Rieter Holding AG (RIEN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. A warm welcome from my side. Thank you for joining us today to review Rieter's full year 2025 performance and discuss the strategic path ahead. Together with our CFO, Oliver Streuli, I will outline the key results of 2025, the progress of our transformation, our expectations for 2026 and beyond. Before I begin the presentation, let me draw your attention to the picture on the cover page. That reflects the new Rieter consisting not only of natural fibers, but also of Man-Made Fibers. So let's move to the agenda on Slide #2. We will briefly look at the key messages and review the market. I will then hand over to Oliver for a deep dive into the financials. Afterwards, we will take a more extensive look at the successful acquisition of Barmag, the medium-term financial guidance and the outlook for 2026. And now to the key messages on Slide #4. Let me first start with the green boxes. 2025 was a year marked by cyclical weakness in the global spinning machinery market, influenced by geopolitical tensions, lower yarn margins and high volatility in investment sentiments. Against this backdrop, Rieter delivered an order intake of CHF 703 million, slightly below last year, but stable in local currencies. Sales declined to CHF 685 million, reflecting the subdued market and the result of lower order intakes in the last years. Our operating EBIT reached CHF 2.5 million, affected by lower volumes and pricing pressure, yet supported by active cost management and the early impact of our restructuring measures. Despite a challenging market, we preserved strategic flexibility, strengthened our portfolio and positioned the group for accelerated earnings recovery once demand normalizes again. Second, the blue boxes. The Asian countries delivered strong order intake, confirming the region's ongoing structural importance for our business model and long-term market presence. The most important structural development, of course, for the year was the successful acquisition of Barmag, a transformative step that expands our presence in the higher growth Man-Made Fiber market, enhances sales diversification across technology and end applications, adds scale, productivity levers, long-term synergy potential and strengthens our market position in the long term in the strategically important Asia region. The soft integration is progressing according to plan. We expect to realize medium term a minimum of CHF 20 million in synergies, driven by portfolio consolidation, cross-selling, procurement efficiencies and optimized production structures. One of the most significant regional developments was China. where sales increased by 32%. This growth was driven by a supportive investment environment, improved mill utilization and strong domestic demand. With our efforts to create a local for local organizational setup, we were able to participate more than in the past in this strong market. Let's turn to the gray boxes. We continue to make tangible progress in sustainability and operational performance. The share of renewable energy used increased to 38.7% compared to 28.6% in 2024. Women in management positions rose to 20.1%, up from 15%. This was enabled by systematically embedding a focus on diversity into all human resources processes and across the entire employee life cycle. We were also able to reduce occupational accidents to a frequency rate of 2.7, down from 3.3 in the prior year. This was thanks to the targeted safety trainings in the year under review. These developments support both our ESG commitments and the long-term stability of our operations. We now move to our group leadership team on Slide #5. To capture the full potential of Barmag and the wider group, we strengthened our leadership team with Georg Stausberg, who now heads up the Man-Made Fiber division. He brings deep industry expertise to this role and the whole combined company. This reinforced leadership setup provides the operational focus required for the successful integration, profitability improvement and long-term competitiveness. And now to the Rieter full year results 2025. Let me start with the global economic and textile key indicators on Slide #7. This slide shows the resilience of retail sales, which confirms that people are still shopping despite of all the global uncertainty. Retail sales are particularly healthy still in Europe. A look at the capacity utilization of spinning mills, however, paints a slightly different picture. In the rest of the world, capacity utilization is down year-on-year, while it is relatively constant in China. India maintains a healthy capacity utilization level of 88%. And a word on the profitability of the spinning mills on Slide #8. Here, you see the cotton margins in terms of Swiss francs per kilo on the left compared with polyester on the right. The spinners cotton margin is naturally very slim and has come under increasing pressure in the recent years due to labor shortages and rising costs. Low capacity utilization further weighs on the margins. Whereas the rest of the world stays quite stable, but with low volumes, India and China have low margins, but high volumes. A similar picture, you can also see on the polyester margins. So here, Barmag and Rieter pursue the same vision of fully digitizing and automizing the value chain underpinned by strong sales and service networks, which in turn will help strengthen the margins. And now, a deep dive into the market situation on Slide #9. The 2025 market developed unevenly across the different regions. The Americas showed a stable market environment overall, being more positive in Central and South America, but more cautious in North America. Rieter is very well positioned in this market, and we see quite some growth prospects for the near future. EMEA includes Europe, Middle East and Africa with the main markets, Turkey, Egypt, Uzbekistan and Pakistan. Whereas Turkey and Uzbekistan have still not recovered from the downturn. We see some market improvements in Egypt. Overall, we can support our customers with automation solutions and low energy-consuming products to create an advantage in the conversion cost per kilogram yarn. India and the part of Southeast Asia is considered as ready for growth. The latest agreements between the U.S. and India regarding tariffs and the free trade agreement between India and the European Union have given more planning security for our customers. With the strong mill utilization, several larger projects are now in the final planning phase. China has shown the highest resilience in the market over the last 4 years of downturn. Besides focusing on latest technology, which helps us, a clear investment plan by the central government supports this trend. Rieter has implemented a strong local organizational setup to match the Chinese requirements and our growth in the biggest textile market indicates that we are following the right strategy. This concludes now my part of the presentation, and I hand over to Oliver Streuli, our CFO, for the financials.

