Rieter's 2008 annual results impacted by global recession

24 Mar '09

5 min read

Rieter Group sales for 2008 declined by 20% to 3142.5 million CHF. The operating result before special charges, interest and taxes totaled 22.4 million CHF. A corporate loss of 396.7 million CHF is mainly attributable to special charges due to restructuring provisions and goodwill impairment as well as the financial result. In the interest of retaining a sound financial basis, the Board of Directors proposes to allocate shareholder options instead of paying a dividend for the 2008 business year.

The 2008 financial year for the Rieter Group bore clear traces of the consequences of the global economic downturn. After achieving record figures in the previous year's more favorable economic climate, Rieter recorded significantly lower orders received, sales, operating result and net result in the year under review. The Rieter Group has to cope with a drop in demand that is unprecedented in its intensity and rapidity. For the first time, both divisions – the textile machinery and the automotive component supply business – are affected simultaneously. Rieter therefore already launched an extensive restructuring program in summer 2008 in order to adjust to the new structural and cyclical conditions prevailing on the market.

In the textile machinery business a significant slowdown on the world market started in spring 2008, and this continued and intensified in the second half of the year. Rieter's automotive component supply business was affected by the crisis in the American automobile industry and the slowdown in economic activity in Europe, especially in the second six months. Despite the difficult overall economic conditions, Rieter succeeded in maintaining its market position in both divisions and even expanding it in Latin America. Both Rieter divisions have a global presence and a broad basis in terms of their products and customer relationships. This strategic position had always enabled diverging cyclical influences to be balanced in previous years. In 2008 the economic downturn affected for the first time all important markets of the Rieter Group at the same time.

Rieter has considerable experience in dealing successfully with pronounced market cycles and reacted promptly and rapidly to the downturn. However, in face of the steep, market-related decline in volumes, particularly in the second half of the year, the action taken was only partially able to reduce the volume-related decline in earnings in 2008. These measures are being implemented systematically in both divisions.

They include the utilization of flexible working-time models, short-time working at locations in Europe and North America, and a worldwide reduction in employee numbers in order to adjust the workforce to lower order volumes. In addition, Rieter has initiated plant closures and structural adjustments in the USA and in Spain, Germany, Italy and France. At the end of 2008 the Rieter Group employed a workforce of 14 183 worldwide, some 9% less than at the end of the previous year. Rieter also terminated the employment contracts of some 1 500 temporary employees; these jobs are not included in the workforce totals stated above.

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