RATIONAL AG: Report on the first halv year 2020

Rational AG completely revamps product portfolio amid severe corona impact in second quarter

- Even greater customer benefit from new product range - positive effect on sales revenues

- Sales revenues down 25 percent in the first half of 2020 - decrease of 43 percent in the second quarter

- Positive EBIT in the second quarter - EBIT margin at 9 percent after six months

- Business model intact - long-term outlook remains positive

- Order intake still significantly down on previous year - forecast not yet possible

Rational AG / keyword(s): half-yearly figures, product launch, forecast
Landsberg am Lech, 30 July 2020

"The full force of COVID-19 hit our company in the second quarter of 2020" - this is how the CEO of Rational AG begins his Letter to Shareholders in the half-yearly report published today. Rational's customers in the hospitality and tourism sector are among the areas hardest hit by government measures. Many restaurants and hotels are closed or running at a very low capacity, which does not allow them to operate profitably. There is practically no airline, event or cruise ship catering, and even canteens are often running on a reduced level, or they are closed.

Sales revenues down 25 percent in the first half of 2020 - decrease of 43 percent in the second quarter
The 43 percent decrease in sales revenues in the second quarter, from 205.1 million euros to 116.8 million euros, is the consequence of this development. Significantly lower order intakes at the end of the first and the beginning of the second quarter provided an early indication of this trend. The falls in orders and sales revenues were driven by measures taken by governments to contain the corona pandemic, which meant that many of Rational's customers did not have a basis for doing business. This was felt in all regions of the world, but especially in markets with weaker economies, such as South America. The more comprehensive these measures were in the respective markets, the more negative their impact on the propensity and ability of customers to invest.

For the first half of the year, this resulted in sales revenues of 298.0 million euros, compared with 399.4 million euros in the prior-year period, a decline in sales revenues of 25 percent.

Even greater customer benefit from completely new products - positive effect on sales revenues
Dr Stadelmann believes that an important reason that sales revenues did not contract even more sharply is the launch of the two new product generations, which led to many initial orders from customers, dealers and buying groups and not least also a catch-up effect. This is particularly true of Germany.

In the past number of weeks, customers, suppliers and Rational itself had a struggle on their hands in dealing with COVID-19 measures. Despite that, Rational together with its business partners successfully tackled the biggest product changeover in its history. An innovation journey lasting several weeks began in Europe on 5 May 2020, which saw the launch of the iCombi Pro, the successor to the SelfCookingCenter and that of the iCombi Classic, which succeeds the CombiMaster Plus. The iVario Pro then followed on 16 June 2020, replacing the VarioCookingCenter.

In addition, the digital platform ConnectedCooking, which is used to connect, control, monitor and optimise all Rational appliances, has also been revamped. New functions, such as a hygiene management module, have been available as fee-based software modules since February.

"A changeover like this is already a Herculean task just on its own but mastering it under COVID-19 conditions is not something many companies would be able to achieve. We managed it only thanks to our U.i.U. entrepreneurs. A big compliment and an even bigger thank you therefore go to our employees for accomplishing it with the greatest commitment, maximum flexibility and a sense of duty", says Dr Stadelmann, acknowledging the contribution of Rational employees.

All-new distribution channels introduced
Due to the contact restrictions, the company had to find new ways of being there for customers in this difficult time. Because of the ban on events, the market launch for the new appliance generations had to be carried out completely online. Through that, more than 25 million contacts were reached across all social networks. Traffic on the company's website was more than 50 percent higher than in the previous year.

Positive EBIT in the second quarter - EBIT margin at 9 percent after six months
Despite the drastic fall in sales revenues, Rational achieved a slightly positive EBIT (earnings before financial result and taxes) of 1.6 million euros and an EBIT margin of 1.4 percent in the second quarter. Despite the 25 percent drop in sales revenues, Rational generated an EBIT margin of 9 percent (2019: 25 percent) and EBIT of 28 million euros (2019: 98 million euros) in the first six months. Having started the year on a highly cost-sensitive basis, a comprehensive cost savings programme was launched from March onwards. The cancellation of trade fairs, customer visits and events resulted in high cost savings being realised. Moreover, a Group-wide recruitment freeze has been in place since March, and some production plants and sales companies have short-time working arrangements in place.

Business model intact - long-term outlook remains positive
The global potential for Rational products was slightly reduced due to the COVID-19 development but, according to the CEO, remains at a high level. "Even if people consume less food in restaurants, on aeroplanes or in company canteens, they will still be hungry and want to eat. They will instead get deliveries or pick up hot meals on the go. The demand remains - the place and type of meal change", he explains.

The crisis is expected to lead to a sharp increase in hygiene and efficiency requirements for professional kitchens and therefore give Rational's technologies an even greater competitive advantage. In addition, the crisis will exacerbate shortages of skilled staff and staff turnover in the kitchen, making the use of versatile, intelligent and efficient cooking technology even more important. Some customer segments are set to benefit from government assistance programmes at record levels. Investments in health care and education, as was the case after the financial crisis, lead to increased demand in the commercial kitchen industry.

Rational is already working on projects to use what it has learned from the crisis to be able to better assess risks in the future and improve process efficiency. "Our traditional way of doing and managing business guarantees us the freedom and independence to act in the crisis. Not all our competitors have this favourable starting point", says Stadelmann with confidence.

Order intake still significantly down on previous year - forecast not yet possible
After six months, sales revenues were 25 percent down on the previous year. The order intake in June and July was down on prior-year figures by a similar percentage. However, given the currently very unclear news situation, the company does not consider itself in a position, even now, to make a medium-term forecast of how relevant areas of life will change for good, and what impact these changes will have on the performance of customers and hence on Rational itself.

"All current and future restrictions of public life have a considerable influence on our customers' business and hence also on ours. Due to this rapidly changing situation, we remain unable to provide a forecast for the current year", explains Dr Stadelmann.

Contact:

Rational Aktiengesellschaft

Stefan Arnold / Head of Investor Relations
Tel. +49 (0)8191 327-2209
Fax +49 (0)8191 327-72 2209

E-mail: ir@rational-online.com
www.rational-online.com

Editorial note:

The Rational Group is the global market and technology leader for thermal preparation of food in professional kitchens. The company, founded in 1973, employs just under 2,300 people, around 1,200 of whom are in Germany. Rational was floated in the Prime Standard of the German stock market in 2000 and is currently represented in the MDAX.

The company's principal objective is to offer maximum customer benefit at all times. Rational is committed to the principle of sustainability, which is expressed in its corporate policies on environmental protection, leadership, job security and social responsibility. Numerous international awards bear witness to the high quality of the work done by Rational's employees year for year.

Editorial closing date: 24 July 2020