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Rieter's 2008 annual results impacted by global recession
24 Mar '09
5 min read
Rieter therefore already reduced employee numbers by more than 2 800 in 2008, equivalent to some 16% of the total workforce. With its restructuring programs and transfers of manufacturing facilities Rieter is not only responding to the structural changes in both sectors, but is also reacting to the cyclical downturn. The cost-cutting action is being complemented by price discipline and selective increases in product prices in order to compensate for cost inflation.
In addition to cyclical effects, the disruptions on the financial markets also exerted a strong influence on the development in net result. Following many years of good performance, Rieter posted negative financial results in the year under review. Together with special charges this resulted in a net loss of 396.7 million CHF (net profit of 211.5 million CHF in 2007).
The trend of business at Rieter Textile Systems in 2008 was dominated by a cyclical downturn on the world market for textile machinery of an intensity and rapidity that had not been experienced by the industry for decades. Orders of 539.5 million CHF received by Textile Systems were 68% lower than in the record year of 2007 (1 703.1 million CHF); this was also due in part to postponements of orders. The weakening effectiveness of government incentive programs, a cyclical decline in fiber consumption in major sales markets such as the USA and more difficult financing conditions caused a rapid fall in customers' tendency to invest. Domestic demand in India and China was unable to offset this decline. Orders received by Rieter Textile Systems for staple fiber machinery since March 2008 have been substantially lower than in previous years.
While the sales trend at Textile Systems in the first six months continued to benefit from the high level of orders in hand at the beginning of the year, the low volume of orders and delays in the acceptance of machines by customers in the second half of the year had a distinctly negative impact. The division's sales of 1 120.4 million CHF for the year as a whole were 28% lower (1 566.8 million CHF in 2007). However, in this difficult business environment Rieter succeeded in maintaining its leadership in the market segments served by Textile Systems.
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Outlook
2009 will be a challenging year for Rieter, since the prospects for both the automotive and the textile machinery industry are very subdued and highly uncertain due to the global recession. Rieter expects declining demand in both divisions, and will therefore continue with capacity reductions and cost saving measures accordingly. Nevertheless, operating losses must be reckoned with in both divisions.
Maintaining a sound balance sheet and adequate liquidity are therefore top priorities. In the medium term Rieter believes that demand will increase at both Textile Systems and Automotive Systems in line with global trends. As market leaders with an innovative product portfolio, both divisions are very well positioned to benefit from the next upswing.
In addition to cyclical effects, the disruptions on the financial markets also exerted a strong influence on the development in net result. Following many years of good performance, Rieter posted negative financial results in the year under review. Together with special charges this resulted in a net loss of 396.7 million CHF (net profit of 211.5 million CHF in 2007).
The trend of business at Rieter Textile Systems in 2008 was dominated by a cyclical downturn on the world market for textile machinery of an intensity and rapidity that had not been experienced by the industry for decades. Orders of 539.5 million CHF received by Textile Systems were 68% lower than in the record year of 2007 (1 703.1 million CHF); this was also due in part to postponements of orders. The weakening effectiveness of government incentive programs, a cyclical decline in fiber consumption in major sales markets such as the USA and more difficult financing conditions caused a rapid fall in customers' tendency to invest. Domestic demand in India and China was unable to offset this decline. Orders received by Rieter Textile Systems for staple fiber machinery since March 2008 have been substantially lower than in previous years.
While the sales trend at Textile Systems in the first six months continued to benefit from the high level of orders in hand at the beginning of the year, the low volume of orders and delays in the acceptance of machines by customers in the second half of the year had a distinctly negative impact. The division's sales of 1 120.4 million CHF for the year as a whole were 28% lower (1 566.8 million CHF in 2007). However, in this difficult business environment Rieter succeeded in maintaining its leadership in the market segments served by Textile Systems.
Click here to read more details:
Outlook
2009 will be a challenging year for Rieter, since the prospects for both the automotive and the textile machinery industry are very subdued and highly uncertain due to the global recession. Rieter expects declining demand in both divisions, and will therefore continue with capacity reductions and cost saving measures accordingly. Nevertheless, operating losses must be reckoned with in both divisions.
Maintaining a sound balance sheet and adequate liquidity are therefore top priorities. In the medium term Rieter believes that demand will increase at both Textile Systems and Automotive Systems in line with global trends. As market leaders with an innovative product portfolio, both divisions are very well positioned to benefit from the next upswing.
Rieter Management AG
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