Report on the Results of Rába Plc. in Q1-Q3 of 2021

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 2021

E-mail:

adam.steszli@raba.hu

Investors relations:

Ádám Steszli

MANAGEMENT REPORT

MAIN RESULTS OF THE COMPANY

  • During Q3 of 2021, the supply disturbances felt in the first half of the year increased, which resulted in capacity problems and drastically increasing purchase prices in an increasing num- ber of market segments. In addition to considerably higher purchase prices on the steel market, the crisis on the energy market resulted in the highest energy procurement price of the past decade. All of this, coupled with the still considerable consumer demand-side activity, exerted substantial inflationary pressure on the economic environment. Supply difficulties are yet to be overcome, global monetary policy answers are yet to be found, thus future outlooks suggest considerable and longer-term inflationary pressures.
  • In Q3 of 2021, there was still substantial business activity on the truck and agricultural markets, the passenger vehicle segment, however, was characterised by clear negative impacts due to the disturbances in supply. The impacts of the COVID-19 pandemic on the basis period should be taken into consideration when evaluating both the quarter and the cumulative period. The Rába Group's sales trends and r4egional distributio n in Q1-Q3 of 2021 duly represent global trends in demand. Group-level sales increased by 19.7 per cent to HUF 33.2 billion during the cumulative period, the sales in Q3 amounted to HUF 9.5 billion through a more modest, 11.3 per cent increase. The Axle business unit contributed to group-level sales by 41.0 per cent in- crease in sales in Q3 and 41.8 per cent in Q1-Q3. The Components business unit generated a more modest, 5.0 per cent sales increase in Q3, which meant that the sales increase of 40 per cent in H1 decreased to 29.0 per cent during the cumulative period. The sales figures of the Vehicle business were characterised by a decrease by 66.8 per cent in Q1-Q3 of 2021explained primarily by the fact, that as a result of the crisis management measures introduced in 2020, the production of steel structures for civilian applications was transferred from the Vehicle business unit to the Axle business unit. In terms of the exchange rate environment, in the exchange rates of the USD representing a lesser portion in the company's foreign exchange turnover, there was a decline by 3.8 per cent, and in the EUR, representing a more substantial portion of FX sales, there was an increase by 2.4 per cent compared to the levels of the previous year.
  • Base material supply linked to the stable increase in demand within the heavy vehicle sector was secured through a substantial increase in delivery lead times and upon continuously in- creasing steel prices. The relaunch of steel manufacturing capacities operated only partially for various company-specific reasons or withdrawn from production during the COVID-19 pan- demic, is done in a phased fashion only. The situation was further deteriorated by the funda- mental changes in supply and demand relations on the global market and in the Chinese trading position.
    As a result of the above, the steel market was, from November 2020 until the end of the first 6 months of this year, characterised by steadily growing prices, triggering various degrees, 50- 100 % (30 June, 2021) of base material price increase on the world market, which is reflected in metal products to a varying extent, depending on their complexity. In terms of procurements in Q3, further drastic price increases were felt.
    The above substantial increase in costs is passed on by the Rába Group to its trading partners

RÁBA Plc's consolidated report for Q1-Q3 of 2021 in acc ordance with the IFRS

as per the terms of the existing agreements and as a result of negotiations, with a quarterly delay in the case of the majority of the products and with a 6-month delay for more complete products and for products with orders fixed in the longer-term. These two factors, namely that in 2021, base material prices have shown a steadily increasing tendency and that the cost increase can be passed on to the customers with a time lag only, have a negative impact on the profit positions and margins of the group of companies in Q1-Q3 of 2021 as well.

It is Rába's firm objective to neutralise these neg ative impacts as soon as possible, following the stabilisation of world market prices through the enforcement in sales prices of the increase of purchase costs.