Thank you, Thomas. Good morning also from my side. I will now walk you through the key financial information for the full year 2025. Sales amounted to CHF 685.1 million, a decrease of 20% compared to the prior year. Free cash flow came in at minus CHF 40.6 million versus a positive CHF 14.1 million in 2024. Order intake, as already heard, reached CHF 703.4 million, down 3% year-on-year in Swiss francs. Despite the exceptionally low sales level, operating EBIT remained slightly positive at CHF 2.5 million, but below last year's CHF 33.9 million. Restructuring, transaction and impairment effects totaled CHF 54.2 million significantly impacting reporting EBIT, free cash flow and leading to a net result of CHF 63.4 million. Thanks to ongoing strong cost discipline consisting of structural and temporary measures, we were able to reduce overhead costs by another CHF 61.3 million compared to the prior year. And lastly, net liquidity improved to CHF 184.3 million, supported by the capital increase ahead of the Barmag closing. Now let's turn to order intake on Slide #11. Order intake decreased by 3% to CHF 703.4 million. Machines & Systems recorded a slight decline. Components softened quite a bit, while After Sales delivered solid growth. FX translation headwinds weighed on reported figures. In local currency, order intake was slightly above prior year. And overall, we achieved a positive book-to-bill ratio when compared to sales, which brings me to the next slide. Sales declined by 20%, closing in at CHF 685.1 million. This was driven by the continuously low market and certain customer-driven deferrals, especially in December. Machines & Systems saw the steepest decline followed by components. In contrast, After Sales remained relatively resilient in absolute terms. FX headwinds reduced sales additionally by about 2.5 percentage. Regionally, China grew by 32%, clearly the highlight, which underpins our local strategy. Americas was stable, while in contrast, Turkey, Africa and several Asian markets where Rieter historically holds a strong market position declined sharply due to the subdued market. Now let us continue with the operating EBIT on Page #13. Operating EBIT remained around breakeven at CHF 2.5 million, thanks to strict cost discipline. The negative gross profit impact of around CHF 92 million due to the lower volume was largely offset by overhead savings. Now allow me the comparison to 2023, our last normal or good sales year. In total, we have now reduced our overhead costs by almost CHF 120 million or by more than 1/3, which mitigates the continuously difficult market environment to some extent. Regarding nonoperating EBIT and net income effects, restructuring and impairment costs totaled CHF 37.8 million and transaction-related costs, including financing amounted to CHF 16.4 million. For the sake of completeness, some real estate disposals, most prominently in half year 1, as already communicated, also supported operating EBIT as part of streamlining our production and administrative footprint. Now let's turn to an update on the announced restructuring programs on Slide #14. As outlined in Q3 2025, we expect the announced measures to deliver a run rate benefit of around CHF 27 million against onetime costs of around CHF 36 million. These benefits are expected to fully hit the P&L in 2027. Now on to some details. On the Short-Staple Fiber division, as we newly call our natural fiber business, we implemented targeted capacity adjustments and shifted parts of the winder assembly to China. We also transferred repair services to Rieter India and Rieter Czech Republic and optimized the indirect to direct labor ratio across the supply chain in India, the Czech Republic, and also China. We also optimized the cost structure in India, Czech Republic, China and in the U.S. In the Components & Technology division, we selectively transferred R&D and SG&A capacities to best cost countries and reduced the overall cost base. Several footprint adjustments were also executed such as the sale of the Graf company Gomitex in Belgium, the closure of Graf Netherlands with production move to China. And finally, we executed a plant consolidation in Germany at Suessen and initiated the closure of Bracker France at the beginning of this year. These measures significantly simplify our footprint and structurally reduce costs, marking another milestone in improving our overall competitiveness. Now on to cash conversion on Slide #16 (sic) [Slide #15]. Free cash flow reached minus CHF 40.6 million, reflecting the negative net result and transaction and restructuring-related cash outflows. Lower advanced payments from customers also weighed on cash flow, while operating working capital improved to some extent through reductions in receivables and inventories, which was partly offsetting. Strong cash discipline obviously remains a key management priority also in this year. Now a word on our financial position on Slide #16, which is my favorite slide, but has to be taken with a pinch of salt, obviously, given the pending Barmag closing at year-end. Our financial position improved during the year and the equity ratio stood at 53.3% and the net liquidity reached a positive CHF 184.3 million at year-end. Which brings me to my last Slide #17 on liquidity headroom. Given the still muted market environment, debt levels will be elevated during the course of 2026 following the Barmag closing. However, it's important for me to state that available liquidity shows a combined liquidity of more than CHF 300 million, which consists of current accounts, deposits and money market funds. On top, Rieter has access to a CHF 375 million revolving credit facility and more than CHF 100 million in bilateral credit lines. This means that our financing is fully secured and provides a sound base. This concludes the financial section. Back to you, Thomas.

Thank you, Oliver. Thanks a lot. So let's have a look at the today's Rieter, a new global leader in the textile industry. And let's look at this new animal on Slide #19. With Barmag included, Rieter is now the global leader in both Short-Staple and Man-Made Fiber solutions. We are present in 31 locations across of 9 countries. We now have more than 7,000 employees with leading-edge expertise in fiber technology, and we are offering technology coverage across the entire spinning and filament value chain. This expanded footprint is a key driver for the future, operating leverage, cross-selling potential, market share gains and profitability improvements over the cycle. Here, you can also see the locations divided by the different regions, Americas, Europe, Middle East, Africa as well as in Asia Pacific. And on the right side, the 3 new divisions, Man-Made Fibers, Short-Staple Fiber as well as Components & Technology. Now let's have a look at the global textile landscape and the value chain on Slide #20. With the integration of Barmag, Rieter enables the full spectrum of yarn production. On the left side, the raw material, which is used in the whole textile industry. This amounted to around 113 million tonnes of raw material per year. This 113 million tonnes are divided into 54 million tonnes of staple fibers and about 59 million tonnes of filament. When we then deep dive into the figures for staple fibers, we see that roughly 1/3 or maybe a little bit more than 1/3 comes from cotton and 1/3 comes from polyester. These are filaments, which are cut afterwards into fibers and then are spun on our machines. The rest is made up of viscose and other products. Now let's jump to the Slide #21. Rieter covers now the entire textile value chain from fiber to yarn and from polymer melt to filament, fiber and nonwoven products and covers the complete process from fiber preparation through to all 4 and spinning technologies in the spinning mills. You see on the left side, the mentioned 3 divisions. The Short-Staple Fiber division unites Rieter's global expertise in short-staple fiber spinning systems across operations, sales and services. The division covers the full portfolio from fiber preparation to spinning preparation and to end spinning and winding. The Man-Made Fiber division covers Rieter's complete solutions for processing polymers into filament yarns as well as systems for the production of synthetic staple fibers and nonwoven. The portfolio also includes the design and engineering of complex spinning plants, the manufacturing of core components and a comprehensive range of After Sales services. Automation and digital solutions complete the offering, enabling efficient, high-quality and future-ready production across the entire textile value chain. Through our third division, Components & Technology, we offer our customers specific textile components. Our brands are Accotex, Bracker, Graf, Novibra, SSM, Suessen and TEMCO. The division is the backbone of Rieter's technology leadership, bringing together in-depth expertise with forward-looking research and development. The division drives the advancement of high-performing short-staple spinning machines, systems and components. The wide range of end applications from the 3 divisions varies from apparel to home textiles, technical textiles and nonwoven. A word on the higher growth and more diversified end application on the Slide #22. Overall, and you see this on the left side, the consumption of raw material will increase from the already mentioned 113 million tonnes to 133 million tonnes in the year 2030. All end consumer markets will contribute to this higher consumption and production. On the right side, you see the impact on our different business segments. All business segments will grow over the next 5 years. So the question is not that the markets are coming back. But the question is when markets are coming back. From a macro perspective, the new investment cycle is overdue. But for this, we also need some political and economic stability to motivate our customers to start to invest again. Projects are there. Our offer pipeline is the highest since 3 years. And I'm sure a lot of those projects will be executed. But still, customers are hesitating to take the investment risk in this very challenging environment. Now let's have a look into the future. What does that mean for us? And I hand over to Oliver for the medium-term guidance and the outlook for 2026.

