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Ladies and gentlemen, welcome to the third quarter media and analyst conference call. I'm Sandra, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Dr. Norbert Klapper. Please go ahead, sir.
Thank you very much. Good morning, ladies and gentlemen. Thank you for being with us this morning for the investors update after 9 months. I'll jump into the key messages right away on Page 2 of the presentation. The order intake in the first 9 months was at a level of CHF 525 million, impacted by a low third quarter where we only booked an order intake of CHF 146 million. The order intake for the big project from Egypt, we will book in October -- or we have already booked in October, it's an order of CHF 165 million, which we received. I guess it's the largest single order Rieter ever booked and it will, obviously, impact the fourth quarter order intake very positively. The market situation remains challenging. The demand for new machines is quite low, and there is 3 major issues, which drive the demand to that level. This is the overcapacity in the spinning business, this is the trade war between China and the United States, and it's the political and economical uncertainties that we are facing in markets, which are important to Rieter. The real estate sale in Ingolstadt has been successfully completed. I'm very happy that we were able to complete this transaction, and it led to a very nice improvement of Rieter's net liquidity. The outlook 2019, I will comment at the end of the presentation.Let me go further to Page 3. On Page 3, you see the comparison of the 9 months 2018 versus the 9 months order intake 2019 and you also see a comparison of the quarter 3 numbers, 2018 and 2019. We see the impact of the low demand for new machines, which started in late 2018. At the same time, I can report that Rieter's market share remains at the 30% level, which we also saw in the last year. So despite the difficult market situation, we do not lose market share as far as we can see. On the coming -- on the next Page #4, we have some more information about the order intake from Egypt. As I said, as far as I've seen in the Rieter history books, it is the biggest order that we have ever -- the largest order that we have ever booked. And we have booked it in October, so we don't see it in the third quarter numbers obviously. The sales related to this order intake will materialize in 2020 and 2021. The exact timing is not clear yet. We are in discussions with our Egyptian partners on how to schedule the program, and the order includes deliveries of compact and ring spinning systems, complete systems, and it is part of a comprehensive modernization program for the Egyptian textile industry, which has a very great and well-known history based on the Egyptian cotton. You might be aware of that. We are coming to Page 5 now, market situation. The market situation remains challenging. As I've said before, the demand for new machinery is at a quite low level. The reasons, we already went into this also: overcapacity in the spinning mills; the trade war -- the trade conflict between The States and the People's Republic of China; and the political and economic uncertainties in regions which are important to Rieter. Market share, I told you about that already, 30%. And if I may, I would like to go through the markets quickly. When we look into China, we see only a couple of projects on the market at the moment, driven by the overcapacity in the country and of course also driven by the trade war impact, which we see in China. A similar situation we have in India, only a few projects on the market, overcapacity also in India. In Turkey, recently, there were some more projects on the market, but based on the situation in the country, it remains volatile, I'd say. In the Asian countries, Southeast Asia, Central Asia, there is a few projects on the market, here we also see the impact of the trade war. In the Americas, there is more projects than in the last couple of years. We take this as an indication for the fact that the textile value chains are starting to move closer to the U.S. market based on the development between The States and China. In Africa, at the moment, we clearly focus on Egypt, which is quite obvious when you look at the size of the order. And the business in Europe, which is not very big for Rieter, is at normal levels. Let me come to Page #6. The real estate sale in Ingolstadt. As I said, we completed the sale as anticipated. The nonrecurring profit contribution as we already communicated will be around EUR 60 million and the net liquidity impact obviously is also very nice. I am moving on to Page #7. On Page #7, we see that the low demand for new machines affects all 3 business groups of Rieter. In Machines & Systems, with a decline of more than 40% compared to last year, the impact is the biggest one obviously. But we also see it in the Components business, with a reduction of 16% compared to last year. The businesses which are close to the new machine business, SSM and Suessen, they are also impacted by the low demand for new machines. And we also see it in our After Sales division where you might not expect it, but After Sales does the installation for the new machines that Rieter sells, and the decline in installation volume is reflected in the numbers of After Sales.And coming to the outlook on Page 8. As we said already a couple of times during the course of the year, our sales will be significantly lower than last year and this will also have an impact on the results from the ongoing business, both EBIT and net result. However, EBIT and net profit are anticipated to be significantly above the levels of the previous year due to the nonrecurring profit contribution from the sale of real estate in Ingolstadt. The cost-cutting measures, which we have announced early this year, have been implemented to a great extent. I can tell you that by the end of December, we had a workforce of 4,620, which is a reduction of more than 1,100 compared to what we had by the end of December last year.At the same time, we continue to work on turning the very high interests, which our customers showed for our innovations at ITMA, into order intake. We are still working on that and we are quite positive on it. You might remember when we announced the cost reductions, we -- it was important to us to state that 2 things must not suffer from the cost reductions. This is the pace of our innovation program and this is our ability to ramp up the business when the market comes back, and we still hold onto this principle. So far, my presentation. We would be very happy to take your questions now.
[Operator Instructions] The first question comes from the line of Armin Rechberger from ZKB.
You mentioned that you turn the outcome of ITMA now into order intake. Well, to be frank, I was disappointed about your order intake in new machine business in the light of ITMA. ITMA closed at the end of June and I expected slight improvement out of that after the ITMA. It didn't realize and now you mention you turn the outcome of ITMA into order intake. When will that be -- I mean, take away the Egypt order, the big order, what's the situation? When can we expect some positive trends from the ITMA, if?
