Ladies and gentlemen, welcome to the half year 2026 results conference call and live webcast. I am Matilde, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star one on your telephone. Webcast viewers may submit their questions in writing via the related field. For operator assistance, please press star zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Thomas Oetterli, Chief Executive Officer. Please go ahead, Sir.
Good morning, ladies and gentlemen. A warm welcome from my side. Thank you for joining us today to review Rieter's half year 2026 performance and discuss the strategic path ahead. The picture you see on the title slide is a Man-Made Fiber mill, and this represents the new potential of our Barmag portfolio. I will outline the key messages, review the market, and then discuss the progress of the integration of Barmag. I will then hand over to Oliver for a deep dive into the financials and the outlook. Last but not least, we then have the Q&A session. Now let me start with the key takeaways. Besides still challenging market conditions, the first half of 2026 was marked by the historical milestone for Rieter, the successful completion of the largest acquisition in the company's history.
With the addition of the Man-Made Fiber Division, Rieter has entered the attractive and fast-growing market segment for Man-Made Fibers, while at the same time significantly strengthening our position in Asia. The integration itself is progressing well, and we are already seeing the first tangible benefits. During the first half of the year, we realized initial cost savings in both material costs and operating expenses. Looking ahead, we are confident that we will achieve our synergy targets of at least CHF 20 million annually by the end of the 2028 financial year. It is important to note that the acquisition was completed on February 2nd, 2026. Consequently, the results reported for the Man-Made Fiber Division in the first half of 2026 reflect only five months of business activity. They therefore do not represent a full six months contribution.
Overall, the acquisition significantly expands Rieter's strategic opportunities, broadens the technology portfolio, and creates a stronger platform for sustainable growth and value creation. Let me move on with the key messages, and I start with the green boxes on slide number four. We achieved an improvement in our market performance. Besides a strong market in China, India's growth is accelerating rapidly. Order intake increased by 56% to CHF 554 million. This increase is mainly attributable to the first-time consolidation of Barmag as the Man-Made Fiber Division, which contributed to the growth with an order intake of CHF 261 million. We also have seen acceleration of orders in the second quarter compared to the first one, and we expect further positive development in the near future. As a result, sales rose by 72% to CHF 576.7 million.
Regarding profitability, Operating EBIT amounted to -CHF 6.3 million in the first half of 2026. Due to the current capacity utilization and the fixed cost structure, Operating EBIT in the first half year of 2026 was below the operating profit break-even point. We expect a higher sales level in the second half of 2026 and confirm our guidance. Moving on to the blue box. A particularly encouraging development is the change in sentiment we are observing in India, one of our key markets. Customer investment activity has now picked up, which supports order intake and also provides further evidence of a market recovery for the coming quarters. Within the Man-Made Fiber Division, we have successfully set up China's local for local organization, which helps us capture the country's strong market growth.
We have completed the successful ramp-up of the winder assembly, which we have moved to China in the Short-Staple Fiber Division. In June 2026, Rieter entered into a strategic partnership with Recycling Powerhouse. Through this collaboration, Rieter contributes its extensive expertise in the clearing of textile waste and the spinning of short fibers to help create the foundation for innovative and sustainable recycling solutions across the textile industry. I will further elaborate on the Recycling Powerhouse model in a few minutes. Let's turn to the gray box. From an operational perspective, the integration of Barmag is progressing according to plan. We remain focused on realizing synergies, aligning processes, and leveraging the strengths of the combined organization. At the same time, our new divisional structure has been well received by customers.
The sharpened market focus and strengthened customer orientation are generating positive feedback while driving stronger customer engagement. We especially have seen that in the second quarter of this year. We are also making good progress with our IT transformation program, which we launched in the summer of 2025. The SAP S/4HANA conversion remains on track and represents an important foundation for future efficiency improvements, process harmonization, and scalability across the group. The first half of 2026 demonstrates that Rieter is executing its strategic priorities successfully, strengthening its market position, and building a solid platform for sustainable and profitable growth. I also have to say, in all fairness, that operationally, we still need further improvement. Let's move to the market, and I will first highlight the global economic and textile indicators.
Let me first provide a brief update on the current market environment and the key factors influencing customer sentiment and industry dynamics. Starting with demand indicators, we continue to see now encouraging operating levels in important textile markets. India remains a bright spot, with spinning mill utilization above 80%, underscoring healthy industry activity. We also see early signs of recovery in our Components & Technology Division, where the demand for consumables, wear, and tear parts, and spare parts increased the first time since more than three years by 3%. This market segment is often a leading indicator of mill activity. It suggests improving capacity utilization and will pave the way for renewed investment in spinning equipment over the coming quarters. Similarly, African spinning mill utilization has surged above 90%, reflecting strong production activity and solid demand conditions across several areas in the region.
