Rába Jármûipari : Q1 2023 Report of RÁBA Plc.

Q1 2023 Report of RÁBA Plc.

Unaudited consolidated quarterly report

in accordance with International Financial Reporting Standards (IFRS)

Company name:	RÁBA Automotive Holding Plc.
Company address:	H-9027 Győr, Martin u. 1.
Sector:	Machine industry
Period:	Q1 of 2023
E-mail:	[e-mail]
Investor contact:	Éva Lang-Péli

EXECUTIVE REPORT

THE MAIN RESULTS OF THE COMPANY

• During the first months of 2023, the market demand for commercial vehicles was decidedly strong in almost all relevant geographical and product segments of Rába, which provides a sound basis for the increase in sales. The economic environment continues to be fundamentally im- pacted by the Russian-Ukrainian war, which is a considerable factor of uncertainty in terms of the long-term predictability of market processes.
  Raw material and energy prices, which sky-rocketed in H2 of 2022 seem to be somewhat more moderate in Q1 of 2023. The cost-pressure on energy prices decreased somewhat and the price of steel raw materials has not increased further either. Nevertheless, production activities have still not been impacted by any energy and raw material prices significantly more favourable than during the base period. The continuous increase in wages remains a substantial burden that risks international competitiveness and emphasizes the need to increase productivity as soon as possible.
• In Q1 of 2023, the Rába group achieved an outstand ing increase in sales turnover amounting to HUF 20.3 billion upon an increase by 53.3 per cent. The sales revenue exceeding HUF 20 billion is the highest Q1 sales of the past 20 years of the Rába group. What contributed to the record- level sales is that from Q3 2022, the Rába Group's portfolio was expanded, and REKARD LLC. which operates as a wholly owned Rába subsidiary, w as included in the consolidation of the Rába group. The sales reveue of REKARD LLC. was HUF 1.7 billion in Q1. The other subsidiar- ies of the group of companies also achieved sales exceeding that of the base period: the Axle business unit achieved HUF 13.7 billion through a 55.4 per cent growth, the Automotive Compo- nents business unit grew by 6.5 per cent to achieve HUF 4.7 billion, whereas the Vehicle busi- ness unit grew by 101.7 per cent to HUF 0.2 billion in sales. In terms of the exchange rate envi- ronment, the dollar, which accounts for a smaller share of the company's foreign exchange turn- over, saw an increase of 9.0 per cent, while the euro, which has a significant foreign currency weighting, saw an increase of 6.7 per cent compared to a year earlier.
• Production costs continue to be high, which puts continuous pressure on the production activity and consequently on profitability. The Rába group m akes considerable efforts to mitigate these negative impacts through both purchasing and sales measures and to neutralise their profit erod- ing impact.
• In addition to the significant increase in sales revenue, the portfolio expansion, the consistent improvement in production efficiency and passing on of production costs meant that the gross profit at group level amounted to HUF 3.6 billion upon an increase by HUF 1.7 billion. In Q1 2023, the gross profit ratio realised at group level exceeded the level of the base period: it amounted to 17.7 per cent, upon an increase by 3.2 percentage points. The gross profit surplus resulting from the portfolio growth amounted to HUF 431 million.
• The balance of other income and expenses reached a loss of HUF 206 million in the period under review, compared to a profit of HUF 242 million in the same period of the previous year. The result from other activities in the base period included a significant real property transaction with a value of HUF 342 million.

