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Place: Swiss Exchange
Rieter, established in
Winterthur in 1795, is a Swiss-based industrial group operating on a global
scale. It is a leading supplier of systems solutions and services for the
textile, automotive and plastics industries. The company is organized into
two divisions, Rieter Textile Systems and Rieter Automotive Systems. In
both of these fields the group is a world market leader in the segments
covered. 14% of its approx. 13 000 employees work in Switzerland.
Rieter Textile Systems
develops and produces machinery, integrated systems and technology components
for converting fibers and plastics into yarns, nonwovens and pellets. In
partnership with automotive manufacturers, Rieter Automotive Systems develops
and produces components, modules and integrated systems on the basis of
fibers, plastics and metals in order to provide acoustic comfort and thermal
insulation in motor vehicles
http://www.rieter.com
03/24/2009
- 2008
annual results impacted by global recession – loan agreement signed – shareholder
options instead of dividend payment
Winterthur
– Rieter Group sales for 2008 declined by 20% to 3142.5 million CHF. The
operating result before special charges, interest and taxes totaled 22.4
million CHF. A corporate loss of 396.7 million CHF is mainly attributable
to special charges due to restructuring provisions and goodwill impairment
as well as the financial result. In the interest of retaining a sound financial
basis, the Board of Directors proposes to allocate shareholder options
instead of paying a dividend for the 2008 business year.
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The
2008 financial year for the Rieter Group bore clear traces of the consequences
of the global economic downturn. After achieving record figures in the
previous year’s more favorable economic climate, Rieter recorded significantly
lower orders received, sales, operating result and net result in the year
under review. The Rieter Group has to cope with a drop in demand that is
unprecedented in its intensity and rapidity. For the first time, both divisions
– the textile machinery and the automotive component supply business –
are affected simultaneously. Rieter therefore already launched an extensive
restructuring program in summer 2008 in order to adjust to the new structural
and cyclical conditions prevailing on the market.
In
the textile machinery business a significant slowdown on the world market
started in spring 2008, and this continued and intensified in the second
half of the year. Rieter’s automotive component supply business was affected
by the crisis in the American automobile industry and the slowdown in economic
activity in Europe, especially in the second six months. Despite the difficult
overall economic conditions, Rieter succeeded in maintaining its market
position in both divisions and even expanding it in Latin America. Both
Rieter divisions have a global presence and a broad basis in terms of their
products and customer relationships. This strategic position had always
enabled diverging cyclical influences to be balanced in previous years.
In 2008 the economic downturn affected for the first time all important
markets of the Rieter Group at the same time.
Steep,
market-related decline in orders received and sales
The
adverse effects of market trends resulted in a steep decline in orders
received and sales by the Rieter Group. The trend in new orders received
was attributable primarily to the drop in order intake at the Textile Systems
Division. Consolidated sales declined less steeply (– 20%) than orders
received and totaled 3 142.5 million CHF (3 930.1 million CHF in 2007).
This was due to the high level of orders in hand for textile machinery
with which Rieter started 2008, and a proportionately smaller decline in
sales by Automotive Systems. Exchange rate movements had a negative impact
on the development in group sales amounting to some three percentage.
Earnings
trend depressed by structural and cyclical factors
The
Rieter Group’s operating result before interest and taxes was adversely
affected by several factors in 2008. While higher raw material and energy
costs, upfront inputs for developing new markets and the cost of initial
restructuring measures primarily accrued in the first six months, the massive
decline in production volumes at both divisions was an additional burden
on the earnings trend in the second half of the year. In order to align
its operations with the structural and cyclical changes in the market,
Rieter launched an extensive restructuring program. This necessitated expenditures
totaling 237.7 million CHF, which were charged to the consolidated financial
statements for 2008. Before special charges, interest and taxes, the Rieter
Group posted an operating result of 22.4 million CHF. As a consequence
of these restructuring measures and impairement charges on goodwill of
96.8 million CHF, the operating result before interest and taxes (EBIT)
showed a loss of 312.1 million CHF – after a record outcome in the previous
year (operating profit of 278.7 million CHF in 2007).
Extensive
action to increase earnings
Rieter
has considerable experience in dealing successfully with pronounced market
cycles and reacted promptly and rapidly to the downturn. However, in face
of the steep, market-related decline in volumes, particularly in the second
half of the year, the action taken was only partially able to reduce the
volume-related decline in earnings in 2008. These measures are being implemented
systematically in both divisions. They include the utilization of flexible
working-time models, short-time working at locations in Europe and North
America, and a worldwide reduction in employee numbers in order to adjust
the workforce to lower order volumes. In addition, Rieter has initiated
plant closures and structural adjustments in the USA and in Spain, Germany,
Italy and France. At the end of 2008 the Rieter Group employed a workforce
of 14 183 worldwide, some 9% less than at the end of the previous year.
Rieter also terminated the employment contracts of some 1 500 temporary
employees; these jobs are not included in the workforce totals stated above.
Rieter therefore already reduced employee numbers by more than 2 800 in
2008, equivalent to some 16% of the total workforce. With its restructuring
programs and transfers of manufacturing facilities Rieter is not only responding
to the structural changes in both sectors, but is also reacting to the
cyclical downturn. The cost-cutting action is being complemented by price
discipline and selective increases in product prices in order to compensate
for cost inflation.
Net
result
In
addition to cyclical effects, the disruptions on the financial markets
also exerted a strong influence on the development in net result. Following
many years of good performance, Rieter posted negative financial results
in the year under review. Together with special charges this resulted in
a net loss of 396.7 million CHF (net profit of 211.5 million CHF in 2007).
Dividend
canceled
Rieter
Holding Ltd. has reported profits and paid substantial dividends to its
shareholders by way of participation in the company’s success from its
incorporation in 1985 until the 2007 financial year. In light of the difficult
earnings situation at both divisions and the subdued outlook for the current
year the Board of Directors will propose to the Annual General Meeting
of Rieter Holding Ltd. on April 29, 2009, that no dividend should be paid
for the 2008 financial year (15.00 CHF in 2007), in the interests of preserving
capital. Instead of a dividend this year, shareholders will receive options
for purchasing Rieter registered shares. They will be financed by contingent
share capital of up to 396‘312 shares – corresponding to max. 9.2% of ordinary
share capital. No AGM resolution is required for this shareholder-friendly
measure. The Board of Directors will announce the respective conditions
(term, strike price) at a later date. |