Rieter Textile Systems: massive decline in orders received
The Rieter Group reported a considerably weaker trend of business in the first half of 2008 than in the very strong equivalent period of the previous year.
The pronounced slowdown in the Asian textile machinery markets, the decline in vehicle production in North America and the massive increases in the cost of raw materials, energy and transportation had a negative impact on orders received, sales and profits in the first six months.
Rieter could not escape the effects of the cyclical downturn in the textile machinery and automotive markets, which is expected to affect the global economy in general.
However, Rieter was able to maintain its strong market position by virtue of its strong brand, good products, global presence and committed workforce.
Mainly as a consequence of the steep decline in demand at the Textile Systems Division, orders received by the group were 32 % lower at 1559.3 million CHF.
Sales of 1806.6 million CHF were 6 % lower than in the first half of 2007 (3 % lower on a currency-adjusted basis). The weaker trend of business in the second half of 2007 and the slump in demand in the first half of 2008 resulted in lower sales at Textile Systems.
Automotive Systems posted a substantial decline in sales, due also to currency effects, primarily in North America.
The operating result before special charges amounted to 88.9 million CHF, equivalent to 5.1 % of corporate output (7.4 % in 2007). The operating result before interest and taxes (EBIT) amounted to 68.9 million CHF (135.8 million CHF in 2007).
This corresponds to 4.0 % of corporate output (7.2 % in 2007). The decline in profits is due mainly to higher raw material and energy costs and a less favorable product mix, but also to lower sales and upfront expenses to establish and expand facilities in rapidly growing markets in Eastern Europe and Asia.
The cost of restructuring programs already initiated was also considerably higher compared with the previous year. Net profit amounted to 40.8 million CHF, equivalent to 2.3 % of corporate output (6.1 % in 2007).
In addition to the lower operating result and a decline in the net financial result, a higher tax rate also had an impact on net profit. Earnings per share were 8.89 CHF, compared with 26.40 CHF in the first half of 2007.
Cash flow declined from the previous year's very good level to 114.5 million CHF. The equity ratio on June 30, 2008, was a sound 46.0 % (51.5 % on June 30, 2007).
Net liquidity amounted to 25.8 million CHF (143.8 million CHF on June 30, 2007). This was the result of lower cash flow, the dividend payment to shareholders of Rieter Holding Ltd. and not least the share repurchase program.
Investments in fixed assets increased compared with the same period of the previous year, since the establishment and expansion of facilities in Eastern Europe and Asia was continued. However, investments in high-cost countries were curtailed.