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Restructuring program is taking effect at Rieter

12
Aug '09
Rieter was severely affected by the market slump in the textile machinery and automotive industries in the first half of 2009, which resulted in a 50% setback in sales. Costs have been drastically reduced, but due to the speed of the slump they could not be adjusted fully to the lower level of income, so that a large operating loss was reported. Although the trend of business improved in the second quarter, Rieter does not believe that the volumes achieved in previous years will be equaled again soon. Restructuring and cost-cutting efforts are therefore being resolutely pursued and are contributing to the group's ability to exploit opportunities that will arise in the next upswing.

The global crisis in the textile and automotive industries continued in the first half of 2009 and resulted in a massive reduction in the volume of business at Rieter. In the period under review the economic output of the OECD countries suffered the most severe decline since statistics began more than 30 years ago.

Orders received by the group declined by more than 700 million CHF or 46% to 840.0 million CHF. The unprecedented downswing on the textile machinery market continued during the initial months of the reporting period. After automobile output had collapsed in 2008 primarily in North America, production levels in Europe and other regions also came under enormous pressure in the period under review and were 30 – 50% lower in the main manufacturing countries. Only in China was a slight increase in output recorded. Group sales of 899.8 million CHF were some 900 million CHF or 50% lower (– 48% lower in local currencies). The volume trend reached its low in the first quarter. Sales in the second quarter were almost 20% higher than in the first three months.

Rieter reacted at an early stage to the signs of approaching crisis with the restructuring program launched last summer. Further drastic saving measures were initiated and systematically implemented in all cost categories: Employee costs and other operating expenses were reduced by one-third compared with the corresponding period of the previous year. Results therefore improved continuously between January and June. However, this was not sufficient to offset the 50% collapse in volume, which resulted in a negative operating result of 136.5 million CHF.

At the end of the reporting period the Rieter Group employed a workforce of 12 617, reflecting a reduction of 2 700 permanent employees or some 18% compared with a year earlier. In the first six months some 3 000 employees in Europe were working on a short-time basis – on the average at about 40%. The number of temporary employees has also been reduced by more than 1 300 during the past 12 months. The cost of the group-wide restructuring program amounted to 18.1 million CHF in the first half and was charged in full to the restructuring provision set aside in 2008. As of June 30, 2009, the remaining restructuring provision amounts to 166.3 million CHF.


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