Rieter Textile Systems: massive decline in orders received

18 Aug '08

5 min read

The Rieter Group's workforce totaled 15 316 on June 30, 2008 (excluding temporary personnel); the equivalent figure on June 30, 2007, was 15 062.

This increase is due solely to the Automotive Division, where some 400 employees were added in low-cost countries, while personnel numbers in high-cost countries were reduced by some 200. At the Textile Division 600 temporary positions have already been eliminated compared with the previous year in response to the decline in volume.

Rieter Textile Systems: Massive decline in orders received
On the global textile machinery market, which had already been weakening since the final quarter of 2007, demand for staple fiber machinery has declined steeply, especially since March 2008.

Due to the subdued business outlook, customers in Rieter's main markets, especially Asian spinning mills, have drastically reduced or postponed capital investment.

The main reasons for this are the high raw material prices and full yarn inventories, a more restrictive investment policy in China, the fading attractions of investment promotion programs in other major markets as well as higher energy costs and unfavorable exchange rates for the spinning mills.

Pronounced demand cycles are typical of the textile machinery market, but the current downturn is more severe than in previous cycles, even taking industry-specific aspects into account.

Orders totaling 417.3 million CHF received by Rieter Textile Systems in the first half of 2008 were 61 % lower compared with the record figure for new orders in the same period of the previous year. Staple fiber machinery is mainly affected by this downturn.

The Textile Systems Division nevertheless succeeded in maintaining its overall market share in a challenging business environment. Sales by Textile Systems were 6 % lower at 664.7 million CHF (706.2 million CHF in 2007).

The decline in volumes was somewhat greater than expected, as customers postponed acceptance of products on order due to the more difficult economic situation. Textile Systems posted an operating result of 55.4 million CHF in the first six months (93.7 million CHF in 2007).

This figure included a gain of 2.6 million CHF on the divestment of the pelletizing machinery business. The operating margin was therefore 8.8 % (13.0 % in 2007).

In addition to the lower level of capacity utilization as a result of the decline in sales, this reduction is largely due to the less favorable product mix.

The steep price rises for raw materials (steel, sheet metal, castings) and increases in the cost of transportation and energy also adversely affected the result by some 15 million CHF.

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