Rieter Holding AG

Good morning, ladies and gentlemen. Welcome to Rita's Results press conference. Thank you all for joining us today. My name is Relinda Svisa. I'm the head of group communication and marketing. Thomas Oetterle, our CEO, will take over the first part of the presentation. He will then hand over to our CFO, Oliver Streule, for the financials. The presentation will be followed by a Q&A session. Webcast viewers may submit their questions in writing. As always, the speeches are recorded. Let's start with the first presentation. Thomas, the stage is yours.

Thank you, Relindis. Good morning, bonjour, grüezi miteinander, benassiva, buongiorno. Dear ladies and gentlemen, also a warm welcome from my side. 2024 was another tough year for the textile industry. In challenging times like these, it is even more important to stay focused and deliver excellence in execution. If you do this and have the right actions in place, you will outperform competition. Thanks to the enormous efforts of our teams all over the world, Reiter achieved a solid financial performance, increased its market position and drove technology leadership. I'm very proud of the Reiter team worldwide and thank all my colleagues. Let's look at the agenda. We will briefly look at the key messages, review the market and take a closer look at our strategy execution. I will then hand over to Oliver for a deep dive into the financials. Let's start with the key messages on slide number four. I will give a high level overview of order intake, sales and EBIT. Oliver will then walk you through the details on sales, EBIT, free cash flow and net profit. Let me start with the green boxes. Order intake. One of the highlights in 2024 was that order intake increased remarkably by 34%, reaching 725.5 million Swiss francs. The final quarter of 2024 was the fourth consecutive quarter of a year-on-year growth. Sales. As expected, we closed the financial year 2024 with lower sales of 859.1 million Swiss francs and thus remained 39% below the prior year. And finally EBIT, as a result of the disciplined execution of our next level performance program, we were able to achieve a solid operating result or EBIT of 28 million Swiss francs or 3.3% as a percentage of sales. On the blue boxes, since January 2025, we have strengthened our leadership team with two new hires. I will introduce them shortly. The market environment is persistently difficult, but we are seeing initial signs of recovery in some key markets. I will come back to this in a few minutes. What is particularly noteworthy is that we were able to improve our competitive position in a weak market. This was further highlighted by the increased hit rate in our machines and system business. Finally, let's turn to the gray boxes. We are hitting our stride in sustainability, which is firmly anchored in our corporate strategy. In 2024, we were able to increase the share in renewable energy to 28.6%. Females in management. This was one of my biggest priorities when I first joined. We were able to increase the share of women in management to 15.3%. Yes, this is still short of our 20% target in 2025, but we are beating now industry average. And finally, occupational accidents. Our goal here at Rieter is zero harm. We have been able to improve our occupational accidents per million hours worked to 3.3%. This is definitely better than last year, but still too high. We now move to our leadership team on slide number five. Let me briefly introduce our new hires. Alexander heads up our after sales division. He has a broad global experience in sales management and the after-sales business from major industrial companies and brings a fresh perspective to our high-margin after-sales business. Emmanuel is an experienced global HR leader with long-standing textile experience at one of the industry's greatest brands. With her leading our people initiatives, we will be able to build high-performing company culture that will prepare us for the future. And now let's move to the market. Let's look at key indicators on slide number seven. Yes, it is true that consumer sentiment could be better. But this slide also shows plainly that people are still shopping. Retail sales in all major regions of the world were up in 2024 and continue to gather momentum going into 2025. Our customer base, spinning mills, are doing financially slightly better after a difficult year in 2023. At the moment, there is still hesitation to invest into new machinery, but we are seeing initial signs of a market recovery. Maybe a word on spinners' margin. The spinners' margin is naturally very slim. Raw material costs make up around 65%. Energy around 15% and labor costs around 10%. This shows that automation and resource efficient technologies like ours are instrumental in helping spinners further improve their margins. And now a deep dive into the market situation on slide number nine. Asia continues to spearhead this recovery. So