EANS-News: Lenzing AG
Lenzing solid in a significantly more challenging market
environment
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Corporate news transmitted by euro adhoc with the aim of a Europe-wide
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Mid Year Results/Company Information
Highlights -
* Continued positive development of specialties business with revenue share of
already more than 48 percent
* Commitment to long-term growth plan - investment in new 100,000 tons plant in
Thailand approved
* Significantly more challenging market environment for standard viscose with
historically low prices
* Outlook for 2019 confirmed
Lenzing - The Lenzing Group continued its solid business development in the
first half of 2019. Despite a significantly more challenging market environment
with historically low prices for standard viscose, Lenzing recorded a slight
increase in revenue. The disciplined implementation of the sCore TEN strategy
and the focus on specialty fibers continue to have a positive impact. Thanks to
ongoing high demand for sustainably produced specialty fibers and positive
currency effects, the impact of low standard viscose prices was largely offset
in earnings.
Revenue of the Lenzing Group increased by 1.2 percent in the first half of 2019
and amounted to EUR 1.09 bn. In addition to more favorable currency relations,
this was primarily attributable to a further product mix optimization and higher
prices for specialty fibers. The share of specialty fibers in revenue, at 48.4
percent, significantly exceeded the prior-year value of 44.1 percent. EBITDA
(earnings before interest, tax, depreciation and amortization) dropped by 7
percent to EUR 181.2 mn. This decline primarily resulted from higher production
volumes and currency effects which led to an increase in pulp costs, from an
increase in personnel expenses and the market environment for standard viscose.
The EBITDA margin declined from 18.1 percent in the first half of 2018 to 16.6
percent in the reporting period. EBIT (earnings before interest and tax) fell by
17.9 percent to EUR 105.6 mn, resulting in a lower EBIT margin of 9.7 percent
(H1 2018: 12 percent). Net profit for the period decreased by 15.9 percent from
EUR 91.3 mn to EUR 76.8 mn. Earnings per share amounted to EUR 2.97 (H1 2018:
EUR 3.44).
"Fully in line with our sCore TEN strategy, our specialty fiber business is
developing very positively, which has made us significantly more resilient today
than a few years back. The investment in new production capacities for lyocell
fibers and the focus on our TENCEL(TM) and VEOCEL(TM) product brands will make
us even more resistant to market fluctuations and strengthen our position as a
leading supplier of specialty fibers. The first phase of this ambitious growth
plan is the construction of a state-of-the-art lyocell plant in Thailand", says
Stefan Doboczky, Chief Executive Officer of the Lenzing Group. "The escalating
trade conflict between the largest economies confirm our decision to temporarily
mothball the Mobile, Alabama project. Lenzing will continue to monitor these
developments closely and review this decision on a regular basis", says
Doboczky.
Capital expenditures dropped by 18.9 percent to EUR 95.1 mn in the first half of
2019. This decline is temporary, primarily attributable to the completion of the
expansion project in Heiligenkreuz (Austria) in 2018. Going forward, the
planning for major projects in Brazil and Thailand will have a significant
effect on the investment volume in the coming quarters.
Zwtl.: Expansion of specialty fiber capacities
The Lenzing Group is substantially increasing its production of lyocell fibers
to meet the strong demand for these products. Lenzing puts the focus on stable
and profitable growth as well as an improvement of the ecological footprint of
the textile and nonwovens industries by expanding the production of specialty
fibers. The first expansion phase of this ambitious growth plan, the
construction of a state-of-the-art production plant for lyocell fibers in
Prachinburi (Thailand), was approved in the second quarter of 2019. The
investment volume for the new plant, which has a capacity of 100,000 tons,
totals approximately EUR 400 mn.
The conversion of production capacities from standard viscose to LENZING(TM)
ECOVERO(TM) fibers in China was also completed during the reporting period.
Zwtl.: Expansion of pulp capacities
An increased backward integration into dissolving wood pulp is another important
step in the implementation of the sCore TEN strategy. Lenzing and its Brazilian
partner Duratex continue to advance the planned construction of a dissolving
wood pulp plant in the state of Minas Gerais (Brazil). The basic engineering,
site preparation and the applications for the required permits are proceeding
according to plan. The final investment decision is expected for the end of
2019.
