Order intake up 7% on previous year; orders amounting to CHF 401.6 million booked in fourth quarter 2019
In the financial year 2019, Rieter, the world’s leading supplier of systems for short-staple fiber spinning, recorded an order intake of CHF 926.1 million, which was 7% up on the prior-year period (2018: CHF 868.8 million). This development is attributable to a strong fourth quarter, in which Rieter booked orders totalling CHF 401.6 million (4th quarter 2018: CHF 119.0 million). At the end of 2019, the company had an order backlog of about CHF 500 million (December 31, 2018: about CHF 325 million). In 2019, Rieter Group sales amounted to CHF 760.0 million (2018: CHF 1 075.2 million), which corresponds to a decrease of 29% compared to the previous year.
Rieter generated an EBIT margin of 11.2% or CHF 84.9 million (2018: 4.0% or CHF 43.2 million). This includes the non-recurring profit from the sale of real estate in Ingolstadt in the amount of CHF 94.5 million. As a result of the capacity adjustment and cost reduction measures, the number of employees decreased by 11% to 4 591 (December 31, 2018: 5 134). Net profit rose to CHF 52.4 million (6.9% of sales) and thus was significantly higher than in the previous year (2018: CHF 32.0 million or 3.0% of sales). The contribution from the sale of real estate in Ingolstadt had an impact of CHF 67.2 million (EUR 61.6 million) at the net profit level. Free cash flow in 2019 was CHF 42.3 million (2018: CHF 63.6 million). Net liquidity rose to CHF 162.1 million (December 31, 2018: CHF 150.2 million). The equity ratio as of December 31, 2019, was 47.8% (prior year balance sheet date: 44.6%).
Sales by region
The reporting year 2019 was characterized by the trade conflict between the USA and China, excess capacity in the spinning mills as well as political and economic uncertainties in regions of importance to Rieter. Against this background, sales in the Asian countries (without China, India and Turkey) amounted to CHF 293.5 million. In India, sales declined by 32% to CHF 99.9 million. Rieter’s sales in Turkey amounted to CHF 66.8 million (-57%). At CHF 136.7 million, sales in China were 8% down on the previous year. In North and South America, sales declined only slightly to CHF 105.8 million (-3%). In the Europe region, sales fell by 13% to CHF 41.2 million, while in the Africa region, Rieter recorded a decline in sales to CHF 16.1 million (-55%).
Business Groups
Sales of new machines were at a very low level in the 2019 reporting year, falling by 42% to CHF 389.0 million (2018: CHF 669.3 million). The business group posted an EBIT of CHF -50.8 million (2018: CHF -9.7 million). This was due to the lower volume and expenditure on the ongoing innovation program. Machines and Systems received an order intake worth CHF 562.8 million, an increase of 20% compared to the previous year (2018: CHF 468.3 million). This is primarily due to the fourth quarter of 2019, in which an order intake worth CHF 307.0 million was booked. This figure includes orders from Cotton & Textile Industries Holding Company, Cairo (Egypt), for the delivery of ring and compact spinning systems, including installation services, of around CHF 165 million.
The Business Group Components recorded a drop in sales of 12% to CHF 230.2 million compared to the prior-year period (2018: CHF 262.3 million). This is attributable to the reluctance to invest in the markets, which primarily affected the business activities of SSM and Suessen. The wear and tear parts business continued at a normal level. At CHF 10.7 million, the business group generated a significantly lower EBIT compared to the previous year (2018: CHF 32.5 million). In addition to lower sales to third parties, this is due to the decline in sales from deliveries to Machines & Systems, which fell by 39% to CHF 52.6 million (2018: CHF 86.2 million).
At CHF 222.0 million, order intake at Components was down by 15% compared to the previous year (2018: CHF 260.1 million), primarily in the Business Units SSM and Suessen.
With sales of CHF 140.8 million, the Business Group After Sales recorded a slight decline of 2% compared to the previous year (2018: CHF 143.6 million). This is mainly attributable to the lower volume in the machine business and the associated lower demand for installation services. In the spare parts business, After Sales generated sales at the level of the previous year. The business group increased EBIT to CHF 23.2 million (2018: CHF 21.3 million). With an order intake of CHF 141.3 million, After Sales also recorded an increase of 1% compared to the previous year (2018: CHF 140.4 million).
Innovations successfully launched
At ITMA 2019 in Barcelona (Spain), Rieter presented a comprehensive range of innovations for all four end spinning systems established on the market. The innovations aim to reduce raw material, energy and labour costs while increasing productivity and flexibility in the spinning mill. The strong demand for innovative solutions since the ITMA 2019 underlines Rieter’s technology leadership. Thus, the company has achieved another important milestone in the implementation of the company strategy. The innovation program continues.
Outlook
As already reported, Rieter expects sales and earnings in the first half of 2020 to be significantly below the prior year level. The positive market sentiment in the fourth quarter of 2019 has continued in the first two months of 2020; hence sales and operating results in the second half of 2020 are expected to be above the prior-year level. The capacity adjustment program announced in January 2020 is proceeding according to plan. The effects of the Covid-19 virus, which cannot be definitively determined at the present time, will be relevant for the year as a whole. Rieter has taken the appropriate precautions to protect employees and to keep the promises made to customers wherever possible.
Rieter discontinues machine assembly at Winterthur
On January 29, 2020, Rieter announced its intention to discontinue the assembly of machines at the Winterthur location due to structural changes in the market situation. The consultation process with employee representatives was completed on March 11, 2020. After intensive discussion and detailed examination of the submitted proposals, the discontinuation of assembly and the associated reduction of 87 jobs were confirmed. The final position was communicated to the employee representatives and the Office for Economy and Labor of the Canton of Zurich. Rieter’s employees were informed of the result. The decision will be implemented gradually during 2020. Rieter has a comprehensive social plan. The focus is on the reintegration of affected employees with the support of the Regional Employment Centre (RAV) as well as a job centre and the avoidance of hardship cases. The company intends to reduce the headcount by means of workforce turnover and early retirement, however some layoffs will be unavoidable.