In steadily improving market conditions Rieter achieved an order intake in the first half of 2013 of 711.4 million CHF (first half of 2012: 404.1 million CHF). Particularly in Turkey, demand was much higher than in the previous year. Sales of 478.1 million CHF were significantly higher (+19 per cent) than in the previous six months, but slightly lower (-2 per cent) than in the first half of 2012. Rieter closed the first half of 2013 with a net profit of 5 million CHF or one per cent of sales (first half of 2012: 21.5 million CHF or 4.4 per cent of sales). In the period under review Rieter completed major steps in the growth investment program announced in spring 2012.
Recovery of the global market for short-staple fiber machinery and components in the second half of 2012 continued in 2013. This positive trend applied to all the geographical markets of relevance for Rieter, to different degrees but particularly in Turkey, supported by a government subsidy program that benefited spinning mills. High demand was also recorded in various Asian countries.
Business in India and China showed a slight upturn in the first half of 2013, but the financial position of Rieter customers in these countries remains challenging. Spinning mill capacities in the US were renewed, thanks to a favorable cost structure in this sector.
Rieter was able to make the most of this overall improvement in market conditions, thanks to an attractive product offering and strong market positioning worldwide. Order intake during the period under review totalled 711.4 million CHF, 76 per cent and 63 per cent higher than in the first and second half of 2012 respectively. This was mostly attributable to orders received by Rieter in Turkey. Rieter was able to increase order intake in China with market-specific products, while in India there was above all a good demand for components. Overall order backlog per June 30, 2013, totalled around 780 million CHF.
The gratifying demand for Rieter products confirms the soundness of its innovation and expansion strategy. Thanks to its market-specific product program, the company holds a strong position worldwide in the cyclical market for textile machinery and components. Spinning mill customers in all main markets increasingly prefer highly automated machinery and components that enable greater productivity and better yarn quality with lower energy consumption.
Rieter sales for the first half of 2013 totalled 478.1 million CHF, two per cent less than in the prior year period (487.3 million CHF) but 19 per cent higher than in the second half of 2012. Sales were attributable to various countries, with business activities broadly based regionally.
Rieter’s capital expenditures in the first half of 2013 amounted to 26.5 million CHF, occurring mainly in China and India, of which 21.2 million CHF for strategic projects. Rieter increased expenditure on research and development in the period under review to 22.1 million CHF, equivalent to 4.6 per cent of sales (first half of 2012: 20.9 million CHF or 4.3 per cent of sales). Net profit for the first half of 2013 totalled 5 million CHF, equivalent to one per cent of sales (first half of 2012: 21.5 million CHF or 4.4 per cent of sales).
The Spun Yarn Systems Business Group (machinery business) recorded a marked increase in order intake in the first half of 2013 to 621.9 million CHF, 88 per cent higher than the prior year period and 70 per cent more than in the second half of 2012. Spun yarn systems sales totalled 392.5 million CHF, two per cent less than in the first half of 2012.
Order intake by the Premium Textile Components Business Group in the first half of 2013 rose 21 per cent to 89.5 million CHF (first half of 2012: 74.1 million CHF). This growth is attributable to both customer segments of this business group: spinning mills and machine manufacturers. Market demand in China recovered above all from machine manufacturers, while in India the main demand was from spinning mills. Business in Turkey continued to develop. Third-party sales by Premium Textile Components totalled 85.6 million CHF in the period under review, and segment sales (i.e., including deliveries to spun yarn systems) totalled 125.7 million CHF.
Progress in the investment program
Most of the investment program projects for 2012-2013 are on track as per June 30, 2013. Rieter made the following progress during the first half of 2013. Capacity expansion in the two key markets of China and India will be concluded by the end of 2013. Intermediate targets for the extensive expansion of production capacities at Rieter’s Changzhou plant in China had been reached as per June 30, 2013. The new plant at Koregaon Bhima in India is now operational.
Rieter worked intensively on innovations during the period under review, with the goals of further improving yarn properties and enabling spinning mill customers to increase their productivity and energy efficiency. With the airjet spinning machine, the focus is on further market introduction.
The projects for global standardization of work processes made good progress particularly with regard to manufacturing, but the global standardization and IT support of business processes has been delayed by about six months.
Outlook
Rieter’s business activities are broadly based globally. At the present time it is still difficult to forecast the development of demand for textile machinery and components in 2013. Demand depends among other factors on yarn and raw material price developments, currency exchange rates, financing costs and consumer sentiment worldwide.
Based on the current order backlog, full-year sales for 2013 are expected to show high single-digit growth compared to 2012. Against the 2012 levels before disposal gains, operating result (EBIT) is expected to profit from volume growth. This includes strategic project costs of about 20 to 25 million CHF for the 2012-2013 investment program.
Investment program for further growth
Rieter expects global demand for short staple fibers (natural fibers/staple man-made fibers) to grow by an average of 2.3 per cent annually until 2030. The additional spinning capacity this will require, the replacement demand and the trend toward greater automation, especially in the Chinese and Indian markets, will have a positive impact on demand for high quality spinning machinery and components.
Against this background Rieter is aiming for overall annual average growth of five per cent, half of which should be organic. Rieter’s strategic targets are to retain its leadership in the premium segment and also to expand its position in the local markets in China and India.
In order to achieve rapid expansion in Asia, to drive product innovation, and to optimize global processes, Rieter is planning investments of 140 million CHF. As of mid-2013, 72.8 million CHF have been invested in total. Another 35.7 million CHF were charged to EBIT as strategic project costs.
These investments are in addition to regular maintenance expenditures. Rieter is seeking with the investment program to achieve an EBIT margin of at least nine per cent average over the demand cycle, and greater than 12 per cent in peak years.