Thanks, Thomas. Now let's do a deep dive into the new midterm financial guidance on Slide #23. It's clear that as a new combined group, we had to reconsider our midterm guidance for different market scenarios. Now based on feedback received, we concluded that the market scenarios are a valuable approach to provide the capital market with our view on financial targets over the cycle. That is why we stick to this approach and adjusted our former low, mid- and high market scenarios, which now include the new division Man-Made Fiber, Barmag, an adjustment of the top line scenarios of the old Rieter Group, where we have to admit that we have been too optimistic in the past, and we had a hard reality check of what low really means over the last 2 years. We also consider a substantial PPA impact in our profit and loss statement due to the acquisition of Barmag. Therefore, we will adjust for all PPA impacts to reflect the operating performance of the business in operating EBIT. And finally, we included our midterm synergy target of CHF 20 million stemming from the transaction. In summary, we see strong potential for a combined company beyond 2026. However, our markets remain cyclical in nature, which brings me to the specific revised scenarios. In a low market scenario, we now expect sales of around CHF 1.4 billion at an operating EBIT margin of 2% to 5%. In a mid-market scenario, we expect sales of around CHF 1.8 billion at an operating EBIT margin of 5% to 8%. While in a high market scenario, we expect sales of around CHF 2.2 billion at an operating EBIT margin of 8% to 11%. In addition to our market scenarios, we would like to provide an update on other key midterm financial targets on Page 24. We target a leverage of below 2.5x net debt to EBITDA. It's clear that in the near future, capital allocation will be focused on deleveraging while our long-term ambition is to achieve a net cash position. CapEx is expected at around CHF 50 million to CHF 70 million for the combined group in a more normalized environment. Short term, it will most likely be lower. And we adhere to our fundamental dividend policy of maintaining a payout ratio of at least 40% of available net profit. As mentioned before, in the short term, our priority is to deleverage and strengthen the balance sheet, while in the long term, we aim at stable absolute payouts per share. We also continue to aim at an equity ratio of more than 35% by means of deleveraging and shortening the balance sheet by effective use of excess cash. To sum it up, our new midterm targets position us well for margin expansion, stronger cash generation and a more stable and diversified earnings across the cycle. And now to the outlook for the full year 2026 on Slide 2026 (sic) [Slide 26]. 2026 will be a transition year, shaped by the integration of Barmag, the full execution of the announced restructuring measures and a delayed market recovery. In addition, we will not yet fully benefit from synergies in the combined Rieter Group. Therefore, in 2026, Rieter expects sales in the range of CHF 1.3 billion to CHF 1.5 billion. Please keep in mind that this includes only 11 months of Barmag given the closing on the 2nd of February. The outlook for 2026 reflects the integration of Barmag and the restructuring measures announced in 2025, of which the positive effects will not yet be fully effective. As a result, a positive operating EBIT margin in the range of 0% to 3% is expected. And with that, I conclude my presentation. We now welcome your questions. And for this, I hand back to Relindis for the Q&A session.

Thanks, Oliver. Ladies and gentlemen, we will start with the questions here in the conference room in Winterthur and afterwards open the lines for participants in the conference call. [Operator Instructions] Then we will take the questions from the webcast. As usual, the Q&A session will be recorded. I kindly ask the participants here in the room to wait for the microphone to mention your name and the company you work for before asking your question. There's a question, Ingo. Thank you.

This is Ingo Stossel from UBS. Can you maybe give us some more color on the divergence between your After Sales order growth and sales decline on the one hand? And looking at your leverage guidance, can you give us your estimate for the end of 2026? And then maybe a time frame, you say medium term below 2.5x long-term net cash. Can you give us maybe that in years or months ideally?

Thank you for the question. And maybe I answer the first one about After Sales, and then I will hand over to you, Oliver. So it is true in After Sales, we have -- we already presented in the past a lot of initiatives how to strengthen our business model. So in fact, there are 2, 3 key drivers we have taken up. One is we are more and more localizing our organization because service business is local business. You have to be very close to the customer. So we have strengthened our service organization all over the world. The second part was availability of spare parts and delivery times. So we're working very hard to decentralize our warehouses and our spare parts to be fast towards our customers. And the third element goes a little bit with our overall strategy of digitization and automation. So we are pushing a lot to automize existing spinning mills. And there, we call this engineered solutions. So these are the three drivers that we have a better order intake. Now the reality is that we concluded many orders or better orders than the year before, but still the execution of the orders is lagging because customers do have certain financing issues. So they close an order, they make a down payment. But then at the moment, with this very wobbling political environment, they don't invest yet, because some of those topics are also quite big investment amounts. So that's one key reason. The second topic is that in After Sales, we also have the installation of new machines. And this part has been reduced in 2025 compared to 2024 because you have a certain time lag. When we deliver the machines in the next 12 months, you finalize the installation. And with the reduction of order intake and sales volumes in the new machine business with a certain time lag also our installation revenues are going down. So there is a little bit of mismatch between order intake is, in fact, positive, but we don't see it yet in our sales volumes. And the second question, I think, Oliver, it's your turn.