Through our participation in the Africa Textile Renaissance Plan, we, where we contribute our in-depth textile expertise and have set up after-sale services, we are well-positioned to benefit from these favorable developments. On the geopolitical front, we have, of course, closely monitored developments surrounding the conflict involving Iran. Based on our current assessment, we do not have a direct operational impact due to our limited exposure to the affected region. However, like for many others, indirect market effects are becoming visible. In particular, we have tensions around the Strait of Hormuz, and this has contributed to higher energy and freight costs, creating additional pressure across the global supply chains. As a result, elevated oil and gas prices continue to weigh on industry profitability, increasing operating costs for spinning mills and other participants throughout the textile value chain.
Against this backdrop of geopolitical uncertainty and higher input costs, we are observing still greater hesitation among some customers regarding capital expenditure decisions. While underlying demand remains present in many markets, customers are still taking a more cautious approach to large investment commitments. In addition, the strong Swiss Franc continues to present a competitive challenge, affecting export competitiveness of our components and market positioning relative to competitors operating from lower cost currency environments. Overall, the market picture remains mixed. Strong utilization rates in Africa and especially in India provide positive signals for industry activity. While geopolitical uncertainty, elevated energy costs, investment caution, and currency headwinds continue to influence customer behavior and market development. A word on the profitability of the spinning mills on slide number seven. Here you see cotton margins in terms of US dollars per kilo on the left, compared with polyester on the right side.
The spun cotton margin is naturally quite slim and has come under increasing pressure in the recent years due to labor shortages and rising costs. Low capacity utilization further weighs on those margins. We see this in the rest of the world, where margins dropped between 2021 and 2025. However, in India, the erosion has finally stopped and margins are starting to recover. In China, by contrast, we see stable margins, but on a lower level, as the Chinese companies are pushing more for volume than for margin. This is thanks to strong modernization activities in the country's technology base. On the polyester side, polyester margins are under pressure too, but show a different geography picture. They have fallen in India and China, each around by almost 30% over the past five years.
In the rest of the world, they have stayed steady since 2021, while staging a strong recovery from sharp declines in the years 2022 and 2023. Here, Man-Made Fiber Division and Short-Staple Fiber Division pursue the same vision of fully digitizing and automating the value chain, underpinned by strong sales and service networks, which in turn will help strengthen the margins. A deep dive into the different markets on slide number eight. Market developments continue to show an uneven picture in the first half of 2026. The Americas showed a stable market environment overall, with interesting opportunities in Central and South America. Brands finally are restocking after the tariff ruling, and we are seeing mill upgrade opportunities in North America. We are well-positioned in this market, and we see real growth prospects for the near future.
EMEA consists of Europe, Middle East and Africa, and this includes key markets like Turkey, Egypt, Uzbekistan and Pakistan. While Turkey and Uzbekistan have still not recovered from the downturn, we see some market improvement in Egypt. You see that also on our press release, where sales in EMEA and Americas have declined year-over-year by CHF 60 million, resulting in a CHF 20 million, more or less, decline of gross contribution. In these markets, we can support our customers with automation solutions and energy-efficient products and systems to create an advantage in the conversion costs per kilogram yarn. India is ready for growth, and we especially have seen that in the 2Q of this year. As the capacity utilizations are still high, several larger projects are now in the planning and final decision phase.
China has shown the greatest resilience in the market over the last four years of downturn. Mills put a focus on installing the latest technology, a trend which is supported by the central government's clear investment plan. Rieter has implemented a strong local organization in all the divisions to match the Chinese requirements. Our growth in the world's biggest textile market confirms that we are following the right strategy. Let me now come to the Recycling Powerhouse model on slide number nine. This is an important element of our sustainability and growth strategy. We are seeing that the global textile industry is undergoing a fundamental transformation. Rising volumes of textile waste, increasing regulatory pressure, and growing demand for sustainable products are accelerating the need for scalable, circular solutions. We believe that value creation will come from connecting all critical steps of recycling into one integrated process.
The model first starts with sourcing. We call that the feedstock of waste, where we support the procurement, and in this case it is, of course, textile waste. The next step is sorting. Textile waste, both pre- and post-consumer, is sorted by color and fabric type, while non-textile components are removed. This is a critical step to ensure high-quality input for the recycling process. The sorted material then moves into tearing, where textile waste is transformed back into fibers. Through a gentle opening process, the fiber quality is maximized, and as much value as possible is preserved from the original material. The recycled fibers are subsequently processed through spinning using state-of-the-art rotor and ring spinning technologies. This enables the production of high-quality recycled yarns that meet the requirements of demanding textile applications. The final stage is marketing, where recycled yarn is sold back into the textile value chain.