  • Gross margins at group level exceeded HUF 6,100 million with an efficiency of 18.4 per cent. The gross profit of the cumulative period was achieved, owing to the increase in sales volume, upon improving capacity utilisation and at the same time under considerably increasing prie pressure for all major cost elements. The Rába Grou p reacted to the volatility of external markets by increasing integrity and flexible adjustment, based on the earlier crisis measures. The unu- sually high steel prices and the considerably increased energy prices in Q3 had a significant negative impact on the quarterly gross margin: group level gross margin in Q3 declined by 6.7 per cent and reached 13.6 per cent. The amount of gross margin in the quarter was HUF 443 million less than during the base period and amounted to HUF 1,294 million.
  • The balance of other revenues and expenditures amounted to HUF 850 million in profit during the review period, against the loss of HUF 672 million during the same period of the previous year. The profit of other activities during the base period included a real estate transaction car- ried out during Q2, with an impact on profits of HUF 815 million. The result of other activity during the base period included a one-off, unplanned write-off in the amount of HUF 296 million due to the unsustainability in accounting terms of the Ministry of Defence capacities.
  • To improve operating profitability, in addition to increasing the flexibility of the manufacturing activity, the Company implemented controls of the general and overhead costs. The indirect costs increased by HUF 19 million on a year/year basis, upon increasing sales. In Q1-Q3 of 2021, the group-level profit from operations amounted to HUF 1,426 million, without the one-off improving items the operating profit was HUF 611 million. All business units made a positive contribution through profitable operation to the group-level operating profit during the cumulative period. The operating profit of the Axle business unit was HUF 350 million in Q1-Q3 of 2021, the operating profit of the Components business unit was HUF 384 million, whereas the Vehicle business unit generated HUF 52 million in profits. Operating profits in Q3 were significantly in- fluenced by the increase in purchase prices as well as the production volume declines and out- ages in the passenger vehicle segment. Group-level losses amounted to HUF 379 million, to which the Axle business unit contributed HUF 295 million and the Components business unit HUF 148 million in losses. The production of civilian applications of the Vehicle business unit was successfully integrated into the Axle business unit, the role and position of the Vehicle busi- ness unit within the new structure seem to be stabilised. Accordingly, their operating activity was profitable both on a quarterly and on a cumulative basis, albeit at a different level. A real estate sale concluded in Q2 also contributed to the operating profit during the cumulative period.
  • In terms of cash generating efficiency, the EBITDA-level profit achieved during the review period exceeded HUF 3.2 billion, amounting to HUF 3,223 million. The EBITDA margin amounted to 9.7 per cent, 7.2 per cent excluding the one-off, improving items. EBITDA-level operating effi- ciency and profitability in Q3 were significantly impacted by the significant increase in cost pres- sure exerted by the supply chains. Group-level EBITDA margin was 2.3 per cent, to which both business units with considerable production contributed substantially declining cash generating efficiency: the Axle business unit achieved a 1.9 per cent EBITDA on sales, whereas the Com- ponents business unit reached -1.3 per cent in Q3 of 2021. The activity of the Components business unit was heavily impacted, in addition to the cost pressure, by the declining volumes characteristic for the passenger vehicle industry. In line with its new position, the Vehicle busi- ness unit contributed to the group-level EBITDA with positive cash generating efficiency, albeit to a lesser extent.
  • The financial result in Q1-Q3 of 2021 amounted to HUF 45 million, compared to the loss of HUF 904 million generated during the same period of the previous year. The financial performance

2

RÁBA Plc's consolidated report for Q1-Q3 of 2021 in acc ordance with the IFRS

was influenced by the realised exchange rate gain by HUF 97 million and the net interest burden of HUF 42 million.

  • The total aggregate income and profit for Q1-Q3 of 2021 amounted to HUF 1,161 million.
  • The financial situation of the Rába group was char acterised by a stable liquidity position in spite of the COVID-19 pandemic period and the challenges of the recovery period that followed. The net borrowings amounted to HUF 10.1 billion at the end of the review period and declined by HUF 549 million compared to the base period. Of the factors influencing the level of net borrow- ings, the profitable operating activity, the increase in working capital as a result of increasing production volumes, capital expenditures and the profit of the one-off real estate sale are note- worthy. The revaluation, due to exchange rate fluctuation, of loans, worth HUF 39 million, not involving cash movements, also contributed to the change in net borrowings.
  • The shareholder's equity increased by 10.7 per cent compared to the same period of the previ- ous year. The shareholder's equity per share reached HUF 1,563/share.

