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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08/21/2003 - Higher sales and earnings in the first half of 2003

 Semi-annual report 2003 (English/PDF/52 KB)

  • Profitable growth thanks to dual strategy
  • Group finances remain healthy and stable
  • Widely spread placement of Rieter shares following sale of shares held by BZ Group

Rieter with higher sales and earnings
In the first half of 2003 the Rieter Group recorded an encouraging overall business trend with increases in sales, operating result and net profit. Compared with the corresponding period of 2002, sales were 8% higher at 1 555.1 million CHF. Expressed in local currencies, the increase amounted to 14%. This rise was due primarily to the good performance of the Textile Systems Division, which maintained its growth momentum in Asia. The currency-related decline in sales at the Automotive Systems Division (due mainly to the US dollar) was partially offset by the first-time consolidation of Rieter Saifa in Spain.

The operating result before interest and taxes (EBIT) showed a positive trend, rising by 15% to 100.9 million CHF (87.9 million CHF in 2002). This is equivalent to 6.7% of corporate output (6.3% in 2002). The contributions to operating earnings by the two divisions varied. While Textile Systems doubled its operating result by virtue of healthy capacity utilization, a favorable product mix and strict cost management, Automotive Systems reported lower results for the first six months. This was due primarily to insufficient utilization of capacity in North America, intensified pressure on prices by the automobile manufacturers and higher costs, especially in connection with production launches of new vehicle models.

Higher operating and improved financial results enabled Rieter to report a 32% increase in net profit to 53.3 million CHF. This is equivalent to 3.5% of corporate output. Earnings per share rose by 48% to 11.72 CHF, compared with 7.93 CHF in the first half of 2002.

The Rieter Group further reinforced its financial health and stability in the first half of 2003. Cash flow increased by 11% to 114.9 million CHF. Compared with the previous year, net liquidity on June 30, 2003, improved by 9.2 million CHF to –4.2 million CHF, and the equity ratio remained at over 39%.

The BZ Group sold its entire holding of Rieter shares on July 21, 2003. The Rieter shares held by the BZ Group (1 286 957 shares, or 28.2% of the voting rights, at the end of 2002) were purchased by various investors – each holding less than 5% of the voting rights – in the context of a widely spread share placement. Rieter Holding Ltd. acquired 220 000 shares in the course of this placement. Rieter also intends to repurchase shares for up to 50 million CHF via a second trading line on the Swiss Exchange SWX until the 2004 annual general meeting. These shares will be cancelled.

Outlook
On a current view, Rieter foresees no significant change in the trend of business in the second half of 2003 compared with the first six months. Unless there is a steep decline in automobile output in Europe and the US, and exchange rates remain in their current range, Rieter expects consolidated sales in the 2003 financial year to be slightly higher than in 2002. Consolidated operating earnings (EBIT) in 2003 may not quite reach the previous year’s figure due to the intensified price and cost pressures prevailing at Automotive Systems. As long as there is no deterioration in the financial markets, net profit in 2003 should be higher than the previous year’s figure.

Rieter Textile Systems
Improvement in sales and operating margins
In the first half of 2003 Rieter Textile Systems posted a 34% increase in sales to 611.1 million CHF. This high rate of growth is due partly to comparison with the weak first half of 2002 (base effect). Turkey and China, the division’s two largest markets, again recorded considerable growth rates compared with the same period of the previous year.

Due to the high level of orders in hand from the previous year, capacity utilization in the staple fiber sector was healthy in the period under review. Newly launched products and systems, especially the Rieter Rotor System, aroused keen interest on the market. A number of sizeable projects were completed in the man-made fiber sector in Asia; however, in this segment Rieter did not participate in the growth due to its selective, margin-based policy on accepting new orders. In the case of production machinery for nonwovens, an innovative sector with growth potential, the trend of business continues to be dominated by individual, large-scale projects. Rieter has expanded its product portfolio with systems based on the melt-blown process. Sales of technology components developed well in the period under review.

