Rieter Holding AG

Ladies and gentlemen, welcome to the Semi-Annual Report Media and Analyst Conference Call. I'm Sascha, the Caller's Call Operator. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Dr. Norbert Klappa. Please go ahead, sir.

Thank you very much. Good morning to all of you. Thanks a lot for being with us today for the presentation of the Half-Year Results 2021. I jump right into the presentation to page two, the key messages, which you saw in our press release already. Order intake of $975 million as announced earlier. Sales, we booked $400 million in the first half year. The EBIT was at a level of $9 million and the net profit at a level of $5.3 million. We will give you an update on strategy implementation and crisis management today and obviously also an outlook. Let's move on to page number three where we have the order intake by business group. Now we see this amazing development in our business group machines and systems. And the key drivers for this development are a catch-up effect. In 2019 and 2020, there were low investments in our industry. And at the moment, the industry is catching up on that. And there is one more thing which is important. This is a regional shift of demand which has to do with China, in particular with the cost development in the country. Customers invest more outside China, and customers in China invest in new technology to stay competitive. Two developments which are good for return. I can illustrate this by the hit list of the countries, the country ranking in the first half year in terms of order intake. On top of the list is Turkey, followed by Pakistan, then comes China and India, and Uzbekistan. I must not forget to mention Latin America, which was exceptionally good in the first half year. Let's move on to sales by business group on page four. Sales, 400 million, which is, of course, a lot better than last year, first half year 2021. You see here the development. It's still impacted, of course, by the low order intake in the machines and systems business of last year. The growth rates we have mentioned in the press release. What I would like to add here is that you see the nice development in components and after sales, which is a result of the spinning mills. which are working under a high capacity utilization as opposed to what we had last year. Let's move on to page five, sales development by region. Of course, this does not reflect what the dynamic we saw in the order intake in the first half year. However, also in sales, you can see the pattern which we experience in the market at the moment. You see a very nice number from China. You see the market recovery in India, and you see the market recovery also in the Asian countries. I mentioned Vietnam. I mentioned Pakistan. I mentioned Uzbekistan already. What we don't see in sales here is the recovery in Turkey, which happened in the order intake in the first half year, not yet in sales. We will see sales going up in Turkey in the coming months. So this is the comments and the observations I wanted to share with you on order intake and sales. And now I hand over to Kurt for the financial highlights. Thank you, Norbert.

Good morning and welcome also from my side. And let me start on slide six with the financial highlights. You heard it already from Norbert. Order intake of the first half year was at $975 million. Sales significantly increased by more than 57% compared to previous year period to 400 million. However, as expected, they were still impacted by the low order intake of the financial year 2020. Order backlog is at a very high level of more than 1.1 billion. Gross profit also developed very nicely from 64 million to 125 million or from 25.1% to 31.1%. This increase was driven by 37 million from the higher volume and 31 million due to increased margins. The free cash flow improved pleasantly compared to the first half year 2021 from minus 95 million to plus 53 million. Besides the strongly improved cash flow from business, the disciplined spending for CapEx and the high inflow of customer advance payments from the strong order intake added to this development. Therefore, net liquidity improved to 99 million and liquid funds remained stable at 280 million compared to both, last June and last December closing. I'm on slide seven now, earnings before interest and taxes. As the waterfall chart on page seven shows clearly, the main driver for the EBIT improvement from minus 55 million to plus nine million was the higher gross margin due to the volume increase. A one-off effect associated with the reversal of allowance for machinery that was delivered in the first half of 2021 contributed 8 million to this development. R&D and SG&A expenses were in total 10 million higher than last year. Besides some positive COVID-19 effects lowering the expenses last year, this increase includes volume-driven expenses like warranty costs, accruals for variable salaries, etc. Other income includes a reversal of provision due to a court ruling in favor of Reiter amounting to 4.1 million. This positive one-off effect was compensated by other negative one-off effects of similar size, also included under other expenses. Water expenses were lower since last year's number includes restructuring expenses of more than $7 million. And I move on to slide 8, the balance sheet. There are five noteworthy points I want to highlight in the balance sheet. Liquid funds remained, as I said before, on last year's high level of $280 million. Net liquidity increased, as mentioned before too, by 57 million to 99 million due to the high free cash flow. As in the year before, we managed net working capital to be negative. That means that inventory and receivables could be fully financed by trade liabilities and customer advance payments. A good share of these advance payments is related to orders that are expected to be delivered in the second half year 2021. Therefore, we anticipate that this position will be reduced in the coming months when order intake is normalizing. Therefore, we plan for net working capital to increase. The high free cash flow was used to repay short-term bank loans which are included under current financial debt. And finally, the balance sheet was strengthened in the first half year by additional 26 million to 377 million. The equity ratio slightly decreased by 1.1 percentage points. Overall, Reuters' balance sheet is very solid and well prepared for the upcoming challenges. With this, I give the word back to Norbert.