Following the investment program for the year 2012-13 and the resulting enhancement of its global presence, Rieter is setting new priorities in the implementation of its strategy. Its priorities for the next three years will be to further reinforce its innovative capabilities and expand its product and service offering, especially in parts and components. The company will also optimise the usage of existing capacity, improve product margins and reduce structural costs.
Rieter, intending to grow faster than the market, will be in a position to continue to derive above-average benefit from the market trend in demand towards products featuring higher levels of automation, productivity and energy-efficiency.
Mid-term financial targets
Rieter, will also at the same time, create shareholder value with its medium-term profitability target of an EBIT margin of about 10 per cent of its sales and a RONA (Return On Net Assets) of about 14 per cent. With a 2-3 per cent annual growth in fibre consumption and with the current raw material prices and existing product and service portfolio, Rieter believes it can achieve a profitability target in the medium term with a sale of about 1.3 billion CHF. The company intends to distribute 30 per cent of its net profits as dividends.
Market environment and outlook
Spinning mills’ narrowing margins due to declining raw material and yarn prices in the third quarter have resulted in a slowdown in market momentum, especially in Turkey, the Asian countries (without China and India) and Latin America. The slightly positive momentum in India was maintained in the third quarter, while the restraint in China continued. The low utilization of spinning mill capacity has also resulted in reduced demand for its spare parts. In this more challenging market environment Rieter recorded an order intake of over 900 million CHF till the end of the third quarter.
Operational profitability (EBIT) in 2014 will be positively impacted by volume growth, whereas additional costs of 10 million CHF for conclusions of the IT-assisted processes project, low airjet capacity utilization and lower order backlog margins than in the second half of 2013 are expected to have an adverse impact in the second half of 2014 also. Overall, Rieter expects a higher operating result (EBIT) in 2014 than the previous year.