over-year, around EUR 14 million to EUR 15 million higher tariff costs than in 2025. And to remind you of that in 2025, they were at around EUR 12 million to EUR 13 million. In addition, as already commented, there will be higher costs mostly for components, for raw material, for logistics this year compared to what we initially expected. And so for 2026, in comparison to the situation when we gave the guidance, this will lead to effects in both directions. So positive one from the tariff refund, negative ones from the higher tariffs, the higher component raw material and logistic expenses. And we expect that these effects will more or less eliminate each other. So therefore, our guidance range is still valid. And in concrete, this means we stay with this mid- to high single-digit growth rate guidance. On the other hand, due to the higher costs we saw, the COGS are going up, and this is, of course, a burden for the gross profit margin in a range somewhere between maybe 100 and 150 basis points. And on the other hand, with the continued investment in sales and services and in R&D and the stable costs in other areas that are not related to sales, we are then staying with this range that I said before in the 25% to 26% EBIT margin. And after this short recap, so we are ready now to answer your questions.

[Operator Instructions] So Philippe is number one and then Ope.

So just to come back a little bit on your comments on the 25% to 26% EBIT margin. So that's now valid, but taking into account the EUR 14 million tariff refund that you got as well. So that's one of the positives.

Yes. The positive -- is the positive position and there is some negatives, which adds up some million here, some million there. And if we then compare that, the magnitude should be approximately on the same level so that we still stay within the guided range.

Yes. So -- and when you started in the year, you hadn't guided for that refund. So if I exclude that and I just look at the fact that you're saying the tariff per se, the new ones are a little less, let's say, negative than previously plus the input cost inflation, that's actually like a net negative that you would have had versus the guidance before the refund.

No, the tariff refund -- let's say, the higher tariff costs are included in this calculation, plus the higher logistic, raw material, et cetera, costs. They should come out -- it's all estimates. You never know this in detail. So for example, raw material costs are depending on the alloy surcharge development. When they get effective and then with a lag of a few months, we feel this in our P&L. So you cannot exactly say how much this will be now. But all over, we think that on the one hand, the EUR 14 million positive. And on the other hand, somewhere in this range, around EUR 14 million negative from these different positions should lead to sort of a wash in -- for the EBIT line in the end.

Okay. That's clear. And also just before you mentioned the tariff. So after mentioning the slowdown in order intake in April, May due to the prebuy and then the pickup in June, you were mentioning something around EUR 10 million, EUR 15 million higher. What was that was the revenue at quarter end?

These were order intake. So we saw, let's say, some slowdown in order intake in May and -- in April and May. And in June, it's strong. And this leads then, of course, to a result that we might not be able to ship everything in June. And so the -- we see this now that the order level -- the order book level is higher than in the last -- at the last quarter end. So this is sort of -- yes, a delayed sales, which is maybe missing a little bit in Q2 and will be then shipped in Q3. So Ope?

So three questions from my end. So just one on the tariffs and so it's rather obvious because you just gone through the point. So it's kind of you're expecting just above -- you were expecting just above EUR 30 million. Now you're expecting EUR 20s million tariff impact. Is that the way to read the comments?

Yes. So maybe difficult to say. So the -- maybe between EUR 27 million and EUR 29 million. It's difficult to calculate the exact effect now because it always depends on when did we ship it, when is it booked in the U.S -- on the U.S. balance sheet and then what was then -- when they sell it 3 months later, then it gets effective in terms of the P&L effect. So that's why this is a little bit difficult to calculate. So we know it is going down, but there is not a complete effect now from going down from the 25 to the 2015 (sic) [ 25% to 15%, ] somewhat comparable to the comparison with 2025 to 2026, where we had a half year effect in '25 and now full year effect in '26. And now with the changing rates getting effective in the different -- yes, just with the delay, we estimate that there is maybe -- yes, half of the extra costs we had first in our estimates, maybe it is now going down again so that we come out with this higher EUR 20 million range.

Okay. And so -- and there was also the change in Section 232. Was that sort of -- do you mind just giving some color on that?

Yes. This is the Section 232. So we had the 25% getting effective, I think, in February. And then we had this change to the 15% now in June. So on our units, on our cooking systems. And so this change is causing why we are reducing the cost expectation now for this year a little bit.

Just ask rather obvious, are you sort of implying that Section 232 has gone from 25% to 15%, or is just the reciprocal element going away?

Sorry?

You sort of -- is the 25% on the Section 232 going to 15%? Or is it the reciprocal going away?

No, it just -- it will stay until '27, they said. So this 15% level is Section 232 by the changed rate. And this is now announced to be effective until end of '27 if there are no changes anymore.

Okay. And just two other quick ones. Do you mind just giving some color on the U.S. market and maybe like the institutional market, like is that weaker or ahead of expectations?