Rieter Holding AG (RIEN) Earnings Call Transcript

Ladies and gentlemen, welcome to the Half Year 2026 Results Conference Call and Live Webcast. I am Matilda, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Thomas Oetterli, CEO. Please go ahead, sir.

Thank you, and 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. And 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 2, 2026. Consequently, the results reported for the Man-Made Fiber Division in the first half of 2026 reflect only 5 months of business activity. They, therefore, do not represent the full 6 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. So let me move on with the key messages, and I start with the green boxes on Slide #4. 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. However, 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. But 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 minus 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 breakeven point. We expect a higher sales level in the second half of 2026 and confirm our guidance. Moving on to the blue boxes. 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. In addition, 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 tiering 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. Last but not least, let's turn to the gray boxes. From operational perspective, the integration of Barmag is progressing according to plan. We remain focused on realizing synergies, aligning processes and leveraging the strength 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, and 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/4 HANA conversion remains on track and represents an important foundation for future efficiency improvements, process harmonization and scalability across the group. Overall, 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. But I also have to say in all fairness that operationally, we still need further improvement, so let's move to the market, and I will first highlight the global economic 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 and Technology Division, where the demand for consumables, wear and tear parts and spare parts increased the first time since more than 3 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 aftersales services, we are well positioned to benefit from this favorable development. 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 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 environment. So 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 #7. Here, you see cotton margins in terms of U.S. dollars per kilo on the left compared with polyester on the right side. The spinner 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 And 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 5 years, and in the rest of the world, they have stayed steady since 2021, while staging a strong recovery from sharp declines in the years '22 and '23. 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. Now a deep dive into the different markets on Slide #8. 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-on-year by CHF 60 million, resulting in a CHF 20 million more or less decline of gross contribution. So 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 second quarter 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 4 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. So let me now come to the Recycling Powerhouse model on Slide #9. 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 tiering 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 the 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 3 pillars. First, a franchise model, which allows scaling efficiently through strong partners. Second, a standardized blueprint, ensuring consistent processes and quality across all locations. And third, operational excellence, leveraging technology and know-how 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 5 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. And 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 2 places is also progressing as planned. So 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 2 important changes compared with previous reporting periods. On Slide #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 3 divisions: Short-Staple Fiber, Components and Technology and the new Man-Made Fiber Division. The Short-Staple Fiber Division consists of the former Machines & Systems and the aftersales divisions. Components and Technology consists of the components business units and the entire R&D for the short-staple fiber business. And 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 clear view of the true operational performance of the business and improves comparability across the 3 divisions. Now let me turn to the financial performance of the first half of 2026 on Slide #14. As indicated by Thomas before, the first 6 months of the year were shaped by 2 factors: First, the integration of the newly acquired business; and second, the 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. Operational EBIT amounted to CHF 6.3 million compared with CHF 4.3 million in the first half of last year, but was on a comparable level when excluding operational real estate disposals in the first half of last year. Now despite relatively weak sales volumes and some pricing pressure in our legacy business, disciplined cost management kept operational profitability close to breakeven. Reported EBIT amounted to minus 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 minus CHF 54.9 million. Free cash flow resulted to minus CHF 96.3 million. This reflects obviously the net loss and the temporary buildup 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. And last but not least and certainly a highlight, we successfully repatriated more than CHF 80 million of excess cash from China through dividend distributions. Now 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 effect 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 and the Components and 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 and Technology increased slightly to CHF 99 million. As outlined before, the regional development 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 and customer sentiment remains constructive and investment activity is healthy. China remains on a stable and high level and order activity continues to be supported by solid project pipeline and a comparatively healthy investment sentiment. However, the picture is very different in EMEA and in the Americas. Customers remain cautious with larger investments and demand for new equipment, therefore, remains clearly below historical levels, especially in countries where Rieter enjoys a strong market position historically, such as Turkey, Egypt, Uzbekistan and the U.S. As a result, Asia continues to carry the recovery, while markets outside of Asia have not yet improved. In addition, this has a negative impact on our profitability as pricing pressure from Asian competitors is significantly stronger in India and in China and compared to the rest of the world. The new Man-Made Fiber Division secured several midsized orders during the first half and keeps a very solid pipeline to further build on the gradual recovery seen in the sector. 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 the 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 reported sales of CHF 190 million, down 14% year-on-year. Components and Technology 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. And now to the operating EBIT on Slide 17. Operating EBIT amounted to minus 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 and the negative mix in Short-Staple Fiber. 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 to CHF 32.8 million. And selling, general and administrative expenses increased by CHF 14.9 million to CHF 104.3 million. Looking at divisional performance, Short-Staple Fiber remained heavily affected by low volumes, lower-than-planned part sales in aftersales and pricing pressure for new equipment. The division reported an operating EBIT of minus CHF 37.8 million and clearly indicates the requirement for further improvements. Components and Technology delivered a stable operating EBIT of CHF 4.6 million despite a slightly lower sales level. And the new Man-Made Fiber Division delivered operating EBIT of CHF 19.7 million after only 5 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 breakeven. Now a word on cash conversion on Slide 18. Free cash flow amounted to minus CHF 96.3 million. Three main factors explain this development. Obviously, a negative net result. Then this is the biggest driver, an increase in net working capital, which explains 2/3 of the negative cash flow. And third, also some investment 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 final payments according to the respective payment terms, especially in the Man-Made Fiber Division. More than 2/3 of the working capital buildup is linked to the Man-Made Fiber Division. And we, therefore, expect much of the increase in net working capital to reverse as related orders will be delivered during the second half. And on top, we expect to conclude several large projects, which will trigger the respective advanced payments. Rest assured not only cost but also cash obviously remains a top management priority, and this applies both to the legacy business, but also the ongoing integration activities. Now 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 these assets increased 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. Obviously, our current level of debt is clearly above our midterm ambition. As a consequence, you can rest assured that we are in constant exchange with our most important stakeholders, and they continuously support the group and believe in the rationale and the value creation potential of the combined organization. Now 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 and 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. And 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. And with that, I conclude the financial section. Thank you very much.