Product quality assurance is essential, and yarns will then be marketed under an established brand. Our strategic partnership is a key enabler of this model. Through this collaboration, capabilities across the recycling value chain are combined to accelerate the industrial scaling of recycling solutions. This concept is built on three pillars. First, a franchise model, which allows scaling efficiently through strong partners. Second, a standardized blueprint ensuring consistent processes and quality across all locations. Third, operational excellence, leveraging technology and knowhow to achieve competitive performance and profitability. Let's now finally turn from my side into an integration update of the Man-Made Fiber Division. One of the advantages of this acquisition is that we can pool resources and leverage our combined strengths. This is why we expect to realize synergies of at least CHF 20 million annually by the end of 2028.
The first five months have confirmed that this is realistic. Through joint negotiations, we already have realized CHF 1.2 million in savings. In total, we have addressed more than 300 suppliers. We also have set the foundation for procurement collaboration for future joint activities. We are stepping up our focus on costs and are accelerating our continuous cost leadership and procurement initiatives. Our local sourcing and best-cost country footprint are being expanded. At the same time, we are reviewing our suppliers and our value chain, our value engineering, while looking into other operating expenses. The consolidation of the headquarters in Winterthur and Remscheid into one organization at two places is also progressing as planned. This concludes my part of the presentation, and I now hand over to Oliver Streuli for the financials.
Thank you very much, Thomas. Good morning, ladies and gentlemen. Before turning to the financial results for the first half-year 2026, let me briefly explain two important changes compared with previous reporting periods. On slide number 13, we show the new segment reporting and the alternative performance measure. First, following the acquisition completed in February 2026 and the new organizational structure that we announced last year, we have adopted our segment reporting structure. We now report the group in three divisions: Short-Staple Fiber Division, Components & Technology Division, and the new Man-Made Fiber Division. The Short-Staple Fiber Division consists of the former machines and systems and the after-sales divisions. Components & Technology Division consists of the components business units and the entire R&D for the Short-Staple Fiber business. The new Man-Made Fiber Division consists of the Barmag brand and all the acquired business.
This reflects how we manage the combined group and also how resources are allocated internally. Second, we have aligned our most important alternative performance measure, which is Operating EBIT. Operating EBIT now excludes restructuring costs, impairments, transaction-related items, and Purchase Price Allocation related to depreciation and amortization. We believe that this allows for a clearer view of the true operational performance of the business and improves comparability across the three divisions. Let me turn to the financial performance of the first half-year 2026 on slide number 14. As indicated by Thomas before, the first six months of the year were shaped by two factors. First, the integration of the newly acquired business, and second, a market environment that remains challenging for large parts of the legacy activities, especially in Short-Staple Fiber Division. Starting with the key messages, sales increased by 72% to CHF 576.7 million.
Order intake increased by 56% to CHF 554.1 million. Both developments were primarily driven by the integration of the new Man-Made Fiber Division. Operating EBIT amounted to CHF 6.3 million compared with CHF 4.3 million in the first half-year last year, but was on a comparable level when excluding operational real estate disposals in the first half-year last year. Despite relatively weak sales volumes and some pricing pressure in our legacy business, disciplined cost management kept operational profitability close to break even. Reported EBIT amounted to -CHF 39.9 million. The difference is largely explained by Purchase Price Allocation-related depreciation and amortization of CHF 26.3 million, as well as restructuring and transaction-related expenses in the amount of CHF 7.3 million. As a consequence, the net result for the period amounted to -CHF 54.9 million. Free cash flow resulted to -CHF 96.3 million.
This reflects obviously the net loss and the temporary build-up of operating net working capital, particularly to support project execution and deliveries planned for the second half of the year. Especially in the Man-Made Fiber Division, we will face a significantly better second half of the year from a cash flow perspective due to the relatively high amount of orders being finalized and handed over to customers in the second half. Order backlog increased to CHF 760 million and provides a good visibility for the coming quarters. Last but not least, and certainly a highlight, we successfully repatriated more than CHF 80 million of excess cash from China through dividend distributions. Let me dive into some of the details on the following slides, starting with orders on slide 15. Order intake increased by 56% to CHF 554.1 million.
The increase is entirely attributable to the new Man-Made Fiber Division, which contributed CHF 261 million of orders during the first half. Negative currency translation effects reduced group order intake by approximately CHF 30 million. On an organic basis, group order intake declined by around 9%. This confirms that the broad-based market recovery has not yet materialized, but we also have to point out a clearly accelerating trend in terms of order in the second quarter versus the first quarter of the year. The legacy Rieter business, consisting of the Short-Staple Fiber Division and the Components & Technology Division, continues to operate in a mixed market environment. Short-Staple Fiber reported an order intake of CHF 194 million, which is down 25% year-on-year. Components & Technology increased slightly to CHF 99 million. As outlined before, the regional developments still differ considerably. India continues to develop positively and is a clear highlight.
