15.08.2007 - Rieter reports a further rise in sales and profits
Rieter Group orders received in the first half of 2007 rose by 12 percent to 2 297.7 million CHF (in local currencies and adjusted for divestiture of the man-made fiber business in 2006). Group sales adjusted for divestitures and currency effects increased by 9 percent to 1 920.1 million CHF, thereby setting a new mid-year record. The Rieter Group operating result before interest and taxes rose by 16 percent to 135.8 million CHF (116.8 million CHF in 2006), and net profit by 42 percent to 116.7 million CHF (82.1 million CHF in 2006). Earnings per share increased by 40 percent to 26.40 CHF (18.82 CHF in 2006).
Semi-Annual Report 2007 (English/PDF/362 KB)
The Rieter Group continued its profitable growth during the first half of 2007. Thanks to the favourable investment climate in the Asian textile industry, and higher market shares among the automobile producers in Western Europe and North America, sales reached a new record level. New records were also set by the operating result and net profit.
Orders received, adjusted for divestiture of the manmade fiber business in 2006, rose in local currencies by 12 percent to 2 297.7 million CHF (2 024.0 million CHF in 2006). The Textile Systems division took full advantage of favourable market conditions to realize for the first time a half-year order intake of more than one billion CHF. Sales adjusted for divestitures and currency effects rose by 9 percent and nominally by 8 percent to 1 920.1 million CHF (1 771.6 million CHF in 2006), almost exclusively due to organic growth.
Rieter’s operating result before interest and taxes rose by 16 percent to 135.8 million CHF (1 16.8 million CHF in 2006), equivalent to 7.2 percent of corporate output (6.7 percent in 2006). This improvement is attributable to the Textile Systems division’s good operating performance. In the context of a challenging automobile industry, Automotive Systems recorded a decline in the operating result. This was also due to higher costs in connection with new start-ups and production relocations in England.
Net profit rose by 42 percent to 116.7 million CHF (82.1 million CHF in 2006), equivalent to 6.1 percent of corporate output (4.7 percent in 2006). This marked increase is attributable to the higher operating result, an excellent financial result, and a slightly lower tax rate. Earnings per share increased by 40 percent to 26.40 CHF (18.82 CHF in 2006).
The 4% bond issued in 2001 of 200 million CHF was repaid per June 21, 2007. The Rieter Group’s financial basis remains sound: cash flow increased by 40 percent to 193.7 million CHF, the equity ratio per June 30, 2007 reached 51.7 percent (45.4 percent per June 30, 2006) and net liquidity rose to 143.8 million CHF (–25.5 million CHF per June 30, 2006).
The slight increase of 1 percent in Rieter’s workforce to 15 062 (14 914 per June 30, 2006) is primarily attributable to the expansion of Automotive Systems production capacities in low-cost countries.
Rieter Textile Systems with further rise in orders received, sales and operating result
The favourable investment climate in the textile industry improved still further during the first half of 2007. Yarn producers in Asia continued to invest heavily in expanding and modernizing their spinning mill capacities. Apart from export trading with Europe and North America, the main reason for this expansion is a steeply rising demand for textiles in the Asian countries. This goes hand in hand with higher textile quality demands, requiring better quality yarns that can only be produced on modern spinning machines.
Asia is clearly the primary growth driver, partially supported by local business incentive plans. Moreover the upswing in Asia is broadly based: apart from India and China, various other Asian countries are increasingly investing in new spinning mills and the modernization of existing ones.
Adjusted for divestiture of the manmade fiber business in the fourth quarter of 2006 and for slight currency effects, orders received by Rieter Textile Systems in the first half of 2007 rose by 18 percent to 1 083.8 million CHF. Textile Systems half-year order intake not only improved thereby on the very high level of 2006, but also exceeded 1 billion CHF for the first time. The biggest orders were received from Turkey, India, China and Indonesia, whereby order intake from Turkey more than doubled the mid-year 2006 figure. Thanks to Rieter’s innovative product offering, these orders were mainly in the core business of staple fiber machinery and related components. There was also a significant increase in orders received for nonwovens machinery.
Due to the good order situation, sales adjusted for divestitures and currency effects rose by 14 percent and nominally by 8 percent to 706.2 million CHF (651.7 million CHF in 2006). In order to meet the high demand by increasing output, investments were made in expanding production capacities. Nevertheless, the volume of orders received still exceeded delivery capacities in the first half of 2007, and deliveries were further delayed by bottleneck situations among suppliers of components and raw materials.
