Rába Jármûipari : Report of RÁBA Plc. for H1 of 2023

H1 2023 Report of RÁBA Plc.

Unaudited consolidated half-year 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:	H1 of 2023
E-mail:	[e-mail]
Investor contact:	Éva Lang-Péli

EXECUTIVE REPORT

MAIN RESULTS OF THE COMPANY

• During the first half of 2023, the activity on the market of commercial vehicles was decidedly strong in spite of the uncertainty caused by the Russian-Ukrainian war. Market demand grew considerably in almost all relevant geographical and product segments of Rába, which provides a sound basis for the increase in sales.
  Market factors impacting production costs showed a mixed picture. Energy and steel purchase prices declining in Q2 had a positive impact on profitability, whereas the continued strong in- crease in wages had a negative effect.
  In Q2 of 2023, the marked strengthening of the HUF exchange rate emerged as a new factor, which had a negative effect on operating profitability through net exports.
• In H1 of 2023, the Rába group achieved an outstand ing increase in sales turnover amounting to the highest of both H1 and Q2 sales of the past 20 years. During the cumulative reporting period, the sales revenue grew by 33.4 per cent and amounted to HUF 40.0 billion, whereas in Q2 group- level sales amounted to HUF 19.7 billion through a 17.6 per cent increase. In terms of sales, Rába Axle Ltd. remains the largest subsidiary of th e group, generating HUF 26.7 billion in sales through a 33.5 per cent increase. The sales revenue of Rába Automotive Components Ltd. in H1 of 2023 exceeded HUF 9.1 billion, whereas Rába V ehicle Ltd. contributed HUF 1.1 billion in sales to the record-level sales revenue of the group. As from Q3 2022, the Rába Group's portfolio was expanded, and REKARD LLC. which operates as a wholly-owned Rába subsidiary, was included in the consolidation of the Rába group. Th e sales revenue of REKARD LLC. was HUF 3.2 billion in H1.
• Production costs continue to be high, in spite of the somewhat more moderate purchase prices in Q2, which puts continuous pressure on profitability. The Rába group makes considerable ef- forts to mitigate these negative impacts through both purchasing and sales measures and to neutralise their profit eroding impact.
• In addition to the significant increase in sales revenue, the portfolio expansion, the consistent improvement in production efficiency and passing on of high production costs meant that the gross profit at group level amounted to HUF 7.4 billion upon an increase by HUF 2.1 billion. In H1 2023, the gross profit ratio realised at group level exceeded the level of the base period: it amounted to 18.4 per cent, upon an increase by 0.7 percentage points. The gross profit surplus resulting from the portfolio growth amounted to HUF 810 million.
• The balance of other income and expenses reached a loss of HUF 279 million in the first 6 months of 2023, compared to a profit of HUF 287 million in the same period of the previous year. The result from other activities in the base period included a one-off real property transaction with a value of HUF 342 million.
  H1 of 2023, in spite of continued high purchase prices, burdened by substantial additional com- munal energy costs, and by the challenging increase in labour costs was nevertheless concluded by profitable operation at group level. All business units achieved positive operating results thus contributing to the operating profit of HUF 1,809 million achieved through a 141.3 per cent growth. The Axle business unit generated operating profits of HUF 645 million, thus considerably exceeding the level of the base period, the Components business unit generated HUF 344 million

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

in operating profit through an increase by 44.9 per cent, whereas the Vehicle business unit increased its result three-fold over the base period and contributed HUF 169 million in profit to the increase in group-level profit. The additional operating profit resulting from the portfolio growth due to REKARD LLC. amounted to HUF 328 million. The group-level result of the base period was surpassed during Q2 as well, the operating profit of HUF 1,300 million was achieved upon an operating margin of 6.6 per cent.

