Rieter’s sales rose by 12% to 3 930.1 million CHF. The operating result before interest and taxes (EBIT) rose by 54% in the year under review to 278.7 million CHF (180.6 million CHF in 2006), equivalent to 7.3% of corporate output. Net profit increased by 34% to 211.5 million CHF (157.4 million CHF in 2006). Earnings per share improved sharply to 48.19 CHF (35.53 CHF in 2006). The Board of Directors proposes a dividend of 15.00 CHF per share as last year.

The global economy as a whole developed positively in 2007. Growth momentum was a characteristic feature in all major industrialized countries as well as the emerging economies in Asia and Latin America. Both divisions of Rieter successfully exploited this trend. The markets served by the group’s two divisions, Textile Systems and Automotive Systems, recorded significant growth in the year under review. The investment climate on the world market for textile machinery was very favorable in the first six months in particular. Vehicle output by the automotive industry increased worldwide. In Rieter’s principal markets vehicle production rose in Western Europe, but was slightly lower in North America. The countries in Eastern Europe, Asia and Latin America recorded strong growth.

Substantial organic growth at both divisions

Rieter’s sales adjusted for divestiture rose by 12% to 3 930.1 million CHF. This good performance is attributable entirely to organic growth, which was resolutely pursued in both divisions. Exchange rate movements had a slightly positive impact on overall group sales.

Further increase in profitability

The operating result before interest and taxes rose by 54% in the year under review to 278.7 million CHF, equivalent to 7.3% of corporate output (5.2% in 2006). The two divisions contributed to this outcome in differing degrees. Textile Systems set a record, while margins at Automotive Systems were adversely affected by a challenging industry environment.

Higher net profit and earnings per share

Profits surged at the Rieter Group in 2007 due to a good operating performance, the absence of losses on disposals and a good net financial result. Net profit increased by 34% to 211.5 million CHF, equivalent to 5.5% of corporate output (4.6% in 2006). Cash flow rose by 9% to 360.2 million CHF (329.6 million CHF in 2006). Earnings per share improved sharply to 48.19 CHF (35.53 CHF in 2006).

Textile Systems: Rieter reports record orders received, sales and operating result

The trend of business at Rieter Textile Systems was very good. Compared with the previous year, orders received 2007 adjusted for divestiture was 6% higher, reaching the record level of 1 703.1 million CHF (1 614.3 million CHF in 2006). As expected, demand eased in the second half of the year. Sales increased by 18% compared with the previous year, reaching the historical record level of 1 566.8 million CHF (1 322.2 million CHF in 2006).

Rieter Textile Systems reported a record operating result before interest and taxes of 200.7 million CHF in 2007. The high operating margin achieved in the first six months was even slightly exceeded in the year as a whole, rising to 13.1% of corporate output (7.0% or 11.1% before special charges in 2006). An attractive offering, a favorable product mix, good capacity utilization and cost discipline all contributed to this achievement. Profitability was also improved by the disposal of the loss making manmade fiber machinery business at the end of 2006, i.e. as a result of the absence of the special charges associated with this business.

Automotive Systems: continued sales growth

The growth trend of the past five years continued at Rieter Automotive Systems in the year under review. Sales increased by 8% to 2 363.3 million CHF. This growth was broad-based in terms of both geographical spread and models equipped. Rieter Automotive Systems grew significantly faster than vehicle output in both its main markets, Western Europe and North America. Rieter also achieved substantial growth in South America and Asia.

The positive sales trend was not translated into a corresponding increase in earnings: the operating result before interest and taxes (EBIT) at Automotive Systems in the 2007 financial year amounted to 91.6 million CHF (94.7 million CHF in 2006). At 4.0% of corporate output (4.4% in 2006), Automotive Systems maintained the operating margin achieved in the first half of 2007. The subdued outcome was attributable to increasingly severe pressure exerted by customers on suppliers’ prices as well as the rising cost of materials and energy, only a small part of which could be passed on to customers. Rieter Automotive was unable to compensate fully for these developments through cost-cutting programs in 2007. Additional costs arose in connection with production relocations in England.

Sound financial condition and a healthy balance sheet

Rieter remained on a sound financial foundation at the end of the year under review with net liquidity of 144.5 million CHF (147.3 million CHF in 2006) and an equity ratio of 48.3% (47.7% in 2006). The good level of liquidity was maintained despite higher capital expenditure and the repayment of 200 million CHF of 4% bonds on June 21, 2007. The equity ratio of the Rieter Group has risen steadily in recent years due to the positive result of the business. This enabled Rieter to launch a share buyback program of up to 150 million CHF on September 7, 2007 without limiting its scope for industrial expansion as a result. A motion proposing a first reduction in share capital will be submitted to the shareholders at the 2008 Annual General Meeting. The share buyback program will be continued as planned until the 2009 Annual General Meeting.

Changes in the Group Executive Committee

Erwin Stoller, who has been a member of Rieter’s Group Executive Committee since 1992 and CEO of the Automotive Systems Division since 2002, withdrew from operating management at the end of 2007. The Board of Directors appointed Wolfgang Drees to succeed Erwin Stoller as of January 1, 2008. Wolfgang Drees is a German national and previously headed Business Group Europe, the largest unit in the Automotive Systems Division. He was at the same time deputy to Erwin Stoller. Rieter has ensured management continuity with this appointment. The Board of Directors and the Group Executive Committee wish to thank Erwin Stoller for his many years of successful work on behalf of the company. Erwin Stoller has rendered valuable service to the group since joining Rieter in 1978. Both at Textile Systems and at Automotive Systems he has initiated and implemented decisive changes that have contributed to Rieter’s long-term success.

Changes in the Board of Directors

At the Annual General Meeting held on May 10, 2007, Rudolf Hauser retired from the board upon reaching retirement age. At the same time shareholders re-elected Dr. Dieter Spälti for a further three-year term of office.

Kurt Feller will retire as Chairman of the Board and a Director of Rieter Holding Ltd. at the 2008 Annual General Meeting upon reaching retirement age as stipulated in the Articles of Association. The Board of Directors of Rieter Holding Ltd., Winterthur, has decided to propose to the Annual General Meeting scheduled for May 8, 2008, that Roland W. Hess be elected to the Board of Directors. It is intended that he should be appointed Chairman. Rieter’s Board of Directors will also propose to the Annual General Meeting on May 8, 2008, that Erwin Stoller, a member of the Group Executive Committee until the end of 2007, be elected to the Board of Directors of Rieter Holding Ltd. Erwin Stoller is nominated as Vice-Chairman. Dr. Rainer Hahn, whose term of office expires 2008, will stand for re-election as a member of the board for a further three years.

Outlook

Economic developments in 2008 are difficult to forecast at present, since the uncertainties coming from the financial markets are persisting. Rieter expects demand for textile machinery in the 2008 financial year to develop at a lower level than in the two very good preceding years. Vehicle output will increase worldwide in 2008, but will probably decline in North America.

Rieter expects sales in the current year after adjustments for currency movements and divestments to be at approximately the previous year’s level. On the basis of current exchange rates, however, currency translation effects are likely to have an adverse effect of 5 – 10% on sales revenues stated in Swiss francs compared with the previous year. Assuming increasingly weak levels of economic activity and due to additional costs incurred in establishing manufacturing capacity in the growing markets of both divisions, Rieter expects a somewhat lower operating result than in the previous year. However, the growth prospects for sales and earnings at both divisions remain positive in the medium and long term.

Important dates 2008

Annual General Meeting 2008

May 8, 2008

Disbursement of dividends to shareholders

May 15, 2008

Semi-Annual Report 2008

August 13, 2008