Rieter order intake up 13%

The 2016 financial year was characterised by a significantly higher order intake, especially in the first half year, and lower sales compared to the previous year. Despite the decline in sales, Rieter achieved an EBIT margin of 6 per cent. Against the background of the solid financial and earnings position, the Board of Directors proposes to the shareholders to increase the dividend compared to the previous year.

In the full year, order intake rose by 13 per cent year-on-year to CHF 905.2 million. In the first half of 2016, orders were at a good level of CHF 510.7 million, mainly driven by solid demand from Turkey. In the second half of the year, the dynamism in Turkey and India slowed significantly due to increasing political uncertainties, with the result that orders declined to CHF 394.5 million.

Sales decreased to CHF 945.0 million, mainly due to the sluggish demand for machinery and systems in the second half of 2015. The market volume of CHF 3.2 billion in 2016 was roughly 8 per cent down on the previous year. Thanks to its global positioning and attractive service portfolio, Rieter succeeded in achieving a market share of around 29 per cent (30 per cent in 2015).

EBIT margin, net profit and free cash flow

In spite of the 9 per cent decline in sales, Rieter achieved an EBIT margin of 6.0 per cent (CHF 56.5 million) and a net profit of 4.5 per cent of sales (CHF 42.7 million). At CHF 76.3 million, free cash flow was significantly higher than net profit. Rieter further strengthened its balance sheet in the year under review. The equity ratio as of December 31, 2016, was 46.2 per cent (44.3 per cent at December 31, 2015).

Sales by region

Both in China and India, Rieter significantly increased sales in the year under review, by 33 per cent to CHF 186.5 million and by 28 per cent to CHF 182.1 million, respectively. In the other Asian countries, sales declined by 12 per cent, but remained at a good level of CHF 286.3 million. In North and South America, following the completion of deliveries of large orders in the previous year, sales declined to CHF 86.6 million (CHF 200.6 million in 2015). In Turkey, a large portion of the good order intake from the first half year was delivered on schedule by the end of the year. Despite this, sales in Turkey fell to CHF 119.4 million, a reduction of 17 per cent compared to the previous year. In Europe, sales decreased to CHF 40.9 million (CHF 60.2 million in 2015), due to the disposal of the Schaltag group in July 2015.

Business groups

The Machines & Systems Business Group recorded sales of CHF 603.4 million (CHF 702.3 million in 2015) and EBIT of CHF 3.6 million (CHF 14.8 million in 2015), thus compensating for a large portion of the market-related volume effect on earnings. At CHF 591.6 million, order intake was well above the previous year (CHF 457.6 million in 2015). After Sales generated EBIT of CHF 25.5 million (CHF 26.5 million in 2015) on sales of CHF 141.6 million (CHF 139.8 million in 2015). The lower result is due to investments relating to the further expansion of the business. Order intake of CHF 135.2 million was 7 per cent above the previous year (CHF 126.3 million in 2015). Components increased sales to third parties to CHF 200 million (CHF 194.7 million in 2015) and improved EBIT to CHF 35.1 million (CHF 33.7 million in 2015). Order intake of CHF 178.4 million was below the previous year’s CHF 217.7 million due to the lower volume of major orders from China and India.

Improvement programme STEP UP

Rieter made significant progress towards the implementation of the STEP UP program. Rieter had launched the program in 2014 to strengthen innovative power, expand the after-sales business and optimise the cost base.

Rieter presented an important innovation in 2016 with the new single-head draw frame generation RSB-D 50. This machine offers unprecedented productivity with the highest quality. Rieter’s UPtime Maintenance Solution, an online expert training system for monitoring and optimising maintenance in the spinning mill, represents a further step towards the digitalisation of the spinning industry. R&D expenditure increased to CHF 48 million (CHF 46.6 million in 2015). In 2016, After Sales further advanced important innovations and thus established more foundations for future expansion. The measures launched in 2015 to reorganise production and sustainably increase profitability are almost completed at the Winterthur location. As announced at the beginning of 2017, Rieter plans to relocate production from the Ingolstadt site in Germany to the Usti site in the Czech Republic.

Winterthur location

Rieter intends to create a modern location in Winterthur, concentrating the customer center, product and technology development, assembly and administration on an area of approximately 30,000 sq m. The necessary planning process is under way. In a later phase, work will begin on developing the remaining area of around 70,000 sq m.

The Board of Directors will propose to the AGM on April 5, 2017, that the dividend be increased from CHF 4.50 in the previous year to CHF 5 per share. Rieter seeks a distribution rate of at least 40 per cent of earnings.

As of April 1, 2016, Jan Siebert, as a member of the Group Executive Committee, took over the management of the Machines & Systems Business Group. This business group had been managed by Norbert Klapper, Chief Executive Officer, on an interim basis since January 2014.

As announced in February 2017, Werner Strasser intends to retire at his own request. On April 6, Serge Entleitner, as a member of the Group Executive Committee, assumes responsibility for the Components Business Group. Strasser began his career in 1994 and was appointed a member of the Group Executive Committee in 2011.

BODs and AGM

At the AGM held on April 6, 2016, shareholders approved all motions proposed by the BODs. They elected two new members to the BODs, Roger Baillod and Bernhard Jucker. Erwin Stoller, Chairman of the Board of Directors, and Michael Pieper, This E. Schneider, Hans-Peter Schwald and Peter Spuhler, directors, were each confirmed for a further one-year term of office. This E. Schneider, Hans-Peter Schwald and Erwin Stoller, the members of the Remuneration Committee who were standing for election, were also each re-elected for a one-year term of office. Jakob Baer and Dieter Spälti were no longer available for re-election and were discharged by the Chairman of the BODs with grateful thanks. In addition, the authorised capital was extended to a maximum of CHF 2.5 million or 5,00,000 shares for two years. The authorised capital gives Rieter greater flexibility to exploit strategic opportunities without delay.

Stoller has decided not to offer himself for re-election at the 2017 AGM. In the almost 40 years of his affiliation with the Rieter, he shaped and formed the company for many years and rendered great service to the Rieter Group. During this time, he held various executive positions, including as Executive Chairman from 2009 to 2013, and as Chairman of the Board since 2008.

In the first two months, demand for components and spare parts was stable. The order intake for new machines remained at a low level. Rieter expects sales and earnings in the first half-year to be on a par with those of the previous year, and a stronger performance in the second half-year. Despite low visibility in the sales markets, Rieter expects sales and profitability for 2017 to be at the level of the previous year (before restructuring costs). At the appropriate time, Rieter will provide information on the restructuring costs associated with the reorganisation concept for the Ingolstadt site in Germany, which was announced on February 1, 2017.

Rieter is the world’s leading supplier of systems for short-staple fibre spinning. Based in Winterthur, the company develops and manufactures machinery, systems and components used to convert natural and manmade fibres and blends into yarns.