In the legacy business, order intake for new equipment increased significantly year-on-year, customer sentiment remains constructive and investment activity is healthy. China remains on a stable and high level, order activity continues to be supported by its solid project pipeline and the comparatively healthy investment sentiment. The picture is very different in EMEA and in the Americas. Customers remain cautious with larger investments, demand for new equipment therefore remains clearly below historical levels, especially in countries where Rieter enjoyed a strong market position historically, such as Turkey, Egypt, Uzbekistan, and the U.S. Asia continues to carry the recovery, while markets outside of Asia have not yet improved. This has a negative impact on our profitability, as pricing pressure from Asian competitors is significantly stronger in India and in China than compared to the rest of the world.
The new Man-Made Fiber Division secured several mid-sized orders during the first half and keeps a very solid pipeline to further build on the gradual recovery seen in the second. In terms of regions, India is the most attractive future growth region for Man-Made Fiber, which is driven by local investments in the upstream chemical fiber installed base, which lays the foundation for local Man-Made Fiber production in India, which in turn is driven by sustained and strong economic growth and a prospering middle class. Let's continue with the top line on slide 16. Sales increased by 72% to CHF 576.7 million. The increase was primarily driven by the inclusion of Man-Made Fiber, which contributed CHF 293 million of sales. Currency translation reduced reported sales by approximately CHF 24 million. The legacy business continues to reflect the relatively low order intake levels of previous periods.
Specifically, Short-Staple Fiber Division reported sales of CHF 190 million, down 14% year-on-year. Components & Technology Division generated sales of CHF 94 million, which is down 18% year-on-year. From a regional perspective, the center of gravity of the group has clearly shifted further towards Asia. China became the largest market of the group with sales of CHF 350 million, and India, being the second-largest market, also continued to perform well, in contrast to EMEA and the Americas, which remained significantly below prior-year levels. As already indicated, customers in these regions continue to postpone larger investments and capacity additions. Now to the Operating EBIT on slide 17. Operating EBIT amounted to -CHF 6.3 million, compared with positive CHF 4.3 million in the first half of 2025. The bridge on this slide highlights the key drivers.
The bigger group generated a higher gross profit contribution, but was diluted by increased pricing pressure than the negative mix in Short-Staple Fiber Division. However, the positive gross profit effect overall was almost offset by the additional operating cost base required to support the bigger group and the corresponding operational capacities. Specifically, research and development expenses slightly increased by CHF 3.4 million -CHF 32.8 million. Selling, general and administrative expenses increased by CHF 14.9 million -CHF 104.3 million. Looking at divisional performance, Short-Staple Fiber Division remained heavily affected by low volumes, lower than planned part sales in after-sales, and pricing pressure for new equipment. The division reported an Operating EBIT of -CHF 37.8 million and clearly indicates the requirement for further improvements. Components & Technology Division delivered a stable Operating EBIT of CHF 4.6 million, despite a slightly lower sales level.
The new Man-Made Fiber Division delivered Operating EBIT of CHF 19.7 million after only five months of consolidation. This highlights both the profitability and the resilience of the division and confirms the strategic rationale of the transaction. Despite weak markets in large parts of the legacy business, disciplined execution and cost control kept operational profitability close to a break-even. A word on cash conversion on slide 18. Free cash flow amounted to -CHF 96.3 million. Three main factors explain this development. Obviously, a negative net result. This is the biggest driver, an increase in net working capital, which explains 2/3 of the negative cash flow. Third, also some investments into the business, although CapEx was handled very restrictively in the first half year, as in the past.
On working capital, which has risen, and the main reason is that activity levels have increased and major projects are currently in production will be ready for delivery in the second half of the year. This will drive sales, but to a larger part, cash flow, due to progress and final payments according to the respective payment terms, especially in the Man-Made Fiber Division. More than two-thirds of the working capital buildup is linked to the Man-Made Fiber Division. We therefore expect much of the increase in net working capital to reverse as related orders will be delivered during the second half. On top, we expect to conclude several large projects which will trigger then respective advance payments. Rest assured that not only costs, but also cash obviously remains a top management priority, and this applies both to the legacy business but also to the ongoing integration activities.
Let me conclude with our financial position on slide 19. Following the acquisition, the balance sheet of the group looks fundamentally different compared with year-end 2025. Not only did assets increase from CHF 1.5 billion at year-end to CHF 2.7 billion, but also the number of employees increased from approximately 4,600 to more than 6,400. Net liquidity of CHF 184 million at year-end moved to a net debt position of CHF 673 million at the end of June. This development is explained primarily by the purchase price consideration and the temporary negative free cash flow during the first half of this year. Equity amounted to CHF 745 million, and the equity ratio stood at 27.8%. As mentioned at the beginning, we have demonstrated our ability to repatriate significant cash from China.
