Rieter

A leading global supplier for textile machinery and components used in short-staple fiber spinning

A leading global supplier for textile machinery and components used in short-staple fiber spinning

The global provider of components for all spinning processes

Yarns that follow fashion

Rieter offers attractive positions around the world

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03/30/2004 - 2003 financial year: increase in sales and net profit

In the 2003 financial year the Rieter Group increased sales by 4.8% (7.5% in local currencies) to 3 118.3 million CHF, net profit by 38.4% to 116.0 million CHF and earnings per share by 51.5% to 25.68 CHF. The operating result before interest and taxes was 0.7% higher at 202.4 million CHF. The dividend of 8.60 CHF per registered share (proposed to Annual General Meeting) is unchanged from the previous year.

 Annual Report 2003 (English/PDF/3.1 MB)

The Rieter Group succeeded in holding its own in the 2003 financial year, although the period under review was characterized by an unstable geopolitical environment and weak economic activity. Rieter recorded higher sales and a substantial increase in net profit.

Operating earnings before interest and taxes (EBIT) of 202.4 million CHF were 0.7% higher than in 2002 (200.9 million CHF), and amounted to 6.8% of corporate output (7.0% in 2002). The slight decline in operating margins was attributable to severe pressure on prices in the automotive industry and substantial up-front expenditure on new technology at Automotive Systems; however, the good results recorded by the Textile Systems Division were able to offset the weakness in the automotive supply business.

Rieter’s net profit increased by 38.4% to 116.0 million CHF (83.8 million CHF in 2002), equivalent to 3.9% of corporate output (2.9% in 2002). The increase in EBIT at Textile Systems and an improvement in financial income were the main contributors. Cash flow rose from 205.4 million CHF to 258.3 million CHF, which was equivalent to 8.6% of corporate output (7.2% in 2002). Earnings per share improved by 51.5% to 25.68 CHF.

Growth despite weak economic activity

On a constant currency basis, orders received by the group were 1.3% higher compared to previous year. At actual exchange rates resulted a decline of 1.1% to 2 967.9 million CHF. Sales increased by 4.8% to 3 118.3 million CHF. The healthy trend of business at Textile Systems and the first-time consolidation of Spanish Rieter Saifa at Automotive Systems had a favorable impact on sales. Exchange rate movements had a negative impact, mainly due to the weakness of the US dollar versus the Swiss franc, which was not entirely offset even by the stronger Euro. On a constant currency basis, Rieter Group’s sales increased by 2.7 percentage points compared with the previous year. At the average exchange rates of the year 2000 sales would currently be 3 407.4 million CHF.

Proven strategy
Rieter’s dual strategy of operating in two industrial sectors – textile machinery and automotive supplies – again proved its worth in the year under review. The group’s profitable growth over many years is due to the systematic implementation of this strategy: this also includes an extensive portfolio of products, customers and markets with differing regional, cyclical and currency-related opportunities and risks. However, success is primarily due to the skills and commitment of our employees with their innovative potential and focus on customers.

Outlook for the group
The first signs of economic recovery appeared in North America and Europe toward the end of 2003. On a current view the relevant indicators do not yet indicate a sustained upturn in the main markets of Rieter in 2004. On the basis of the acceptable level of firm orders received at Textile Systems and the economic trend to date in the automotive industry, Rieter expects sales at group level in 2004 to be much the same as in the previous year at constant currency rates. Due to the action already initiated to reduce costs and increase productivity, the Rieter Group expects to report improved earnings in 2004.

Rieter Textile Systems: substantial rise in sales and earnings

The world market for textile machinery remained at a healthy level in the year under review, with strong demand in China providing substantial support in all segments of the market. Rieter Textile Systems recorded an excellent business trend in 2003, with a 120.0 million CHF increase in sales to 1 228.2 million CHF.

As in the previous year, Rieter’s sales growth was the strongest in Asia - especially China and Turkey - while volumes in North and South America declined again, due partly to currency effects. Demand in the Asian markets showed no signs of slowing down in the year under review.

Order intake was on a respectable level in both the first and second half of the year. Orders received in the second half of 2003 were 2.7% higher than in the same period of the previous year. For the year as a whole, orders received by the division of 1 077.8 million CHF were recorded.

Through rigorous management of cost, flexibility in manufacturing operations, exploitation of low-cost locations, price discipline and higher capacity utilization, Rieter Textile Systems achieved a 30.1% improvement in its operating result before interest and taxes to 122.7 million CHF (94.3 million CHF in 2002), equivalent to 10.6% of corporate output (8.9% in 2002).

Strong market position in staple fiber machinery and higher volumes in man-made fiber machinery
In the market for staple fiber machinery - the most important segment served by Rieter Textile Systems - Rieter participated successfully in the positive market trend by virtue of its broad product range, its innovative machinery and systems, and its firmly established global presence. Customers are continuing to rely on the high quality of Rieter products as well as the know-how and global service facilities that go with it.

