EQS-News: Lenzing AG: Lenzing responds with savings program to earnings development

EQS-News: Lenzing AG / Key word(s): 9 Month figures
Lenzing AG: Lenzing responds with savings program to earnings development

03.11.2022 / 07:30 CET/CEST
The issuer is solely responsible for the content of this announcement.

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• Revenue in the first three quarters up 24 percent – significant
deterioration in market environment impacts earnings performance
• 2022 earnings in the range of current market expectations
• Reorganization and cost reduction program of EUR 70 mn launched
• Supervisory Board appoints new Chief Financial Officer – Nico Reiner
succeeds Thomas Obendrauf as of January 1, 2023

Lenzing – The Lenzing Group, the world’s leading supplier of specialty
fibers for the textile and nonwovens industries, was increasingly affected
by the extreme developments in global energy and raw material markets in
the first three quarters of 2022, in line with the impact on the whole of
manufacturing industry. The market environment deteriorated sharply,
especially during the course of the third quarter, and the worsening
consumer climate placed additional pressure on Lenzing’s business
performance.

Revenue grew by 24 percent year-on-year to reach EUR 1.97 bn in the
reporting period, primarily due to higher fiber prices. In addition to
lower demand, the earnings trend particularly reflects the sharp rise in
energy and raw material costs. As a consequence, earnings before interest,
tax, depreciation and amortization (EBITDA) decreased by 11.6 percent
year-on-year to EUR 263 mn. Net profit for the period decreased by 33.9
percent to EUR 74.9 mn, while earnings per share amounted to EUR 2.16 in
the first three quarters (compared to EUR 3.77 in the first three quarters
of 2021).

Adjusted equity grew by 6.9 percent to EUR 2.26 bn as a consequence of the
operating profit trend as well as positive currency effects. As a
consequence, the adjusted equity ratio is at 37.7 percent.

Both the earnings trend and the significant deterioration in the market
environment led the Lenzing Managing Board to launch a reorganization and
cost reduction program. The program is already being implemented and is
expected to save at least EUR 70 mn in costs annualized once fully
implemented.

“We are experiencing distortions in energy and commodity markets which are
weighing on consumer sentiment and significantly limiting our view of
short- to medium-term business trends. This is prompting us to step up our
efforts to cope with this situation and further extend Lenzing’s
international competitiveness. For this reason we have launched a global
program that will already lead to initial cost savings in the short term
and also strengthens Lenzing for the long term,” comments Stephan Sielaff,
Lenzing Group CEO.

Gross cash flow reduced by 17.6 percent to EUR 248.2 mn in the first three
quarters of 2022, mainly reflecting the cost developments. Due to the
higher level of working capital, cash flow from operating activities
amounted to EUR 34.8 mn (compared to EUR 307.8 mn in the first three
quarters of 2021). Free cash flow amounted to EUR minus 495.8 mn (compared
to EUR minus 317.9 mn in the first three quarters of 2021), which
especially reflected the investment activities related to the pulp project
in Brazil. Capital expenditure on intangible assets, on property, plant
and equipment and on biological assets (CAPEX) decreased by 15.7 percent
to EUR 532 mn. The continued high level of investment volume primarily
reflects the completion of the pulp project in Brazil.

Strengthening specialty fibers growth

The successful commissioning of the two key projects in Thailand and
Brazil as well as the implementation of projects at the existing sites in
China and Indonesia formed the focus of Lenzing’s investment activities in
the first three quarters of 2022. The opening of the lyocell plant in
Thailand in the first quarter of 2022 enables Lenzing to significantly
boost its share of specialties and thereby better serve structurally
growing demand for TENCEL™ branded lyocell fibers. Despite the
pandemic-related challenges, the project was realized on time and within
the planned budget, and the volumes produced to date were successfully
placed on the market. With a nameplate capacity of 100,000 tonnes per
year, the production plant is the largest of its kind in the world.

Lenzing is currently investing more than EUR 200 mn in China and Indonesia
in order to convert existing standard viscose capacities into capacities
for environmentally responsible specialty fibers. In Nanjing, Lenzing is
working on converting a line to modal fiber production. The Chinese
location’s product portfolio will thereby consist entirely of specialty
fibers by the end of 2022. In Purwakarta, Lenzing is creating additional
capacity for LENZING™ ECOVERO™ branded fibers. The Indonesian site will
become a pure specialty viscose supplier in 2023.