Our current level of debt is clearly above our midterm ambition. You can rest assured that we are in constant exchange with our most important stakeholders, they continuously support the group and believe in the rationale and the value creation potential of the combined organization. Let me conclude with our outlook as we move to slide 21. The market environment remains mixed. India, clearly the highlight, continues to show positive momentum, China remains stable at a relatively high level. Demand in EMEA and in the Americas, in contrast, remains very subdued. Based on current backlog, expected project execution in the Man-Made Fiber Division and the measures implemented across the group, we expect a stronger second half in terms of profitability and cash generation. We therefore confirm the outlook communicated earlier this year for the full year 2026.
Our priorities remain our customers, the continuous footprint adjustments, and cash generation. With that, I conclude the financial section. Thank you very much.
We now come to your questions. Ladies and gentlemen, we will start with the questions of the participants in the conference call. We will take the questions from the webcast. As usual, the Q&A session will be recorded. Matilde, may I kindly ask you to open the line, please, for the first participant?
Yes. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Webcast viewers may submit their questions in writing via the relative field. Anyone who has a question may press star and one at this time. The first question comes from the line of Amira Manai from ODDO BHF. Please go ahead.
Yes. Good morning, and thank you for the presentation and for taking my questions. I have actually two questions related to the outlook. The full year guidance complies significant improvements in H2 sales. What gives you the highest confidence in achieving this acceleration? Excluding the contribution from Barmag, what level of sales evolution do you expect in H2, and which divisions or regions are expected to be the main drivers? This was the first question. The second one is how much of the H2 revenue outlook is already covered by the current order backlog. Thank you.
Thank you. When you look on our sales we have achieved in the first half year, roughly CHF 580 million. It would be easy just to double it. You come to CHF 1,150. You have to add one more month for Barmag. CHF 50 million-CHF 60 million. You already end at CHF 1.2 billion. Of course, we know our backlog, and the backlog has execution dates and delivery dates and billing dates. The whole outlook is based on our existing backlog. In the after-sales component and so-called single machine sales, still some additional sales volume will come with order intake of July, August, and September. Three-quarters of this additional, let's say, CHF 100 million-CHF 300 million, is already in our book. There is a high confidence that this outlook can be achieved.
This is valid for all the three divisions, and we will see that it is especially a continuation of the strong performance in Asia Pacific.
Oh, it's the divisional split.
Yeah, the divisional split. As I said, when you take our volume we had at the old Rieter last year, CHF 685 million was our total sales value for the year. You can calculate with ± CHF 700 million, you can calculate with probably a little bit short of CHF 700 million for the Man-Made Fiber Division, because we will, at year-end, only have 11 months instead of 12 months.
Yes. Thank you. Maybe just some other questions. For the order intake, in Short-Staple Fiber remains relatively weak. When do you expect this division to return to sustainable growth?
Yeah. It is true. We have suffered also. I mean, we have suffered for many, many years now. There are two things happening. Overall, the overall global market was down. It was just down. It was especially down in the so-called rest of the world. When you look on sales volumes, the sales volumes we are achieving today in the rest of the world, which is Americas and EMEA, is 80% less than it has been three, four years ago. We have partially compensated that with higher market shares now in India and in China. Thank God. Otherwise, it would have been much, much worse. Historically, Rieter was especially strong in these Americas and EMEA region. We all know that in the past, in Turkey, we made per year CHF 300 million sales volume.
We are struggling to come somewhere between CHF 30 million-CHF 40 million per year now. It has completely collapsed. Already two years ago, we started to move our organization more towards India and China and other Southeast Asian markets. We have strengthened our local organization. China was quite stable over the last couple of years, but we had a very low market share there. We have increased that, and we will also further increase it to benefit from this quite resilient market. India also went down a lot, but India now very clear is back. It is very, very clear. Especially the second quarter was very strong. Looking on the order pipeline, I have to say, there is no reason at all why this should change. The growth will be driven by Asia Pacific.
In all the other markets, we mentioned that we do see Africa, but it is quite a small one to bring some opportunities. We see especially Middle and Latin America in order intake to grow over the next couple of months. This will only impact our sales and margin levels next year.
Thank you.
The next question comes from the line of Tobias Klöpper, from Zürcher Kantonalbank. Please go ahead.
Good morning. Just one question from my side. As you say, the restructuring is yet to be fully implemented. Can you give us some insights on what one-time costs you expect in the second half of the year and maybe going forward?