let's start with the rest of the world. We see growth in Africa and key Asian countries, while markets in Europe, North and South America remain flat. Let me spotlight three countries or regions. Turkey, the overall market remains flat. But we see that our automation solutions are in high demand in Turkey, where the labor situation deteriorated dramatically after the tragic earthquakes in 2023. South America. Here, too, overall markets are flat, but we have seen good new order intake for our machines. This is the result of the reshaping of supply chains and nearshoring in the Americas. And finally, Africa. This is one of my biggest highlights in 2024, as we signed a strategic framework agreement with ARISE, an operator of industrial parks, and Africa's export-import bank, Afrexim Bank, to revitalize Africa's textile industry through the Africa Textile Renaissance Plan, especially in the sub-Saharan zone. Let's move to India. In India, we clearly see an increased offer pipeline, which should potentially turn into order intake down the road, also fueled by government initiatives. As part of the next level performance program, we are successfully implementing product power hubs that are helping us move closer to customers and react more swiftly to changing market demands. And finally, the market in China. China is our strongest market. This remains unchanged. our strengthened local organization is translating into improved go-to-market initiatives. Chinese customers continue to expand also into other Asian countries where we are historically very strong. So the positive investment sentiment in this market persists. Now let's turn to strategy execution. On to our strategy house on the slide number 11. I will focus on three elements of innovative solutions where we have a competitive advantage. Technology leadership, customer service, and automation and digitization. First, technology leadership. This helps us expand our market leadership with new machines and system sales. One of our flagship innovations is our card, C81, which stands out for two reasons. First, it offers the largest carding area on the market, which makes it more productive and therefore more cost effective. Second, the machine uses artificial intelligence to provide excellent quality at highest production. The features are carding gap control and threshold level monitoring. We have tested it against competitor machines. The result was 20% higher productivity, 30% better yarn quality and finally less waste, which is not only good for our customers, but also for the planet. Let me give you a brief update on our AirJet spinning machine, J70, which I presented a year ago. Since its release into the market, initial feedback has been very positive. I am particularly proud that we signed an agreement to install the world's first complete spinning system using our J70 technology at Guangzhou by Shen Textile Company in China. Second topic, customer service. Customer service is at the heart of our strategy, and we are pulling all stops to bring about a step change here. We put the focus in 2025 on speed of delivery, which is critical for our customers with a more decentralized structure. When a machine cannot run, this means an entire production line cannot run. The cost of not producing is much, much higher than the cost of spare parts. So the closer we are to customers, the faster we deliver parts and services, the less price sensitive customers are. Essential Order is our new e-commerce platform which features more than 15 million spare parts with a personalized ordering experience. The third topic is automation and digitization. It is clear that to lead the industry, this is where we need to be strong. Just like the rest of the manufacturing industry, the spinning industry is struggling as a result of labor shortages and shifting labor markets. We are therefore introducing key artificial intelligence applications across our product lines to improve productivity and performance. I already discussed our CART C81, so let me briefly spotlight RoboSpin. We are improving RoboSpin with artificial intelligence technology to further enhance efficiency. The demand for this automation technology is growing persistently. And last but not least, we have completed a concept study of the labor-free milk. Within the next two years, we will move forward to implement and offer all these automation solutions for our customers. So let's turn to R&D on slide number 13. Investments into research and development in the financial year 2024 were 50 million Swiss francs. which amounts to around 5.8% of sales. We successfully and sustainably adapted our cost footprint without losing our innovation edge. As part of the next level program, we have increased collaboration with third-party R&D providers so we can gain access to an extended external workbench. This concludes my part of the presentation, and I will hand over to Oliver Streuli for the financials.

