Lenzing solid in a historically tough knitting market

Lenzing solid in a historically tough market

Despite a generally difficult demand environment for textile fibres and a drastic drop in standard viscose prices, the Lenzing Group reports that it recorded a solid business performance in 2019. The disciplined implementation of its sCore TEN corporate strategy and the accompanying focus on specialty fibres once again helped Lenzing to mitigate the effect of unprecedented price drops for standard viscose.

As a result, revenue dropped by 3.3% from EUR 2.18 billion to EUR 2.11 billion in 2019, driven by lower selling prices as well as standard fibre volumes. Due to positive mix effects and more resilient specialty fibre prices, the share of specialty fibres increased from 45.5% to 51.6% f revenue.

The earnings development was largely influenced by the decline in revenue, but also by negative currency effects on material and personnel costs. EBITDA fell by 14.4% from EUR 382 million to EUR 326.9 million. The EBITDA margin declined from 17.6% to 15.5%. Net profit, at EUR 114.9 million, was 22.4% lower than in the previous year at EUR 148.2 million. Earnings per share amounted to EUR 4.63 (2018: EUR 5.61).

“Lenzing and the entire textile value chain operated in a historically difficult market environment in 2019, which had a negative impact on our revenue and earnings development. The focus on specialty fibres has been contributing to the company’s resilience in the reporting period and we feel very well positioned with our corporate strategy. Our goals for 2024 underpin this confidence in our future,” says Stefan Doboczky, Chief Executive Officer of the Lenzing Group.

“The implementation of the key projects in Thailand and Brazil plays a central role in further strengthening our market position and in accomplishing our ambitious climate targets. We are very satisfied with the progress of both projects,” Doboczky adds.

CAPEX (acquisition of property plant and equipment) amounted to EUR 244 mn in 2019, reflecting the Lenzing Group’s investment activities on increasing internal pulp production and raising the share of specialty fibers in line with the sCore TEN strategy. The major projects in Brazil and Thailand will have an increased impact on the CAPEX volume as of 2020.

Expansion of pulp capacities

The expansion and modernization of the dissolving wood pulp plants in Lenzing and Paskov, which started in 2017, will increase pulp production capacities by roughly 35,000 tons annually. The expansion in Lenzing was successfully implemented in the second half of 2019. At roughly the same time, the new capacities at the Paskov plant were gradually started up. This process will be completed in the first quarter of 2020.

Based on the decision to build a dissolving wood pulp plant in Brazil with its partner Duratex, Lenzing will increase its self-supply by 500,000 tons annually, thus strongly enhancing backwards integration. The plant is expected to start operations in the first half of 2022. Lenzing and Duratex hold 51% and 49%, respectively, in the joint venture. Industrial CAPEX are expected to total roughly USD 1.3 billion (based on current exchange rates and customary tax refunds).

Expansion of specialty fibre capacities

In 2019, Lenzing also started the construction of a state-of-the-art lyocell production facility in Thailand. The investment for the new plant with a capacity of 100,000 tons amounts to roughly EUR 400 million. Construction work started in the second half of 2019. The completion is scheduled for the end of 2021.

Lenzing aims to achieve stable and profitable growth and to improve the ecological footprint of the textile and nonwovens industry by expanding the production of specialty fibres. In addition, the conversion of production capacities from standard viscose to Lenzing Ecovero branded specialty viscose fibres progressed well during the reporting period. Lenzing says its Ecovero fibres “are very well received on the market thanks to their very favourable ecological footprint and their unique identification technology”.

Lenzing shines at the Oscars

The Tencel brand’s visibility was further increased through co-branding during the reporting period. Compared with the previous year, the number of end products labelled with the Tencel brand nearly doubled to 173 million. The digital marketing concept “Where to buy” was introduced on the website www.tencel.com  in the first quarter of 2019. Based on this concept, products made from Tencel fibres can be presented and linked in the online shops of more than 135 partners, including brands like H&M, Levi’s, Allbirds, Victoria’s Secret, Esprit, Pottery Barn and Asos.

Lenzings fibres were also a great success at this year’s Oscar ceremony in Los Angeles. Three dresses worn by nominees and winners were handmade from fabrics with our TENCEL Luxe filaments. The strong response on social media accelerated awareness for this sustainable and innovative product of the Lenzing Group.

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