WINTERTHUR, Switzerland — March 13, 2018 — A significant increase in order intake and order backlog at the end of the year marked the 2017 financial year. In terms of sales, Rieter posted a slight increase. The EBIT margin before restructuring charges was 5.4%. Despite special effects, the company’s dividend policy and solid financial position allow the payment of an attractive dividend. Therefore, the Board of Directors proposes to the shareholders to leave the dividend unchanged at 5.00 Swiss francs.
Rieter posted an order intake of 1,051.5 million Swiss francs in the 2017 financial year. This represents an increase of 16% compared to the previous year (increase of 146.3 million Swiss francs). Thus, the upturn that began in the first half of 2017 continued. At the end of 2017, Rieter’s order backlog was some 100 million Swiss francs higher than the previous year at around 540 million Swiss francs (December 31, 2016: around 440 million Swiss francs).
At 965.6 million Swiss francs, total sales were 2% higher than the previous year (2016: 945.0 million Swiss francs). Compared to sales of 415.2 million Swiss francs in the first half year, Rieter posted strong growth in the second half year to 550.4 million Swiss francs, due in particular to a large increase in deliveries in the Business Group Machines & Systems and the acquisition of SSM Textile Machinery. Thanks to a global presence and a comprehensive product and service portfolio, Rieter again achieved a market share of around 30%.
EBIT Margin, Net Profit and Free Cash Flow
The 2017 financial year was characterized by improved profitability in the Business Group After Sales and weaker, volume-related results in the Business Groups Machines & Systems and Components. With slightly higher sales than in the previous year, Rieter recorded an EBIT margin (before restructuring charges) of 5.4% or 51.8 million Swiss francs (2016: 6.0% or 56.5 million Swiss francs). The restructuring charges amounted to 36 million Swiss francs. These are associated with the reorganization of the Ingolstadt location (Germany). Consequently, at 13.3 million Swiss francs (1.4% of sales), the net profit is considerably lower than in the previous year (42.7 million Swiss francs or 4.5% of sales). Free cash flow amounted to -101.3 million Swiss francs, mainly due to the cash outflow of 100.2 million Swiss francs for the acquisition of SSM Textile Machinery and the demand driven increase of net working capital. The equity ratio as of December 31, 2017 was 43.6% (December 31, 2016: 46.2%).
Sales by Region
In the Asian countries (excluding China, India and Turkey), Rieter increased sales in the reporting year by 11% to 319.1 million Swiss francs. At 184.0 million Swiss francs, a good level of sales was achieved in China, despite a slight decline of 1%. Sales in India fell by 5% to 173.8 million Swiss francs. This development is attributable in particular to lower sales of technology components. Sales in Turkey fell by 16% to 100.1 million Swiss francs in 2017, mainly due to the sluggish order intake for new machines in the first half of the year.
Orders in the USA and Brazil led to sales of 114.7 million Swiss francs in the North and South America region, an increase of 32%.
Business Groups
In terms of sales, the Business Group Machines & Systems posted a slight decline to 589.5 million Swiss francs (2016: 603.4 million Swiss francs) and an EBIT (before restructuring charges) of 0.8 million Swiss francs (2016: 3.6 million Swiss francs). Order intake rose to 668.2 Swiss francs million (2016: 591.6 million Swiss francs).
The Business Group After Sales generated an EBIT (before restructuring charges) of 27.9 million Swiss francs (2016: 25.5 million Swiss francs) on sales of 146.3 million Swiss francs (2016: 141.6 million Swiss francs). With stable installation volume, growth was driven by spare parts and after sales services. Order intake in what continues to be a demanding market increased to 154.8 million Swiss francs (2016: 135.2 million Swiss francs).
The Business Group Components increased sales thanks to the acquisition of SSM Textile Machinery (49.1 million Swiss francs) to 229.8 million Swiss francs (2016: 200.0 million Swiss francs); at 30.8 million Swiss francs, however, the EBIT margin was lower compared to the previous year (2016: 35.1 million Swiss francs). The strong second half-year could not fully compensate for the first half-year. The order intake was significantly higher than the previous year at 228.5 million Swiss francs (2016: 178.4 million Swiss francs), with the acquisition of SSM Textile Machinery contributing CHF 42.5 million to this positive growth from the second half of the year.