A strong upward trend in order intake became apparent toward the end of the first half-year. Despite this increase in demand – especially for staple fiber machinery – the ground lost in the first quarter, when customers were very cautious due to the Iraq crisis and uncertainties caused by the SARS outbreak, was not recovered in full. Total orders received in the first half of 2003 were 11% lower at 544.3 million CHF.

The operating result before interest and taxes (EBIT) rose to 64.4 million CHF in the first half of 2003, more than double the figure for the corresponding period of the previous year (25.9 million CHF). This is equivalent to an operating margin of 10.9% (5.8% in 2002). This increase was achieved due to considerably improved capacity utilization, strict cost management exploiting low-cost locations, and a favorable product mix. The action initiated in the past to make business processes more flexible also contributed to this good earnings performance.

Rieter Textile Systems, the leading supplier of integrated systems for manufacturing yarns from natural and man-made fibers for all applications, developed new products and systems in the first half of 2003. These innovations will be presented to potential purchasers in their home markets during the coming months. Trend-setting investments have been made for our customers: Rieter opened a new test and customer spinning center for staple fiber machinery in Winterthur. In India, Textile Systems is building a test spinning installation for man-made staple fibers for a strategic partner.

Further business trends
The market for staple fiber machinery is expected to weaken slightly in the second half of 2003, while demand in the different segments of the man-made fiber machinery market served by Rieter remains very uneven. Higher sales are expected for 2003 as a whole compared to the previous year.

Rieter Automotive Systems
Operating margins under pressure
In the first half of 2003 global automobile production was slightly lower than in the same period of the previous year. The decline in Rieter’s main markets – Western Europe and North America – was 2.0% and 3.9%, respectively. The downturn in North America mainly affected American manufacturers, while Japanese manufacturers operating in the US recorded a slight overall increase in output in the period under review. In North America, Rieter maintained sales levels in local currency, while in Europe they increased compared with the corresponding period of the previous year due to the first-time consolidation of Rieter Saifa in Spain. Total sales expressed in Swiss francs declined due to exchange rate movements (especially in the US dollar) by 4% to 939.2 million CHF.

In the period under review Rieter Automotive Systems reported an operating result (EBIT) of 40.3 million CHF (65.6 million CHF in 2002). This is equivalent to an operating margin of 4.4% (6.9% in 2002). The decline in operating result is based on various factors. In North America excess capacity at the US manufacturers again resulted in vehicles’ being sold at steep discounts, which further intensified price pressures on suppliers. Rieter’s good standing with the Japanese manufacturers was not enough to offset this trend. Furthermore, the two newly opened production plants in North America are not yet fully utilized due to the subdued automobile market. Various demanding model launches with new products and technologies involving significant additional costs depressed half-year results.

Steps were already taken in the final quarter of 2002 to improve the cost structure. Production launches of new vehicles required an increase of workforce and delayed the implementation of measures to improve productivity at certain locations.

As a leading supplier of integrated acoustic and thermal management systems, Rieter Automotive Systems will continue systematically to pursue its strategy with innovative solutions for noise and weight reduction. Measures to cut costs and enhance manufacturing flexibility involving low-cost locations in Eastern and Central Europe are being intensified.

Further business trend
Global automobile production is likely to be slightly lower in 2003 than in the previous year. The following declines in output are forecast for the main markets: North America –3.6%, Western Europe –2.4%, Japan –5.0%. On the other hand, growth rates are forecast for the rest of Asia, and China in particular. For example, the number of new vehicle registrations in China rose from 0.8 million to 2.6 million between 1995 and 2002. This year Rieter will establish a joint venture there with its Japanese partner to manufacture noise control components. On the basis of the above-mentioned market trends and stable exchange rates, sales in the second half of 2003 are expected to be at the same level as in the first six months.

 
Contact for the media:


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

 
 
Contact for financial analysts:


Hans Rudolf Widmer
CFO
T +41 52 208 81 78
F +41 52 208 80 61
 investor@rieter.com