Rba Jrmipari : Report of Rba Plc. for Q1-Q3 of 2022


Report of RÁBA Plc. for Q1-Q3 of 2022

Unaudited, consolidated quarterly report

according to the International Financial Reporting Standards (IFRS)

Company:

RÁBA Automotive Holding Plc.

Company address:

H-9027 Győr. Martin u. 1.

Sector:

Machine industry

Period:

Q1-Q3 of 2022

E-mail:

ir@raba.hu

Investors relations:

Éva Lang-Péli

EXECUTIVE SUMMARY

KEY ACHIEVEMENTS OF THE BUSINESS

  • Due to the prolonged military conflict between Russia and the Ukraine, the earlier thought that the economic environment will be uncertain and European production costs will increase dras- tically in the long run seems to be substantiated. In Q3 of 2022 the price of energy and labour costs have reached unprecedented levels, which has put record pressure on the profitability of operation. In the automotive industry, the military conflict’s negative impact was most palpable in the European passenger vehicle segments. In the European commercial vehicle and the global agricultural vehicle segments the decline in demand has not been felt so far in Q1-Q3 of 2022. Accordingly, in Q1-Q3 of 2022, the demand on all major commercial vehicle markets of Rába exceeded the levels of the previous year.
  • Relying on the market demand and on the exchange rate environment conducive to exports, the Rába group generated outstanding sales results in Q 3 and in Q1-Q3 of 2022. In Q3, all business units involved in production registered a sales increase exceeding 50 per cent, as a result of which the quarterly sales revenue at group level reached HUF 15.8 billion, upon an increase by 66.4 per cent. As from Q3 of 2022, the portfolio of the Rába group has been expanded, Rekard Llc. will operate as a wholly-owned subsidiary of Rába, included in the Rába group consolida- tion. Owing to the extraordinary increase in sales revenue during Q2 and to the expanded port- folio, the group-level sales revenue in Q1-Q3 of 2022 amounted to HUF 45.8 billion, which ex- ceeds the level of the base period of a year earlier by 38.0 per cent. In terms of the exchange rate environment, in the exchange rate of the USD representing a lesser portion in the com- pany’s foreign exchange turnover, there was a considerable increase by 25.5 per cent, and in the EUR, representing a more substantial portion of FX sales, there was a moderate increase by 8.0 per cent compared to the levels of the previous year.
  • In Q3 of 2022, energy prices and labour costs increased further reaching record levels, whereas steel purchase prices after a minor decline still exceeded the level of the base period consider- ably. Clearly, inflation has become a general feature putting drastic pressure on the operating activity and profitability.
    The Rába group passes on the above increased costs to its customers in accordance with the provisions of the contracts concluded and in line with individual agreements, mostly with a quar- terly delay and in the case of complete products, with more long-term, fixed orders, with a longer time delay. The considerably and continuously increasing purchase prices and the delay in pass- ing on such costs, have led to the fact that the inflationary pressure has had a considerable negative impact on the group’s profitability and margins in Q1-Q3 of 2022.
    It is the Rába group’s firm objective to neutralise these negative impacts as soon as possible, through the enforcement in sales prices of the increase in purchase costs.
  • In Q1-Q3 of 2022, gross margins at group level amounted to HUF 7,832 million, an increase by HUF 1,732 million, 28.4 per cent, as the combined result of the flexible adjustment in production and sales, the expanded portfolio and due to the drastic increase in production costs. In Q3, the gross margin exceeded the level of the base period by HUF 1,224 million and amounted to HUF 2,519 million. The additional profit resulting from the expanded portfolio amounted to HUF 255

RÁBA Plc’s consolidated report for Q1-Q3 of 2022 in acc ordance with the IFRS

million.