Improvement Program STEP UP
Rieter also forged ahead with the improvement program STEP UP in the 2017 financial year. Strengthening innovative capacity and the after sales and components business as well as increasing profitability through cost reduction remain the top priorities.
The systematic implementation of the current innovation program continues. For example, the single-head draw frame RSB-D 50 was launched successfully in 2017. In 2018, Rieter will present a new ring spinning machine and a new compact spinning machine. In the Business Groups After Sales and Components, innovations that enjoy strong demand are also regularly launched on the market. Research and development expenditure increased to 49.2 million Swiss francs (2016: 48.0 million Swiss francs).
Rieter places a further priority on the digitization of spinning mills. Thanks to the combination of profound expertise in spinning mills with technologies from the digital world, the UPtime Maintenance Solution has emerged as the digital expert system that optimizes the maintenance of spinning mills and their monitoring in relation to predictive maintenance.
In mid-2017, Rieter acquired the SSM Textile Machinery Division (SSM) from Schweiter Technologies AG in Horgen (Switzerland). SSM is the world’s leading supplier of precision winding machines in the fields of dyeing, weaving and sewing thread preparation and enjoys success in individual segments of filament yarn production. Assigned to the Business Group Components, the unit will further strengthen Rieter’s components business.
Following the agreement with the Works Council, the restructuring at the Ingolstadt location is proceeding according to plan. Rieter will concentrate on the development of machines in Ingolstadt, and the previous production will be relocated to Ústí nad Orlicí in the Czech Republic. Overall, Rieter expects cost reductions of more than 15 million Swiss francs from 2019 as a result of these measures.
Winterthur Location
In Winterthur, the intention is to create a modern location, concentrating the customer center, product and technology development, assembly and administration on an area of approximately 30 000 square meters. In October 2017, Rieter launched a study contract and awarded this to five renowned consultancy firms from the Canton of Zurich. These firms have until the end of March 2018 to submit their projects, which will then be assessed by a panel of judges. The final decision on the realization of the project will be taken by the Rieter Board of Directors during 2018.
Dividends And Dividend Policy
At the Annual General Meeting on April 5, 2018, as in the previous year the Board of Directors will propose a dividend of 5.00 Swiss francs. The company’s dividend policy allows a payout ratio of at least 40% of net profit. Rieter’s solid financial strength allows the pay-out of an attractive dividend even with one-off special charges.
Changes in Group Executive Committee
As of April 6, 2017, Serge Entleitner, as a member of the Group Executive Committee, took over the management of the Business Group Components. This group was previously managed by Werner Strasser, who has retired.
Board of Directors and Annual General Meeting
At the Annual General Meeting held on April 5, 2017, shareholders approved all motions proposed by the Board of Directors. They elected two new members to the Board of Directors, Carl Illi and Luc Tack. The members of the Board of Directors: Roger Baillod, Bernhard Jucker, Michael Pieper, This E. Schneider, Hans-Peter Schwald and Peter Spuhler were confirmed for a further one-year term of office.
Chairman of the Board of Directors Erwin Stoller was no longer available to stand for re-election. The general meeting elected Bernhard Jucker as Chairman of the Board of Directors. This E. Schneider and Hans-Peter Schwald, the members of the Remuneration Committee who were standing for election, were also each re-elected for a one-year term of office. Chairman of the Board of Directors, Bernhard Jucker was elected as a new member of the Remuneration Committee.
Outlook
In the first two months, demand has been on a stable level. Rieter expects this momentum to continue. With a stronger second semester, Rieter expects sales and profitability for 2018 to be above the level of 2017 (before restructuring charges). In the first semester of 2018, EBIT and net profit for the Group are expected at the level of the previous period due to the country and product mix at the Business Group Machines & Systems.
Thanks
On behalf of the Board of Directors and the Group Executive Committee, we wish to thank all Rieter employees for their dedicated commitment in the year 2017. We also offer our heartfelt gratitude to our customers, suppliers and other business partners for your loyalty to our company – and to the shareholders for their confidence.
Posted March 13, 2018
Source: Rieter