Consolidated report of Rába Plc on operations for Q 1 2023 under IFRS

• Q1 of 2023, burdened by substantial additional communal energy cost due to the energy prices, has nevertheless been concluded by profitable at group level operation through substantial in- crease in sales based on market activity and through the consistent improvement of efficiency. The operating result of the Rába Group in Q1 of 202 3 amounted to HUF 509 million, an increase of HUF 993 million compared to the base period in Q1 of 2022. The Automotive Components business unit achieved an operating profit of HUF 209 million upon considerable efficiency im- provement and the Axle business unit, with the most energy intensive activity, achieved an op- erating result of HUF 40 million, also far exceeding the result of the base period. The cyclical nature of the special activity of the Vehicle business unit resulted in the weaker operating profit during the first months of the year, accordingly the operating result was HUF 34 million in losses. The surplus in operating profit resulting from the portfolio growth due to REKARD LLC. amounted to HUF 106 million.
• Production costs continue to exert considerable pressure on profitability, thus regaining and maintaining cash generation capacity continue to be the primary objective for the Rába group. The focus of the measures, in addition to passing on the inflationary effects to customers, was to further increase the flexibility of manufacturing operations, renew manufacturing technology and structure and to exercise tight cost control. The Rába group's EBITDA for Q1 2023 was HUF 1,024 million above the previous year's result and reached a profit of HUF 1,161 million. The EBITDA result was second highest of the past decade, to which subsidiaries contributed as fol- lows: the Axle business unit achieved an EBITDA level profit of HUF 492 million, the Automotive Components business unit HUF 279 million, while the Vehicle business unit had a minimal loss of HUF 26 million at EBITDA level. The EBITDA surplus from the portfolio expansion due to REKARD LLC. amounted to HUF 158 million.
• The result of financial operations for the period under review is mainly affected by the non-cash loan revaluation. In Q1 2023, the result of financial operations showed a profit of HUF 662 million compared to a loss of HUF 64 million in the same period last year. The unrealised loss from loan revaluation amounted to HUF 1,010 million. In addition, the financial result includes a net interest charge of HUF 100 million.
• The total comprehensive income and profit for the year amounted to a profit of HUF 992 million in Q1 2023, HUF 1,562 million higher than during the previous year.
• Despite the uncertainties caused by the military conflict between Russia and the Ukraine, the financial situation of the Rába Group was character ised by a stable liquidity position. The level of net debt reached HUF 16.1 billion at the end of the period under review, an increase of HUF 4.0 billion compared to the base period. Factors influencing the level of the net debt portfolio included technological renewal and reorganisation far exceeding the capital expenditures of pre- vious years, operating profit realised since the base period and the working capital (increased inventory levels), which increased in order to increase the security of supply and due to inflation. The HUF 1,010 million worth of loan revaluation resulting from exchange rate changes, not in- volving cash movements, was another factor contributing to the net borrowing figure.
• Compared to the same period last year, equity increased by 15.5 per cent. The equity per share was HUF 1,767 per share.

	thousand HUF			Q1 2022			Q1 2023			Change
	Sales revenue	13 265 153		20 332 293		53.3%
	Gross profit	1 917 941		3 597 605		87.6%
	Gross margin	14,5%		17,7%			3.2%p
	EBITDA	137 480		1 161 008		744.5%
	EBITDA level	1,0%		5,7%			4.7%p
	Operating profit	-484 153		509 032		205.1%
	Net financial result	-64 470		661 783		1126.5%
	Profit after tax for current year	-569 655		992 150		274.2%
	Total comprehensive income	-569 655		992 150		274.2%

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Consolidated report of Rába Plc on operations for Q 1 2023 under IFRS

PURPOSE AND STRATEGY OF THE COMPANY

"The first months of this year were concluded with substantial profits and we succeeded in achieving the highest Q1 sales revenue of the past twenty years, in spite of the negative impact on our operating profitability as an export-oriented company, of the strengthening exchange rate of the Hungar- ian forint. High energy prices continue to represent a challenge. These results show that the strategic direction we have chosen is correct and underscore the importance of the implementation of the individual measures. We continue to dedicate substantial efforts to the implementation of our re- structuring, modernisation and capital expenditure plans since we believe that this is the way to ensure the stability and future of the group of companies," said Béla Hetzmann, Chairman-Chief Executive Officer of RÁBA Automotive Holding Plc. e valuating the results of the company.

