Sales and profits shoot in 2013
Rieter recorded a positive trend in business in 2013. The improvement in its market position enabled the company to post significant growth compared with the previous year. New orders of 1,259.4 million CHF were 50 per cent higher. Sales totalled 1,035.3 million CHF, equivalent to an increase of 17 per cent. The group generated net profits of 37.4 million CHF, equivalent to 3.6 per cent of sales. This figure is 46 per cent higher than the previous year.
The investment program initiated for 2012 and 2013 in order to generate further growth was largely completed at year-end. It was already having a positive impact on the business trend.
After a subdued start to the year, the market for short staple fiber machinery and components gained momentum in the course of 2013. Spinning mills’ margins continued to develop favorably, and this stimulated customers’ willingness to invest. This positive trend was broad-based in regional terms and apparent in a large number of national markets. Following a strong initial six months, demand stabilized in the second half of the year, but remained at a pleasingly high level.
The positive trend in order intake and sales in 2013 underlines that Rieter is on the right track with the innovation and expansion strategy being followed since 2012. Demand for the company’s offering, expanded by major product launches, has been very strong in both traditional and new markets.
Rieter has further developed its already strong market position with the implementation of the massive 2012/2013 investment program aimed at further growth and focusing on the three priorities of expansion in Asia, innovation and process improvements.
With its product range centering on specific markets and its new plants, the company is ideally positioned with a worldwide operating network. Spinning mills in all major markets are increasingly placing their confidence in machinery and components which enable a high degree of automation to be achieved in conjunction with higher productivity and yarn quality with lower energy consumption. As the sole global supplier of integrated systems for all four spinning processes, Rieter can optimize the entire spinning operation in line with customers’ specific needs. This is a crucial and lasting competitive advantage.
In the year under review, new orders received by Rieter increased by 50 per cent to 1,259.4 million CHF. Global markets did well, including markets like Turkey where demand had been particularly strong with the support of government development schemes.
Rieter also booked substantial new orders in China, especially in the first six months, due to the further expansion of its local presence. However, investments by Chinese spinning mills waned towards the year-end due to large raw material inventories and growing difficulties with financing investment projects.
Healthy demand for Rieter products nevertheless continued throughout the year in a number of Asian countries, such as Pakistan, Uzbekistan, South Korea, Bangladesh, Indonesia and Vietnam. Spinning mills in the US are renewing capacity as the industry benefits from a competitive cost structure. Business here developed briskly in the second half in particular, and Rieter secured substantial orders for rotor spinning machines.
Orders received in India rose in the second half, albeit at a modest level. Rieter posted an increase in order intake at both business groups, with the striking momentum in the first six months being attributable mainly to orders for integrated systems from spun yarn systems. Rieter had a backlog of orders in hand, of some 765 million CHF, at the end of 2013, which will ensure high capacity utilization until well into 2014 (compared to some 550 million CHF on December 31, 2012).
The sales trend at Rieter in 2013 was also very good. The figure of 1,035.3 million CHF was 17 per cent higher than a year earlier. All regions recorded increases, with only Europe posting slightly lower sales. Expanded and modernized manufacturing capacity enabled Rieter to process orders promptly and post a 17 per cent increase in sales in the second half of the year compared with the first half.
Rieter employed a total workforce of 4,793 as of December 31, 2013, compared with 4,720 a year earlier. It coped with the large volume of incoming orders mainly through higher productivity and with larger numbers of temporary employees, amounting per year-end to 1,210 employees or 20 per cent of the total workforce (2012: 985 temporaries or 17 per cent).
The increase in the number of permanent employees was due entirely to the new facilities in Asia. The structurally related reduction in administrative staff announced in early 2013 was implemented as planned despite the high order volumes.
Rieter’s capital expenditure in 2013 totalled 55 million CHF (5.3 per cent of sales). This figure was, as planned, 33 per cent lower than in the previous year. The strategic investment program accounted for 35.7 million CHF of this total, while operating investments accounted for 19.3 million CHF or 1.9 per cent of sales (30 million CHF or 3.4 per cent of sales in 2012).
Rieter’s investments in research and development of 45 million CHF or 4.3 per cent of sales were slightly higher than a year earlier (42.7 million CHF or 4.8 per cent of sales in 2012).
Spun Yarn Systems Business Group
The Spun Yarn Systems Business Group (machinery business) posted order intake of 1,084.3 million CHF, an increase of 56 per cent compared to 2012. The strongest growth was recorded in Turkey and the US, followed by other Asian countries such as Pakistan, Uzbekistan, South Korea, Vietnam and Bangladesh, where demand was sustained at a high level. Orders received in India revived in the second half of the year, but still remained below the previous year’s level overall. Following an encouraging start in the first six months, demand declined in China in the second half.
Customers were unsettled by large inventories of cotton fiber, lower demand for yarns produced from viscose fibers and financing problems. Spun Yarn Systems reported sales of 857.8 million CHF in 2013, an increase of 18 per cent compared with the previous year. All regions contributed to this. Only in Europe were sales slightly lower. In this context, Spun Yarn Systems posted an 19 per cent increase in sales in the second half compared with the first six months, and output increased considerably, especially toward the year-end.
