The Rupp Report: Good Results For The Rieter Group

The regular reader of the Rupp Report knows about the positive comments of the major textile machinery suppliers that exhibited at ITMA Barcelona. Over the last months since the end of ITMA 2011 last September, most of the machinery suppliers reported satisfactory results for 2011. However, it was not that certain whether the good impression of ITMA 2011 would be evident in the annual results. The first big player with final results now going public with its figures is the Switzerland-based Rieter Group, which has reported a significant increase in sales.

Rieter's Dec. 31, 2011, figures are the first it has reported for a full financial year under the new structure that went into effect May 13, 2011, following the spinoff of Rieter's automotive business. Since then, Rieter Group has focused on being a supplier of machinery and components for staple-fiber spinning mills. The company will publish its final results March 21, 2012.

Booming Demand And Mixed Emotions
Rieter reports: "The boom in demand on the world market for textile machinery and components experienced in 2010 continued in the first quarter of 2011. The investment climate started to cool off as of the second quarter. The high cost of cotton and declining yarn prices intensified pressure on spinning mills' margins and liquidity. The second half of the year was also dominated by uncertainty due to the trend in raw material prices and prospects for the global economy. As of the second quarter the market retreated to a lower level compared with the previous year. Demand for yarns also declined in 2011. However, spinning mills were able to reduce yarn inventories to some extent again in the second half of the year.

Market Disruption Affects Order Intake
"Orders totaling 958.3 million CHF [Swiss francs] received by Rieter in 2011 were 34% lower than the very high figure recorded in the previous year (-31% in local currencies). The decline occurred in particular as of the second quarter and affected both Business Groups. While orders received by Spun Yarn Systems were 36% lower at 775.0 million CHF, at Premium Textile Components they declined by 22% to 183.3 million CHF (-34% and -17% respectively in local currencies."

Some orders were postponed or canceled as a consequence of the raw material and yarn market disruptions, Rieter reports: "Most cancelations affected orders placed in the peak year of 2010. Rieter therefore adjusted its order book by a total of 112.6 million CHF in the second half of 2011. Excluding cancelations, orders received in the second half of the year amounted to 399.6 million CHF. Orders in hand at year-end were slightly over 600 million CHF.

"China, Turkey and India were the sources of the largest volume of orders. Other important markets were South Korea, Indonesia, the USA, Brazil, Pakistan and Bangladesh. All in all Reiter further expanded its market position worldwide in the year under review and gained market share with attractive products. In China and India Rieter strengthened its market position with a specific offering for the local markets. ...

"Due to the high level of orders in hand and increased output at Spun Yarn Systems, Rieter's sales rose overall by 22% compared with the previous year, to 1060.8 million CHF (+27 percent in local currencies). The Spun Yarn Systems Business Group posted a 28% increase in sales to 861.7 million CHF. Sales at the Premium Textile Components Business Group increased by 4% to 199.1 million CHF. In local currencies Spun Yarn Systems grew by 32%, Premium Textile Components by 11%."

Outlook For 2011
Rieter reports its profitability grew disproportionately in the overall 2011 financial year, and it expects to post an operating margin in the double-digit range for the year.