• In terms of cash generating efficiency, the group of companies managed to achieve EBITDA results exceeding the base level both during the six-month period and during Q2. During the cumulative period of H1 2023, the EBITDA result was HUF 3,094 million, which is an increase of
• 1. per cent over the base period. All business units contributed to the cumulative group-level results by increasing the EBITDA-level profit. Retaining and maintaining cash generation capac- ity continue to be the primary objective for the Rá ba group, to which end the group has made significant efforts recently. 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 additional EBITDA resulting from the portfolio growth due to REKARD LLC. amounted to HUF 428 million in H1 of 2023.
• The result of financial operations for the period under review is mainly affected by the non-cash loan revaluation. In H1 2023, the result of financial operations showed a profit of HUF 1,001 million compared to a loss of HUF 906 million in the same period last year. The unrealised gain from loan revaluation amounted to HUF 1,485 million. In addition, the financial result includes a net interest charge of HUF 170 million.
• The total comprehensive income and profit for the year amounted to a profit of HUF 2,402 million in H1 2023, considerably 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 15.7 billion at the end of the period under review, an increase of HUF
• 1. 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 1,485 million worth of loan revaluation resulting from exchange rate changes, not in- volving cash movements, was another factor positively contributing to the net borrowing figure.
• Compared to the same period last year, equity increased by 20.5 per cent. The equity per share was HUF 1,871 per share.

thousand HUF

H1 2022

H1 2023

Change

Q2 2022

Q2 2023

Change

Sales revenue	30 007 278	40 024 662	33.4%	16 742 125	19 692 369	17.6%
Gross profit	5 312 939	7 363 867	38.6%	3 394 998	3 766 261	10.9%
Gross margin	17,7%	18,4%	0.7%p	20,3%	19,1%	-1.2%p
EBITDA	1 991 138	3 094 208	55.4%	1 853 659	1 933 200	4.3%
EBITDA level	6,6%	7,7%	1.1%p	11,1%	9,8%	-1.3%p
Operating profit	749 759	1 809 204	141.3%	1 233 912	1 300 172	5.4%
Net financial result	-906 194	1 001 386	210.5%	-841 724	339 603	140.3%
Profit after tax for current year	-252 028	2 401 942	1053.0%	317 627	1 409 792	343.9%
Total comprehensive income	-252 028	2 401 942	1053.0%	317 627	1 409 792	343.9%

GOALS, STRATEGY OF THE COMPANY

"The Rába group relentlessly pursues the implementa tion of the Rába Modernisation Programme 2025, capital expenditures into machinery, real estate and sustainability, as well as efficiency improvement and the enforcement of the lean principles. Upon these reorganisation measures we managed to maintain the results defined in or business plan in spite of the unfavourable economic environment. Our goal remains to keep and increase the confidence of our customers, to improve the practical cooperation with various educational institutions and to put special emphasis on the development of the R+D area", said Béla Hetzmann, Chairman-Chief Executive Officer of Rába Automotive Holding Plc. evaluating the results of the company.

