Rational make the best commercial ovens in the world; 54% of all combi-steamers sold are made by Rational. They’re a picture of a solid German business; still owned 70% by insiders, paying a substantial dividend, and growing profitably year-on-year. You might think a company like this has a relentless focus on margins or returns, but that isn’t the case; Rational say their primary corporate objective is to ‘offer the greatest possible benefit to the people preparing hot food in the professional kitchens around the world’.

A lofty goal – ‘maximising customer benefit’ as the focus of the business – has flow-through effects to shareholder returns. There are benefits to hosting free training for all your customers, rolling out software updates for the ovens you provide, offering 24/7 technical support and providing the services of 300 trained chefs (who are also, unsurprisingly, also salesmen) to your clients, as well as offering them direct contact to the CEO if they’re not satisfied with the service provided.

Check out the 10 year performance graph:

Rational_HeadlineRational operate with the conviction that they will provide the best possible service for their customers, and they do it shrewdly – in Japan they sell their ovens through an OEM, Fujimak. Japan is a notoriously insular and difficult market to penetrate – and partnering with a local player neatly turns a competitor into a domestic, entrenched and valuable sales force.

They also don’t buy into the synergistic or conglomeratorial logic so many chief execs seem beset by – they’re no empire builders. From the annual report:

We only do things ourselves if we can manufacture them better or more cheaply than others, or if we possess system-critical expertise. Everything else we buy in from specialist, highly-skilled suppliers… As a company with minimal vertical integration, we essentially handle the final assembly of the appliances… an employee assembles ‘his’ unit from the first to the last screw and puts his name on the identification plate as a guarantee of quality.

They just put together better ovens, better than everyone else. They spent €16.7m last year on research & development – hardly a trivial amount for a company in physical goods, but hardly a US tech start-up, either.

All of this makes for a return on capital as high as you’ll ever see:

Rational_RoCE

You’ll find hardly any companies in the world able to compound…

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