  • The balance of other revenues and expenditures amounted to HUF 405 million in profit during the review period, against the profit of HUF 850 million during the same period of the previous year. The revenue of other activities during the base period included a substantial real estate transaction, with an impact of HUF 815 million on the profit.
  • In Q3 characterised by low profitability due to the summer closures, the group of companies managed to generate operating profit amounting to HUF 335 million, which is HUF 714 million higher than the profit of the previous year. All subsidiaries contributed to the operating revenues of Q3, with a profit exceeding that of the base period: he Component Business Unit generated HUF 289 million with an increase by HUF 437 million, the Vehicle Business Unit generated HUF 73 million in operating profits upon an increase by HUF 28 million and the Axle Business Unit generated HUF 146 million in losses, with an increase by HUF 149 million. Following the loss- making Q1 burdened by considerable excess communal energy costs, the confident perfor- mance in Q2 and Q3 has ensured the profit at operating level in Q1-Q3 of 2022: the revenue from operations at group-level amounted to HUF 1,085 million. The additional operating profit resulting from the expanded portfolio due to Rekard Llc., amounted to HUF 118 million.
  • All organisational units of the Rába group make su bstantial efforts to regain the cash generating capabilities compromised by the record-high level of production costs. Key measures, in addition to passing on to customers of the inflationary effects, include further increase of production flex- ibility, the renewal of production technology and the consistent improvement of efficiency in ad- dition to stringent cost control. The EBITDA-level profit of the Rába group during Q3 of 2022 amounted to HUF 1,005 million, exceeding the level of the previous year by HUF 790 million. All business units with production activities contributed EBITDA-level results exceeding the base period to the group-level result. The contribution of the Component Business Unit was HUF 371 million, of the Axle Business Unit it was HUF 320 million, whereas of the Vehicle Business Unit it was HUF 75 million at EBITDA level in Q3. Through such improving cash generating capabil- ities the group-level EBITDA for the cumulative period of Q1-Q3 of 2022 amounted to HUF 2,996 million. The additional EBITDA resulting from the expanded portfolio due to Rekard Llc., amounted to HUF 167 million.
  • The financial result of the review period was fundamentally impacted by the revaluation of loans involving no cash movement. In Q1-Q3 of 2022, the result of financial operations amounted to HUF 1,693 million in losses, compared to the HUF 45 million in profits generated during the same period of the previous year. The amount of non-realised loss due to the revaluation of loans was HUF 1,671 million. Additionally, the financial result also includes a net interest burden of HUF 85 million.
  • The total aggregate income and profit for Q1-Q3 of 2022 amounted to a loss of HUF 815 million.
  • The financial situation of the Rába group was char acterised by a stable liquidity position in spite of the uncertainties caused by the Russian-Ukrainian military conflict. The net borrowings amounted to HUF 15.5 billion at the end of the review period, an increase by HUF 5.4 billion compared to the base period. Of the factors influencing the level of net borrowings, the operating profit since the base period, and the increase in working capital (increased stock level) because of increasing production volumes and the safety of supply, and capital expenditures aimed at technological development and efficiency improvement are noteworthy. The revaluation, due to exchange rate fluctuation, of loans, worth HUF 1,671 million, not involving cash movements, also contributed to the increase in net borrowings.
  • The shareholder’s equity declined by 0.8 per cent compared to the same period of the previous year. The shareholder’s equity per share reached HUF 1.550/share.

2

RÁBA Plc’s consolidated report for Q1-Q3 of 2022 in acc ordance with the IFRS

Thousand HUF

Q1-Q3

Q1-Q3

Change

Q3

Q3

Change

2021

2022

2021

2022

Sales revenue

33 226 821

45 846 598

38.0%

9 519 808

15 839 320

66.4%

Gross profit

6 100 254

7 832 261

28.4%

1 294 579

2 519 322

94.6%

Gross margin

18,4%

17,1%

-1.3%p

13,6%

15,9%

2.3%p

EBITDA

3 223 051

2 996 045

-7.0%

214 523

1 004 906

368.4%

EBITDA level

9,7%

6,5%

-3.2%p

2,3%

6,3%

4.1%p

Operating profit

1 425 590

1 084 702

-23.9%

-378 523

334 944

188.5%

Net financial profit/loss

45 461

-1 693 151

-3824.4%

-214 658

-786 957

-266.6%

Profit after tax for the cur-

rent year

1 160 640

-814 757

-170.2%

-665 424

-562 729

15.4%

Total aggregate income

1 160 640

-814 757

-170.2%

-665 424

-562 729

15.4%

GOAL AND STRATEGY OF THE BUSINESS

“In Q3 of 2022, the Rába group successfully and con sistently pursued the implementation of the strategy defined by the Board of Directors of Rába Plc. in the first half of 2021.

The overwhelming majority of structural and organisational changes necessary to increase efficiency has been successfully implemented in the group of companies, as well as in the individual subsidi- aries. The latest moves related to corporate structure involved the acquisition of the remaining 75.1 per cent stake in Rekard Llc. on the one hand, as a result of which the company will operate as a wholly owned Rába subsidiary in the future and the reorganisation of the Sárvár Plant of Rába Automotive Components Ltd., into Rába Axle Ltd on the other.

The Rába Development Institute is a key element of our Company’s vision and strategy. Development competence represents a key strength of the Rá ba group with further potentials if managed and strengthened, hence its priority status.

In Q3 of 2022, having concluded the preparatory and approval – by the appropriate bodies – phases, the practical implementation of the RÁBA Modernisat ion Programme 2025 has started.

The RÁBA Modernisation Programme 2025 encompasses t he reorganisation of the entire production structure at the central Győr plant, as well as the reinstallation of the production lines in the individual production halls and movement within plant sections of individual activities. Additionally, it entails the implementation of a substantial capital expenditure programme into machinery and the modernisa- tion of the real estate infrastructure, together with the optimisation of the Group’s energy consumption in the medium and long run, the latter through the establishment of alternative energy sources and the renegotiation of traditional energy supply agreements. Parallel to these changes, the organisational culture of the Group is and will also be consciously renewed and developed.