You may understand that, we don't provide a guidance on leverage for 2026. However, I can help you with some indications. As you know, we financed the transaction roughly 50-50 with equity and debt. For that portion, we initiated a CHF 375 million term loan on the debt side. And on top, we had existing debt of around CHF 250 million at Rieter, so to say, which means that you may assume that our debt position is around CHF 500 million to CHF 600 million at the moment. With regards to the phase-in of the midterm targets, that's usually to be understood over a time horizon of 2 to 3 years, probably around 3 years and the path to net cash comes thereafter.

And maybe to add on that, it also -- the speed of deleveraging also depends a little bit on the market recovery because usually, when the market is recovering, what first happens is you have a lot of order intake. And with the order intake, you have a lot of down payments. And history shows in both areas, let's say, the old Rieter, but especially also at Barmag that this cash generation happens extremely fast. So if -- and we all pray for that, the markets in the near future now are picking up, then this can go very fast to deleveraging. It's not only profitability, but it's especially also net working capital, which improves substantially in the uptime or in the process where markets are picking up.

[indiscernible] Capital. I got a couple of questions. First one on the market. We can see retail sales increasing steadily in your presentation, also spinning mill utilization is increasing, yet the yarn fiber margins are coming down still. Why is that?

So what is happening at the moment is the following. I try to explain, of course, I'm in contact with many, many customers all over the world, and we have regular monthly, let's say, market updates. So we have to look a little bit on the 3 different areas. So China, India and the rest of the world because it's very different what is happening. The end consumer market is there. That's the good news. The end consumer market even is picking up. So it's not so depressed like the machinery part. The end consumer market is, in fact, quite, quite stable, especially in the apparel side, whether this is the U.S., whether this is also in the European Union. Now what happened is that we had a substantial increase due to the inflation after the COVID crisis, mainly in the rest of the world. So labor costs were increasing a lot. On top of it, the biggest market we had was Turkey. Turkey was destroyed after the earthquake. The reason why the spin utilization is so low in the rest of the world is especially driven by Turkey. If you go back 4, 5 years, our sales volumes in Turkey were like CHF 250 million. Now we talk about CHF 25 million. We were absolute market leader in this market, and the margins were very healthy. Now Turkey never recovered from this earthquake. 70% of the installed base was affected by the earthquake. And people left the industry and the mill utilization in Turkey is slightly above 50%. So this in a mix impact for this rest of the world has a huge impact. A little bit similar was Uzbekistan. They probably have overinvested in '21 and '22 like some other countries in the rest of the world. And it takes some time until all these overinvestments are absorbed by the increase of the end markets. And we believe that this is now the time where we see, okay, the good ones, the big customers, they are at full capacity and the small ones who have not the funds to invest in new technology, automation, they might go bankrupt. So there's quite some tension in this rest of the world. Now India is different. India is split into North India and South India. North India are the big spinners. They are all above 90%. The biggest spinners in India are very healthy. They have very good net profit margins. They are -- they have full capacity. But again, in this country, the South, these are all small spinners. And they have been partially Indonesia, partially it was like a part-time spinning mill they had, and they are not competitive anymore. So this is a small -- they still produce because their cost can be -- the fixed cost can be absorbed. And the domestic demand is now picking up. India as a country, we see there will be a shift from export activities much, much more into domestic demand. And China is China for China. So China, even if we only see something like 70% spinning mill utilization, also there, there is not a north and the south, there is a east and the west. The east part along the coast, the traditional market of China, there is almost no investment anymore. Everything is investment in the west because costs for energy are much lower. You have CHF 0.04 per kilowatt hour and also the labor costs are very low. So that's a little bit how the market is there. So rest of the world is still suffering, although markets is there, they are too expensive because labor costs are so high. And India and China, India is very good and China, in fact, is also good. We have 2 strong markets with China and India and the rest of the world, there is not yet light at the end of the tunnel.

When we look at Barmag's results in the last quarter and in H2, we can see a slight pickup in orders there, orders higher versus sales. Maybe you can talk a little bit about what you've seen for Barmag, but also for you over the last few months in terms of order intake.

Well, I don't want to comment the result of Barmag of last year, but I can maybe give an outlook. I'm not so much discussion about others like others are doing. So I more look forward into 2026. And let's be honest, Barmag is part of our group since 24 days. So I don't know everything because before we were not allowed to talk about any market or pricing or product topics due to regulations. However, in the last 24 days, there were already a lot of meetings happening. All the different expert teams already have met the first time. I was 2 weeks ago at Remscheid. I will go next week to Suzhou and Wuxi to the Barmag factories in China. And what I can say is, first of all, we are impressed and got a confirmation about our good impression we had in the past. It's a very solid company, very well managed and have a similar strategy like us, technology leadership in order to achieve higher prices and margins. And the pipeline we see is somehow also increasing. I know now after 24 days, several larger projects in the pipeline to come. The question is not if they come, it's again when they come. And this is not only in China, it's also in some other parts of the world. So I'm optimistic that Barmag is delivering good results towards our group. We have a similar expectation in terms of sales volumes. So overall, we see in sales more a side step '25 to '26 because it takes some time until order intake will materialize in higher sales volumes. Barmag even has a higher cycle time than the old Rieter part, whereas in Rieter, it was maybe 9 to 12 months. At Barmag, it's more like 12 to 18 months. So whatever we have as a pickup in certain markets will only materialize in sales volumes and EBIT at the end in 2027. So Barmag, everything we have seen, everything we have discussed, I have to say, it's like they already belong to us in certain years. It's a perfect match. It took some time until we married, but now we are both -- we are altogether happy couple. Now the Rieter part, when I look at Rieter, I clearly have to say China is stable, and there is no reason why it should not stay stable. China tries to create a lot of production volume with low margins because they are very cost competitive in the Eastern part of China. And we have changed a lot, and we are benefiting. We have quite substantially increased our market share in China. And India, we are convinced with the latest agreements and a huge local demand increase because the middle class population in India is over proportionately increasing. All these textile activities will more and more focus on Indian demand and not anymore just for export. So we are convinced that India now is ready for growth. Now, this is a little bit a change to our historical footprint. Historically, we were super, super strong in the rest of the world. We had the highest market share in the rest of the world, and the rest of the world was also more than 50% of the worldwide market. If you compare our sales volumes in rest of the world in '25 compared to '22, it has been reduced by more than 80%. So we lost 80% of high-margin business and had to compensate now with more competitive businesses in India and China. And that's the reason why we have started to do all these transformation programs without Barmag. We have to be where the new markets are. So this shift to Asia is a structural shift, in my opinion. Some areas in the rest of the world will pick up. Egypt, we are convinced. Latin America, we are convinced. And we also see now Bangladesh, Pakistan coming back. But some other areas, we are very hesitant like Turkey, Uzbekistan, countries where we had the highest market shares in the past.

