Following on the 2012/2013 investment program and the resulting enhancement of its global presence, Rieter is setting new priorities in the implementation of its strategy, among which includes growing faster than the market.
Rieter said it will be in a position to continue deriving above-average benefit from the market trend in demand towards products featuring higher levels of automation, productivity and energy-efficiency and thereby grow faster than the market.
The textile spinning machines manufacturer said its strategic objective of being the world’s leading supplier of short staple spinning systems offering the full range of machines, components and parts remains unchanged.
Rieter will continue in future to differentiate itself through its systems expertise, value creating innovative solutions, after sales excellence and the worldwide availability of its product and service offering.
The priorities for the next three years will be the further reinforcement of its innovative capabilities and the expansion of its product and service offering, especially in parts and components for which it has earmarked additional resources for research and development.
Alongside the Switzerland based textile machinery manufacturer, will also take action to optimise the utilisation of existing capacity, improve product margins and reduce structural costs.
At the same time Rieter will create shareholder value with its medium-term profitability target of an EBIT margin of about 10% of sales and a RONA (Return On Net Assets) of about 14%.
With ongoing annual growth in fibre consumption of 2-3%, the present currency environment, current raw material prices and its existing product and service portfolio, Rieter believes it can achieve its profitability target in the medium term with sales of around CHF 1.3 billion.
“Narrowing margins of spinning mills due to declining raw material and yarn prices in the third quarter have resulted in a slowdown in market momentum, especially in Turkey, Latin America and Asian countries, except China and India,” Rieter informed.
“The slightly positive momentum in India was maintained in the third quarter, while the restraint in China continued,” it added.
The lower overall utilization of spinning mill capacity has also resulted in reduced demand for spare and wear and tear parts. However, in this challenging market environment, Rieter recorded an order intake of slightly over 900 million CHF up to the end of the third quarter.
Rieter expects for the second half of 2014 a market demand on lower levels than in the strong first half. “Demand depends among other factors on the development of yarn and raw materials prices, currency exchange rates, financing costs, and global consumer sentiment,” it said.
Based on the current order backlog, of which a substantial share will flow into 2015, Rieter now expects full year sales in 2014 to show at least high single digit growth compared to 2013.
Rieter noted that operational profitability (EBIT) in 2014 will be positively impacted by volume growth, whereas additional costs of 10 million CHF for IT projects, low airjet capacity utilization and lower order backlog margins than in the second half of 2013 are expected to have an adverse impact also in the second half of 2014.
All in all, Rieter now expects 2014 to achieve a higher operating result (EBIT) than in 2013. (AR)