Rieter expects in the second semester of 2012 lower sales and operating profitability at around break-even level due to the challenging market environment. Overall, capacity utilization of spinning mills and margins continued to be stable and on a profitable level. However, downstream buying behaviour remained volatile. Financing for projects is becoming increasingly difficult, especially in China and India, leading to a generally more challenging market environment.
The weaker trend in the second semester as compared to the first is due to the shift of machine orders into 2013, cancellations and lower component sales. The operating profitability (EBIT) in the second semester is expected to follow the volume development and to show the effects of a less favorable product mix. The planned investment activity in growth projects and process improvements will further reduce the operating margin by around three percentage points. The operating profitability would be around the break-even level in the second semester.
Matching demand in Asia
The Chinese market is generally weaker due to locked-in raw material prices, but looking for automation, upgrade in equipment and lower energy demand. In Turkey, the Government incentive program has not yet shown large effects. In the third quarter, India has seen a pick-up in investment demand, with northern India showing more interest than the southern States.
“China and India will witness an increase in demand for machinery and components offering higher productivity and quality as well as lower energy consumption. Both Rieter’s current product portfolio and its innovation strategy address this demand. With the timely execution of its investment program for 2012-2013 Rieter will be ready to profit from these trends.
In the third quarter, a pick-up in order intake in the Indian market has been registered. A stable third-quarter order intake in China in a difficult market confirms the attractiveness of Rieter’s product portfolio.
Overall, Rieter managed to increase its order intake in the third quarter compared to the average of the two previous quarters, thanks mainly received to larger machinery orders. Majority of these orders will be executed in 2013.