EANS-Adhoc: Lenzing AG
Sales and Earnings Decline in 2013 - Countermeasures
Well Underway
--------------------------------------------------------------------------------
ad-hoc disclosure transmitted by euro adhoc with the aim of a Europe-wide
distribution. The issuer is solely responsible for the content of this
announcement.
--------------------------------------------------------------------------------
annual result/annual report
21.03.2014
-Ongoing good volume demand, new record sales volumes
-Unsatisfactory earnings situation due to very weak fiber selling prices
-Initial effects of cost optimization measures already have a positive impact
in H1 2014
The business development of the Lenzing Group in 2013 was characterized by the
continuation of good volume demand, new record shipment volumes and full
capacity utilization against the backdrop of extremely weak fiber selling
prices. Lenzing has moved to counteract this situation on the basis of a
comprehensive cost optimization program, a marketing offensive for specialty
fibers, adjustments made to the business strategy in order to minimize risk and
an optimized organizational structure in the Group.
Consolidated sales[1]in the 2013 financial year fell by 8.7% from EUR 2.09 bn to
EUR 1.91 bn, which can be attributed to the drop in fiber selling prices, which
declined by 13% year-on-year to EUR 1.70 per kilogram, as well as the divestment
of the Business Unit Plastics. Moreover, there was a loss of external sales
totaling EUR 61.8 mn as a consequence of the complete conversion of the Paskov
pulp plant in 2013 from paper to dissolving pulp which is used within the
Lenzing Group.
Consolidated earnings before interest, taxes, depreciation on property, plant
and equipment and amortization (EBITDA)[2]totaled EUR 225.4 mn, down from the
adjusted figure of EUR 352.4 mn in 2012[3]) but in line with the most recently
published guidance for the year. The EBITDA margin amounted to 11.8%, compared
to the adjusted level of 16.9% in the previous year. Consolidated earnings
before interest and taxes (EBIT)[4]amounted to EUR 86.4 mn in the 2013 financial
year, compared to the prior-year level of EUR 231.5 mn (adjusted). The EBIT
margin was 4.5%, down from the adjusted figure of 11.1% in 2012.
Comprehensive countermeasures
"We assume that the difficult market environment will continue in 2014 and
perhaps far into the year 2015. For this reason, we have implemented timely and
comprehensive countermeasures", explains Peter Untersperger, Chief Executive
Officer of Lenzing. "We are massively reducing costs at the same time adding
impetus to the marketplace by promoting our specialty fibers TENCEL® and Lenzing
Modal®. Our market and quality offensive is being supported since the beginning
of the year by the newly created functional Group organization. At the same
time, our growth strategy is oriented to the current market situation on the
basis of a consistent adjustment of risk", CEO Untersperger adds. "The
uninterrupted strong volume demand for Lenzing fibers shows that against the
backdrop of a difficult business environment we are offering the right products
in a sustainably attractive growth market. We are working intensively and
resolutely to optimize our competitive strengths".
Resolute implementation of cost optimization program
The first cost optimization program entitled excelLENZ 1.0 was already launched
in the beginning of 2013, generating savings of approximately EUR 40 mn. This
was followed by excelLENZ 2.0, which was initiated in November 2013 and is now
being resolutely implemented. Cost savings from all cost modules and all sites
operated by the Group of EUR 120 mn starting in the 2015/16 financial years have
been identified. Cost savings generated by this program of about EUR 60 mn have
been budgeted for the 2014 financial year. Two-thirds of the cost savings will
be derived from cutting material costs, overhead, massively reducing operating
expenses and increasing operating efficiency. About one-third of the cost
reductions will be related to lower personnel expenditures. In order to cushion
these measures, a comprehensive redundancy program was developed at the end of
2013, for which provisions of EUR 19.7 mn were allocated in the consolidated
financial statements for 2013.
In the light of current market conditions, the revised Lenzing strategy focuses
on risk optimization and further promoting highly profitable specialty fibers.
Construction of the new TENCEL® production plant at the Lenzing site is the only
capacity expansion project being implemented by the Lenzing Group at present. No
further viscose fiber growth investments will be carried out for the time
being. The construction of a viscose fiber facility in India was postponed.
