The Rupp Report: Rebound For The Rieter Group
Jürg Rupp, Executive Editor
Switzerland-based textile machinery manufacturer Rieter Group was hit heavily by the financial
crisis in 2008 and, in some ways, also in 2009. Nevertheless, Rieter is enjoying some recovery,
with an increase in orders received and sales in the second half of 2009. On top of that, Rieter
was also considered to be a valuable candidate for acquiring Germany-based Oerlikon Textile GmbH, a
subsidiary of Switzerland-based OC Oerlikon Management AG. As of now, it seems that this
possibility will no longer be the case. Yet, time will tell.
Global Drop In Textile Machinery Orders
The global market for textile machinery, which had been declining since the fourth quarter of 2007, plunged deeply as of March 2008, finally bottoming out in the first quarter of 2009. Both structural and cyclical influences contributed to the downturn: Increased investments to expand spinning capacity, which also had benefited in many markets from government stimulus programs, came to a halt; and excess capacities and the consequences of the global economic crisis had further impacted the downturn. As a result, textile consumption declined in the United States and Europe, and spinning mills around the world were left holding high yarn inventories.
Slow Recovery In 2009
Between 2007 and 2009, the Rieter Group saw sales drop by 1,973.8 million Swiss francs, representing a decline of approximately 50 percent. However, the company reports, "the group successfully defended its strong market position in the textile machinery and automotive supply businesses. ... Rieter believes that activities in both sectors in which the group operates bottomed out before mid-2009."
Rieter further reports: "Orders received by the Rieter Group in the 2009 financial year declined by 24 percent (21 percent in local currencies) to 1935.1 million [Swiss francs]. Order intake in the second half of 2009 was 9-percent higher than in the same period of the previous year and 30 percent higher than in the first half of 2009. ... Over the year as a whole group sales declined more steeply than orders received, to 1956.3 million [Swiss francs], a reduction of 38 percent (35 percent in local currencies). In the second half of 2009 this figure was 21-percent lower than in the same period of the previous year but 17-percent higher than in the first half of 2009."
Textile Systems Is Recovering
In 2009, Rieter Textile Systems received orders totaling 510.8 million Swiss francs - 5-percent less than in the previous year, when orders totaled 539.5 million Swiss francs. While orders in the first six months continued to decline compared with the first half of 2008, they increased by some 69 percent in the second half of 2009 over the first half. Demand for spare parts and components was already increasing significantly in the second quarter of 2009.
Rieter further reports: "Due mainly to the very low level of orders received in the second half of 2008 and at the beginning of 2009, sales in the year under review as a whole were again sharply lower. They amounted to 532.0 million [Swiss francs], equivalent to a 53-percent reduction compared with the previous year. As a result of the increase in orders received as of summer 2009, sales in the second half of 2009 were already some 13-percent higher than in the first six months."
Regarding its automotive business, Rieter reports: "Automobile production worldwide was 13-percent lower in 2009, declining from 67.4 [million] to 58.6 million vehicles. Output was 32-percent lower in North America and 20-percent lower in Europe ... . Due largely to government stimulus programs to support economic activity, automobile manufacturers in both of these regions were able to reduce their excess inventories in the first six months ... . The trend in vehicle output in Asia (excl. Japan) and South America was significantly better. China's automobile production grew by 46 percent and India's by 13 percent."
This slump also hit the Rieter Groups' Automotive Systems: "Sales dropped by 30 percent (26 percent lower in local currencies) in the 2009 financial year, and amounted to 1,424.3 million [Swiss francs] (2022.1 million [Swiss francs] in 2008). Sales in the second six months were 12-percent lower than in the same period of the previous year." But there is some hope, Rieter reports: "The division's sales in the second half of 2009 were 19-percent higher than in the first six months. ... The division is well placed to defend and selectively expand its strong market position in future."
In its outlook for 2009 results, the company reports: "Rieter reduced its losses in the second half of the year compared with the first six months as a result of the restructuring and cost cutting action taken and thanks to the slightly higher volumes in the second half. ... Rieter had a positive net liquidity at the year-end. The structural adjustment programs will continue and should be virtually be completed in 2010."
February 2, 2010