Thank you very much, Armin, for the question. You might remember when we discussed ITMA in June, we said that we expect first order intakes this year, first sales next year and the full impact of the innovations, we will see in 2021. I still hold onto this assessment. For our customers, it takes time to plan their projects, to do the tests that are required and a couple of other things need to happen before they order new machines, and this is going on at the moment. I am still very optimistic on order intakes from ITMA. In relation to ITMA and the innovations we presented, the interest of our customers is still very high.
But you expect first output from the ITMA now in Q4.
That would be...
In order intake, I mean.
That is -- yes, I would say that. Yes.
Okay. Then you mentioned some measures introduced for cost cutting. You mentioned your workforce, but what else did you implement? And can you repeat the figures regarding workforce again?
Armin, when you do cost cutting you look into all your cost categories, obviously. But the workforce and the personnel cost is a very important one. So what I said in terms of numbers is, we had a workforce by the end of December last year of 5,745. You'll find this in our reports that we discussed with you. And by the end of September, we were at 4,620. We also did reductions from expenses and material cost and -- so this was a bigger package obviously.
Okay. But the CHF 80 million for the campus in Winterthur, they are out of question. They -- that will -- you will proceed with this project?
We will proceed with this project because it is a key element of our strategy to have a strong innovation and technology center here in Winterthur. But the situation is the following: we apply for a Baugenehmigung, for an approval by the city of Winterthur that the way we have planned the project can be implemented. That doesn't mean that we will start to do the buildings to -- to erect the buildings tomorrow. So we wait for the approval and then we decide when we start to build the buildings.
Yes. But once you have Baugenehmigung, it's very difficult to change it. I mean you have to stick to your project once you have it.
We love the project.
Okay. I have a last question, if I may, sorry. Where do you expect the markets first to see some improvement, some light at the end of the tunnel? I expect not in China, more in Turkey? Or am I wrong?
Well, that depends on what happens to the 3 things that I mentioned earlier in the call, the overcapacity, the trade war and the political and economic uncertainties. Whatever change we see regarding these 3 issues might trigger additional demand for new machines. So if we really see an end of the trade war by the end of this year, this might have an impact and the impact might be in China.
But still China suffers from a big overcapacity. I doubt that there will be a big change in this market. What do you think?
I mean that would be crystal ball. I don't know. I mean we all know that the agenda -- the industrial agenda in China is driven to a great extent by the government. So if the trade war ends, it depends what the governments want to do.
[Operator Instructions]So far, there are no more questions, sir.
No more questions? Really?
Now we have a new registration from Rolf Renders from Helvea.
I'm curious to learn what your thoughts are on your strong balance sheet and future capital allocation plans?
Well, capital allocation for Rieter, the philosophy has not changed. Number one is strong balance sheet; number two is attractive dividend; and number three is to reinvest the returns and the cash flows into the business. And we hold onto that. The strong balance sheet, we can see this year how important it is. So that is still at the highest -- at the top of the list. Attractive dividend is important because Rieter is not that much of a growth story. It's more of a value story. And the reinvestment of the capital into -- of the cash into the business, you saw us doing that already, and if the market allows for it, we will continue to do that.
All right. And you mean with, you saw us do that already, do you refer to the SSM acquisition or...
Yes, for example.
Yes, and we are now a bit more than 2 years after that. So how would you quantify the shareholder returns for that deal?
Well, I guess that was a good acquisition. It was an addition to the business. There were -- as we discussed at the time, there were not too many synergies here. We didn't expect that. It's an addition in the -- for Rieter's business. It's an adjacent area that Rieter understands, a premium brand. So I guess it works very well for Rieter and it added value also for the shareholders.
The next question comes from Pascal Boll from MainFirst.
From my side, I have a question regarding the project in Egypt. You said that this project will impact the sales for 2020 and '21. Do you have any visibility concerning the split of the project for the 2 years?
Well, what we have at the moment is assumptions but we are still in the process, as I said, of scheduling the deliveries with our Egyptian partners. The biggest issue here is the buildings in which the spinning machines are supposed to go. There is buildings, which already exist. And there is also buildings, which have to be built. And that is what we're talking about with them at the moment. So I can't give you an exact number so far. It is still in the making.
We have now a follow-up question from Mr. Armin Rechberger from ZKB.
Yes, I mean, October, we have now already finished, ended October already. What's the situation? Is there a positive trend, some hope there? I mean new machine business is extremely low at CHF 60 million -- was extremely low at CHF 60 million for Q3. Any expectations for the last quarter in this year? Or same, no end at -- no light at the end of the tunnel?
Well, Armin, I obviously can't give you a guidance on the quarter -- on the fourth quarter or the October order intake. But I -- what I said is, I remain -- I repeat what I said. October will be heavily impacted by the Egyptian order. And in addition, we are working on turning the high interest that our customers showed at ITMA into order intake. And I also told you where the activities from a regional point of view are at the moment. So that is the situation at the moment regarding the fourth quarter.
[Operator Instructions] There are no more questions, sir.
Thank you very much. Ladies and gentlemen, on the phone, thank you for having dialed in. I wish you a great remainder of the day, and I thank you for your interest in Rieter. Thanks a lot.
Ladies and gentlemen, the conference call is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.