thousand HUF

Q1-Q3

Q1-Q3

Change

Q3 2020

Q3 2021

Change

2020

2021

Sales revenue

27 763 839

33 226 821

19.7%

8 549 847

9 519 808

11.3%

Gross profit

5 140 851

6 100 254

18.7%

1 738 547

1 294 579

-25.5%

Gross margin

18.5%

18.4%

-0,1%p

20.3%

13.6%

-6.7%p

EBITDA

701 798

3 223 051

359.3%

652 713

214 523

-67.1%

EBITDA level

2.5%

9.7%

7.2%p

7.6%

2.3%

-5.4%p

Operating profit

-1 037 163

1 425 590

237.5%

64 906

-378 523

-683.2%

Net financial profit/loss

-903 624

45 461

105.0%

-252 309

-214 658

14.9%

Profit after tax for the current year

-2 168 559

1 160 640

153.5%

-267 272

-665 424

-149.0%

Total comprehensive income

-2 168 559

1 160 640

153.5%

-267 272

-665 424

-149.0%

GOAL AND STRAGY OF THE BUSINESS

"Our company posted a profitable three-quarter year even under the current difficult economic con- ditions. Market processes, price increases and supply chain disruptions generated by the continuing epidemic threat posed a serious challenge to companies in the industry, including Rába. The key to our success is that in addition to increasing the flexibility of our manufacturing operations, we have implemented strict cost management. Our company continues to work on improving the efficiency of manufacturing and technology. Our main goal is to be able to neutralize the negative effects as soon as possible after the stabilization of world market purchase prices by passing on the cost increases in our sales prices." - said Béla Hetzmann, Chairman-CEO of Rába Automotive Holding Plc.

BUSINESS ENVIRONMENT OF THE ENTERPRISE

  • Q3 of 2021 continued to be characterised by considerable sales activity and raw material and energy prices hiking even compared to earlier levels. A new economic phenomenon is that the disturbances in the supply chains are increasingly manifest in various levels and sectors, which, however, did not yet have an impact on the quarterly performance. In terms of future outlooks, though, supply problems may hinder economic growth.
  • The demand for shipping continued to be high in Q3 of 2021, which means that shipping tariffs were also high. The increased demand and high shipping tariffs ensure the profitability of hauli- ers, which provides a solid basis for the demand for heavy trucks. Parallel to the renewal of vehicle fleets, used vehicles continued to be present, which means that there is a strong demand for spare parts. Accordingly, market conditions were favourable on all of Rába's principal markets in Q1-Q3 of 2021. Sales activities improved considerably compared to the levels of a year earlier, impacted by the economic effects of the COVID-19 pandemic.
  • In Q1-Q3 of 2021, the European truck market exceeded the level of a year earlier by 27 per cent, fundamentally impacted by the economic effects of the COVID-19 pandemic. Market outlooks for the last quarter of the year are somewhat more cautious, as a result of which the annual forecast suggests a minor decline. The North American truck market expanded by 22 per cent compared to the base period in 2020. There was a significant demand for Rába's agricultural products

3

RÁBA Plc's consolidated report for Q1-Q3 of 2021 in acc ordance with the IFRS

compared to the base year 2020 affected by the shut down due to COVID-19: sales increased by 55 per cent during the first 9 months of 2021. The Russian truck market grew spectacularly in months 1-8 of 2021: 41 per cent more new trucks were produced than during the base period a year earlier. The Russian bus market was also characterised by an increase in demand during the review period: the sales of new buses exceeded the 2020 sales volume by 8 per cent. On the European passenger vehicle market the growth in demand during the cumulative period still exceeded 6 per cent, the supply chain problems of the automotive industry however, impacted the sales figures of Q3 and especially of September. Rába's sales in the passenger vehicle segment suffered from a decline in demand by 35-50 per cent compared to Q3 of 2020 and to the previous forecasts. As a result, sales figures for Q4 of the passenger vehicle segment are likely going to remain below the values for the base period.

  • Capacity shortages resulting from increased demands have led to increasing purchase prices upon uncertain supply conditions. The considerable increase in steel prices, by 21.7 per cent on a year/year basis experienced in H1 of 2021 further increased in Q3 and reached 52.5 per cent compared to the same quarter of 2020. All this has led to 31.8 per cent higher purchase prices for steel purchases in Q1-Q3 of 2021. This has led to record high steel raw material prices, exceeding even the highest levels since the 2008 economic crisis.
  • The increase in human resource expenses was 8.4 per cent in Q1-Q3 of 2021, which exerts considerable pressure on operating activities. Improving operating efficiency and implementing it within production technology, to cover the continuously increasing wage costs is increasingly challenging for the Company.
  • In Q2 of 2021, purchase prices of energy costs also started to increase drastically, followed in Q3 by dramatic price increases as a result of the crisis on the European energy market. In Q3 the annual price increase was 48.7 per cent, whereas the increase in the Q1-Q3 cumulative period reached 19.6 per cent. All this meant that the highest energy purchase prices of the last decade had a negative impact on the profitability of production.
  • With regard to the exchange rate environment, a decrease by 3.8 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, an increase by 2.4 per cent was seen in Q1-Q3 of 2021 compared to the levels of the previous year.1