Sales increases for specialty fibers
The focus is now on expanding the share of specialty fibers in relation to total
sales volumes. "In 2013 ourspecialty fibers Lenzing Modal® and TENCEL® achieved
an
unchanged and attractive price premium of 50%vis-à-visstandard viscose fibers
against the backdrop of good volume demand", saysFriedrich Weninger, Member of
the Management Board with responsibility for fiber production. "Moreover, we
have opened up new sales markets and regions for TENCEL® in preparation for the
start-up of production at the new TENCEL® plant in Lenzing, and have further
expanded our innovation pipeline", Mr. Weninger adds. However, Lenzing was only
able to partially counteract the weak price development for standard viscose
fibers by increasing total sales volumes. On balance, fiber sales volumes
reached a new record level of about 890,000 tons in 2013, a rise of 10% from the
comparable level of 810,000 tons in 2012.
Ongoing high equity ratio, reduced level of investments
The balance sheet total of the Lenzing Group fell considerably in the past
financial year, from EUR 2.63 bn to EUR 2.44 bn as at the end of 2013. This can
be mainly attributed to the planned reduction in cash and cash equivalents in
connection with the completion of current investment projects. The adjusted
equity ratio rose from 43.8% to 45.5% of the balance sheet total. Net financial
debt of the Lenzing Group climbed to EUR 504.7 mn at the end of 2013 (2012: EUR
346.3 mn).
Investments in property, plant and equipment, intangible assets and non-
controlling interests (cash-CAPEX)[5]were significantly cut back in the 2013
financial year to EUR 252.2 mn from the prior-year figure of EUR 346.2 mn. The
focal point of the investment activity carried out by the Lenzing Group was
construction of the new TENCEL® production plant, urgently needed infrastructure
investments at the Lenzing site and completion of the conversion project at the
Paskov pulp plant.
Outlook 2014
Hardly any change was perceptible in the difficult business environment
impacting the business operations of the Lenzing Group in the first weeks of
2014 compared to the fourth quarter of 2013. No major improvement is in sight
with respect to the price situation on the global fiber market. The reasons are
the historically high cotton inventories, high cotton production and surplus
capacities in China for manufacturing man-made cellulose fibers.
Volume demand for fibers remained strong at the turn of the year 2013/14.
In 2014 the Lenzing Group is counteracting the unfavorable market situation by
speedily implementing the cost reduction and efficiency enhancement program
excelLENZ 2.0. All required provisions for the non-recurring costs relating to
excelLENZ 2.0 were made in the consolidated financial statements for the 2013
financial year. This program is expected to already positively affect earnings
in 2014 to the amount of more than EUR 60 mn.
This program together with the new Group organizational structure which took
effect at the beginning of 2014 are major contributions towards restoring the
global competitiveness of the Lenzing Group.
Key Group indicators
(IFRS) in EUR mn 1-12/2013
1-12/2012(1)
Consolidated sales 1,908.9 2,090.4
EBITDA 225.4 352.4
EBITDA margin in % 11.8 16.9
EBIT 86.4 231.5
EBIT margin in % 4.5 11.1
Profit for the period 50.0 180.9
CAPEX (incl. BU Plastics) 252.2 346.2
Dec. 31, 2013 Dec. 31, 2012
Adjusted equity ratio(2)in % 45.5
43.8
Number of employees at 6,675 7,033
period-end
1) The previous year's figures were adjusted due to reporting changes (refer to
Note 2 of the consolidated financial statements as per December 31, 2013)
2) Equity incl. government grants less prop. deferred taxes
--------------------------------------------------------------------------------
[1] All figures including discontinued operations except when explicitly stated
otherwise.
[2] Consolidated EBITDA before restructuring amounted to EUR 219.4 mn (2012: EUR
358.7 mn).
[3] The previous year's figures were subsequently partly adjusted (refer to Note
2 of the consolidated financial statements as at December 31, 2013).
[4] Consolidated EBIT before restructuring amounted to EUR 106.5 mn (2012: EUR
255.0 mn).
[5]Incl. the Business Unit Plastics
Further inquiry note:
Lenzing AG
Mag. Angelika Guldt
Tel.: +43 (0) 7672-701-2713
Fax: +43 (0) 7672-918-2713
mailto:a.guldt@lenzing.com
end of announcement euro adhoc
--------------------------------------------------------------------------------
issuer: Lenzing AG
A-A-4860 Lenzing
phone: +43 7672-701-0
FAX: +43 7672-96301
mail: a.guldt@lenzing.com
WWW: http://www.lenzing.com
sector: Chemicals
ISIN: AT0000644505
indexes: WBI, ATX, Prime Market
stockmarkets: free trade: Berlin, official market: Wien
language: English
Original content of: Lenzing AG, transmitted by news aktuell