Rieter Holding AG

Good morning. Ladies and gentlemen, also a warm welcome from my side. First, let me start by briefly giving you an overview of what happened in the first half of 2024. The cover slide is still the same like in March. It shows our air jet spinning machine J-70. We unveiled the J70 last year at the industry's largest fair, ITMA, in Milan. In June 2024, we then announced that we will install the world's first ever complete air jet spinning system with J70 technology at Guangxi Baisheng Textile Company in China. So, the future is no longer a plan, but it has become reality. This sale also reflects the strength of our product portfolio, which is designed around automation, digitization, and recycling. In the fiercely competitive markets in which we operate, this meets a key need of our customers. Customer interest at the ITM exhibition in Istanbul in June 2024 confirmed our innovation approach. RoboSpin, our automatic piecing robot, was the centerpiece of our exhibition and was sold for the first time on the Turkish market. In further confirmation of our innovation strategy, we just received a follow-up order for our winding machines from DIW, one of the biggest spinners in China. This contract follows on from a previous order in March 2024 for draw frames and combers. The cooperation is part of a broader agreement to develop state-of-the-art spinning operations and achieve unprecedented levels of quality, productivity, and efficiency. This takes me to my next point, our campus. We have just moved into our new headquarters, which is designed to further sharpen our customer centricity. Our campus is a powerful innovation hub that houses the industry's most advanced spin center. This is where we pool all our expertise so we can better cater to our customers' needs and accelerate their success. We invite you to tour our campus at our upcoming Capital Market Day in October 2024. You will be able to see for yourself the open collaboration and community zones and a state-of-the-art spin center. Before I dive into the presentation, let me also say a word about our next level performance program, which we launched one year ago. It was a tough year for our employees, but they carried out this program very professionally. It is thanks to their relentless implementation that we find ourselves in a good cost position, which allows us to perform sustainably also in low market scenarios like this year, 2024. We now move to slide number four, the key messages. I will focus on order intake, our performance program next level, the current market situation, our campus and order backlog. And I will also give a high level overview of sales. Oliver will then walk you through the details on the financials. This includes a deep dive into sales, EBIT, free cash flow, and net profit. But now let's have a look on order intake. In line with expectations, the order intake was 403.4 million Swiss francs in the first half of 2024, which was 24% higher than the previous year. The increase in demand for new machines in the business group machines and systems contributed to this positive development. Orders came mainly from China, from India, and from Turkey. At the same time, demand for consumables, wear and tear, and spare parts declined slightly due to the continued weak demand for textiles. A quick word on sales. Sales were 421 million Swiss francs. As expected, this was 44% lower than in the previous year. Oliver will walk you through the details, and I will say more about the next level shortly. Last one is order backlog. On June 30, 2024, we had an order backlog of around 640 million Swiss francs, which therefore remained more or less stable compared to the last year's final figures. Now let's turn to the market. Let's move to slide number six and have a look at the spinners margin and the cotton price development. The average spinners margin in 2023 was substantially lower than in the boom years of 2021 and 2022. It slowly started to improve in the first half of 2024. The average cotton price dropped in 2023 and again in the first half of 2024, which allows spinners to make profit with their mills. Many of our customers still had cotton in stock, which they had bought at high prices in 2022, so they made no profit with the yarn prices of 2023. Now, this situation has improved. Let's continue on slide number seven with the spinning mill utilization. We have seen overheated markets in the year 2021 and in the first half of 2022. At the end of 2022, China cooled down first and has started to recover in 2023. Capacity utilization in China remains unchanged. Over the last couple of months, the spinners in India have been seeing an improvement in their margin and volume generation. The rest of the world is still on a steady level. The demand for consumables, wear and tear, and spare parts will depend on spinning mill capacity utilization in the months ahead. According to our estimation, the steady increase will have a positive impact on volumes in the second half of 2024. Let's take a look at how the overall spinning market is developing on slide number eight. In the first column, you see the overall market and then where we stand as Reiter. Next, you see the market that covers the rest of the world, followed by India and China. China is clearly spearheading the market recovery. Africa and Asian countries are growing overall, while Europe, North and South America are stable. Turkey, meanwhile, is still in a recovery from the earthquakes. A standout in the rest of the world market is that Reuters' order from the Egyptian holding company is to be completed in 2024. In the declining market of Turkey, we are meeting a growing demand for RoboSpin, our automated piecing robot. In South America, we have received good new orders for new machines. Here, Reiter is ideally positioned to benefit from a recovery. Let's turn to India, one of the largest textile markets in the world that is also hyper-competitive. We are seeing an uptake in volumes for our customers, but they are still recording at a relatively low margin level. The good news is that the offer pipeline now is increasing for us. In addition, the strengthening of the local R&D setup will further underpin our sales efforts. In China, we are seeing a continued positive investment sentiment. and it remains the strongest market in the world. We are recording large orders for machines and systems and components. Here too, our local R&D setup is also an important support for our market position and helps us expand our market share. A couple of words on next level here on slide number 10. As mentioned, we are working intensively on the implementation of the next level performance program. The optimization of overhead structures and the adjustment of production capacities were successfully executed according to plan. Thanks to strict cost management, EBIT was positive despite the fact that sales were lower than forecasted in the low market scenario. The transfer of resources and responsibilities to India and China is on track, enabling these key markets to respond more effectively to customer needs and cycles in the machinery business. Realtor continues to pursue growth in the after sales and components business in order to achieve a more balanced mix between the business groups in the medium term. With this introduction, I close the first part of my presentation and now hand over to Oliver Stroylie for the financial.