The world market for man-made fiber machinery, driven by investments in Asia, recorded encouraging growth rates in the year under review. Rieter Textile Systems concluded many more contracts in the man-made fiber sector than in the previous year; however, potential still remains for achieving significantly greater market share in this growing segment. Demand was strong for texturing machinery, with Rieter recording substantially higher sales than in the previous year.

New products
Growth potential in the innovative nonwovens machinery segment is promising: annual growth rates in nonwovens are estimated at some 8% worldwide. In this segment - Textile Systems’ youngest - Rieter recorded considerably higher sales than in the previous year with less activity. An entry has been made into the market for spunbond and meltblown systems, and initial orders have been concluded in important key markets. Rieter has opened a nonwovens technology center in Montbonnot/Grenoble (France), where the latest processes and technologies can be tested and developed further, together with customers, in an industrial environment.

The Rieter Rotor System, the integrated system for manufacturing rotor-spun yarns that was launched last year, comprises the new C 60 card, the SB-D 15 and RSB-D 35 drawframes and the R 40 rotor spinning machine. This system has established itself successfully in the marketplace and has fulfilled customers’ high expectations with regard to shorter processes, higher productivity and yarn quality. In the nonwovens machinery sector Rieter has launched the new Perfobond 3000 spunbond machine and the meltblown process on the market. The Perfobond 3000 currently achieves the highest productivity in this segment. In the year under review Rieter presented these and other innovations at symposia for customers held in local markets, for example in Turkey, and also at international trade fairs, such as Shanghaitex. The innovations also attracted considerable interest there.

Entering the Chinese market
The relocation of important elements in the textile value added chain from traditional industrialized countries to Asia and Turkey intensified further in the year under review. A new sales office was opened in Shanghai at the beginning of 2003. Branch offices already exist in Peking, Urumqi and Hong Kong to serve customers in this huge market. While these offices initially handled only sales and service, in autumn Rieter also opened a new spinning center in Shanghai to provide customer training and also for their use in conducting spinning trials. The Changzhou plant, Jiangsu Province, now employs more than 250 personnel and produces texturing machines, drawframes as well as other textile machinery and components for the local and export markets. This plant is continually being expanded.

Future business trend
With its flexible structures and a broad, innovative product range, Textile Systems is well equipped to adjust rapidly to changes in market conditions and customers’ requirements. The first signs that the boom in Asia is losing momentum have become apparent since the beginning of the current year. Nevertheless Rieter Textile Systems expects a healthy trend in sales and earnings for the year as a whole.

Rieter Automotive Systems: sales levels maintained in declining markets

Automotive Systems held its own against the backdrop of a weak market in the 2003 financial year and sales were 5.7% higher in local currency. 1.7% of this increase represented organic growth, 4.0% resulted from changes in the scope of consolidation. Due to the weakening of the US dollar relative to the Swiss franc, nominal sales growth was only 1.5%, to 1 875.6 million CHF (1 848.2 million CHF in 2002).

In the year under review Rieter increased its holding in Rieter Saifa, the Spanish automotive supplier, to 50% and integrated that company’s customer service and product policy in the Rieter organization. With the change in control, Rieter Saifa was fully consolidated for the first time with effect from January 1, 2003.

In both of Automotive Systems’ main markets - Western Europe and the Nafta region - fewer vehicles were produced in the year under review than in 2002. As a result of the weak level of economic activity in important national markets, output in Western Europe declined by 0.7% to 16.4 million vehicles. Automotive production in the Nafta region was 3.0% lower at 15.9 million vehicles (16.4 million vehicles in 2002).

Severe competition in North America
Severe competition and price wars among manufacturers and suppliers in the US automotive industry intensified further in the year under review. The major American manufacturers had to contend with excess capacity and increasingly keen competition from Japanese and European rivals that have established manufacturing capacity in North America. Japanese suppliers have already taken one-fourth of the American market. As in previous years, the US manufacturers sought to boost sales by offering large discounts, while the Japanese only had to make minor price concessions on their products, for which demand has been healthy. More light trucks (minivans, pick-up trucks and sport utility vehicles) than passenger cars were again sold in the US. 20 years ago light trucks accounted for only one-fifth of total sales.

The UGN joint venture, which supplies Japanese manufacturers in the US, performed well. Capacity at the production plant established in the previous year in Jackson, Tennessee, was well utilized at the end of the year and developed positively. Weight-saving Rieter Ultra Light acoustic packages are produced for the Japanese automotive manufacturers in the US in a 15 000 m2 facility.

