The Management Board of the Lenzing Group. © Lenzing AG

The Lenzing Group continued its solid development in the first quarter of 2019. Despite a much tighter market environment, the Lenzing Group recorded a slight increase in revenue. The declining prices for standard viscose were largely offset in earnings.

Group revenue rose by 1.8% to EUR 560 million in the first quarter of 2019, compared with the same quarter of 2018. Net profit for the period dropped by 14.5% from EUR 50 million in the previous year to EUR 42.8 million. EBITDA dropped by 9.5% to EUR 92 million. In addition to the market environment for standard viscose, this was primarily caused by currency effects, which burdened material and personnel costs. The EBITDA margin dropped from 18.5% in the first quarter of 2018 to 16.4% in the reporting period.

“Our specialty fibre business is still developing very well, which has made us significantly more resilient today than only a few years ago. In order to become even more resistant to market fluctuations, we continue to advance the implementation of the sCore TEN strategy and the planned major projects in Brazil and Thailand with great discipline,” said Stefan Doboczky, CEO of the Lenzing Group.

Expansion of pulp and lyocell capacities

CAPEX (acquisition of property, plant and equipment) dropped by 22.4% to EUR 45.7 million in the first quarter of 2019. This decline is attributable to the completion of the expansion project in Heiligenkreuz, Austria, in 2018 and the ongoing planning for the major projects in Brazil and Thailand, which will only have an effect on the investment volume in the coming quarters. The basic engineering for the construction of the new lyocell plant in Prachinburi, near Bangkok, is making equally good progress as the planned establishment of the pulp plant in Minas Gerais.

Focus on innovation and customer intimacy

Lenzing continues to intensify its collaboration with next generation fashion designers in Asia. Recently, with the Tencel Studio, a design centre featuring fashion from Tencel fibres was opened in Singapore.

The Lenzing Group expects the positive development of its specialty fibre business to continue. © Lenzing AG

The centre is the next step in the effort to give consumers an insight into innovations and new applications. In the area of nonwovens, another milestone was set with the start of the establishment of an innovation centres in Germany. The new test facility, which is being set up in cooperation with the Hof University of Applied Sciences, enables Lenzing to work even more closely with its customers and partners in the hygiene, cosmetics and medical industries.

Partner for change

The focus of the Sustainability Report 2018, which was published in March, is on the wide range of activities the company is engaged in pursuing its mission of greening up the value chain. The Report is entitled Partner for Change, with the most recent example of this concept being the cooperation with the Swiss retailer Coop and the Austrian supermarkets of REWE International.

Together, their new reusable net bags for fruit and vegetables, Lenzing and its partners offer consumers an eco-friendly alternative to plastic packaging. Reusable net bags made from Lenzing modal fibres are said to offer a significant ecological advantage over conventional plastic packaging because of their natural origin, which makes them biodegradable and compostable.

Outlook

Demand on the global fibre markets is still positive. According to preliminary calculations, cotton inventory levels should decline slightly again in 2019. Capacity expansions for standard viscose should remain at a similar level as in the 2018 financial year.

Despite strong demand, this will result in growing oversupply, which will cause even higher pressure on prices. The Lenzing Group expects the positive development of its specialty fibre business to continue. Overall, Lenzing does not expect any significant changes for key raw materials that would be relevant to earnings. Based on the current exchange rates, the Lenzing Group continues to expect its results for 2019 to reach a similar level as in 2018 despite a much tighter market environment for standard viscose.

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