WINTERTHUR, Switzerland — July 20, 2023 — In the first half of 2023, Rieter recorded a significant increase in sales of 22.2 percent to 758.2 million Swiss francs ($837 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 325 million Swiss francs ($376 million) (-62.6%) in the reporting period, lower than in the corresponding period of the previous year.
At the EBIT level, Rieter posted a profit of 25.2 million Swiss francs ($29 million) in the first half of 2023, compared with a loss of 10.2 million Swiss francs ($11.8 million) in the same period of the previous year. This positive result is attributable to the increased sales and higher gross profit as a percentage of sales of 23.9 percent (first half of 2022: 21.0 percent).
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 45 million to 50 million Swiss francs ($52 million to $57.8 million) in the second half of 2023.
Sales
In the first half of 2023, Rieter posted sales of 758.2 million Swiss francs ($877 million) (first half of 2022: 620.6 million Swiss francs or $718 million). This corresponds to an increase of 22.2 percent, despite the fact that deliveries for Turkey had to be postponed or cancelled, mainly in the Business Group Machines & Systems.
Order Intake and Order Backlog
Order intake in the first half of 2023 was 325 million Swiss francs ($376 million) (first half of 2022: 869.4 million ($1,005 million). As expected, demand thus weakened significantly from the high level of the corresponding previous year period.
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 1,100 million Swiss francs ($1,272 million) (June 30, 2022: around 2,100 million Swiss francs ($2,428 million). This therefore extends into the year 2024. As in the previous year, cancellations in the reporting period were around 5 percent of the order backlog, also impacted by the effects of the severe earthquake in Turkey.
EBIT, Net Profit and Free Cash Flow
In the first half of 2023, Rieter posted a profit of 25.2 million Swiss francs ($29.1 million) at the EBIT level, with an EBIT margin of 3.3 percent (first half of 2022: loss of -10.2 million Swiss francs (-$11.8 million)) and a net profit of 13.3 million Swiss francs ($15.4 million) (first half of 2022: loss of -25.2 million Swiss francs (-$29.1 milion).
Free cash flow in the first half of 2023 was 10.0 million Swiss francs ($11.6 million) (first half of 2022: -57.1 million ($66 million)), which reflected the positive trend in operating profit. Net working capital remained at a high level.
“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 45 to 50 million Swiss francs ($52 million to $57.8 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 80 million Swiss francs ($92.5 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 square meters. The agreed sales price is 96.0 million Swiss francs ($111 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 70 million to 75 million Swiss francs ($81 million to $87 million). The new Rieter CAMPUS is not part of this transaction.
Syndicated loan
The Rieter Group has transferred the bilaterally committed credit lines in the amount of 250 million Swiss francs ($289 million) into a syndicated loan in the same amount. With this transaction, Rieter sustainably strengthens its financing security. The term of the loan is three years.
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 percent (including positive special effects of less than 2%) and sales at the previous year’s level of around 1.5 billion Swiss francs ($1.7 billion).
Posted: August 10, 2023
Source: Rieter