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

BUSINESS ENVIRONMENT OF THE COMPANY

• During H1 of 2023, the uncertainty caused by the Russian-Ukrainian war continued to be a major economic factor, nevertheless, the activity on the commercial vehicle market is considered de- cidedly strong. Market demand was considerable in nearly all our geographical and product seg- ments, which provides a solid basis for expanding sales.
  Raw material prices, which sky-rocketed in H2 of 2022, seem are somewhat more moderate in H1 of 2023. The decline in energy and steel raw material purchase prices reached a substantial 20 per cent or even higher rate in the second quarter of the year. The increase in wages, how- ever, remains a substantial burden, which jeopardises long-term international competitiveness and profitability.
  The substantial strengthening of the HUF exchange rate had a negative impact on operating profitability in Q2 2023.
• H1 of 2023 was a decidedly strong period 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 the whole year of 2023 are also clearly positive, however projections remain highly uncertain due to the substantial economic and political risks. The North American commercial vehicle market experienced a considerable, 22 per cent growth over the base period of 2022. Demand for Rába's agr icultural products remained strong in H1 of 2023: turnover exceeded the level of the previous year by some 19 per cent. In compliance with the European sanction regulations in force against Russia, since the beginning of the Russian- Ukrainian military conflict Rába has not conducted any business with its Russian partners. The European passenger vehicle market also saw considerable growth in the first half of 2023: new car registrations increased by 18 per cent year on year.
• Substantial economic risks together with the drastic increase in energy prices have resulted in high volatility on the steel market. In 2023 both energy prices and the demand-supply relations were adjusted compared to the base period, which had a favourable impact on the development of the purchase price of steel. In Q3 of 2023, the purchase price level of steel was some 19.7 per cent lower. The 14.3 per cent lower purchase prices of the cumulative period impacted pro- duction activities.
• There were no significant changes on the labour market in the first months of 2023, thus labour shortages and inflationary pressures continued to have a significant impact on the increase in average wages. In January-May 2023, average gross national earnings increased by 17.9 per cent. Finding and implementing operational efficiency improvements in production technology to cover the years of steadily increasing wage costs remains a major challenge for the Company.
• Energy prices, which were more moderate in Q1 of 2023, continued to decline in the second quarter, as a result of which the energy price level for the cumulative period was lower than during the base period. The energy price drop in Q2 was 22.8 per cent, whereas the price drop during the cumulative period for the first half of the year reached 6.1 per cent. The gradually declining energy prices lead to somewhat reduced pressures on the cost side of production ac- tivities, it should be noted, though, that even so purchase prices remain three times higher than during the energy crisis. Recently, the Rába group has largely increased its flexibility in terms of energy purchase prices and product sales prices. It is safe to say, though, that there are consid- erable 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 during the cumulative period under review, the dollar saw an increase of 2.6 per cent, while the euro, which has a significant foreign currency weighting, saw an increase of 1.6 per cent compared to a year earlier. For Q2 of the year, the exchange rate environment had a negative impact on the operating profit, for the USD, the de- cline in exchange rates was 5.5 per cent, for the EUR it was 3.4 per cent, which impacted the net export.1

1 Average exchange rates were calculated based on the official FX rates of the National Bank of Hungary. Source: http://www.mnb.hu/arfolyam-lekerdezes

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

	H1	H1		Change		Q2	Q2		Change
	2022	2023			2022	2023
EURHUF - average	375.1	380.9	1.6%		385.9	372.9	-3,4%
EURHUF - end of period	396.8	371.1	-6.5%		396.8	371.1	-6,5%
USDHUF - average	343.6	352.5	2.6%		362.5	342.5	-5,5%
USDHUF - end of period	380.0	342.4	-9.9%		380.0	342.4	-9,9%
Changes in raw material prices*	199%	170%	-14.3%		213%	171%	-19,7%
Wage level**	483.2	569.9	17.9%		495.0	585.0	18,2%
Changes in energy prices***	755%	709%	-6.1%		717%	553%	-22,8%

*Rába indices - own calculation - base: Q1 2007; av erage values for the period

**KSH (Central Statistical Office) national gross average wage within companies (thousand HUF/month) - based on figures for Jan-May. 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 26.7 billion in H1 2023, compared to HUF 20.0 billion in the 2022 base period. This corresponds to an increase of 33.5 per cent.

On the American market, revenue in USD for the period was USD 5.8 million in the review period, which equalled the sales revenue generated during H1 of 2022.

On the EU market, Rába Axle Ltd's sales figures in HUF terms increase d by 38.5 per cent, amounting to HUF 23.4 billion, compared to HUF 16.9 billion during the base period.

European exports in H1 of 2023 were 49.8 per cent higher than in the base period, reaching EUR 53.4 million compared to EUR 35.7 million in H1 2022.

Domestic sales revenue before consolidation amounted to HUF 3,041 million, a decrease of 13.3 per cent compared to HUF 3,508 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 H1 2022 was also minimal, amounting to a mere EUR 0.2 million.

Revenues from Other markets in Euro terms amounted to EUR 3.4 million in the period under re- view, which was 19.3 per cent more than the EUR 2.8 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 Components business unit was transferred from the Components business unit to the Axle business unit in Q3 2022.

