From the Sector

During the second quarter of 2023, the orders index for textile machinery, as compiled by the Economics Department of ACIMIT, the Association of Italian Textile Machinery Manufacturers, dropped significantly compared to 2022 April – June 2022 period (-30%). In absolute terms, the index stood at 85.1 points (basis 2015=100).

This drop is the result of a reduction in the collection of new orders recorded by manufacturers both domestically and on foreign markets. The decrease in orders in Italy amounted to 21%, whereas a 31% downtrend was observed abroad. The absolute value of the index on foreign markets settled at 81.9 points, while in Italy it stands at 117.2 points. New orders for the second quarter amounted to 4.1 months of guaranteed production. ACIMIT’s data also shows that the use of production capacity by Italian manufacturers was 70% for the first half of 2023. This percentage is expected to remain stable for the second half of the year.

ACIMIT president Marco Salvadè stated that, “The orders index for the second quarter elaborated by our Economics Department clearly shows a decline in new orders both in Italy and abroad compared to the previous year. The decline that usually precedes an event such as ITMA, the international textile machinery exhibition held last June in Milan, however, is part of a negative trend that has been going on for several quarters”.

Uncertainty appears to be weighing heavily especially on markets abroad, where foreign trade statistics updated to the first quarter of 2023 are marked by a slackening in Italian sales in some important reference markets, such as Turkey, China, the United States and Pakistan.

Salvadè added that, “Feedback from over 400 Italian companies that took part in ITMA is positive. It’s now necessary for the many contacts made during the event to materialize and for the demand for machinery in the main textile machinery markets to resume a path towards growth.”

‘Best of Bangladesh’ -- the first ever sole ‘Made in Bangladesh’ show in Europe -- aims to open the doors for Europe to experience what the Bangladeshi industries has to offer.

As Bangladesh celebrates five decades of strong ties with Europe, in order to further strengthen the ties and deepen collaborations with the partners across Europe, Bangladesh Apparel Exchange, supported by the Bangladesh Embassy in the Netherlands, is organizing the event in Amsterdam, Netherlands on September 4th and 5th, 2023.

The ‘Best of Bangladesh’ aims to serve as a dynamic platform to showcase the progress and potential across diverse sectors of Bangladesh economy, especially manufacturing.

A total of 40 Bangladeshi companies each of which is the country’s best from apparel, textile, leather, Agro, jute, handicrafts, pharmaceutical, light engineering, digital industry, FMCG and bicycle will showcase their sustainable and innovative products in the Best of Bangladesh.  

Bangladesh economy ranks as the world’s 37th largest now and it’s rapidly-expanding. The ‘Best of Bangladesh’ is being organized to accelerate interests and burgeoning engagements between the entrepreneurs and private sector entities on both European and Bangladeshi sides. The event has been structured to serve as a platform to showcase the multifaceted progress made and potential across diverse sectors of Bangladesh’s economy.

There will be an inaugural and 7 interactive panel sessions at the Best of Bangladesh on the topics ‘Bangladesh – Perspectives From An Emerging Economy’, ‘Bangladesh - Your Sustainable Sourcing Destination’, ‘Empowering the Future: Advancing Safety & Well-being for Garments Workforce in Bangladesh’, ‘Bangladesh Agro-Food: A Next Opportunity for Collaboration’, ‘Impact Investing - The Next Frontier’, ‘Sustainable Synergy: Circular Economy, Climate Action & Bangladesh’s Future’, and ‘Digitization and Digital Economy in Bangladesh’.

In the first half of 2023, Rieter recorded a significant increase in sales of 22.2% to CHF 758.2 million, despite some cancellations or postponements of deliveries as a result of the earthquake in Türkiye. Cyclical market downturns in the individual market segments, which were already apparent in the second half of 2022, led to an order intake of CHF 325.0 million (-62.6%) in the reporting period, lower than in the corresponding period of the previous year.

Order intake in almost all regions was characterized by the reluctance to invest in new machines. Only in China did order intake increase due to investments by spinning mills in improving their local competitiveness. In addition, some customers held back pending investment decisions and waited for the innovations presented at ITMA in Milan in June 2023. At the same time, demand for consumables, wear & tear and spare parts declined due to the global market downturn.

On June 30, 2023, the company had a high order backlog of around CHF 1 100 million (June 30, 2022: around CHF 2 100 million). This therefore extends into the year 2024. As in the previous year, cancellations in the reporting period were around 5% of the order backlog, also impacted by the effects of the severe earthquake in Türkiye.

In the first half of 2023, Rieter posted a profit of CHF 25.2 million at the EBIT level, with an EBIT margin of 3.3% (first half of 2022: loss of CHF -10.2 million) and a net profit of CHF 13.3 million (first half of 2022: loss of CHF -25.2 million).

“Next Level” performance program planned
The challenging market situation over the past two years was marked by severe disruptions in the global supply chain in conjunction with rising material, energy, labor, and production costs. The current global demand for textile products remains at a low level. To increase long-term value for customers, employees, and shareholders, Rieter, as technology leader, is planning a performance program called “Next Level”. The goal of the program is to strengthen sales excellence, sharpen customer focus, improve cost efficiency in production and optimize fixed cost structures. The one-time cost of the program is anticipated to be around CHF 45 to 50 million, which will have an impact on the second half of 2023. Most of the program initiatives will be implemented before the end of 2023 with a view to achieving an expected impact from as early as 2024. With these measures Rieter is aiming to reduce operating costs by some CHF 80 million per year.

The program includes provisions for the net reduction of around 300 positions throughout the Group in relation to overhead functions. The possibility of further market- and volume-related adjustments in the order of 400 to 600 positions cannot be excluded. At the end of June 2023, Rieter had a global workforce of 5 555 employees.

Outlook
Given the economic situation and the ongoing cyclical market weakness, Rieter continues to expect below-average demand for new equipment in the coming months. A revival is not expected until the fourth quarter of 2023 at the earliest. Rieter also believes that demand for consumables, wear & tear and spare parts will not recover until later in 2023.

For the full year 2023, Rieter expects an EBIT margin of around 5 to 7% (including positive special effects of less than 2%) and sales at the previous year’s level of around CHF 1.5 billion.