The Lenzing Group has reported a drop in profits of EUR 21.4 million from continued operations for the first three quarters of 2014.

Sales and earnings declined in the first nine months of 2014 compared to the prior-year performance, but cost savings are having a positive impact, the Austrian company reports. This led to a slight earnings improvement in the third quarter of 2014, the first time in about two years.

Further cost reductions are planned in light of the fact that no significant impetus is expected from the market.

Ongoing weak fibre prices

The decline in the average fibre selling prices and the high volatility on the fibre market continue to negatively impact the company’s business operations. Consolidated sales decreased by 6.2% to EUR 1,357.7 million in the first three quarters of 2014.

More than half of the sales drop is due to the non-recurring effects relating to the disposal of the Business Unit Plastics in 2013. Consolidated sales were down by 2.8% in a like-for-like comparison. Average fibre selling prices of the Lenzing Group fell to 1.55 EUR/kg compared to 1.73 EUR/kg in the first three quarters of 2013.

The price decline could not be fully offset by increasing fibre production and sales volumes, which rose as a result of the successful start-up of the new Tencel fibre manufacturing facility at the Lenzing site. Fibre sales volumes rose by 7% year-on-year to 706,900 tons in the first nine months of 2014.

Earnings and cost saving programme

In a like-for-like comparison of continuing operations, consolidated EBITDA in the first nine months of the year amounted to EUR 159.8 million, a 16% decrease compared to EUR 190.2 million for the same period 2013.

This corresponded to an EBITDA margin of 11.8%. Consolidated nine-month earnings before interest and taxes (EBIT) amounted to EUR 69.5 million, a drop of 34.8% from EUR 106.6 million in the previous year.

This comprised an EBIT margin of 5.1%. As a consequence of the excelLENZ programme, the number of employees working for the Lenzing Group fell to 6,352 people by September 2014, despite the full operation of the new Tencel fibre production plant in Lenzing.

Further cost savings

“We expect cost savings exceeding EUR 90 million for the entire year 2014, of which about one quarter involves personnel expenses. The remaining cost decreases equally relate to reduction in material costs and savings derived from efficiency projects to cut general and administrative expenses,” said Untersperger.

“Planning work has begun to enable a further improvement of the Lenzing Group’s cost structure to be achieved in 2015. Starting in 2016 we will achieve sustainable cost reductions of over EUR 160 million p.a. These measures are designed to safeguard the long-term competitive strength of the company and its self-financing capacity for future investments.”

Outlook

The global market for man-made cellulose fibres will continue to be impacted in the upcoming months by low pulp prices and surplus fibre production capacities, the company reports.

Lenzing hopes to improve the company’s market position, due to the successful ramp-up of the Tencel fibre plant in Lenzing, the initiated improvements in the product mix, and the strong expansion of marketing and sales activities along the entire value chain.

www.lenzing.com