Rieter reduces earnings forecast for 2008

09 Dec '08

3 min read

The grave financial and economic crisis has a severely negative impact on the textile machinery and automobile markets. In recent weeks in particular, demand for vehicles has collapsed worldwide. As a result of this situation, sales and profits of the Rieter Group in 2008 will be well short of forecasts made to date.

Textile Systems:
No signs of a recovery in the markets are currently apparent at the Textile Systems Division. On a current view, orders received and sales in 2008 must be expected to decline by some 65% and 30%, respectively, compared with the previous year. Operating profit before special charges will also be correspondingly lower than was being forecast up to now.

Automotive Systems:
At Automotive Systems the turmoil on the automobile markets in recent weeks has resulted in a significant reduction in delivery requests by customers, for both passenger cars and trucks. While demand and output by the automobile industry in North America had already declined in the first half of 2008, manufacturers in Europe, Asia and South America have since also been affected by the global economic downturn.

Rieter therefore foresees a decline in sales of more than 15% in 2008 compared with the previous year and a significant reduction in operating profit before special charges compared with estimates to date.

Restructuring measures:
Rieter already responded in summer to the emerging signs of an economic downturn and launched an extensive restructuring program. This mainly comprises capacity adjustments and the transfer of manufacturing operations, and is being resolutely implemented in both divisions.

In addition to the restructuring program already initiated, further measures are being implemented faster in order to adjust the costs to the declines in volume at both divisions. This includes short-time working at many Automotive and

Textile sites in Europe and North America as well as redundancies worldwide, including both temporary and permanent personnel. The restructuring projects are being accompanied by significant reductions in capital expenditures and action to lower working capital.

Outlook for the group:
Rieter expects consolidated sales in 2008 to be more than 20% lower and operating profits to be significantly reduced compared with the previous year's figure. The restructuring program will entail total expenditure of some 250 million CHF.

In addition impairment charges on goodwill amounting to some 100 million CHF will have to be recognized. The disruptions on the financial markets will depress financial results. In light of the unsettled markets as a consequence of the financial crisis no forecasts can yet be made for 2009.

About Rieter:
The Group operates internationally, developing and producing sophisticated systems solutions for the textile and automotive industries. Rieter generated sales of 3,930 million CHF with some 15,000 employees worldwide in the 2007 financial year.

The Textile Systems Division accounted for 1,567 million CHF, the Automotive Systems Division for 2,363 million CHF of this total.

Rieter Group

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