And that's a good market overview, but more in terms of month-over-month over the past few months, maybe you can tell us, if you see a further pickup. We heard the pipeline is good, about firm orders. Maybe you can tell us something about that.

So starting to the year was okay, was okay. We saw that -- and a very early indicator is besides the parts business, it's also part of our component business. So we saw that in the last 3 months, our component order intake has substantially improved. So these are consumables, spare and wear parts where we saw a pickup. Another early indicator is also our company, SSM, who is also in the Man-Made Fiber business, but more in specialized areas. There, we had very good order intakes as well. And our offer pipeline of new machines is the highest since I'm here. And this is now 3 years. These are not yet orders, but all these offers have to become orders and the question will be what is the share we can really get for ourselves. I have to admit pricing over the last 3 years has been heaviest under pressure, because the cake has become smaller, and everybody had empty books and everybody was jumping on these orders. So we are mitigating that with very consequent cost management, Oliver.

And last one, then I'll go back in the queue. On the guidance, I can see that despite at least a little bit higher order intake, it's prudent to guide for basically stable sales and midpoint. When I look at margins, maybe you can tell us a little bit, how you came to the 0% to 3% Barmag alone roughly made 3% for the combined group. Maybe you can give us some more insights into that.

Sure. Perhaps I try to explain the bridge of the 2026 guidance towards the midterm guidance. And there are 2 main effects. One effect being that at Rieter, we still adjust our capacity, and also our cost base to the market realities. That's also why we announced those restructuring programs in Q3. So these effects will only fully materialize with the full year 2027. And the second part is that the integration of Barmag has only started 2 weeks ago. And that's why we expect those synergies only to fully hit our P&L with the full year 2027. That's the reason behind that gap between the 2026 and the midterm financial guidance on that low scenario.

But what I more meant was the Barmag made roughly CHF 40 million, if I'm not mistaken. If we put that on to CHF 1.4 billion, we would come to the 3% already. And obviously, you did a lot of work for Rieter, too. So is it just being very cautious and that's fine? Or are there other things that we should consider which will push the margin down a little bit in '26?

I mean, Thomas mentioned it before. I don't consider this guidance as cautious, but that's realistic. We are in the middle of adjusting to the new market reality, plus there is also some margin pressure in the market and the market success that we have in China, we fully believe that it's structurally the absolute right thing to focus on those markets, but these markets are more competitive than the rest of the world markets in the past. So there is some pricing pressure, which is also reflected in the 2026 targets. But Thomas, perhaps you want to elaborate on that as well.

I think the question is, what is the performance of the old Rieter? Are we contributing? When you take an operating EBIT of CHF 2.5 million, and we mentioned that some of it also was onetime because of real estate changes. In all fairness, if you would deduct that, the run rate was negative in 2025. So we tried with everything we could do to compensate. So you first have to catch up. This will come mainly with the restructuring programs we have launched in the quarter 4 2025. And this CHF 27 million improvement, you can calculate half of it will come in '26 and the other half comes in '27 because some of it are production closures, and this is not from one day to the other, it takes a little bit of time. So that's the catch-up we have. Then we, of course, in 2025, we had a drop in the margins for our new orders for new machines. So margins came under pressure because of the shift of volumes towards China and India. So this we also have to catch up with more cost measures. Structurally, the old Rieter is not set up for a CHF 700 million business. This is below our real internal breakeven point. So we are doing that, and we probably will continue to adapt our footprint because we have far too many locations, clearly. But at the moment, we are not ready to make high margins with a plus/minus CHF 700 million volume. So the Rieter part with that low scenario without any synergies is contributing almost nothing. Now you can say, well, combined, but you still would go maybe to 2% or 3% -- you might not be wrong there. And in year 4, even myself, I have learned that sometimes you have to be cautious because future is very unpredictable. So we rather prefer -- if it comes better, we will take that happily.

[ Thomas Litto from NZZ ]. I have 2 questions. First, like you have been cutting a lot of costs in 2025, especially like in Europe and Western Europe and Switzerland. And I'm wondering what will be like the long-term consequences of that, for example, if it comes to innovations and so on. I mean, these people haven't just been hanging around, I guess. So there has to be like an impact somehow. And second question, you say like more or less the future is in Europe, is in China and in India. And you also say, like the margins are very low over there. So I'm wondering like, will this change like somehow in the future? Is there any chance that will change? Or you just have to live with that, that you will operate like in markets with very low margins?

