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

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08/19/2004 - Rieter increased profit substantially

Winterthur - The Rieter Group continued its profitable growth in the first half of 2004, and recorded increases in orders received, sales and operating earnings compared with the same period of the previous year. Net profit and earnings per share were substantially higher.

 Semi-Annual Report 2004 (English/PDF/107 KB)

Healthy growth
Orders received were 12% higher at 1663.1 million CHF. Group sales improved by 5% to 1626.1 million CHF due to the positive business trend at Automotive Systems. Rieter is geographically well positioned and is therefore benefiting especially from the dynamic performance of the growing Asian markets. The share of group sales booked in Asia (including Turkey) continued to increase, reaching 27% in the first six months, compared to 25% in 2003.

The operating result before interest and taxes (EBIT) improved by 3% to 104.3 million CHF compared with the previous year, which is equivalent to 6.6% of corporate output (6.7% in 2003). Higher volumes and rigorous cost management compensated increased costs due to the higher expenditure for energy and raw materials as well as the continued demand for price reductions at Automotive Systems. Rieter increased net profit by 27% to 67.7 million CHF, which is equivalent to 4.3% of corporate output (3.5% in 2003). The improved financial result contributed to this outcome. Earnings per share rose by 29% to 15.07 CHF, compared with 11.72 CHF in the first half of 2003.

Rieter Textile Systems recorded a 14% increase in orders received in the first six months. The capacity utilization of this division's business units is almost assured until the end of the year. Textile Systems made further progress in the major Asian markets and already books 70% of textile machinery sales in this region. Rieter Automotive Systems achieved sales growth of 10% in the currently not growing automotive industry's main markets and made further progress in improving its operating margins. Automotive Systems' operating earnings increased by 25%.

The Rieter Group achieved the growth with only a slight increase in the workforce, which was attributable primarily to the addition of 150 employees in the context of establishing and expanding capacity in China. At mid-year Rieter had a total of 13520 employees, compared with 13355 employees at the same day of the previous year.

The group's financial stability was further reinforced. For example, cash flow increased by 17% to 135.0 million CHF and net liquidity has improved by 77.7 million CHF – from –22.2 million CHF to 55.5 million CHF – since the end of 2003. The equity ratio is a sound 40.9% (39.5% at the end of 2003). The reduction in share capital through the cancellation of 118200 of the company's registered shares was completed after June 30, 2004.

Rieter Textile Systems with significantly higher order intake
Orders received by Rieter Textile Systems in the first half of 2004 reached 619.4 million CHF, 14% higher than in the same period of the previous year. The demand for textile machinery continued to grow in the Asian markets, while remaining subdued in Europe, North America and Latin America. Staple fiber machinery was in especially strong demand, primarily in China, Turkey and Pakistan. Orders for man-made fiber processing machinery were slightly higher than in the same period of 2003.

Sales declined by 5% to 582.4 million CHF, since delivery of some orders was delayed due to scarcity of resources (energy) at our customer sites in China; this backlog should be cleared in the second half of the year. China overtook Turkey to head the sales table for the first time in the period under review. More than 20% of total half-year sales were booked in China. Deliveries by Textile Systems to Asia increased by 9 percentage points to 70% in the first six months.

The operating result before interest and taxes (EBIT) declined to 58.1 million CHF (64.4 million CHF in 2003) due to lower volumes, but operating margins were still very good (10.2% compared to 10.9% in the first half of 2003).

Rieter's strategy of operating as a systems supplier is proving successful: increasing numbers of customers in Rieter's core business sector of staple fiber processing machinery are showing an interest in complete spinning installations rather than individual machines. Since the end of the nineteen-nineties Textile Systems has continuously increased deliveries of complete systems. The Rieter Rotor System, the new integrated system for manufacturing rotor-spun yarns, is encountering encouraging demand from customers and gaining market share. The new C 60 Card, another major source of innovation and sales, is meeting a good level of acceptance both from customers and in the textile press. It won the 2004 innovation award presented by the trade magazine «Textile World».

With the healthy level of orders in hand, Rieter currently believes that Textile Systems will make up the shortfall from the first six months despite the subdued man-made fiber business, and will achieve sales for the entire business year at the same healthy level as in the previous year.

Rieter Automotive Systems improved sales and operating margin
As a successful supplier of integrated acoustic systems, Rieter Automotive increased sales in the first six months by 10% to 1032.7 million CHF in a generally subdued automotive market. This performance was due to its very broad customer base, its strong position with the Japanese automobile manufacturers in Europe and North America and strong demand for Rieter Ultra-Light acoustic solutions. The commercial vehicle market was also a source of positive momentum in the first half of the year.

Global car production increased slightly in the first six months of 2004. However, the upswing forecasted by automotive industry experts remained weak. In Rieter's key markets of Western Europe and Nafta vehicle production even declined slightly by 0.3% and 0.1%, respectively. The trend was positive in the Eastern European and Asian markets as well as for the Japanese manufacturers in the US; in the first half of the year they produced 8.8% more vehicles than in the same period of 2003.

Despite ongoing demand for price reductions and higher raw material and energy costs, Automotive Systems reached a 25% increase in the operating result before interest and taxes (EBIT) to 50.3 million CHF. This corresponds to 5.0% of corporate output, compared with 4.4% in the previous year. The improved operating margin is attributable to initial successes of the «Roadmap to Profitable Growth» program and improved utilization of manufacturing capacity.

High growth rates of some 20% in automobile production are again forecast for China this year. The joint venture formed last year by Rieter with Nittoku in southern China to supply the Japanese automobile manufacturers operating in that region started up as planned in the first half of 2004. As expected, sales during the start-up phase are still at a low level.

In light of the ongoing demand for price reductions and the high cost of raw materials, innovation, cost reductions and new manufacturing concepts continue to have high priority for Automotive Systems. Despite the moderate prospects for increased output by the automobile manufacturers in the main markets of Western Europe and North America, sales momentum at Rieter Automotive will be maintained, although the sales trend in the second half of the year is likely to be rather more restrained than in the first six months due to seasonal factors.

Outlook
Rieter expects sales in 2004 as a whole to exceed the previous year's figure, and forsees further improvements in operating earnings and net profit, provided exchange rates remain within the current range and there is no significant deterioration in the financial markets. This expectation is based on the healthy earnings position at Textile Systems and further improvement of the operating margin at Automotive Systems. Rieter is convinced of its ability to continue exploiting the opportunities for profitable growth in future on the basis of its dual strategy with two industrial divisions – Textile Systems and Automotive Systems – a good regional presence and the innovation potential of both divisions.

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