The transformation, modernisation and capital expenditure measures already implemented and still underway will continuously improve our efficiency, however their positive impact on the operation and profitability will mostly be felt once the Modernisation Programme is concluded, in the second half of 2024 and in 2025.

In spite of the burden resulting from the reorganisation processes of the corporate structure and production and of the continuously increasing energy prices, the Rába group managed to operate profitably in Q3 of 2022 as well. Passing on the cost of energy prices to our customers and the elimination of the uncertainties caused by the supply chains continue to use resources in our organisation far exceeding the demands of the business as usual but we have managed and will continue to manage these. We have maintained and will ensure the stability of the Group in the future as well, stringent cost control remains in place and we work methodically on the renewal of the Rába group”, said Béla Hetzmann, Chairman-Chief Executive Officer of RÁBA Automotive Holding Plc.

BUSINESS ENVIRONMENT OF THE ENTERPRISE

  • The disrupted supply chains resulting in the wake of the COVID-19 pandemic, together with the explosion in energy prices experienced in Q4 of 2021, were coupled by the Russian-Ukrainian military conflict in Q1 of 2022, presenting yet another significant risk factor. Earlier supply prob- lems were exacerbated as a result of the drastic decline in East-West supplies, and the uncer- tainties of the war and the sanctions raised inflationary pressures to unprecedented levels. In

3

RÁBA Plc’s consolidated report for Q1-Q3 of 2022 in acc ordance with the IFRS

2022, economic actors realised that the severe economic difficulties will not be resolved in the short-term and considerable volatility is to be expected in various sectors of the economy. All this will force economic actors to adjust to external circumstances and flexible adaptation should become an increasingly important aspect of their daily operation. The military conflict was felt in the European passenger car industry in the first place. The decline in demand has not yet been felt by Q1-Q3 of 2022 in the European commercial vehicle market and the global agricultural segments.

  • In Q3 of 2022, the demand of the European commercial vehicle market was strong, the registra- tion of heavy vehicles in Europe increased by more than 15 per cent, resulting in a cumulative market growth of 5 per cent. Market outlooks for the remainder of the year and the following year remain positive, and do not suggest significant decline, forecasts however, have become much more uncertain due to the substantial economic and political risks. The North American commer- cial vehicle market showed a 7 per cent increase compared to the base period in 2021. The demand for Rába’s agricultural products increased c onsiderably in 2022: the volume has in- creased by some 45 per cent since the base period a year earlier. In compliance with the Euro- pean sanctions in force against Russia, in Q2 and Q3 of 2022 Rába had no commercial activities with its Russian partners. The supply chain of the European passenger vehicle market has sub- stantial East-European exposure, so it is no surprise that there was a strong decline in volumes in reaction to the Russian-Ukrainian military conflict. In Q1-Q3 of 2022, the number of new car registrations declined by 10 per cent
  • The substantial economic risks resulted in largely volatile movements on the market of steel. As a result, in Q3 of 2022 steel raw material purchase prices declined by 15 per cent compared to the record levels reached in Q2 of 2022. Such decline in prices, however, can only be seen as a minor adjustment for now, since the price of steel is considerably above the level of the base period both on a quarterly, and on a cumulative basis. In terms of Q3, the annual price increase is 13.8 per cent, and in the cumulative period 38.8 per cent higher purchase prices impacted the operation.
  • In Q3 of 2022, substantial shortage of labour force was still characteristic for the labour market. Together with the generalised inflationary pressure, it raised the risk of labour fluctuation consid- erably, suggesting a substantial increase in wages. National average wage increases in an ac- celerated fashion reaching 14.4 per cent in January-August, 2022. Finding and implementing into the production technology the improvement in operating efficiency to cover the prolonged increase of wage costs remains a major challenge for the Company.
  • Q3 of 2022 was a turbulent period on the energy market preceding the 2022 winter period. Pur- chase prices increased to such extent over a short period of time, that the viability of energy- intensive industrial sectors is fundamentally questioned. AS for Q3, the increase in energy prices reached 263.7 per cent, resulting in a price increase of 254.2 per cent during the cumuolative period. In terms of future outlooks of the energy market, long-term uncertainty and at the same time drastically increasing purchase prices are to be expected. The contracting terms of the Rába Group made it difficult to fix energy purchase prices so the Company manages the effects of the crisis primarily by increasing integrity and making sales prices more flexible.
  • With regard to the exchange rate environment, a substantial increase by 25.5 per cent occurred in the case of the USD, representing a lesser proportion in the FX turnover of the company, whereas for the EUR, representing more substantial weight in the FX turnover, a more moderate increase by 8.0 per cent was seen compared to the levels of the previous year.1