We now come to the questions. Ladies and gentlemen we will start with the questions of the participants in the conference call, then we'll take the questions from the webcast. As usual, the Q&A session will be recorded. Matilda, may I kindly ask you to open the line, please, for the first participant.

[Operator Instructions] The first question comes from the line of Amira Manai from ODDO BHF.

So I have actually 2 questions related to the outlook. So the full year guidance implies significant improvement in H2 sales. What gives you the highest confidence in achieving this acceleration? And excluding the contribution from Barmag, what level of organic sales evolution do you expect in H2? And which divisions or regions are expected to be the main drivers? This was the first question. And the second one is how much of the H2 revenue outlook is already covered by the current order backlog? Thank you.

When you look on our sales, we have achieved in the first half year, so roughly CHF 580 million, it would be easy just to double it, then you come to 150 million. Then you have to add one more month for Barmag so CHF 50 million to CHF 60 million, so you already end at CHF 1.2 billion. Then, of course, we know our backlog and the backlog has execution dates and delivery dates and billing dates, so the whole outlook is based on our existing backlog. In the aftersales component and so-called single machine sales, still some additional sales volume will come with order intake of July, August and September, but 3/4 of this additional, let's say, CHF 100 million to CHF 300 million is already in our book, so there is a high confidence that this outlook can be achieved. And this is valid for all the 3 divisions. And you will see that it is especially a continuation of the strong performance in Asia Pacific. The divisional split, as I said, when you take our volume we had at all last year, CHF 685 million was our total sales value for the year. So you can calculate with plus/minus CHF 700 million, and 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 instead of 12 months.

Yes. Maybe just some other questions. For the order intake in Short-Staple Fiber remains relatively weak, so when do you expect this division to return to sustainable growth?

