The Lenzing Group reports that it successfully responded to the extremely difficult market environment in the first three quarters of 2020. With the increased pressure on prices and volume due to the COVID-19 crisis, the company implemented a broad package of measures and remains fully on track in terms of its strategy.

Lenzing’s cooperation with partners along the value chains was intensified and the company says it was agile and flexible in adjusting production volume to demand. In addition, Lenzing also intensified measures for structural earnings improvement to mitigate the effect of the pressure on fibre prices and demand for fibres and reduced its operating costs significantly as a result.

The immediate effects of the COVID-19 crisis increased the pressure on prices and volumes in the textile fibre segment, in particular in the second quarter of 2020. The increase in demand towards the end of the third quarter, primarily for wood-based specialty fibres such as Tencel Modal and Lenzing Ecovero, had a positive impact on the revenue and earnings development, but was still below the level of the previous year. As a result, revenue declined by 26.1% to EUR 1.19 billion in the first three quarters of 2020.

Strategically, we remain fully on track despite the pandemic

The earnings development essentially reflects the decline in revenue. The implementation of measures for structural earnings improvements in all regions mitigated this effect, Lenzing says. EBITDA (earnings before interest, tax, depreciation and amortization) fell by 47.4% to EUR 140.4 million in the first three quarters of 2020. The EBITDA margin decreased from 16.5% to 11.7%. Net loss for the period* amounted to EUR minus 2.8 million (01- 09/2019: net profit of EUR 117.1 million) and earnings per share to EUR minus 0.10 (01-09/2019: EUR 4.41).

“Lenzing reacted quickly to the increased pressure on prices and volume caused by the COVID-19 crisis and consequently held its ground in this extremely difficult market environment due to a comprehensive set of measures. In the third quarter, we saw a broad recovery of the fibre market; in particular, demand for our sustainably produced specialty fibres increased significantly,” comments Stefan Doboczky, CEO of the Lenzing Group.

“Strategically, we remain fully on track despite the pandemic, and the implementation of our key projects in Thailand and Brazil is progressing as planned,” says Doboczky.

Strengthening specialty fibre growth

CAPEX (expenditures for intangible assets and property, plant and equipment and biological assets) roughly tripled to EUR 449.8 million in the first three quarters of 2020. This increase is a consequence of the progress of the major projects in Brazil and Thailand, Lenzing explains. The Lenzing Group’s investment activities continued to focus on expanding the internal production of pulp, increasing the share of specialty fibres and implementing the climate targets in line with the sCore TEN corporate strategy during the reporting period.

The construction of the dissolving wood pulp plant in Brazil continues to progress according to plan, Lenzing adds. After the final investment decision in December 2019, the Duratex Group acquired a 49% share in the in the joint venture LD Celulose in the first quarter of 2020 as agreed. Lenzing holds 51% of the shares. The expected Industrial CAPEX will be USD 1.38 billion. The project is predominantly financed through long-term debt. The corresponding financing contracts were concluded in the second quarter of 2020 as planned. IFC, a member of the World Bank Group, and IDB Invest, a member of the IDB Group, support the investment program of the joint venture LD Celulose. The export credit agency Finnvera and seven commercial banks are also participating in the financing in the amount of approximately USD 1.1 billion. The commissioning of the pulp plant is scheduled for the first half of 2022.

Specialty fibres - Lenzing’s great strength

The strategic target to generate roughly 50% of revenue with specialty fibres in 2020 has already been met. Lenzing aims for further organic growth in this area in order to be even more resilient to volatile markets in the future. The focus of the coming years will clearly be on the construction of the new, state-of-the-art lyocell plant in Thailand, with the objective to increase the share of specialty fibres in the revenue generated by the Segment Fibers to more than 75% by 2024. 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 and went according to plan during the reporting period. Production is expected to be launched at the end of 2021.

* Attributable to Lenzing AG shareholders

View the full Lenzing Group Interim Report 01-09/2020