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The Rupp Report: Rieter Is Back With Success

Jürg Rupp, Executive Editor

As already reported before, the recovery of the global textile industry is significant. This revival in the textile machinery sector also is having a positive influence on the annual results of the Switzerland-based Rieter Group, which is back on track: After disastrous 2008 and 2009 results, the company reports that orders received in fiscal year 2010, totaling 3,170 million Swiss francs, were 64-percent higher compared to the previous year's results. Sales netted an increase of 32 percent at 2,585.8 million Swiss francs, compared to 1,956.3 Swiss francs in 2009. The Rupp Report spoke to Peter Grädel, Rieter's head of corporate communications.

Troublesome Exchange Rates
Grädel said that the strong upswing compared to 2009 was mainly due to a very strong demand at Rieter Textile Systems (RTS). However, the 32-percent increase in overall group sales was less than the growth in orders received because 2009 order volume was low. Troubles experienced by some major currencies, and, consequently, the exchange rate trends, had adverse impacts on both orders and sales, especially in the second half of 2010. Based on local currency values, new orders and sales grew by 68 percent and 36 percent, respectively, in 2010. Based on 2007 exchange rates, consolidated 2010 sales would have reached 2,900 million Swiss francs.

Rieter Textile Systems
Looking at Rieter Textile Systems' performance, Rieter's shareholder letter dated February 4 reported: "The world market for spinning machinery and components recorded a strong recovery with a broad regional base in the year under review. ... The main markets for Rieter were China, India and Turkey. There was also a large volume of demand from Bangladesh, Brazil, Indonesia, Pakistan, South Korea, and also the USA. The upswing was driven by investment demand for replacements and expansion as well as strong growth in textile consumption in the major Asian markets." And the major reasons for success are said to be the "strong market position, increasingly also in machinery and technology components which are adapted to local needs in emerging markets."

The results are impressive: Orders received by RTS jumped to 1,454.6 million Swiss francs, compared with 510.8 million Swiss francs in 2009. Second-half sales growth was particularly strong, and overall 2010 revenues grew by 64 percent to 870.4 million Swiss francs from 532.0 million Swiss francs the previous year. Based on local currency values, orders received and sales grew by 188 percent and 67 percent, respectively, over 2009 totals.

Rieter Automotive Systems
Also the automobile production worldwide developed strongly during 2010. A total of some 73 million light motor vehicles were manufactured, equivalent to an increase of 23 percent compared with the previous year. Growth was strongest in North America, where output of light motor vehicles increased by 38 percent, and in Europe by 14 percent.

Since its integration into the Rieter Group, Rieter Automotive Systems (RAS) plays an important part in the group's strategy. RAS produces systems and components for vehicle acoustics and thermal management such as for the engine bay, interior trim and floor, trunk, underbody, body and others. RAS operates 48 production plants, including joint ventures, on five continents. However, Grädel said, despite the upswing in 2010, neither the European nor the North American market achieved output at the levels reached before the global financial and economic crisis.

On the other hand, Rieter reports: "China experienced a boom exceeding even optimistic forecasts, with automobile production increasing by 28 percent. In 2010 more automobiles were manufactured in China than in North America as a whole. Other Asian markets also developed very strongly. There was a marked increase in the production of commercial vehicles worldwide ...."

RAS was able to take advantage of the improving global environment thanks to its broad customer portfolio and its product lines. Sales in 2010 rose by 20 percent to 1,715.4 million Swiss francs, compared to 1,424.3 million Swiss francs in 2009. As with the Rieter Group as a whole, the weakness of the U.S. dollar and the euro compared to the Swiss franc adversely affected sales trends. Based on 2007 exchange rates, automotive sales would total some 2,000 million Swiss francs, Rieter reports.

For the future, RTS is willing to continue its capacity and product portfolio expansion in Asian markets. In 2010 the division "continuously developed further products and components designed to meet the specific needs of these markets, [such as] new types of yarn, higher productivity of the systems, optimum utilization of raw material and energy efficiency," Rieter reports.

For RAS, Rieter reports, "production capacity in Asia will to continue to be progressively expanded in 2011. This will enable the division's strong position in its traditional markets also to be extended to new markets with innovative products and systems.

At the consolidated level, Rieter reports its operating margin improved significantly in the second half of the year, and the company has met its turnaround targets. The final results for the 2010 financial year will be available end of March.

February 8, 2011