We do have launched existing programs. We announced that last year. This was mainly regarding our component landscape. We had a very fragmented production landscape here in Europe. Over the last six months, we have sold our company we had in Belgium. We have announced to shut down our company in the Netherlands, and we also are closing our company in France. Belgium and Holland have been. They were part of Graf. For combers and cards. France was a participation of Bräcker, where we produce rings and travelers for ring spinning machines. We also have closed our manufacturing at SSM in Switzerland, so we don't produce any more machines here in Switzerland. We have moved that to Asia-Pacific. These are the, let's say, the actual activities in the CNT division.
The impact will be fully visible with the yearly results of 2027, because we are now still in execution. You don't see the improvement by 100%. What you see is that we were able to keep our margins in CNT, although our sales volumes were roughly 15% less than last year. We kept the absolute amount of operating profit, and you will see an improvement for the next year because then we have the full impact. On the other side, we also have, in the area of SSF, we have at the moment four manufacturing sites, and we have a huge underutilization of our capacity. Two of those factories are in Europe, two of the factories are in Asia-Pacific.
As the market now is 80% in Asia-Pacific, we of course have to consider that we have to align and correct our supply footprint. It's not only manufacturing, it's also supplier base. We are in the planning phase of that, and as soon as we have more concrete details, we will communicate this. Last but not least, in Man-Made Fiber, we have two factories in Germany. For Neumag in Neumünster and from Barmag in Remscheid. We have a strong manufacturing footprint in China, mainly in Suzhou and in Wuxi. Suzhou is our main manufacturing site. We have started already one year ago. It was before Barmag belonged to us. We have started to move our winder production to set up also in China and to slightly reduce the winder production in Germany.
This also will generate in the foreseeable future, the one or the other adjustment case. You can expect that we will communicate as soon as we have the final picture in the second half of the year. I cannot give you a clear amount at the moment.
No, that's helpful. Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. We now have a question from the line of Leonie Zirn from UBS. Please go ahead.
Yes. Hi, good morning. Thanks for taking my question. Regarding the synergies that you mentioned that you secured in the first half, CHF 1.2 million, can you already give an estimate what you would expect this to be in the full year 2026? I think when I look at the chart, it looks like CHF 3 million-CHF 4 million approximately.
We are targeting for these first couple of months. You are right, we are targeting a synergy level of CHF 3 million. You always have to say this is a run rate. You don't see it already in the P&L. It's always a yearly run rate. We have achieved now, in the first couple of months, we achieved already CHF 1.2 million. This was mainly driven by synergies in the area of material cost. What we have done, we were first looking at all our suppliers, who is supplying to old Rieter and Barmag. We brought those volumes together and have renegotiated prices.
Another topic we did is, at Rieter, we were used, when we saw that volumes for a certain supplier were above the level we somehow have indicated for them in a year, we went back and said, "Hey, you have made more business with us. I would like to have some extra money." We have now applied that also at Barmag. This was a learning Barmag took from the Rieter side. Now we are expanding. We now go into the different components. Say, okay, maybe we have two different suppliers, but we might be able to combine volumes and achieve better costs. That's what we are doing now in the second half of the year. The second topic we are doing, we are looking into operating expenses.
Giving you an example, we are now monitoring what are our costs for audits, what are our costs for insurances, what are our costs for facility management? We see that we can also here create quite substantial savings. Last but not least, we are also working now on this topic of the headquarters, but this takes more time. When you look on this specific chart, we have in our presentation, this was the chart on slide number 11. You see that operating expenses and cost of personnel, they will start towards the end of this year. Last but not least, of course, we are also looking on our R&D facilities and on cross-divisional sourcing and manufacturing. Where do we have today a sourcing from a third-party supplier, where in fact we could supply also internally and get the margins into our books.
We had a good start, we have a clear plan, we have clear accountabilities and responsibilities and those CHF 3 million-CHF 4 million run rate by the end of the year, I'm sure we will achieve that.
Thank you so much for the many details. A second question on the advanced payment. If I look at those, they've risen to CHF 205 million, compared to the CHF 77 million from end of 2025. Barmag also reported CHF 140 million prepayments end of 2025. I'm just wondering how much of this CHF 205 million is actually additional prepayments that you added in the first half. How much is effectively new or how much is just like a Barmag add-on? Maybe some details here.
Hello. Leonie, I cannot give you the detailed advanced payment breakdown by division, as we do not disclose that. What I can give you is some color on the development by division.
Yeah.
The payment behavior has remained unchanged, there is some difference between the regions and more specifically, we see slightly lower advanced payments in the Indian market than especially the rest of the world. That is like for like a slight drag on the Short-Staple Fiber side. Other than that, the payment behavior has remained stable overall. With regards to Man-Made Fiber, we had a relatively weak month of June in terms of order intake, not because project are postponed, it's more a timing gap between June, July or maybe August and therefore also the June month was the weak month in terms of advanced payments and we expect that to normalize in the coming months. Overall no significant change in advanced payments behavior.