The expansion and modernization of the production capacities for dissolving wood
pulp at the Lenzing site was successfully completed in the first half of 2019.
Zwtl.: Transparency from wood to garment
Lenzing will use blockchain technology to support its TENCEL(TM) branded fiber
business, ensuring complete transparency and traceability for brands and
consumers of its fibers in the finished garment. In the second quarter of 2019
Lenzing announced a cooperation with the Hong Kong based technology company
TextileGenesis(TM) to accomplish this ambition. Lenzing will carry out several
pilot tests involving partners along the entire value chain and expects the
platform to be operational as of 2020.
Zwtl.: Ambitious climate targets
The Lenzing Group aims to strengthen its position as a sustainability front
runner in the fiber industry, by investing over EUR 100 mn in energy-saving
measures, in the continued conversion to renewable energies and in new
technologies. In the planning of new pulp and lyocell facilities such as the
plant in Thailand, Lenzing also puts a strong focus on low-carbon energy sources
and production processes. The goal of its climate strategy is to reduce net
emissions of greenhouse gases to zero by 2050. An important milestone on the way
to becoming climate-neutral is set for the year 2030. By then, Lenzing commits
to reduce emissions per ton of fibers and pulp by 50 percent compared with 2017.
Zwtl.: Outlook
The International Monetary Fund expects a slowdown of global economic growth to
3.2 percent in 2019, mainly driven by increasing protectionist tendencies and
growing geopolitical tensions. The currency environment in the regions relevant
to Lenzing will remain volatile.
Global fiber demand remains strong. According to preliminary calculations,
cotton inventory levels should nevertheless increase in the 2019/20 season.
Towards the end of the second quarter 2019, the polyester market recovered from
slower growth in the preceding months. The price levels for cotton and polyester
are expected to decline slightly. Despite continued strong demand, capacity
expansions for standard viscose caused higher pressure on prices, which fell to
a historic low in the first half of 2019. In specialty fibers, the Lenzing Group
expects the positive development of its business to continue.
Driven by the challenging situation in standard viscose, prices for dissolving
wood pulp show a downward trend. Caustic soda prices in Asia have already
declined significantly over the past months; this development has now become
noticeable also in Europe.
In a challenging market environment for standard viscose with prices at historic
lows, the Lenzing Group continues to expect its results for 2019 to reach a
similar level as in 2018 based on the current exchange rates. Above developments
reassure the Lenzing Group in its chosen strategy sCore TEN. Lenzing is very
well positioned in this market environment and will continue to focus growth
with specialty fibers.
Key group indicators
(IFRS) 01-06/2019 01-06/2018
(in EUR mn)
Revenue 1,088.5 1,075.4
Earnings before interest,
tax, depreciation and 181.2 194.8
amortization (EBITDA)
EBITDA margin in % 16.6 18.1
Earnings before interest 105.6 128.7
and tax (EBIT)
EBIT margin in % 9.7 12.0
Net profit for the period 76.8 91.3
CAPEX(1) 95.1 117.2
30.06.2019 31.12.2018
Adjusted equity ratio(2) 56.6 59.0
in %
Number of employees 6,914 6,839
(headcount)
1) Capital expenditures: acquisition of intangible assets, property, plant and
equipment as per statement of cash flows
2) Ratio of adjusted equity to total assets in percent
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Further inquiry note:
Lenzing AG
Waltraud Kaserer
Vice President Corporate Communications & Investor Relations
Tel.: +43 (0) 7672 701-2713
mailto:w.kaserer@lenzing.com
end of announcement euro adhoc
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issuer: Lenzing AG
A-A-4860 Lenzing
phone: +43 7672-701-0
FAX: +43 7672-96301
mail: office@lenzing.com
WWW: http://www.lenzing.com
ISIN: AT0000644505
indexes: WBI, ATX
stockmarkets: Wien
language: English
Original content of: Lenzing AG, transmitted by news aktuell