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Report | August 2019

26% decline in Rieter's order intake in first half of 2019

The significant decline in sales in the machinery business resulted in an operating loss (EBIT) of CHF -1.2 million in the first half of 2019 (first half year 2018: CHF +14.1 million).

In the first half of 2019, Rieter posted an order intake of CHF 378.3 million (first half year 2018: CHF 511.8 million). This represents a decline of around 26 per cent compared to the previous year period. As already reported, the main reason was low demand in the new machinery business (Business Group Machines & Systems: -34 per cent). Rieter understands that market share remained unchanged at the previous year’s level of around 30 per cent. Order backlog as at June 30, 2019 was CHF 295 million (December 31, 2018: CHF 325 million).

Sales in the first half of 2019 amounted to CHF 416.1 million (first half year 2018: CHF 515.3 million), which represents a decline of 19 per cent compared to the previous year period. This development is mainly attributable to lower demand in the new machinery business (Business Group Machines & Systems: -27 per cent).

The significant decline in sales in the machinery business resulted in an operating loss (EBIT) of CHF -1.2 million in the first half of 2019 (first half year 2018: CHF +14.1 million). The cost-cutting measures introduced had a positive effect on the result from the second quarter of 2019.

Net profit was CHF -3.8 million (first half year 2018: CHF +10.9 million). Due to the seasonal increase in net working capital, free cash flow amounted to CHF -23.4 million (first half year 2018: CHF -59.7 million). Net liquidity as at June 30, 2019, was CHF 97.6 million (December 31, 2018: CHF 150.2 million). The equity ratio as of June 30, 2019, stood at 45.7 per cent (December 31, 2018: 44.6 per cent).

Sales in the first half of 2019 declined by 19 per cent to CHF 416.1 million (first half year 2018: CHF 515.3 million). In the Asian countries (excluding China, India and Turkey), sales fell by 17 per cent to CHF 165.4 million.

In Vietnam and Pakistan, by contrast, sales increased compared to the previous year period. In China, sales declined by 12 per cent to CHF 72.6 million. In contrast, sales in India increased by 11 per cent to CHF 66.7 million. In Turkey, sales fell by 58 per cent to CHF 24.5 million in the first half of 2019. Sales in North and South America declined by 8 per cent to CHF 54.8 million. In the Europe region, sales amounted to CHF 23.1 million (-13 per cent) and in Africa to CHF 9.0 million (-68 per cent).

Order intake by the Business Group Machines and Systems fell by 34 per cent to CHF 196.2 million (first half year 2018: CHF 297.7 million). The reasons for the customers’ reluctance to invest were, primarily, overcapacity in the spinning mills, the trade conflict between the USA and China, and political and economic uncertainties in other regions of importance to Rieter. In addition, some customers have been holding back on investment decisions and waiting for the innovations presented at ITMA in Barcelona in June 2019. For the Business Group, sales were CHF 220.8 million (first half year 2018: CHF 303.9 million), around 27 per cent below the previous year period. This reflects the low demand for new machinery, which has prevailed since the fourth quarter of 2018. Despite the ongoing cost reduction measures, due to lower volumes EBIT amounted to CHF -23.8 million (first half year 2018: CHF -14.8 million).

The Business Group Components posted an order intake of CHF 115.8 million (first half year 2018: CHF 139.1 million), which was around 17 per cent down on the previous year period. The decline was related, in particular, to the business activities of SSM and Suessen, mainly as a consequence of the investment restraint in the market, as already described. At CHF 123.3 million, sales were 10 per cent down on the prior year level (first half year 2018: CHF 137.3 million). This again related, in particular, to SSM and Suessen. Business for wear and tear parts for spinning mills, however, is running at a good level. EBIT amounted to CHF 6.4 million (first half year 2018: CHF 19.2 million). In addition to the decline in sales to third parties, a downturn in volume of deliveries to the Business Group Machines & Systems was also evident here.

Order intake in the Business Group After Sales fell by 12 per cent year-on-year to CHF 66.3 million (first half year 2018: CHF 75 million). This was mainly attributable to the lack of installation volume for new machinery. However, the spare parts business for spinning mills is at a good level. At CHF 72.0 million, sales were 3 per cent down on the previous year (first half year 2018: CHF 74.1 million). Despite lower sales, EBIT reached CHF 12.3 million and was therefore higher than the previous year period (first half year 2018: CHF 11.2 million).

Rieter is the world’s leading supplier of systems for short-staple fibre spinning. Based in Winterthur (Switzerland), the company develops and manufactures machinery, systems and components used to convert natural and manmade fibres and their blends into yarns. Rieter is the only supplier worldwide to cover both spinning preparation processes and all four end spinning processes currently established on the market. Furthermore, Rieter is a leader in the field of precision winding machines. With 16 manufacturing locations in ten countries, the company employs a global workforce of some 4,740, about 20 per cent of whom are based in Switzerland.

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