Actions to improve profitability
Rieter Automotive was unable to achieve fully its ambitious cost-reduction targets in the year under review, neither in the US nor in Europe. As a result of severe pressure on prices, higher raw material and energy prices in the US and heavy up-front expenditure for new technologies, the operating result before interest and taxes declined to 84.6 million CHF (109.6 million CHF in 2002). The operating margin was 4.6% (6.1% in 2002). Cost-reduction efforts are being pursued with high priority and intensity with a view to achieving substantial improvements in the earnings situation at Automotive Systems.

At the forefront of these are:

  • eliminating productivity backlogs in certain plants
  • further reductions in procurement costs
  • reduction in material consumption
  • optimization of fixed cost structures
  • expansion in low-cost locations


Establishing capacity in the Chinese market
In the year under review China became the world’s fourth-largest market for the automotive industry behind the US, Japan and Germany. In order to exploit the opportunities offered by this rapidly expanding market, Rieter has established a joint venture with Nittoku in Huadu, southern China, to supply the Japanese automobile manufacturers operating there. As of spring 2004 Rieter will supply Japanese manufacturers in the southern Chinese province of Guangzhou with components for acoustic comfort from the new plant in Huadu. Further projects for progressively expanding our commitment to this huge market are currently under examination. Rieter has maintained a strategic partnership which has proved its worth over decades with its joint venture partner Nihon Tokushu Toryo Co. Ltd. (Nittoku), for example, in the UGN joint venture in the US and a joint acoustics laboratory in Japan. Idea Institute, the Italian subsidiary with extensive experience in the development and styling of vehicles for emerging markets, received various orders from Chinese vehicle manufacturers in the year under review.

Innovation by exploiting synergies in core competences
Due to the synergies between the core competences of vehicle acoustics, thermal management as well as design & engineering, Rieter Automotive Systems has been able to reinforce its position further as a leading supplier of complete acoustic and thermal insulation systems. Innovative solutions such as Rieter Ultra Light for reducing noise and weight are currently used in successful vehicles in the US, Europe and Japan.

The Rieter underfloor module made from new plastics raw materials combines noise and thermal insulation by means of integrated heat shields. At the same time the aerodynamics of the vehicle are improved and driving behavior is favorably influenced. Market surveys confirm that vehicle manufacturers are showing considerable interest in this innovative module. As individual components these solutions have already been introduced into volume production in some cases by the manufacturers; the launch of integrated overall underfloor modules is in preparation.

Future business trend

As a leading supplier of noise control and thermal management systems as well as innovative underfloor lining modules, Rieter Automotive Systems is well placed to take advantage of the forecast increase in vehicle output in the main markets in 2004 in order to drive its own growth. Rieter expects sales to be slightly higher in 2004 than in the previous year at unchanged exchange rates. Due to the action already initiated to reduce costs and increase productivity, it can be assumed that operating earnings will improve progressively, despite continued pressure on prices.

Annual general meeting 
Rieter Holding Ltd. closed the 2003 financial year with a net profit of 36.6 million CHF (31.1 million CHF in 2002). Including retained earnings brought forward from the previous year, 54.6 million CHF is at the disposal of the Annual General Meeting. The Board of Directors proposes to the Annual General Meeting that an unchanged gross dividend of 8.60 CHF per registered share will be paid. The Board of Directors further proposes the re-election of Dr. Dieter Spälti for another three-year term of office. The Annual General Meeting will be held at 4.30 p.m. on Wednesday, May 5, 2004, in the Auwiesen indoor tennis stadium at Winterthur-Töss. An invitation to attend, together with the detailed agenda, is enclosed with this letter to shareholders.

Repurchase of shares via second trading line 
Between  September 29, 2003, and  March 16, 2004, Rieter repurchased a total of 118 200 shares with a value of 35.2 million CHF via a second trading line on the SWX Swiss Exchange. This corresponds to 2.6% of the share capital. These shares will be cancelled. The cancellation of the registered shares acquired via the second trading line and the associated reduction in share capital and amendment to the articles of association will be submitted to the 2004 Annual General Meeting for approval.

Personnel and thanks
The transfer of responsibility as Chief Financial Officer (CFO) from Hans Rudolf Widmer to Urs Leinhäuser on  January 1, 2004, ensured the continuity in top management. The Board of Directors and the group executive committee wish to thank Hans Rudolf Widmer for his unstinting personal efforts and his significant contribution to the further development of the group. Our thanks also to you, our valued shareholders, for the confidence you have shown in us during the past year. This encourages us to continue to follow the course we have chosen.

 
Contact for the media:


Peter Grädel
Corporate Communications
T +41 (0)52 208 70 12
F +41 (0)52 208 72 73
 media@rieter.com

 
 
Contact for financial analysts:


Urs Leinhäuser
Chief Financial Officer
T +41 (0)52 208 79 55
F +41 (0)52 208 70 60
 investor@rieter.com