BUSINESS ENVIRONMENT OF THE COMPANY

• During the first months of 2023, the uncertainty caused by the Russian-Ukrainian war continued to be a major economic factor and East-West supply channels and supply disturbances have not been normalised either. Nevertheless, the demand on the commercial vehicle market is consid- ered decidedly strong in nearly all our geographical and product segments, which provides a solid basis for expanding sales. Raw material and energy purchase prices, which sky-rocketed in H2 of 2022, seem to be somewhat more moderate in Q1 of 2023. The cost-pressure on energy prices decreased somewhat and the price of steel raw materials has not increased further either. The increase in wages, however, remains a substantial burden, which risks international com- petitiveness and emphasizes the need to increase productivity as soon as possible.
• Q1 of 2023 was a decidedly strong quarter for the European commercial vehicle market in terms of demand: the registration of new commercial vehicles increased by 19 per cent over the rate of the previous year. The market outlooks for 2023 are clearly positive, however projections re- main highly uncertain due to the substantial economic and political risks. The North American commercial vehicle market experienced a 28 per cent growth over the base period of 2022. De- mand for Rába's agricultural products remained stro ng in Q1 of 2023: turnover exceeded the level of the previous year by some 15 per cent. In compliance with the European sanction regu- lations in force against Russia, since the beginning of the Russian-Ukrainian military conflict Rába has not conducted any business with its Russia n partners. The European passenger vehi- cle market also saw considerable growth in the beginning of 2023: new car registrations in- creased by 18 per cent year on year in Q1.
• Substantial economic risks together with the drastic increase in energy prices have resulted in high volatility on the steel market. Purchase prices, however, seemed to somewhat stabilise and slightly decline in the first months of 2023. In Q1 purchase prices were 8.1 per cent lower, which impacted production activities.
• The labour market in Q1 of 2023 was still characterised by high labour shortages and extreme inflationary pressures, which further increased the risks of fluctuation, while projecting a signifi- cant increase in average wages. In January-February 2023, average gross national earnings increased by 17.3 per cent. Finding and implementing operational efficiency improvements in production technology to cover the years of steadily increasing wage costs remains a major chal- lenge for the Company.
• Energy prices, which sky-rocketed in H2 of 2022, were somewhat more moderate in Q1 of 2023, but were still 9.1 per cent above the level of the previous year. Energy prices are still considered high, purchase prices were still four times higher than the level prior to the energy crisis. Recently the Rába group has largely increased its flexibilit y in terms of energy purchase prices and product sales prices. It is safe to say, though, that there are considerable uncertainties in terms of both procurement and sales, which make the use of long-term solutions considerably more difficult.
• In terms of the exchange rate environment, the dollar, which accounts for a smaller share of the company's foreign exchange turnover, saw an increase of 9.0 per cent, while the euro, which has a significant foreign currency weighting, saw a more moderate increase of 6.7 per cent com- pared to a year earlier.1

1 The average exchange rates were calculated based on the official FX exchange rates of the MNB.

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Consolidated report of Rába Plc on operations for Q 1 2023 under IFRS

		Q1 2022			Q1 2023			Change
EURHUF - average		364,3			388,6	6.7%
EURHUF - end of period		369,6			381,0	3.1%
USDHUF - average		344,5			375,4	9.0%
USDHUF - end of period		332,1			349,9	5.3%
Changes in raw material prices*		185%			170%	-8.1%
Wage level**		461,0			540,6	17.3%
Changes in energy prices***		793%			865%	9.1%

*Rába indices - own calculation - base: 2007. Q1; a verage values for the period

**Central Statistical Office national gross average wage within companies (thousand HUF/month) - based on figures for Jan-Feb. 2023

***Rába indices - own calculation - base: Dec. 2004 . Average values for the period

SUMMARY OF THE CHANGES IN THE RESULT FOR THE REPORTING PERIOD

Rába Axle Ltd.

The sales revenue of Rába Axle Ltd. amounted to HUF 13.7 billion in Q1 2023, compared to HUF 8.8 billion in the 2022 base period. This corresponds to an increase of 55.4 per cent.

On the American market, revenue in USD for the period was USD 2.4 million in the review period, compared to USD 2.7 million in Q1 of 2022. This corresponds to a decrease of 11.1 per cent.

On the EU market, Rába Axle Ltd's sales figures in HUF terms increase d by 62.7 per cent, amounting to HUF 12.2 billion, compared to HUF 7.5 billion during the base period.

European exports in Q1 of 2023 were 73.0 per cent higher than in the base period, reaching EUR 27.5 million compared to EUR 15.9 million in Q1 2022.

Domestic sales revenue before consolidation amounted to HUF 1,482 million, a decrease of 10.2 per cent compared to HUF 1,650 million in the base period.

