Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Order intake increased by 24% in the first half of 2024, reaching CHF403.4 million.
- Rieter Holding AG (XSWX:RIEN, Financial) successfully launched the J70 air-jet spinning machine and secured significant orders from China.
- The company moved into a new headquarters designed to enhance customer centricity and innovation.
- The Next Level performance program led to significant overhead cost savings and a positive EBIT of CHF8.9 million.
- Net debt decreased to minus CHF243.9 million due to a reduction in operating working capital.
Negative Points
- Sales dropped by 44% compared to the previous year, totaling CHF421 million.
- Demand for consumables, wear and tear, and spare parts declined slightly.
- The EBIT margin was only 2.1%, reflecting the challenges of a low-market scenario.
- The company experienced some shifts in deliveries from 2024 into the first half of 2025, affecting order backlog stability.
- R&D expenses were substantially lower, raising concerns about future innovation capabilities.
Q & A Highlights
Q: On the sales guidance, you previously mentioned around CHF1 billion, but now it's CHF900 million to CHF1 billion. What has changed since March?
A: (Thomas Oetterli, CEO) The adjustment reflects the uncertainty in the second half of 2024. We achieved CHF420 million in the first half, and the second half could range between CHF480 million to CHF580 million. The variance depends on the finalization of some larger projects, which may shift into early 2025.
Q: Regarding the EBIT margin, if sales land at CHF900 million, will the EBIT margin be 2%, and if closer to CHF1 billion, will it be 4%?
A: (Oliver Streuli, CFO) Yes, that's a fair assumption. The EBIT margin is sensitive to volume. A stronger second half should reflect a higher EBIT margin, aligning with our baseline scenario.
Q: Can you provide details on the follow-up orders from DIW?
A: (Thomas Oetterli, CEO) The follow-up order is the highest ever for Rieter China, larger than the CHF62 million order from March. This will be booked in the second half of 2024, with execution mainly in 2025 and partially in 2026.
Q: On the margin development of different divisions, after sales margins were above 20%, while components were low. Are these new normal levels?
A: (Oliver Streuli, CFO) After sales margins should remain stable if volumes continue. The low margin in components is due to a significant drop in internal business volumes. We expect normalization as volumes recover.
Q: Can we expect a similar development in individual divisions in the second half of the year as in the first half, also in terms of margins?
A: (Thomas Oetterli, CEO) We expect higher sales volumes in the second half, which should improve gross margins and EBIT margins. The improvement will come from new machines, systems, and components, while after sales are already at a high level.
Q: Do you expect an improvement in order intake in the second half of the year compared to the first half?
A: (Thomas Oetterli, CEO) Yes, we expect order intake to increase, driven by strong activity in China, a recovering market in India, and a good offer pipeline in the rest of the world.
Q: Can you specify the markets where you see order delivery shifts from 2024 to the first half of 2025?
A: (Oliver Streuli, CFO) The shifts are mainly in the rest of the world due to weak textile demand. This has a higher impact due to a lower order backlog.
Q: How might potential new US tariffs under a possible Trump presidency impact Rieter's business?
A: (Thomas Oetterli, CEO) There is minimal yarn export from China to the US. We have a strong presence in the US and Latin America, and our global footprint allows us to adapt to political changes. We are well-positioned to handle any potential tariffs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
