“Next Level” performance program planned
In the first half of 2023, Rieter recorded a significant increase in sales of 22.2% to CHF 758.2 million, despite some cancellations or postponements of deliveries as a result of the earthquake in Türkiye. Cyclical market downturns in the individual market segments, which were already apparent in the second half of 2022, led to an order intake of CHF 325.0 million (-62.6%) in the reporting period, lower than in the corresponding period of the previous year.
The Group is planning a “Next Level” performance program aimed at strengthening sales excellence, sharpening customer focus, improving cost efficiency in production and optimizing fixed cost structures. By taking these measures, Rieter intends to create the basis for providing an even more agile response to the cyclical machinery business. The initiatives planned in this context are expected to incur one-off restructuring costs of around CHF 45 to 50 million in the second half of 2023.
In the first half of 2023, Rieter posted sales of CHF 758.2 million (first half of 2022: CHF 620.6 million). This corresponds to an increase of 22.2%, despite the fact that deliveries for Türkiye had to be postponed or cancelled, mainly in the Business.
Order intake in almost all regions was characterized by the reluctance to invest in new machines. Only in China did order intake increase due to investments by spinning mills in improving their local competitiveness. In addition, some customers held back pending investment decisions and waited for the innovations presented at ITMA in Milan in June 2023. At the same time, demand for consumables, wear & tear and spare parts declined due to the global market downturn.
On June 30, 2023, the company had a high order backlog of around CHF 1 100 million (June 30, 2022: around CHF 2 100 million). This therefore extends into the year 2024. As in the previous year, cancellations in the reporting period were around 5% of the order backlog, also impacted by the effects of the severe earthquake in Türkiye.
“Next Level” performance program planned
The challenging market situation over the past two years was marked by severe disruptions in the global supply chain in conjunction with rising material, energy, labor, and production costs. The current global demand for textile products remains at a low level. To increase long-term value for customers, employees, and shareholders, Rieter, as technology leader, is planning a performance program called “Next Level”.
The goal of the program is to strengthen sales excellence, sharpen customer focus, improve cost efficiency in production and optimize fixed cost structures. The one-time cost of the program is anticipated to be around CHF 45 to 50 million, which will have an impact on the second half of 2023. Most of the program initiatives will be implemented before the end of 2023 with a view to achieving an expected impact from as early as 2024. With these measures Rieter is aiming to reduce operating costs by some CHF 80 million per year.
The program includes provisions for the net reduction of around 300 positions throughout the Group in relation to overhead functions. The possibility of further market- and volume-related adjustments in the order of 400 to 600 positions cannot be excluded. At the end of June 2023, Rieter had a global workforce of 5 555 employees.
The consultation processes with the employee representatives are expected to begin in the near future. Rieter will provide information about the outcome at the appropriate time.
The Rieter Board of Directors and the Group Executive Committee are confident that the planned strategic and operational measures will lay the foundations for the profitable and sustainable development of the Group.
Rieter site, Winterthur
As communicated on July 10, 2023, Rieter sold the land at Klosterstrasse in Winterthur (Switzerland), which was no longer required for operations, to the company Allreal, Glattpark (Switzerland). The company is acquiring the land with a total area of around 75 000 m2. The agreed sales price is CHF 96.0 million. Transfer of ownership is expected to take place in the fall of 2023 after fulfillment of the legally and contractually stipulated completion conditions. Rieter anticipates a positive impact on EBIT of around CHF 70 to 75 million. The new Rieter CAMPUS is not part of this transaction.
ITMA 2023
The textile exhibition ITMA in Milan in June 2023 was a resounding success for Rieter. The company showcased innovations in ring and air-jet spinning, as well as in fiber and spinning preparation. The products for increased automation and digitization of spinning mills and solutions in the area of recycling and sustainability were also very well received by customers. The reservation lists for all new machines were fully booked within a few days.
Outlook
Given the economic situation and the ongoing cyclical market weakness, Rieter continues to expect below-average demand for new equipment in the coming months. A revival is not expected until the fourth quarter of 2023 at the earliest. Rieter also believes that demand for consumables, wear & tear and spare parts will not recover until later in 2023.
For the full year 2023, Rieter expects an EBIT margin of around 5 to 7% (including positive special effects of less than 2%) and sales at the previous year’s level of around CHF 1.5 billion.