Aiming for a carbon-free future

As part of these investments, both sites will be gradually converted to
renewable energy; conversion to green electricity was realized in the
third quarter of 2022 in China and in Indonesia. Both the new lyocell
plant in Thailand, which will be operated in a carbon-neutral manner, and
the investments in existing sites will help Lenzing achieve its ambitious
climate targets. Lenzing aims to reduce its carbon emissions by 50 percent
by 2030 and achieve net zero by 2050. In 2019, Lenzing became the world’s
first manufacturer of wood-based cellulosic fibers to have its climate
targets scientifically confirmed.

With the new pulp plant in Brazil, Lenzing is strengthening its own supply
of dissolving wood pulp and thereby also growth in specialty fibers. It
will rank as one of the world’s most productive and energy-efficient
plants and feed more than 50 percent of the electricity generated into the
public grid as renewable energy. With the successful start-up on schedule,
Lenzing, which holds a 51 percent interest in the LD Celulose joint
venture, reached a further important milestone. The plant ramp-up phase is
running to schedule and will prospectively be completed by the end of
2022. The first volumes produced have already been successfully placed on
the market.

Energy independence enhanced

In order to become less dependent on global energy markets and to further
reduce carbon emissions in line with its strategic targets, Lenzing is
also focusing to an even greater extent on electricity generated from
renewable energies in Austria. During the reporting period, Lenzing
constructed several photovoltaic plants at the Lenzing site in Upper
Austria together with Austrian energy utility VERBUND. With a capacity of
5.6 MWp, the ground-mounted plant is the largest of its kind in this
entire federal state. The output of the three roof systems amounts to 1.5
MWp.

Lenzing also announced the signing of a long-term electricity supply
agreement with green power producer Enery and Energie Steiermark. Once
commissioned, the photovoltaic plant that has thereby been financed will
supply the fiber and pulp plant at the Lenzing site with further green
electricity from the fourth quarter of 2023. The plant’s output will
amount to 5.5 MWp.

Nico Reiner new CFO

The Lenzing Supervisory Board also appointed Nico Reiner as the new Chief
Financial Officer with effect as of January 1, 2023 (see also the [1]press
release of November 2, 2022). In this position he succeeds Thomas
Obendrauf, who informed the Supervisory Board in March that he would not
be available for a further extension of his contract, which expires in
June 2022. Until Nico Reiner joins the company, Sielaff will continue to
perform the duties of the CFO on an interim basis, while Obendrauf will
support the company in an advisory capacity.

Corporate strategy further developed

A comprehensive review of the corporate strategy was also conducted in the
reporting period. As a consequence, Lenzing will continue on its
profitable growth trajectory following the successful implementation of
the two key projects in Thailand and Brazil, sharpen its focus on
sustainable and high-quality premium textile fibers and nonwoven fibers,
and further advance the transition from a linear to a circular economy
model. On the basis of this further development of the corporate strategy,
Lenzing also adjusted its financial targets and, assuming that a healthy
economic environment prevails, will significantly increase its EBITDA to
over EUR 1 bn by 2027, with a ROCE of over 12 percent.[2]^[1]

30 years of TENCEL™ fibers

With the positioning of its product brands, the Lenzing Group has been
sending a strong message to consumers since 2018. With TENCEL™ und
LENZING™ ECOVERO™ as umbrella brands for all specialty products in the
textile segment, VEOCEL™ as the umbrella brand for all specialty nonwoven
products, and LENZING™ for all industrial applications, the company
showcases its strengths in a targeted manner.

The TENCEL™ brand has been supporting customers and partners in the
textile and apparel industry with sustainable fiber innovations since
1992. In 2022, Lenzing is celebrating the 30th anniversary of its premium
textile brand, which today stands for high-quality, sustainable fibers,
digital technologies and transparency in the supply chain worldwide, and
is the fastest growing ingredient brand on the market. This brand success
is also reflected in the company’s collaboration with more than 300
partner brands. Since February, Lenzing has been conducting customer and
employee activities in various regions under the motto [3]“Feel Good
Fibers Since 1992″ in order to mark the brand anniversary.

Sustainability champion

For the second time, Lenzing was awarded platinum status for its
sustainability performance by EcoVadis, a leading international provider
of corporate sustainability ratings. This places Lenzing in the top
one percent of companies worldwide in its industry as rated by EcoVadis.
Already during the first quarter, Lenzing was also pleased to receive the
prestigious ÖGUT Environmental Award 2022 in the “World Without Waste”
category. The Austrian Society for Environment and Technology (ÖGUT)
thereby recognized Lenzing’s contribution to transforming the textile
industry into a model of the circular economy. In 2021, Lenzing was
recognized on several occasions for its achievements as a “sustainability
champion”, including top ratings by CDP and MSCI.