On the CIS and Eastern European markets Rába Axle Ltd. generated no sales revenue during t he review period, primarily due to the sanctions against Russia. The turnover during Q1 2022 was also minimal, amounting to a mere EUR 0.2 million.

Revenues from Other markets in euro terms amounted to EUR 1.7 million in the period under re- view, which was 41.7 per cent more than the EUR 1.2 million turnover in the base period of 2022. The sales figures and their comparison for the base period with the period in review are fundamentally affected by the fact that in the framework of efficiency improvement measures, the organisational and operational management of the Sárvár sit e of the Automotive Components business unit was transferred from the Automotive Components business unit to the Axle business unit in Q3 2022. As from 1 January 2023, the Rába Development Instit ute, performing R+D activities has been integrated into Rába Vehicles Ltd. from Rába Axles Ltd.

The operating result of the Company in Q1 2023 was a profit of HUF 40 million, compared to HUF 771 million during the same period of the previous year.

At EBITDA level, the operating profit of the Axle business unit was HUF 492 million compared to the loss of HUF 341 million registered a year earlier.

Source: http://www.mnb.hu/arfolyam-lekerdezes

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Consolidated report of Rába Plc on operations for Q 1 2023 under IFRS

	HUF million			Q1 2022			Q1 2023			Change
	America	866		887		2.4%
	EU - export	5 803		10 685		84.1%
	EU - domestic	1 650		1 482		-10.2%
	CIS and East-Europe	67		0	-100.0%
	Other	451		678		50.3%
	Total sales revenue	8 837		13 732		55.4%
	EBITDA	-341		492		-244.3%
	Operating profit	-771		40		-105.2%

Rába Automotive Components Ltd.

The sales revenue of Rába Automotive Components Ltd . amounted to HUF 4.8 billion in Q1 2023, an increase of 6.5 per cent compared to the base period.

Rába Automotive Components Ltd. generates a signif icant part of its turnover on the European market.

European exports in Q1 2023 reached EUR 4.8 million, an increase of 26.1 per cent compared to EUR 6.5 million in the base period of 2022.

Domestic sales revenue before consolidation in the reporting period amounted to HUF 2,876 million compared to HUF 2,098 million in Q1 2022, an increase of 37.1 per cent.

The sales figures and their comparison for the base period with the period in review are fundamentally affected by the fact that in the framework of efficiency improvement measures, the organisational and operational management of the Sárvár sit e of the Automotive Components business unit was transferred from the Automotive Components business unit to the Axle business unit in Q3 2022.

At operating level, the Business Unit generated a profit of HUF 209 million in the period under review, compared to a profit of HUF 19 million in Q1 2022.

At the EBITDA level, the operating profit of the Automotive Components business unit for the period under review amounted to HUF 279 million, compared to HUF 141 million a year earlier.

	HUF million			Q1 2022			Q1 2023			Change
	EU - export	2 362		1 877		-20.5%
	EU - domestic	2 098		2 876		37.1%
	Other	4	0	0.0%
	Total sales revenue	4 464		4 753		6.5%
	EBITDA	141		279		97.9%
	Operating profit	19		209		1000.0%

Rába Vehicle Ltd.

The realised sales revenue of Rába Vehicle Ltd. in Q1 2023 was 101.7 per cent higher than the base period level, increasing from HUF 121 million to HUF 244 million.

The majority of Rába Vehicle Ltd. 's sales are real ised on the domestic market, while it sells on the European market on a project basis.

European exports in Q1 2023 did not show any considerable sales during either the base period or the review period amounting to HUF 3.0 million, due to the project nature of sales.

The domestic sales revenue before consolidation in the first three months of 2023 was HUF 242 million, an increase of 100.0 per cent.

As from 1 January 2023, the Rába Development Instit ute, performing R+D activities has been integrated into Rába Vehicle Ltd. from Rába Axles Ltd.

The operating profit amounted to HUF 34 million of losses during the reporting period, compared to the loss of HUF 28 million during the base period last year.

At the EBITDA level, the operating loss of the Vehicle business unit for the period was HUF 26 million compared to HUF 25 million in losses in Q1 2022.

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