The Rupp Report: Positive First Results Business Year 2014 For Rieter

Rieter Ltd., the Switzerland-based textile machinery manufacturer, published its first results for the business year 2014. The results show a double-digit sales growth with a strong second half of 2014. The Rupp Report requested some additional information on these results from Rieter’s headquarters in Winterthur.
 
Market Dynamics
Rieter reports that it “took full advantage of the market dynamics in the 2014 financial year and improved its market share, thanks to successful products and extended presence in Asia.” What does this means? The company replies that it “holds a comprehensive attractive product portfolio and has delivered a record number of spinning equivalents in 2014.”
 
The company achieved double-digit sales growth with a particularly strong performance in the second half of the year. Sales increased by a total of 11 percent to CHF 1153.4 million ($1,245.1 million). Orders received reached the level of sales in the year under review, at CHF 1146.1 million ($1,237.4 million). The backlog of orders in hand at the end of 2014 is numbered at around CHF 730 million ($788 million). This means for the Swiss “a high level of capacity utilization until well into the 2015 financial year.” Table 1 shows some facts and figures:
 

Table 1
 
“In the market for short-staple fiber machinery and components, the positive trend of the previous year continued, albeit with the different characteristics of the individual economic regions,” said Rieter. However, what was in demand on the short fiber markets — rotor, ring, compact or Airjet? The somewhat unclear answer is that the demand for the different technologies was different in the various regions of the world. Nevertheless, overall, it shows an average distribution. To be précis, Rieter says that “demand was above the average of previous years, although momentum slowed in some important markets in the second half of the year.”
 
On the other hand, the Swiss took advantage of a positive trend in the flourishing countries and significantly increased sales compared to 2013, thereby benefiting from the significant strategic investments in China and India in previous years. “Today, Rieter is able to offer products at the highest quality level from all its locations.” Does this mean that the products do have an equal quality from all different manufacturing locations? The answer was quite without obligation: “Quality by Rieter means that the quality is not depending on the location of the production.”
 
Orders Received
A large number of orders received came from Asian countries — where spinning mill capacities were built up to supply the Chinese textile markets — and from Turkey and the U.S. However, there was no answer about the technology breakdown in the different regions of the world. On the other hand, “the positive trend in India continued throughout the year under review.” What kind of products were in demand in India? The Indian market, so Rieter, is asking for all kind of products, particularly for ring and compact yarns.
 
Trends have shown over the past year that demand in China was subdued. In the still favorable market environment of the first half of the year, the Swiss recorded significantly higher order intake than in the more challenging second half. The decline in the second half of the year was mainly attributable to lower orders from Turkey and China, which affected Rieter’s machinery business more than its components business.
 
At Spun Yarn Systems, orders received decreased in the year under review by 10 percent to CHF 973.8 million ($1,050.4 million), compared to 2013 with CHF 1,084.3 million ($1,169.7 million). Rieter’s Premium Textile Components business almost equaled the previous year’s level, with orders of CHF 172.3 million ($185.8 million) compared to CHF 175.1 million ($188.8 million) in 2013.
 
Rieter had a backlog of orders in hand of around CHF 730 million ($787 million) at the end of 2014, which means a high level of capacity utilization until well into the 2015 financial year.
 
Sales
As expected, sales by Rieter developed strongly in the year under review and increased by 11 percent to CHF 1153.4 million ($1,244.3 million) compared to CHF 1035.3 million ($1,117.2 million) in 2013. In the second half of the year, sales increased by 21 percent compared to the first half.
 
According to Rieter, the highest jump in sales netted the U.S., followed by Turkey, India and other Asian countries. In contrast, sales in China and Africa decreased compared to the previous year.
 
Divisions
Spun Yarn Systems increased sales by 14 percent to CHF 980.9 million ($1,058.8 million) compared to CHF 857.8 million ($926 million) in 2013. Premium Textile Components posted sales to third parties of CHF 172.4 million ($186.1 million) compared to CHF 177.5 million ($191.6 million) in 2013. Segment sales, including deliveries to Spun Yarn Systems, increased by 1 percent to CHF 262.1 million ($282.7 million). In Table 2, one can see the sales by region:
 

Table 2

Swiss Franc Exposure Reduced
Rieter informs that in recent years it has invested increasingly in the Indian and Chinese markets, as well as expanding production capacity in the Czech Republic. Luckily, “the global manufacturing concept has enabled the company’s flexibility to be improved and its exposure to the Swiss franc to be reduced compared to 2011.” In 2011, the company invoiced 53 percent of sales in Swiss francs, in 2014 there were 40 percent of sales in Swiss francs, 37 percent in euros and 23 percent in U.S. dollars and local currencies.
 
Of course, after the “shock” with the Swiss franc, Rieter expects increasing pricing pressure on sales invoiced in Swiss francs in the 2015 financial year. However, the Swiss company to achieve an EBIT margin of a good 7 percent and net profit of about 4.5 percent of sales in the 2014 financial year. More information on Rieter’s full annual financial statements for 2014 will be published by mid-March 2015.
 
February 10, 2015