The operating result before interest and taxes (EBIT) per mid-year 2007 is very pleasing. With no further charges from the manmade fiber business, and thanks to disciplined cost management – also during the upswing – as well as greater order volume, the operating result rose to 93.7 million CHF (62.0 million CHF in 2006). Textile Systems thereby increased the EBIT margin to a record level of 13.0 percent (9.7 percent in 2006).
Rieter will continue to extend production in India and China. During the period under review this already commenced in India by expanding the existing plant in Pune with new production and assembly capacities.
Due to the high volume of orders received, most units of the Textile Systems division will enjoy a full workload well into the second half of 2008. For 2007 Rieter Textile Systems expects to improve further on the good prior-year sales and also to significantly exceed the 2006 operating result.
Rieter Automotive Systems with higher sales but lower earnings
During the first half of 2007 automobile production worldwide totalled 38.3 million vehicles, an increase of 5.2 percent. This growth is attributable to the emerging countries, with 2-digit growth rates among the BRIC nations (Brazil, Russia, India and China), while automobile production in the traditional markets of North America, Western Europe and Japan is stagnating.
The two primary Rieter markets of Western Europe and North America developed ac-cordingly in the first half of 2007. Production in Western Europe was only 1.1 percent higher than the 2006 level, while in North America production declined by 5.3 percent due to the domestic market sales problems of US manufacturers. Strong growth was recorded by the car producers in Eastern Europe (+14.8 percent), South America (+12.1 percent), India (+8.6 percent) and China (+19.8 percent). China has now taken over from Germany as the world’s third largest automobile producer.
Thanks to organic growth, Rieter Automotive sales rose again in all regions – Europe, North America, Latin America, and Asia – by 8 percent during the first half 2007 to 1 213.9 million CHF (1 119.9 million CHF in 2006), exceeding the market average. Sales growth in local currencies amounted to 7 percent.
In Europe Rieter has expanded business both in the passenger car and commercial vehicle sectors. In North America, Rieter Automotive Systems recorded modest sales growth despite the unfavourable market conditions, above all with carpeting systems for Japanese and US customers. Rieter Automotive sales growth in the emerging countries was mainly in South America, China and Turkey.
Rieter Automotive Systems operating result (EBIT) for the period under review was 47.3 million CHF (59.0 million CHF in 2006), equivalent to 4.0 percent of corporate output (5.4 percent in 2006), and thus clearly did not meet the internal objectives. The division was challenged by ongoing pricing pressure and high raw material and energy costs. Only some of these additional costs could be passed on to customers in a demanding automobile market situation, but they were partially compensated by internal improvements. Further unexpectedly high costs arose in connection with production relocations in England, where the associated restart of production and several new vehicle launches negatively impacted the operating result. Measures have been introduced for mastering these start-up problems in England, but the additional costs involved will also affect results for the second half of 2007.
Rieter Automotive expects practically unchanged market conditions for the second half of 2007, with rather subdued automobile production in Rieter’s main markets and ongoing production growth in the emerging countries. For seasonal reasons, sales in the second half of 2007 will not match those in the first half, but sales for 2007 as a whole are expected to exceed the 2006 level. The operating margin of Rieter Automotive is expected to be slightly higher in the second half of 2007 than in the first half.
Rieter foresees the favourable investment climate in the textile industry to continue during the second half of 2007, and a further increase in worldwide automobile production mainly outside Western Europe and North America. The faster relocation of production capacities to emerging countries will bring higher investments in the second half of 2007 than in the first. Rieter also expects higher sales, operating result, net profit and earnings per share for 2007 as a whole than in 2006.
Important dates 2008
Publication of sales figures for the 2007 financial year
Results press conference and presentation
of the 2007 financial statements
Annual General Meeting
January 31, 2008
March 20, 2008
May 8, 2008
Contact for financial analysts:
Chief Financial Officer
T +41 52 208 79 55
F +41 52 208 70 60
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Contact for the media:
Head Corporate Communications
T +41 52 208 70 12
F +41 52 208 72 73
All statements in this report which do not refer to historical facts are statements related to the future which offer no guarantee with regard to future performance; they are subject to risks and uncertainties including, but not confined to, future global economic conditions, exchange rates, legal provisions, market conditions, activities by competitors and other factors outside the company’s control.