So maybe I take that up as an answer. And it's, of course, something which is heavily discussed also within the company. This is -- it's a very valid question. So we had to adapt our cost structure to a new reality. This is the minimum everybody can expect from us. And of course, we are segregating our workforce into different clusters. We say there are high-cost countries, there are mid-cost countries and there are lower-cost countries. That's point number one. Point number two, whatever is a customer-related activity should be as close to the customer as possible. Many Swiss medium-sized groups have had the same challenge that it was more -- everything was at the headquarter and all the new Asian markets have been export markets. But this is not accepted by customers anymore. They want to have their local teams. So a lot of the shifts were customer-related functions we have moved into China, into India, but also into the U.S. away from headquarter, point number one. Point number two, then in R&D and production, you have certain transactional tasks. Not everything is innovation. A lot is executing certain programs for customer-related products. This also should be where the customers are sitting because these are amendments to specific market requirements you might have in China or in India or in the Americas. So that's part of, let's say, R&D, we have started to shift to those markets. And then the question is what's left for Europe, and especially what's left for Switzerland. And here, I want to make a very clear statement. Europe and especially Switzerland has a fundamental meaning and importance for us. And this is the innovation. I don't know another country who has such an innovation DNA like Switzerland. I mean, we have the best universities. We have fantastic people coming from the universities. We are a very attractive place for many high-caliber brains outside of Switzerland. Innovation is the key driver. That's the strength and the survival package of Switzerland and this is also valid for Rieter. So in our different places we have, for example, our 3 component companies, SSM, Bracker and Graf, the innovation is all in Switzerland and will remain in Switzerland. If I look on our R&D department we have here, we have now a new department, which is called new technologies. This is all based here in Switzerland. Digital automation brains are all based here in Switzerland. So the core innovation will be made here in this place. If you then have to execute a development plan with milestones planning, you have to purchase the material, you have to work with suppliers. Some of those tasks are then in our customer markets. But that's super important. Europe and Switzerland, it's driven by innovation and value-added tasks. And if you have more repetitive transactional execution tasks, you are more on the customer side and therefore, more in the customer markets. Does that answer this first part of the question? The second one, you have to repeat once again. I somehow have forgotten with all my enthusiasm.

The margins in India and China, how this -- is there any chance that they will be higher like in the future or if you just have to be with that?

Margins are -- margins are very simple. It's price minus cost. And the price is driven by the market, and those 2 markets are very competitive. So you have to work on your cost. And working on the cost is that you have to follow a China for China strategy and an India for India strategy in the production and the sourcing. And you might have the one or the other area where in the innovation, you have to say, wow, does the Chinese and an Indian customer exactly need everywhere that premium package? I believe, yes. But the premium they are willing to pay for it is maybe lower than in the rest of the world. So our answer is prices, we get better prices in China and in India than competitors. We do get that because we are considered as a technology leader. But we have to work on our cost competitiveness. And this means, you have to source out of China for China, and you have to source out of India for India. And the rest of the world, by the way, I also believe that in the next 2, 3 years, some rest of the world markets will pick up. I'm sure about that. And there, we also have enough production capacity here in Europe. We have 2 major sites in Czech Republic and in Germany besides the component factories where we serve more the rest of the world. Any more questions here from the room? I don't think so, really.

[Operator Instructions] So Valentina, may I kindly ask you to open the first line, please.

Sure. The first question from the phone comes from Amira Manai, ODDO BHF.

I have actually 2 main questions. First one is regarding the 2026 guidance of CHF 1.3 billion and CHF 1.5 billion in sales and an EBIT margin between 0% and 3%. Could you break down the underlying assumptions for return on a stand-alone basis versus the contribution expected from Barmag? And what would be the main risks that could jeopardize your scenario this year?

Oli, that's your turn.

I mean, the main assumption is pretty simple one. So we don't expect a significant recovery in the market to be reflected in sales. There might be some recovery in the market reflected in order intake, but not in sales. That means for both entities, more or less similar numbers than in 2025. That was the main assumption. And on the profitability side, as we outlined before, 2026 will be a transition year on the way to achieving the midterm targets in a low market scenario. I hope that answered the questions. The line was not very good.

Yes. And what the main risk that could jeopardize your scenario this year? What are the main risks?

Well, it's a very good question. It's not so easy to answer because in the last 3 years, I could not count anymore all the risks which have arose unexpected, and then even materialized within 1 week. So I think one risk is that, the biggest risk is, in fact, that all this tariff situation is not somehow now fixed. Now I don't want to challenge any Supreme Court decision, and I don't want to challenge any company decision, whether they want to claim back or not any tariffs. But finally, we achieved somehow now all over the world some stability that everybody knew what the tariffs are. Now -- and it seems that U.S. government somehow stays with the 15% more or less now on this level. Whatever law you need to do that, I cannot exactly explain to you. So I think that's the biggest risk is really this tariff situation. There is a second risk that's a supply chain situation. I'm not aware -- or I don't know if everybody is aware, but with the increase of artificial intelligence with KI [ Foreign Language ], how you say in German, and all these new demands for chips, chips have become short again. So chip prices are going up, and this could disrupt all over the economy again. I don't want to see anymore cars where you don't have any navigation system because they don't have chips anymore or machines from us who cannot run because there is no electronics available anymore. So that's another risk which we have foreseen and mitigated. We secured all our supplier contracts. But that's a second risk. And I think the thirdly risk in all fairness, could be wherever a new war will happen, because with all the peace activities we had in the last 12 months, I could not say that, the war activities have been substantially reduced. And there is always in the one or in the other place, certain uncertainty. That would be more from our side. I don't know if you see more risks on financing, on banks, on financial markets.

I think something which obviously was a risk in the past, but where I see more ease on the financial markets is basically that we see a global trend towards lower interest rates, also driven by lower inflation and that could be a bit of a tailwind. But yes, I think, it's good now with the risk section.

So to come to a conclusion, I see much more opportunities and chances looking the next 3 years ahead than I see risks.

Okay. Then we will take the next question, please.

The next question comes from Walter Bamert from Zurcher Kantonalbank.

Can you hear me?

Very good, loud and clear.

Perfect. So I'm asking a lot of questions that help me in modeling. Can you give me the pro forma net debt figure after the closing?

Walt, as I said before, we don't give a specific guidance, but you can take as a rule of thumb that we took a term loan of CHF 375 million to finance the acquisition, plus we had existing debt that so-called old Rieter of around CHF 250 million. And if you combine that, you ballpark where we currently stand. What I did not mention before, I mean, this number is obviously elevated and is not in line with our deleveraging plans. This is also why we have discussed that with the banks, and we have found the consent with the banks. They know about the risks and opportunities over the next 18 months. And as we said before, the financing is fully secured.