1 The average exchange rates were calculated based on the official FX exchange rates of the MNB. Source: http://www.mnb.hu/arfolyam-lekerdezes

4

RÁBA Plc’s consolidated report for Q1-Q3 of 2022 in acc ordance with the IFRS

Q1-Q3

Q1-Q3

Change

Q3

Q3

Change

2021

2022

2021

2022

EURHUF – average

356.5

385.0

8.0%

353.9

403.5

14.0%

EURHUF – end of period

360.5

421.4

16.9%

360.5

421.4

16.9%

USDHUF – average

298.1

374.2

25.5%

300.1

400.6

33.5%

USDHUF – end of period

310.7

428.6

38.0%

310.7

428.6

38.0%

Changes in raw material prices*

139%

193%

38.8%

159%

181%

13.8%

Wage level**

441.2

505.0

14.4%

440.2

508.7

15.6%

Energy prices***

251%

888%

254.2%

317%

1155%

263.7%

*Rába indices – own calculation – base: 2007. H1; a verage values for the period

**KSH (Central Statistical Office) national gross average wage (thousand HUF/month) -based on 01-05. 2022 data

***Rába indices – own calculation – base: Dec. 2004 .; average values for the period

SUMMARY OF RESULTS ACHIEVED DURING THE REVIEW PERIOD

Rába Axle Ltd.

The sales revenue of Rába Axle Ltd. in Q1-Q3 of 202 2 amounted to HUF 30.5 billion compared to HUF 21.3 billion achieved during the base period of 2021. This corresponds to an increase of 43.1 per cent.

On the American market the sales revenue in the reporting period was USD 8.7 million, compared to the USD 5.5 million in Q1-Q3 of 2021. This corresponds to an increase by 58.2 per cent.

On the EU market Rába Axle Ltd.’s sales figures in HUF terms increas ed by 41.8 per cent, amounting to HUF 25.5 billion, compared to HUF 18.0 billion during the base period.

European exports in Q1-Q3 of 2022 exceeded the level of the base period by 31.6 per cent, amounting to EUR 52.9 million, against EUR 40.2 million in Q1-Q3 of 2021.

Domestic sales before consolidation amounted to HUF 5,092 million, which represents an increase by 40.9 per cent compared to the HUF 3,614 million of the base period.

On the CIS and East-European markets the export sales revenues achieved by Rába Axle Ltd. in Q1-Q3 of 2022 were 95.8 per cent lower than the base period in 2021, decreasing from EUR 1.3 million in the base period to EUR 0.0 million.

In the other markets the sales revenue during the reporting period amounted to EUR 4.6 million, which was 28.4 per cent lower than the EUR 3.6 million turnover of the 2021 base period.

Sales figures were fundamentally impacted by the reorganisation in Q3 of 2022 of the organisational and operational management of the Sárvár plant of t he Component Business Unit from the Component Business Unit to the activities of the Axle Business Unit, as part of the efficiency improvement measures.

The operating result of the Company in Q1-Q3 of 2022 was a loss of HUF 225 million, compared to HUF 350 million profit during the same period of the previous year.

At EBITDA level, the operating profit of the Axle business unit was HUF 1,100 million compared to profits of HUF 1,585 million registered a year earlier.

Q1-Q3

Q1-Q3

Change

Q3

Q3

Change

2021

2022

2021

2022

America

1 628

3 241

99.1%

731

1 244

70.2%

EU – export

14 349

20 382

42.0%

3 575

7 001

95.8%

EU – domestic

3 614

5 092

40.9%

1 103

1 584

43.6%

CIS

457

21

-95.4%

155

-44

-128.4%

Other

1 283

1 779

38.7%

510

722

41.6%

Total sales revenue

21 331

30 514

43.1%

6 075

10 508

73.0%

EBITDA

1 585

1 100

-30.6%

118

320

171.2%

Operating profit

350

-225

-164.3%

-295

-146

50.5%

5

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RÁBA Jarmuipari Holding Nyrt. published this content on 16 November 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 November 2022 16:58:03 UTC.

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All news about RBA JRMIPARI HOLDING NYRT.

Sales 2020 38 754 M
99,1 M
99,1 M
Net income 2020 -1 030 M
-2,64 M
-2,64 M
Net Debt 2020 6 663 M
17,0 M
17,0 M
P/E ratio 2020 -19,4x
Yield 2020
Capitalization 18 494 M
47,3 M
47,3 M
EV / Sales 2019 0,47x
EV / Sales 2020 0,69x
Nbr of Employees 1 213
Free-Float 24,8%

Chart RBA JRMIPARI HOLDING NYRT.



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