Please, Oliver. Thank you, Thomas. Good morning, ladies and gentlemen. Welcome also from my side. I will now present the key elements of our financial performance for the full year 2024 to you. Let me start with the key message on slide 15. 2024 was a success in terms of order intake, despite the continuously challenging market environment. For a fourth quarter in a row, we were able to increase our order intake versus the same period the year before, leading to an overall increase of 34% versus 2023 to 726 million Swiss francs for the full year 2024. In contrast, sales were 39% lower compared to 2023 at 859 million Swiss francs. The result of a very low order intake in 2023 and amplified by a slower than expected market recovery for components and spare parts, especially in the second half of the year. Thanks to the disciplined execution of our cost measures, especially in overhead costs, we were able to compensate for some of the sales decrease and safeguard an EBIT of 28 million Swiss francs. This represents an EBIT margin of 3.3%, including restructuring costs of 0.6% EBIT margin. Free cash flow came in at 14 million Swiss francs, despite heavy cash outflows from the execution of next-level measures. Net debt increased versus prior year despite the positive free cash flow, mainly due to recognition of a lease liability for the newer Jeter Compos in Winterthur. Despite the extraordinarily low sales volume, we suggest to our shareholders to pay out a dividend of 2 CHF per share, which represents a payout ratio of 86% of net profit. Let us continue with a deep dive in the following slides, starting with order intake on slide 16. Order intake increased by 34% driven by machines and systems, but also against an exceptionally low base in 2023. The components division recorded a slight decrease in order intake due to lower demand for components for new machinery equipment. while the after-sales division achieved a slight increase in order intake, predominantly driven by increased demand for engineered solutions, such as our automated piecing robot RoboSpin. Across the regions, we saw a continuously strong market activity in China, followed by a certain recovery in India, and especially in South America in half year two, while the rest of the world remained on still muted levels. Let us move on with sales on slide 17. Sales for the full year were 39% below prior year at 859 million CHF. The drop in sales in local currency was most pronounced in machines and systems at minus 56% year-on-year, while sales in the components division came in 6% lower. On the positive, aftersales managed a slight growth of 3% in local currency against a difficult market. Let us continue with the order backlog on slide 18. Order backlog at year end 2024 stood at around 530 million CHF, covering roughly half of a low market scenario sales level. The current level of the order book represents a low, but not unusual situation after a prolonged market downturn when comparing it with long-term historical figures. As can be seen on slide 19, we were able to defend our EBIT margin despite a significant sales drop of 39%. Specifically, The lower sales level led to a negative gross profit volume effect of 152 million Swiss francs compared to 2023. A better gross profit mix due to a 50-50 sales split between machines and systems versus components and after sales, as well as cost savings in the amount of more than 58 million Swiss francs in R&D and overhead spend enabled an EBIT of 28 million Swiss francs or 3.3%. Related restructuring expenses amount to 5.8 million Swiss francs, as can be seen on the chart on the right hand side. This means that on a comparable basis, we achieved an EBIT margin before restructuring and impairment of 3.9% versus 6.1% in 2023, which is at the upper end of our next level EBIT margin ambition in a low market scenario. Cash is king for Reiter, so let's move to slide number 20. Despite various headwinds, we achieved a positive free cash flow of 14 million Swiss francs, which is a key focus. The main negative cash outflows were related to the execution of the performance program Next Level. where restructuring actions were executed, which led to subsequent cash outflows in the amount of around 30 million Swiss francs against the restructuring provisions booked as costs in the year 2023, as can be seen on the left-hand side. Let's deep dive into networking capital on the right-hand side, which reveals that we significantly improved on key operational balance sheet items. Specifically, we reduced receivables in the amount of 64 million Swiss francs. We reduced inventories against an already low base in 2023 by another 40 million Swiss francs. And we improved payment terms with suppliers significantly, as evidenced by only a slight decrease in account payables, considering the substantially lower procurement volume in 2024 versus 2023. In contrast, the less operational balance sheet items of advance payments and other liabilities decreased by more than 90 million Swiss francs, having a negative cash impact due to the still muted mortgage sentiment and the consummation of restructuring provisions on the next level. Let us move to slide number 21 on capex and depreciation. We were not only disciplined on costs, but also on capex. At 25.6 million Swiss francs, capex was substantially lower compared to previous years and well below depreciation and amortization. In line with our ambition to achieve a return on net operating assets above cost of capital, we will continue to reduce our fixed asset base to become more asset-light in the medium term. On slide 22, we see the summary of our debt and equity position at year-end 2024. Despite the positive free cash flow, net debt increased due to the recognition of a lease liability in relation to our new technology campus and winter tour and M&A effects, where we booked a liability for the entire amount of the still-to-be-executed full acquisition of Prosino. To conclude this slide, we were able to further increase our equity ratio from 28.8% to 33.7%, which puts us on track to reach our strategic target of an equity ratio of more than 35%. I conclude my presentation with the dividend proposal of 2 Swiss francs per share, which we will propose to the shareholders at the upcoming Ordinary Annual General Meetings. The dividend payout is at the upper end of our financial policy, but well supported by the generated net income and free cash flow. So that's it on the financials. Back to you for the outlook, Thomas.