Mostly a timing effect from what I understand. Thank you.
Yeah.
In terms of reversing net working capital, as you have seen quite some build up there, how much do you expect to reverse as you have deliveries in the second half? Also, in terms of free cash flow, can we already expect free cash flow to turn positive at end of 2026 or will this still remain in negative territory?
Also there, we will not provide guidance for the full year, but a bit of color on that as well. We expect the net working capital effect in the Man-Made Fiber Division to largely reverse, even more than that actually, and we expect Man-Made Fiber to be positive on free cash flow level quite significantly, which was not the case in the first half year. In the other divisions, we continuously to work on those topics. Obviously, if you are below your sales, this does not help in the short term in terms of releasing net working capital. We see quite some potential in the second half of the year on free cash flow.
Okay. Thank you. Just a quick clarification question from what we've been discussing before regarding second half revenues and your expectations around that. You mentioned this number of CHF 700 million for Short-Staple Fiber Division that we should take as a proxy for what exactly? Can you just elaborate maybe a second time? From what I understand, one more month of Barmag should give CHF 50 million-CHF 60 million and then existing backlog backs the rest of the outlook. Is that correct from my understanding?
It is almost correct. The CHF 700 million I said is the old Rieter. Last year we had CHF 685 million and this was Short-Staple Fiber Division and Components & Technology Division. Just that you don't mix it up. The old Rieter last year was CHF 685 million and in that area we will also remain this year. We also said that, you might remember the year-end call where we said we have a transition year where we have a flat development in the old Rieter. Expecting a better order intake. You take 11 months of a year for Man-Made Fiber. There is also here a little bit of seasonality, but not so much like in the Short-Staple Fiber, because some accounting differences we also have. We have a percentage of completion method for certain projects, big projects in the MMF Division.
At Rieter, we show the sales in the moment where we were able to do the final billing. Altogether, this range of 1.3-1.5, yes, it is absolutely valid. To be also clear, it will be probably slightly below the midpoint, because of the 11 months of Barmag.
Okay. If I recalculate what the organic growth of Barmag was, it was probably from a double digit down as well, maybe down between 10%-15%. Do you really expect Barmag levels to be comparable to those of 2025? From what it looks into the start of the year, it looks probably also below this number.
More or less, yes. Maybe slightly below in sales and a good chance to be above in order intake.
Okay, good. Thank you.
Thank you.
Ladies and gentlemen, that was the last question over the phone.
Okay, we take the question from the webcast. The first question comes from Dominik Feldges from NZZ. What was your organic growth in sales and order intake?
Okay. Thank you for this question. I think the best is if you look on slide number 15 and slide number 16, because you see the bridge there on the left side, half year one to half year two. You see there also Short-Staple Fiber and Components & Technology. In order intake, Short-Staple Fiber was down by CHF 48 million, and the level last year was CHF 260 million. When you take that, it is somewhere a little bit less than 20% it went down in sales. Because you always have to adjust it for FX. When you look at CNT, it went up CHF 5.8 million. Our level last year was CHF 96 million. The order intake went up by roughly 7%. That is on the order intake level. Double-digit minus on Short-Staple Fiber and high single-digit plus on Components & Technology.
When you then go to sales, you see that on the chart 16. On the left side, you see Short-Staple Fiber went down by 20%. You see on the right side, last year we were at CHF 222, so it's somewhere at 8%-9%, so less than 10%, the sales volume went down. At CNT, because we have for every year, our components order intake went down. We have quite a substantial decrease of CHF 18 million on a baseline of CHF 113.9. Here we also talk about a little bit more than 10%, it went down. In the second half, of course, those figures will look different because now the order intake, which is improving quarter-by-quarter, will also turn into improved sales values in the second half of the year.
A second question from Dominik Feldges . What is your view of textile and end markets, especially with regard to clothing? Have they finally boomed out?
For us, there are two elements. One is how much do people spend? How much clothes do they buy? We are more interested in meter fabrics than in millions or billions they spend, because we are driven by volume. It is clear that there is a hesitation in some Western markets to spend too much money for clothing, and there is a trend to go to fast fashion or to ultra-fast fashion. This, of course, is fueling, especially the textile industry in China and also Vietnam. There, volumes are going up. That's a fact. What is also a key indicator is where do you see that the so-called middle class is developing? We clearly see the biggest growth of middle class is a people who buy a lot of clothes, and there are many people there. This is China and India.
One driver of this Indian growth is the economic growth, but also this middle class growth. I see also in the foreseeable future that the demand of meters, of tons, it goes continuously up.
Thank you. The next question comes from Elia Geiser from Research Partners. What levels of CapEx are you expecting in the mid and long term?