As from 1 January, 2023, the Rába Development Insti tute, performing R+D activities has been integrated into Rába Vehicles Ltd. from Rába Axles Ltd.

The operating result of the Company in H1 2023 was a profit of HUF 442 million, compared to the loss of HUF 79 million during the same period of the previous year.

At EBITDA level, the operating profit of the Axle business unit was HUF 1,334 million compared to HUF 780 million registered a year earlier.

Million HUF

H1

2022

H1

2023

Change

Q2

2022

Q2

2023

Change

America	1 997	2 039	2.1%	1 131	1 152	1.9%
EU - export	13 381	20 354	52.1%	7 578	9 669	27.6%
EU - domestic	3 508	3 041	-13.3%	1 858	1 559	-16.1%
CIS and East-Europe	65	0	-100.0%	-3	0	-100.0%
Other	1 057	1 280	21.1%	606	602	-0.7%
Total sales revenue	20 007	26 714	33.5%	11 170	12 982	16.2%
EBITDA	780	1 334	71.0%	1 121	842	-24.9%
Operating profit	-79	442	659.5%	692	402	-41.9%

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

Rába Automotive Components Ltd.

The sales revenue of Rába Automotive Components Ltd . amounted to HUF 9.1 billion in H1 2023, a decrease of 6.0 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 H1 2023 reached EUR 9.7 million, a decrease of 27.9 per cent compared to EUR 13.5 million in the base period of 2022.

Domestic sales revenue before consolidation in the reporting period amounted to HUF 5,429 million compared to HUF 4,639 million in H1 2022, an increase of 17.0 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 Components business unit was transferred from the Components business to the Axle business unit in Q3 2022.

At operating level, the Business Unit generated a profit of HUF 545 million in the period under review, compared to a profit of HUF 376 million in H1 2022.

At the EBITDA level, the operating profit of the Components business unit for the period under review amounted to HUF 684 million, compared to HUF 619 million a year earlier.

Million HUF

H1

2022

H1

2023

Change

Q2

2022

Q2

2023

Change

EU - export	5 069	3 714	-26.7%	2 707	1 837	-32.1%
EU - domestic	4 639	5 429	17.0%	2 541	2 553	0.5%
Total sales revenue	22	0	-100.0%	18	0	-100.0%
EBITDA	9 730	9 142	-6.0%	5 267	4 390	-16.7%
Operating profit	619	684	10.5%	478	405	-15.3%
EU - export	376	545	44.9%	357	336	-5.9%

Rába Vehicle Ltd.

The realised sales revenue of Rába Vehicle Ltd. in H1 2023 was 80.7 per cent higher than the base period level, increasing from HUF 622 million to HUF 1,124 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 the cumulative period of 2023 were equal to the sales generated during the base period amounting to HUF 0.6 million.

The domestic sales revenue before consolidation in the first six months of 2023 was HUF 907 million, an increase of 121.2 per cent.

As from 1 January, 2023, the Rába Development Insti tute, performing R+D activities has been integrated into Rába Vehicles Ltd. from Rába Axles Ltd.

The operating profit amounted to HUF 169 million during the reporting period, compared to the profit of HUF 57 million during the base period last year.

At the EBITDA level, the operating profit of the Vehicle business unit for the period was HUF 185 million compared to HUF 62 million in H1 2022.

	Million HUF		H1	H1				Change		Q2	Q2		Change
		2022	2023				2022	2023
	EU - export	212		217		2.4%		212	215		0.0%
	EU - domestic	410		907		121.2%		290	665		129.3%
	Total sales revenue	622	1	124		80.7%		501	880		75.6%
	EBITDA	62		185		198.4%		87	211		142.5%
	Operating profit	57		169		196.5%		85	203		138.8%

REKARD LLC.

As of Q3 2022, the portfolio of the Rába Group has been expanded, REKARD LLC. will continue to operate as a wholly owned Rába subsidiary included in the consolidation of the Rába Group.

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