Machines weaken, but components, after sales and land sales make Rieter's 2023 financial year successful

Sales by business group

The Business Group Machines & Systems recorded sales of CHF 965.0 million, a decrease of 7% compared to the previous year (2022: CHF 1 034.7 million). In the Business Group Components, sales fell to CHF 266.2 million, down 12% from the prior year period (2022: CHF 303.5 million). The Business Group After Sales recorded sales of CHF 187.4 million, 9% higher than the previous year (2022: CHF 172.7 million).

Order intake

In line with expectations, the order intake of CHF 541.8 million in 2023 was considerably below the previous year (2022: CHF 1 157.3 million). As already reported, the market situation is characterized by investment restraint due to geopolitical uncertainties, higher financing costs and consumer reticence in important markets. Rieter recorded higher demand in the second half of 2023. However, project commitments have not yet materialized.

Order backlog

At the end of 2023, the company had an order backlog of about CHF 650 million (December 31, 2022: CHF 1 540 million).

EBIT, net profit and free cash flow

Profit at the EBIT level in the year under review was CHF 101.7 million (2022: CHF 32.2 million), which represents an EBIT margin of 7.2%. This significant improvement was mainly due to falling logistics costs, higher margins on the order backlog and lower production costs. EBIT also includes the non-recurring profit of CHF 72.5 million from the sale of land in Winterthur, as well as restructuring costs and impairment losses of CHF -54.6 million, primarily attributable to the “Next Level” performance program.

Rieter closed the 2023 financial year with a net profit of CHF 74.0 million (2022: CHF 12.1 million). This represents an increase of 512% compared to the previous year.

Free cash flow amounted to CHF 118.7 million (2022: CHF -98.6 million), mainly due to proceeds from the sale of land in Winterthur (CHF 89.1 million) and operating performance. Thanks to this positive free cash flow, net debt was significantly reduced to CHF 191.2 million (2022: CHF 285.6 million). As of December 31, 2023, Rieter had liquid funds of CHF 135.9 million (2022: CHF 176.1 million).

The equity ratio as of December 31, 2023, was 28.8%, mainly due to the reduced working capital and lower financial debt (previous year’s reporting date 23.4%).

“Next Level” performance program on track

Rieter is working diligently to implement the measures set out in the “Next Level” performance program. This includes strengthening sales excellence, sharpening customer focus, and improving efficiency and quality in production. Rieter is also pursuing growth in the after sales and components business in order to achieve a more balanced mix between the business groups. At the same time, the transfer of resources and responsibilities to India and China is intended to enable the key markets to be more agile in responding to customer needs and cycles in the machinery business.

Overhead structures were optimized, and production capacities were adjusted substantially in the 2023 financial year. The closure of the Ingolstadt site was almost complete by the end of the reporting year.

Innovation program

At ITMA 2023 in Milan (Italy) and in Shanghai (China), Rieter presented solutions in the areas of digitization, automation and the circular economy. The new air-jet spinning machine J 70 made its debut at ITMA and met with great interest from customers. In the 2023 financial year, Rieter invested around CHF 76.8 million or around 5.4% of Group sales in research and development.

New Campus in Winterthur

The sale process for the Rieter site in Winterthur (Switzerland) was successfully completed. The land, with a total area of approximately 75 000 m2, was sold to Allreal Group for CHF 96 million.

Rieter will move into the Campus as its new corporate headquarters in Winterthur in summer 2024. The company is concentrating its expertise in this innovation hub, which houses the most modern Spin Center of its kind. The focus of development is on automation, digitization and artificial intelligence, in order to allow Rieter customers to fully exploit the potential of their spinning mills.

Dividend

The Board of Directors proposes to the shareholders the distribution of a dividend of CHF 3.00 per share for 2023. This corresponds to a payout ratio of 18.2%. In view of the net debt of CHF 191.2 million and the equity ratio of 28.8%, the motion of the Board of Directors for the appropriation of retained earnings is in line with Rieter's responsible dividend policy, which is based on a solid balance sheet structure.

Sustainability

For the first time, the topic of sustainability is an integral part of the 2023 Annual Report. The report on non-financial matters highlights the progress Rieter has made in addressing environmental, social and corporate governance issues.

Further significant progress was made, especially in relation to the environmental goals in the “Planet” area, including greenhouse gas emissions, waste and recycling. In the “People” area, Rieter recorded improvements in social sustainability by increasing the proportion of women in management and in occupational safety.

Board of Directors and Annual General Meeting

At the 132nd Annual General Meeting held on April 20, 2023, the shareholders approved all motions proposed by the Board of Directors. The Chairman of the Board, Bernhard Jucker, and the Directors, Hans-Peter Schwald, Peter Spuhler, Roger Baillod, Carl Illi, Sarah Kreienbühl and Daniel Grieder were confirmed for a further one-year term of office. Thomas Oetterli was newly elected to the Board of Directors for a term of office. The members of the Remuneration Committee who were standing for election – Hans-Peter Schwald, Bernhard Jucker and Sarah Kreienbühl – were likewise re-elected for a one-year term of office.

Outlook 2024 with sales of around CHF 1 billion

Markets remain under pressure from the economic slowdown, high inflation rates and noticeably dampened consumer sentiment. Customers are reluctant to place orders due to financing challenges. The first signs of a recovery in the 2024 financial year have emerged in the key markets of China and India. Rieter expects demand to increase in the coming months.

For the full year 2024, Rieter anticipates sales in the region of CHF 1 billion and a positive EBIT margin of up to 4%.