Good morning, ladies and gentlemen. Welcome also from my side. I will now present to you the key elements of our financial performance in the first half year of 2024. I will start on slide 12 with the key messages. Overall, The first half of 2024 was characterized by a higher order intake, both compared to the prior year, as well as compared to the second half year of 2023, which confirmed our expectation of a market recovery in the course of 2024. In contrast, sales were remarkably lower compared to 2023, driven by a very low order intake in 2023, and amplified by a seasonally weaker first half year of 2024, especially in the machines and systems segment. Due to a better mix of after sales and component sales versus sales of machines and systems, we were able to expand the gross profit margin. Absolute gross profit amounted to 122.2 million Swiss francs, a decline of 33% versus 2023. Most remarkably, A significant overhead cost savings, largely driven by next-level measures, protected the positive EBIT of 8.9 million Swiss francs for the first half year of 2024. Net debt decreased to minus 243.9 million Swiss francs versus the prior year, on the back of a reduction in operating networking capital. Free cash flow was only slightly negative at minus 1.1 million Swiss francs. mainly driven by cash outflows due to the execution of next level measures let's continue with a deep dive on the key financial highlights on the following slides starting with order intake on page 13. order intake increased by 24 percent in the first half year of 2024 driven by more than 100 million Swiss francs higher orders for machines and systems compared to a very low base in 2023. Order intake for components and after sales was slightly lower due to still subdued demand for wear and tear and spare parts and overall significantly lower production volumes for new machines across the industry. Across the regions, we saw a continuously strong market activity in China followed by a certain recovery in India, while the rest of the world remained on low levels. This is in line with our expected sequence of market recovery, as explained earlier. Let's move on with sales on the following page. Sales for the first half year were 44% below the prior year at 421 million Swiss francs. the low market scenario in combination with a sequentially lower first half year was executed according to expectations. The drop in sales was most pronounced in the business group machines and systems by more than 60% year-on-year, while sales in the business group components came in 11% lower. In contrast, the business group after sales managed a growth of 7% against a difficult market environment. As a consequence, The growth in after sales helped to balance the high cyclicality of the new machines and systems business to some extent. Let's move to slide 15. The higher order intake combined with a low market sales scenario led to a stable order backlog. On June 30, 2024, we had an order backlog of around 640 million Swiss francs. This corresponds to a similar level at the end of 2023. Order cancellations in the first half year of 2024 remained on a normal level. However, we are still experiencing some shifts in deliveries from 2024 into the first half of 2025. The current order backlog level represents a normal level of visibility in terms of book-to-bill times of six to nine months after the extraordinarily high order backlog of 2021 and 2022. As can be seen on page 16, the EBIT margin of 2.1% against the lower than low sales scenario of 421 million Swiss francs in the first half year of 2024 is in line with our next level ambitions. Specifically, the realization of price increases in the machines and systems business in 2022 and 2023, which came into effect this year as well as a better mix of components and after-sales, led to a resilient gross profit margin. This resulted in a gross profit margin that was around 5 percentage points higher compared to the prior year. Significant cost decreases in R&D and SG&A as a result of Next Level concluded the solid operating performance in a very difficult overall environment. Let's dive into the details on EBIT on page 17. Compared to prior year EBIT, we lost 80.6 million Swiss francs gross contribution by the significantly lower sales level, most notably in business group machines and systems. A better mix, both in terms of margins and after sales and component volumes, contributed 21.5 million Swiss francs. This mitigates, to some extent, the underabsorption in our operations, driven by the significantly lower production volumes. Overhead costs for R&D and SG&A were 41.6 million Swiss francs lower than the prior year, confirming our next-level cost-saving targets. Overall, the team did a great job in executing the next-level measures, to some extent even faster than planned, and slightly overachieved in terms of cost discipline in the first half year of 2024. On the following page 18, I would like to present you a breakdown of our cash flow in the first semester of 2024. On first sight, free cash flow was slightly negative by 1.1 million Swiss francs. However, broken down into the individual elements, it becomes evident that our sales, operations, and supply chain departments improved cash generation via a reduction of operating networking capital in the first half of the year by around 35 million CHF. CapEx, in contrast, was spent restrictively, which led to an adjusted pre-cash flow of around 50 million CHF for illustration purposes. We had a significant one-off item in the first half year of 2024. As expected, which should be looked at in contrast to the solid operating performance. Specifically, we executed the expected cash out of restructuring measures amounting to 23.1 million, most notably in relation to the closure of the Ingolstadt site. On page 19, we see the summary of our most important balance sheet items compared to the financial closing of 2023. Networking capital overall increased versus the end of last year, driven by other networking capital, most notably the execution of next level measures. Net debt increased by 52.7 million Swiss francs due to the dividend cash out of 13.5 million Swiss francs and higher leasing liabilities in the amount of 35.9 million Swiss francs in relation to our new spin center and headquarters at the Riota campus. our equity ratio increased by 3.1 percentage points to 31.9% due to favorable non-operating currency impact in our balance sheet. I conclude with the workforce overview on page 20. As a consequence of painful but strict capacity adjustments and the next level execution due to the low market scenario, we reduced our overall workforce by almost one quarter compared to the prior year going forward we do not plan any more structural measures and expect to manage the flexing of our capacity with temporary personnel and other supply chain optimization initiatives that's it on the financials back to you thomas for the outlook thank you very much oliver

Well, the markets remained under pressure from the economic slowdown, the high inflation rates and noticeably dampened consumer sentiment. The first signs of recovery in financial year 2024 have emerged in the key markets of China and India. And the realtor expects demand to pick up further in the coming months. For the full year 2024, Reiter anticipates sales in the range of 900 million to 1 billion Swiss francs and a positive EBIT margin of 2 to 4%. And now we are open for questions from your side.