The challenge is not the figures you mentioned. The challenge is the net cash situation of Barmag, which is not very transparent to me. But okay, I can work with it. And the other question is, you indicate somewhere purchase price allocation effect of about CHF 50 million. You mentioned mid-double digit. So that would eat up the entire EBIT of 5.5% indicated by Oerlikon on Barmag in -- if that stays about at the same level in this year. Is that correct? Or is there something wrong with my assumption?

No, that is more or less correct. As you may assume, if you acquire a market leader and an asset-light business, then the purchase price allocation consists of a lot of intangible assets and goodwill that is just normal. Now in the first year following the closing of the transaction, you have extraordinary purchase price allocation driven by the step-up on inventories, for instance. And so in the first year, it will be slightly elevated. And in the following years, we will be in a run rate for the combined group of around CHF 40 million to CHF 50 million.

You mentioned CHF 40 million to CHF 50 million run rate in the coming years, phasing out over about 5 years. Or what would you assume there?

It very much depends. For brands, we take a longer period. It's very much a mix on the different elements of the purchase price allocation. We will provide more details on the purchase price allocation with the half year figures. You may appreciate that we just closed the transaction 2 weeks ago and any PPA assumptions at the moment are provisional in nature. What is very important to understand that this PPA effect, this is normal if you do a big transaction, these are noncash costs, and they are also not reflecting of the operating performance. That's why we normalize. Obviously, over time, they ease, and it is also our target to, at some point, come them back to a more reported figure.

That brings me to the next question. When you say you guide for 0% to 3% EBIT margin, that would be lower on a reported base due to the purchase price allocation, or you have that reflected already in there?

No, that's operating EBIT margin guidance. This is adjusted, and you can find the slide in the appendix, Walter, on the details that is adjusted by purchase price effects as well as restructuring and any incremental transaction costs. We had some transaction costs with regards to the closing, but they are much, much lower, obviously, than what we had in 2025.

In Slide #30 in the appendix of the presentation.

Okay. And that would mean you're rather assuming operating performance in line with last year where Oerlikon reported 5.5% EBIT margin overall.

I think that's a fair assumption. I think that is a fair assumption.

Yes. And then -- can you give a figure for the one-offs you expect in the staple fiber business in this year?

Well, obviously, we will have some cash outs with regards to the restructuring activities that we undertake, mostly consisting of severance, which unfortunately are pretty high in France and also in Germany for the measures we undertake. That is one element. Then we also plan some incremental restructuring, not in the amount announced in Q3, but there will be most likely further measures. And then as mentioned, it's the transaction costs minor in nature, but I would say, those are the 2 main areas, apart, obviously, from the purchase price allocation effect.

With parts of it already provisioned in last year.

Exactly. Exactly. So all the programs, that's important -- from an EBIT point of view, all the programs we knew and where we have a very clear plan what to do has been provided in this quarter 4 last year. But of course, this has not been cash effective as we have certain closures now during the course of 2026. The cash impact comes in 2026. And the P&L impact we had in 2025.

Okay. We will now move to the questions from the webcast. The first question comes from Andreas Meier, Finanz und Wirtschaft. What is the future of the Turkish market?

So I mentioned that before, the market in Turkey for us was shrinking by 90%. It was the strongest market we had in the past and it's the weakest market we have today. And it all happened, in fact, with the -- it was a combination of elements. One was the earthquake on February 6, 2023, where 70% of the installed base has been impacted. Not everything has been destroyed, but people left. The second topic is, of course, that from a macro economical point of view, it's not so easy to understand what exactly the target of the Turkish government is. They have imposed very high minimum salaries. So to give you an idea, a worker in Turkey costs about $1,500 per month. A worker in Egypt costs $250 per month. Labor costs are roughly 15% of total cost in a spinning mill. And if you have 5x or 6x higher costs, you just become totally uncompetitive. So this means the Turkish spinners make no money. The large one have economies of scale. They are maybe serving around the 0 line, but the small ones, they make all a loss. Then they have not the fund to do the necessary investment and the necessary investment for Turkey to survive is automation. They have to automize their spinning mills. If they do, they don't have this handicap of labor cost anymore. And this is why Turkey for us in terms of automation is the key market we are now focusing on. We have launched now several programs. But of course, if you don't have money, it's also difficult to invest into automation. So it's a little bit chicken or egg and the government has promised certain support, which has not happened in full. And so Turkey is really struggling. And if this, let's say, government controls are not eliminated in terms of minimum salaries, if there is not a support to invest into automation, I think the textile industry of Turkey is really under pressure. Now the Turkish customers do the following. They go to Egypt. So the biggest investors now or some of the biggest investors in Egypt are now Turkish spinners, who have all the know-how because Turkey has a huge know-how in the spinning industry or textile industry, but the home territory at the moment is not affordable anymore. So they go to Egypt and they wait that, Syria becomes stable. And then they just jump over the border. And so the country itself, Turkey, I see very challenging in the next 2, 3 years. There is the one or the other project coming up, but it's very, very difficult for them. And it's homemade and an external factor with the earthquake.

Okay. Then I move on to the next question from Dennis Piretra. Retail sales decreased by 20% in 2025, falling to CHF 685 million. Is this drop attributed to a loss in Rieter's market share? Or is it a result of a broader downturn in the global market?

Maybe you can say a few words then to the one or the other shift from '25 to '26. I think it's both in all fairness. The market was still down and even went down a little bit more. That's one element. And then, of course, sales is always the result out of orders you had. And still in '24, we still had some orders from the good times '21 and '22. So in '25, we were just living from orders we got in '23 and '24. So it was now the real new normal. That's one point. So there is a book-to-bill topic. It's the first time that our bookings are higher than our billings. It's a turning point we have seen on a low level, by the way, but it's a turning point. And the second topic is, yes, the market has not recovered. But the third topic is even more important. Historically, and that's why globally, we probably have lost a little bit of market share because the market who was the strongest one was China, where we have the lowest market share, although we improved tremendously our market share there, but the mix shift to China was bigger. So from a mix impact, we improved in China, but China became more important, and this has dampened our global market share. And where we have a super high market share in the rest of the world, this market has disappeared. So it's especially an outcome of tectonic shifts from the 3 or 4 regions we have in the world. When I look on our order intake figures, I'm confident that in the future, our market shares will go up. And I think the reason why '25 was especially low, we also had the one or the other shift, Oliver.