Yes. It is true. We have suffered also -- I mean, we have suffered for many, many years now. And there are 2 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 3, 4 years ago, and we have partially compensated that with higher market shares now in India and in China, thanks God. Otherwise, it would have been much, much worse because historically, Rieter was especially strong in the Americas and EMEA region. We all know that in the past in Turkey, we made per year, 300 million sales volume and we are struggling to come somewhere between 30 million to 40 million per year now, so it has completely collapsed. So already 2 years ago, we started to move our organization more towards India and China and other Southeast Asian markets, and 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. Now India also went down a lot, but India now very clear is back. It's very, very clear. Especially the second quarter was very strong, and looking on the order pipeline, I have to say there's no reason at all why this should change. So the growth will be driven by Asia Pacific. Now in all the other markets, we mentioned that we do see Africa, but it's quite a small one to bring some opportunities. And we see especially Middle and Latin America in order intake to grow over the next couple of months, but this will only impact our sales and margin levels next year.

The next question comes from the line of Tobias Klöpper from Zürcher Kantonalbank.

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 onetime costs you expect in the second half of the year and maybe going forward?

So we do have launched existing programs. We announced that last year. This was mainly regarding our component landscape. We had a very, very fragmented production landscape here in Europe. So over the last 6 months, we have sold our company we have 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 especially -- they were part of Graf, so for combs and cards. And France was more -- 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, and we have moved that to Asia Pacific. So these are the, let's say, the actual activities in the C&T division. And the impact will be fully visible with the year-end with the yearly results of 2027 because we are now still in execution, so you don't see the improvement by 100%. But what you see is that we were able to keep our margins in C&T, 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 4 manufacturing sites, and we have a huge underutilization of our capacity. Two of those factories are in Europe, 2 of the factories are in Asia Pacific. And 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, so we are in the planning phase of that. And as soon as we have more concrete details, we will communicate this. And then last but not least, in Man-Made Fiber, we have 2 factories in Germany, so in -- for Neumag in Neumünster, and for Barmag in Remscheid. And we have a strong manufacturing footprint in China mainly in Suzhou and in Wuxi. And Suzhou is our main manufacturing site, and we have started already 1 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, so you can expect that we will communicate as soon as we have the final picture in the second half of this year. I cannot give you a clear amount at the moment.

[Operator Instructions] We now have a question from the line of Leonie Zirn from UBS.

Regarding the synergies that you mentioned that you secured in the first half, CHF 1.2 million, can you already give like an estimate what you would expect this to be in the full year '26? I think when I look at the chart, it looks like CHF 3 million to CHF 4 million approximately.

So we are targeting -- for the first couple of months, you are right. We are targeting a synergy level of CHF 3 million, and you always have to say this is a run rate. You don't see it already in the P&L, right? It's always a yearly run rate. And so we have achieved now in the first couple of months, we achieved already CHF 1.2. 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 for all the Rieter and Barmag, so we brought those volumes together and have renegotiated prices. Another topic we did is at Rieter, where we 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. And we have now applied that also at Barmag, so this was a learning Barmag took from the Rieter side. And now we are expanding, so we now go into the different components and say, okay, maybe we have 2 different suppliers, but we might be able to combine volumes and achieve better costs, so 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. So 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, and we see that we can also here create quite substantial savings. And then last but not least, we are also working now on this topic of the headquarters, but this takes more time. And when you look on this specific chart we have in our presentation, this was the chart on Slide #11, you see that operating expenses and cost of personnel, they will start towards the end of this year. And then last but not least, of course, we are also looking on our R&D facilities and on cross-divisional sourcing and manufacturing. So 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 book, so we are -- we have a good start. We have a clear plan, and we have clear accountabilities and responsibilities and those 3 million to 4 million run rate by the end of the year, I'm sure we will achieve that.

Okay. Then a second question on the advanced payments. So if I look at those, they have risen to 205 million compared to the 77 million from end of '25, but then Barmag also reported 140 million prepayments end of '25. So I'm just wondering how much of this 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? Yes, maybe some details here.

Hello Leonie, I cannot give you the detailed advanced payment breakdown by division as we do not disclose that, but what I can give you is some color on the development by division. The payment behavior has remained unchanged, but there is some difference between the regions. And more specifically, we see slightly lower advanced payments in the Indian market than especially rest of the world, so that is like-for-like, a slight drag on the short-staple fiber side, but other than that, the payment behavior has remained stable overall. And with regards to Man-Made Fiber, we had a relatively weak month of June in terms of order intake, not because projects are postponed, but 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 then in the coming months. But overall, no significant change in advanced payment behavior.