Q1-Q3

Q1-Q3 2021

Change

Q3

Q3

Change

2020

2020

2021

EURHUF - average

348.0

356.5

2.4%

353.6

353.9

0.1%

EURHUF - end of period

364.7

360.5

-1.1%

364.7

360.5

-1.1%

USDHUF - average

309.7

298.1

-3.8%

302.8

300.1

-0.9%

USDHUF - end of period

311.4

310.7

-0.2%

311.4

310.7

-0.2%

Changes in raw material prices*

106%

139%

31.8%

104%

159%

52.5%

Wage level**

395.4

428.7

8.4%

396.7

430.1

8.4%

Changes in energy prices**

210%

251%

19.6%

213%

317%

48.7%

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

**KSH (Central Statistical Office) national gross average wage (thousand HUF/month) -based on 05. 01 2021. data

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

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 2021 in acc ordance with the IFRS

SUMMARY OF RESULTS DURING THE REVIEW PERIOD

Rába Axle Ltd.

The sales revenue of Rába Axle Ltd. in Q1-Q3 of 202 1 amounted to HUF 21.3 billion compared to HUF 15.0 billion achieved during the base period of 2020. This corresponds to an increase of 41.8 per cent.

On the American market the sales revenue in the reporting period was USD 5.5 million, compared to the USD 7.0 million in Q1-Q3 of 2020. This corresponds to a decrease of 21.7 per cent.

On the EU market Rába Axle Ltd's sales figures in HUF terms increase d by 53.6 per cent, amounting to HUF 16.2 billion, compared to HUF 10.6 billion during the base period.

European exports in Q1-Q3 of 2021 exceeded the level of the base period by 60.8 per cent, amounting to EUR 35.4 million, against EUR 22.0 million in Q1-Q3 of 2020. Sales figures are fundamentally influenced by the reorganisation of the civilian applications of the Vehicle business unit to the activities of the Axle business unit as a result of the crisis management measures of 2020.

Domestic sales before consolidation amounted to HUF 3,614 million, which represents an increase by 23.9per cent compared to the HUF 2,917 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 2021 were 65.9 per cent lower than the base period in 2020, decreasing from EUR 3.8 million in the base period to EUR 1.3 million.

In the other markets, the sales revenue during the reporting period amounted to EUR 8.5 million, which was 203.2 per cent higher than the EUR 2.8 million turnover of the 2020 base period.

The operating result of the Company in Q1-Q3 of 2021 was a profit of HUF 350 million, compared to HUF 286 million in losses during the same period of the previous year.

At EBITDA level, the operating profit of the Axle business unit was HUF 1,585 million compared to HUF 634 million registered a year earlier.

million HUF

Q1-Q3

Q1-Q3

Change

Q3 2020

Q3 2021

Change

2020

2021

America

2 197

1 628

-25.9%

466

731

56.9%

EU - export

7 650

12 618

64.9%

2 631

3 072

16.8%

EU - domestic

2 917

3 614

23.9%

762

1 103

44.8%

CIS

1 307

457

-65.0%

168

155

-7.7%

Other

970

3 014

210.7%

281

1 013

260.5%

Total sales revenue

15 040

21 331

41.8%

4 308

6 075

41.0%

EBITDA

634

1 585

150.0%

341

117

65.7%

Operating profit

-286

350

222.4%

27

-295

-1192.6%

Rába Automotive Components Ltd.

The sales revenue of Rába Automotive Components Ltd . amounted to HUF 11.2 billion in Q1-Q3 of 2021, which is a 29.0 per cent increase compared to the base period.

Rába Automotive Components Ltd. generates a conside rable portion of its sales on the European market.

European exports during Q1-Q3 of 2021 amounted to EUR 15.0 million, which represents an increase of 23.5 per cent compared to the EUR 12.1 million of the base period of 2020.

Domestic sales before consolidation amounted to HUF 5,860 million during the reporting period, which corresponds to an increase by 31.5 per cent compared to the sales revenue of HUF 4,455 million during Q1-Q3 of 2020.

The Company generated a profit of HUF 384 million at operating level during the reporting period compared to a loss of HUF 447 million in Q1-Q3 of 2020.

On the level of EBITDA, the profit of the Components business unit was HUF 709 million during the period, compared to the loss of HUF 94 million of the previous year.

5

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RÁBA Jarmuipari Holding Nyrt. published this content on 18 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 November 2021 11:52:09 UTC.