Yes. I think it's very, very difficult to differentiate between underlying market performance and market share. It is my strong belief that the market has the much bigger effect than the relative competitive situation. On top came also that in 2022 and 2023, we had very high sales levels because we took a lot of orders, our competitors did not take anymore. So that also distorted the picture to some extent. Now, when I look at the different regions, I'm referring to Page 33 in the presentation. For me, the highlight, clearly, if I look at the difference in local currency, which is reflective of the underlying performance, China increased sales by 38%, which is clearly a highlight. The market was not up by 38%. So we gained market share there. Then North and South America, we expanded slightly. So we at least kept our market share stable over there. And then we had a couple of very, very difficult markets. As mentioned before, Turkey, minus 76% because the market is just inexistent at the moment in Turkey due to the challenges we've heard. And then also in some other Asian countries, which were heavily affected by tariffs, such as Vietnam, for instance, where we declined by 20%. And there, it's very much driven by the underlying market.

Okay. Thank you. Then the next question comes from Leonie Zirn from UBS. Three parts. I will start with the first one. Your numbers suggest good positive order intake in machines end of 2025 and slightly positive for components, while negative for aftersales. Can you give a bit more color here? What exit rates do you currently see in 2026 in machines and components similar to the fourth quarter?

Exit rates.

Cancellations...

Cancellations. So it's true. We had a better fourth quarter than what we had the 2 years before. That's point number one. And this is a good sign. And the reality is it really was driven by new machine sales and also by order intake and components. I mentioned that before, it started in November that we saw that our component business is picking up. Now the aftersales business, we had this trend of the installation part of our aftersales business. This still was shrinking. And we also saw that, Engineered Solutions, which are mainly focusing the Turkish market at the moment and some rest of the world markets, there was no money availability to invest. So it was a little bit counterintuitive that although, they have the need for that, and we are doing a good job in the aftersales business, but especially for this topic of Engineered Solutions, it was not really picking through in Turkey. And that was the main reason why we had a difference in the development of the 3 segments. Now, when we talk about -- you mentioned exits, and I take cancellations as a word because this is usually what we had. So we were having more or less the same level of cancellations like in the past. Now, of course, what we have to do and this we are just starting, we have to look how order intake are booked in the new Rieter Group and how we deal with cancellations, because we now have a certain history and procedure like Barmag is doing that, and we have a procedure how we did it in the past. So we now have to align that, and this might give the one or the other cancellation during the course of 2026 in the first half year when we align all that. So cancellations were on a similar level, like in the past. Now we just said only that we want to review our backlog. We still have some orders of '21 and '22 in our books where we have the down payment. But you can imagine, I was also asking the question, well, are you sure after 5 years that they still will execute the job. And we have -- this we will check. But it will be the last year of such reviews.

Okay. Then I move on to the second question. Aftersales margin dropped from 17% in 2024 to 11% in 2025. Can you please give some color here?

Well, I think it's mainly volume driven because you saw that our volumes were going down in sales, not in order intake, but in sales. Now our gross margins in aftersales are extremely good. So this hits us a lot in the bottom line, which you cannot compensate with any structural cost adjustments. It's not possible. Aftersales is damped to grow and to achieve a certain volume. That's one part. I think that's true. And there was within aftersales, we also had some more engineered solutions in our sales volumes than we had in the past. The margins of engineered solutions are a little bit lower than maybe in spare parts and in repair. So there was a slight mix impact. This also has hit us partially. And then, of course, as rest of the world is heavy under pressure, where prices are much higher than when you go to China, or to India where the landscape is more competitive, you also have a little bit of negative mix impact on the aftersales margins. But we are quite confident that we will have a good result in 2026.

Okay. And then the third part is concerning guidance. Does your guidance price include further downside risk? Or do we still need to add a buffer in case markets remain weaker than expected? Also, your margin guidance of 0% to 3% is below the low scenario of 2% to 5%. How should we understand this? Any drags likely to be expected on the 2026 margin you would like to mention?

I mean, obviously, guidance always includes ideally a balanced view on risks and opportunities. I think we elaborated on our assumptions. So no significant market recovery materializing on sales level. So more or less the same picture like in 2025. If that was to further deteriorate, which again is not our current understanding, and also not the market indications, that would pose some downside risks. But otherwise, we believe that is a very balanced view. With regards to the difference between 2026 and midterm, I think we have also elaborated 2 main drivers. First, the full integration of the Barmag business, and also the phasing of the synergies that we expect. And the second one being that, at Rieter, we still need to fully execute the announced restructuring measures. It will become effective fully with 2027. And as we heard before, for 2026, we expect roughly half of the CHF 27 million run rate benefits to materialize, and that gives you the gap.

Everybody understood. Good.

Thank you very much. There are no more questions. Back to you, Thomas.

Okay. Thank you very much. Ladies and gentlemen, I would like to conclude now this call. I think it's clear 2025 was challenging. But on the other side, strategically, it was super, super important for us and transformative. And the acquisition of Barmag will strengthen our market position, and it will also create or is creating a lot of earnings potential. Our medium-term value creation levers are very clear. We will realize the synergies of minimum CHF 20 million. The market will recover. I think we have done a lot in operational excellence, but I believe we still can do a lot in operational excellence. This journey never comes to an end. And we have started to work on our widening portfolio on one side in terms of customer markets. But on the other side, we also -- internally, our portfolio where we do produce what, we also have been very clear and consequent in execution. We are committed to a disciplined capital allocation. So in terms of expenses, CapEx, we are still pushing the brake because we want to use cash to generate a better EBITDA net debt ratio. So we also will work on a sustainable margin expansion. I have no doubt about that. If you have done so many things in operational excellence, cost structure, efficiency, once markets come back, then you have an operating leverage which immediately jumps up your profitability. And with this more diversified portfolio, we are now also very well positioned that we can unlock long-term shareholder value. So thank you very much to all of you online, but also here in the room. I would like to close this annual press conference. And thank you for your interest. Goodbye. It's a very warm day today. So spring is coming back, and we should take that as a very positive sign for our market developments. Thanks a lot, and goodbye.