This is unchanged to what we have previously communicated. We expect that the combined group should be sufficiently equipped with roughly CHF 50 million-CHF 80 million of CapEx, depending obviously on maintenance CapEx and maybe some selected growth CapEx that will be possible in the future. That is unchanged from our previous communication.
Okay, thank you. The next question comes from Tina Tuor from AWP Finanznachrichten regarding the partnership with Recycling Powerhouse. Can you give more details on your role in this partnership? Do you mainly provide technology? Do you execute those steps yourself, or how does this work?
This is, of course, the first time that we make this announcement of the Recycling Powerhouse, let me explain a little bit more in detail what it is all about. Imagine today, the textile industry is consuming about 120 million tons of raw material. Half of it is in the filament area, and half of it is in the short staple fiber area. In the short staple fiber area, 60 million tons, an incredible number, is creating all those clothes we are wearing. Now, more than 97% of clothes are thrown away afterwards. It's waste to landfill. From an ecological point of view, this is, of course, not very sustainable.
For that reason, many global initiatives have started to become more and more visible that the recycling of clothes back into fibers, then from the fibers again into yarn, and from the yarn into clothes. Circular economy is a big mega trend. As a technology leader, we always said we want to be ahead of the curve, and we want to jump on highly profitable mega trends. You do have recycling already today, to be clear. Very often in a spinning mill, nothing is thrown away during the processing of yarn production. These are very small volumes, mill by mill. What we wanted to do in the Recycling Powerhouse is to standardize, to have a blueprint factory, a recycling factory, where all these processes are combined.
You bring in the material, you are sorting, you are tearing, you are spinning, and it goes out and it is sold back into the market. These are those four, five things: sourcing, sorting, tearing, spinning, and marketing. Now, our competence, of course, is that we are very good in the whole spinning process, and we also have our experience in tearing. We decided, well, we want to look for partners we can work together. We were aligned with experts in the tearing area, in the sourcing area, in the sorting area. In order to have a vehicle where at the end, those partners can be in, we founded the company, Recycling Powerhouse. There will be several shareholders in the future there, but we have done this initial step.
This is not foreseen that this is a full-fledged Rieter company. We are, of course, delivering machines, but we also deliver operational expertise how to run such a mill. Because those recycling mills, they are five, six times bigger than a normal, let's say, recycling department of a spinning mill. These are huge factories. Over the next couple of days, maybe weeks, we will see. We will announce the first factory, which we already have agreed and which we already have done the whole planning, and we also have secured the feedstock, the sourcing of raw material and agreement, in the textile industry to buy this yarn. There are many aspects, but not all of them we can cover. That's the reason we do have partners.
I personally, if you just calculate how many recycling mills you will need in the future, if this trend goes on, then we talk about a three-digit number of mills to be established over the next one, latest two decades, hundreds of such Recycling Powerhouses. Nobody else has the complete value chain under control like us. If we are successful in this will become a business model, which is really big. Now, it's not only selling, as I said, machinery, it's also a franchise model. The ones, the investors who build such a recycling factory, they will have a license fee to be paid to the Recycling Powerhouse. This will, over time, create continuous revenue streams into this Recycling Powerhouse, and of course then indirectly also to Rieter. We are quite fascinated by that.
I also would like to say that since yesterday evening, our website is opened. Or not our, the website of the Recycling Powerhouse. If you would like to know a little bit more about that, you can go into that. With this, I think, I have seen we do not have more questions. Dear ladies and gentlemen, as we mentioned, the first half of 2026 was shaped by the integration of Barmag. This was for us a key, key focus point. It is progressing as planned, and it's already delivering now in terms of synergy potential, but also first realizations and earnings potential. We can say it was the right thing to do, this strategic move. We will have a lot of happiness at the end of the street.
With the Recycling Powerhouse, we are now bringing to bear our in-depth textile expertise to help standardizing, industrializing, and scaling textile recycling. This will become a complete new revenue stream for us, where I have to say, depending how good it is, the limit will be the sky. Nevertheless, let's also be honest, we still have to work on the Short-Staple Fiber operational performance. We were lacking for years in orders. This now starts to improve, but we also have this challenge of the shift from the rest of the world to India and China. We have to sharp focus on our cost. We have to have a disciplined capital allocation. We have to build up stronger our teams in Asia Pacific to achieve sustainable margin expansion. Nevertheless, I'm really confident. We are stronger, we are more resilient than we have been before.
We are now well-positioned to benefit when the market conditions now are improving. With this, I would like to close our half year results conference. I thank you for your interest and I wish all of you a great summer break. I mean, the weather in Mengeringhausen, I can say, already shows that summer has started. Thanks a lot, and see you soon again. Goodbye.
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