Outlook

The war in Ukraine, China’s zero-Covid policy and the sharp rise in
inflation have had a significant impact on the global economy. In July,
the International Monetary Fund downgraded its growth expectations for the
current calendar year to 3.2 percent. This deterioration in the market
environment is also increasingly affecting the consumer climate as well as
sentiment in industries relevant for Lenzing. As a consequence, business
prospects worsened significantly in the third quarter.

Given this deterioration in the market environment, Lenzing suspended its
earnings guidance for the 2022 financial year on September 19, 2022.

The Lenzing Group anticipates earnings in the 2022 financial year in line
with current market expectations.

Selected indicators of the Lenzing Group
EUR mn 01-09/2022 01-09/2021
Revenue 1,970.1 1,588.5
EBITDA (operating profit before depreciation and 263.0 297.6
amortization)
EBITDA margin 13.3 % 18.7 %
Net profit for the period 74.9 113.4
Earnings per share in EUR 2.16 3.77
Cash flow from operating activities 34.8 307.8
CAPEX^1 532.0 631.1

 

  30/09/2022 31/12/2021
Net financial debt 1,714.2 977.0
Adjusted equity ratio^2 37.7 % 39.7 %
Number of employees (headcount) 8,428 7,958

 

1) Capital expenditures: Investments in intangible assets, property, plant
and equipment and in biological assets as per the consolidated statement
of cash flows

2) Ratio of adjusted equity to total assets in percent

 

Photo download:
[4] https://mediadb.lenzing.com/pinaccess/showpin.do?pinCode=WuLaNpqbneR8
PIN: WuLaNpqbneR8

 

Your contact for  
Public Relations: Investor Relations:
   
Dominic Köfner Sébastien Knus
Vice President Corporate Communications & Vice President Capital Markets
Public Affairs Lenzing Aktiengesellschaft
Lenzing Aktiengesellschaft Werkstrasse 2, 4860 Lenzing,
Werkstrasse 2, 4860 Lenzing, Austria Austria
   
Phone +43 7672 701 2743 Phone +43 664 8281576
E-mail  [5]media@lenzing.com E-mail   [7]s.knus@lenzing.com
Web    [6] www.lenzing.com Web    [8] www.lenzing.com
   

 

About the Lenzing Group
 
The Lenzing Group stands for the ecologically responsible production of
specialty fibers made from the renewable raw material wood. As an
innovation leader, Lenzing is a partner to global textile and nonwoven
manufacturers and drives many new technological developments. The Lenzing
Group’s high-quality fibers form the basis for a variety of textile
applications ranging from elegant clothing to versatile denims and
high-performance sports clothing. Due to their consistent high quality,
biodegradability and compostability, Lenzing fibers are also highly
suitable for hygiene products and agricultural applications.
 
The Lenzing Group’s business model extends far beyond that of a
traditional fiber producer. Together with its customers and partners,
Lenzing develops innovative products along the value chain and creates
added value for consumers. The Lenzing Group strives for the efficient
utilization and processing of all raw materials and offers solutions to
help redirect the textile and nonwovens sector towards a closed loop
economy. In order to slow the rate of global warming and to accomplish the
climate targets of the Paris Agreement and the EU Commission’s “Green
Deal”, Lenzing has a clear vision: namely to make a zero-carbon future
come true.
 
Lenzing Group facts & figures 2021
Revenue: EUR 2.19 bn
Nameplate capacity: 1,145,000 tonnes
Employees: 7,958
 
TENCEL™, VEOCEL™, LENZING™, REFIBRA™, ECOVERO™, LENZING MODAL™, LENZING
VISCOSE™, MICROMODAL™ and PROMODAL™ are trademarks of Lenzing AG.
 
Disclaimer: The above financial indicators are derived primarily from the
Lenzing Group’s condensed consolidated interim financial statements and
the Lenzing Group’s prior-year consolidated financial statements.
Additional details are provided in the “Notes on the financial performance
indicators of the Lenzing Group”, available at the following link
[9] https://www.lenzing.com/de/erlaeuterungen-lenzing-gruppe-2022-q3, and
in the condensed consolidated interim financial statements as well as the
Lenzing Group’s prior-year consolidated financial statements. Rounding
differences can occur in the presentation of rounded amounts and
percentage rates.

[10]^[1] Adjusted for major plants under construction and in the start-up
phase

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03.11.2022 CET/CEST This Corporate News was distributed by EQS Group AG.
www.eqs.com

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Language: English
Company: Lenzing AG
4860 Lenzing
Austria
Phone: +43 7672-701-0
Fax: +43 7672-96301
E-mail: office@lenzing.com
Internet: www.lenzing.com
ISIN: AT0000644505
Indices: ATX
Listed: Vienna Stock Exchange (Official Market)
EQS News ID: 1477855

 
End of News EQS News Service

1477855  03.11.2022 CET/CEST

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