This positive trend resulted mainly from higher volumes in the second half, a more favorable product mix with margins above the average of current orders in hand and improved market penetration in the spare parts business. The savings achieved as a result of the reduced head count also had its greatest impact on Spun Yarn Systems.
Innovative spinning process
The large capital expenditure program in 2012/2013 has given Rieter’s innovative capabilities a further boost. Product launches, such as those of the K 46 compact spinning machine, the G 36 ring spinning machine and the semi-automatic R 35 rotor spinning machine, enhance the competitiveness of Spun Yarn Systems. Energy, automation and performance innovations have been launched for all stages of the spinning process.
Important examples of this are the J 20 airjet spinning machine, which has been released for further applications, and the ECOrized suction tube for ring spinning machines, which was presented with the Swiss government’s “Watt d’Or” Award in recognition of its high energy-saving potential.
Customers have confidence in the Rieter brand. It vouches for uniform quality standards worldwide for all products manufactured locally and focusing on specific market requirements. The “Made by Rieter” label also stands for this. With the successful completion of the expansion projects in China and India, and process optimization at all its locations and its global supply network, the group has stabilised itself further.
Spun Yarn Systems is present in its target markets with innovative solutions extending from project planning to continuous support for spinning mills. Personnel at all plants are seamlessly integrated in the global Rieter team. Rieter also attaches great importance to well-trained personnel in India and China and has introduced apprenticeship programs based on the proven Swiss model for this purpose.
Premium Textile Components Business Group
Orders received by the Premium Textile Components Business Group (components business) in 2013 increased by 21 per cent to 175.1 million CHF. The highest growth rate was recorded in China where Premium Textile Components had reinforced its local presence.
The business group did good business both with spinning mills and with local textile machinery manufacturers. Orders placed in Turkey continued their positive trend. In India, Premium Textile Components maintained the level of order intake compared with the previous year despite the steep devaluation of the Indian rupee. Demand from other Asian countries was slightly higher. Demand was strong in the year under review for all four Premium Textile Components’ brands – Bräcker, Graf, Novibra and Suessen.
Premium Textile Components’ sales to third parties of 177.5 million CHF in the year under review were 10 per cent higher (160.9 million CHF in 2012). The business group recorded a substantial increase in China, and sales also revived in India.
Increasing numbers of EliTe conversion kits were delivered by Suessen, especially in the second half. Inter-company sales rose even more strongly than those to third parties, which in turn reflects the good trend of business at Spun Yarn Systems. As a result, segment sales of 259.1 million CHF were 12 per cent higher than a year earlier.
Spinning mills worldwide were keen to invest in the year under review and again increasingly sought components in the premium segment. This trend continued in all markets, especially in China and other East Asian countries. Spinning mills aim to make use of higher-quality components in order to boost productivity, utilize raw material more efficiently and reduce energy consumption. Premium Textile Components has a wide range of products at its disposal to meet these market needs.
They assure customers of the high degree of reliability required in yarn manufacture, thus enabling Premium Textile Components to hold its own against all competitors. In 2013 Premium Textile Components launched a series of new products offering further competitive advantages for customers.
The OPAL ring by Bräcker offers customers in China a particularly favorable price-performance ratio for ring spinning installations in the dimensions specific to this market. Novibra launched the LENA spindle, which enables substantial energy savings to be achieved and, at the same time, permits higher spinning speeds on ring spinning machines. It also reduces noise levels in spinning mills and stands out for its long service life.
Premium Textile Components’ technology components are developed and manufactured in Europe. Its plants have comprehensive know-how in manufacturing which is carefully protected. Process improvements aimed at raising the speed of response and at the same time reducing inventories contributed to the business group’s commercial success in the year under review.
Expansion in Asia
The planned expansion of facilities in China and India has been completed. This means that Rieter is considerably better positioned in these large markets and at the same time has made state-of-the-art capacity available. This assumes a core function in the company’s global manufacturing network.
Rieter has expanded its offerings with important products for new markets. The new version of the J 20 airjet spinning machine was released for serial production at the end of 2013. Rieter canthus proceed with the selective market launch of this product. The airjet spinning process enables high productivity and fiber utilization to be achieved with good yarn quality.
The goal of operational excellence is being pursued in all Rieter facilities. Process improvements have resulted in a perceptible increase in competitiveness in manufacturing operations in particular. As already announced earlier, new IT-assisted global business processes will be introduced with a six-month delay, as of January 2014.
Outlook
With broadly-based business worldwide, Rieter has seen a good demand for textile machinery and components in the first two months of 2014. Demand depends among other factors, on the development of yarn and raw materials prices, currency exchange rates, financing costs, and global consumer sentiment.
Based on the current order backlog – already reaching into 2015 – full year sales for 2014 are expected to show high single-digit growth compared to 2013 with a stronger second semester. Operational profitability (EBIT) in 2014 will be positively impacted by volume growth, whereas additional costs of 10 million CHF for conclusions of the IT-supported processes project, low airjet capacity utilization and lower order backlog margins than in the second semester of 2013 are expected to have an adverse impact. Rieter expects for 2014 a higher operating result (EBIT) than in 2013.
Rieter will also put additional focus in 2014 on its customers to ensure on-time delivery of order backlog and a profitable future order intake. Further priorities will be the completion of the final investment program activities and leveraging the new assets from the investment program of 2012/2013.