OC Oerlikon Corp., the world's biggest maker of spinning machines, cut its 2008 profit forecast and Swiss rival Rieter Holding AG will shed 2,000 jobs after a slump in demand for textile machinery accelerated.

Oerlikon, based in Pfaeffikon, Switzerland, fell 11 percent in Zurich trading after predicting a 33 percent drop in operating profit and 350 million francs ($322 million) in writedowns. Rieter forecast a 20 percent plunge in textile-equipment sales and will spend 225 million francs trimming operations.

The decline in the global textile market has accelerated in the last four months as Asian clothmakers reined in investment to combat a slowdown in consumer spending and higher energy and raw- material costs, Winterthur-based Rieter said today. Swollen yarn inventories, higher cotton costs and a more restrictive investment policy in China further weighed on orders.

``With high commodities prices for the company's clients in the textile business, it doesn't look good,'' said Beat Fueglistaller, a Zurich-based analyst at Bank Sal. Oppenheim Jr. & Cie. who has a ``neutral'' rating on Rieter. ``It'll be bad in 2008, and there's no improvement expected before 2009.''

Oerlikon slid as much as 31.8 francs, or 11 percent, to 246.70 francs, the most in 12 months, before paring losses to close at 261.75 francs. Rieter, which cut its 2008 earnings forecast in May, rose 1.5 francs, or 0.4 percent, to 356.75.

Worst-Ever Slump

The current textiles slump is ``unprecedented,'' Oerlikon Chief Executive Officer Uwe Krueger said in an interview today.

The Swiss company budgeted for downturns when it paid $1.06 billion for spinning machine maker Saurer in 2006, though the speed of the deterioration in the market this year has been a surprise, Krueger said. A seizure in credit markets clipped spending among mid-sized customers and China ``put the brakes'' on what it saw as an overheated market in 2007, the CEO said.

China then raised tax rebates on exports of textiles and garments to 13 percent from 11 percent from Aug. 1 to aid manufacturers also facing rising labor and raw-material costs. Exporters are concerned a slowing global economy will erode shipments. Over two-thirds of Chinese textile and clothing makers incurred losses or made little profit since March, CNCotton.com reported, citing studies by government and industry groups.

The textile industry ``is really cyclical, and with the Chinese government controlling it, it's even worse than before,'' Rechberger said. ``One day the state says they support the textile industry, the next day they cancel it, then they're supporting it again.''

Cost-Cutting Measures

Krueger said he will announce a ``spectrum'' of restructuring measures when the company reports first-half results on Aug. 26. He declined to go into any details or discuss analyst estimates for earnings. The 53-year-old said he's taking a prudent view of the balance sheet given the outlook for markets, resulting in the impairment charges highlighted today.

Oerlikon forecast flat sales this year, buoyed by faster- growing markets such as solar-panel technology. ``Most of our businesses have proven to be resilient and are on track,'' he said. The semiconductor market will also be a drag on earnings, the company said. Its coating machines are used to make computer chips, solar panels, and optical disks.

Rieter missed estimates for first-half profit. Net income decreased to 40.8 million francs from 116.7 million a year earlier. Five analysts surveyed by Bloomberg estimated profit of 55 million francs. Sales fell 6 percent to 1.81 billion francs.

Rieter CEO Hartmut Reuter forecast declining full-year sales and profit margins, calling the textile downturn ``more severe than previous cycles.'' The automotive division, which makes noise control products, also lost sales to the slowdown in U.S. car markets. The company plans to cut jobs in both divisions, amounting to about 15 percent of its workforce. Most of the cost- cutting expenses will be booked this year, the company said.

``I'm a little bit astonished that they plan to do most of the restructuring this year -- I wonder if they really can do so much in the next five months,'' said Zuercher Kantonalbank analyst Armin Rechberger, who is reviewing his ``market perform'' ratings on both companies.