Lenzing Group, the Austrian global producer of wood-based specialty fibers, is registering some encouraging results after the past year’s third and fourth difficult quarters thanks to a series of new projects, including some significant sustainably-focused plans.
Part of this strategy is the expansion of its sustainable viscose fiber portfolio globally through the launch of Veocel, a group of branded carbon-neutral viscose fibers aimed to the non-woven market in Europe and the US.
The new fiber group’s carbon-neutrality is achieved by balancing remaining GHG emissions through verified compensation measures including, for instance, reforestation activities, and by retiring carbon credits so that the impact of global warming from human-related industrial and agricultural activities is calculated to zero.
In Asia, Lenzing will convert the existing production capacity for conventional viscose into capacity for responsible specialty fibers in the second half of 2023.
From a financial perspective, after the difficult third and fourth quarters of the previous year, signs of recovery emerged for the company during the first quarter of 2023 in terms of demand as well as raw material and energy costs.
Textile fibers recorded moderate but steadily improving demand. Business with fibers for nonwovens and with dissolving wood pulp performed better than expected. Raw material and energy costs were still at an elevated, albeit decreasing level.
Revenues increased by 1.3% compared to the prior-year quarter to €623.1 million. This growth was primarily due to higher pulp revenues, while fiber revenues were down. As a consequence, earnings before interest, tax, depreciation and amortization (EBITDA) decreased by 66.2% year-on-year to €29.7 million in the first quarter of 2023. The net result for the reporting period amounted to minus €64.9 million (compared with €34.1 million in the first quarter of 2022) and earnings per share amounted to minus €3.03 (compared with €0.87 in the first quarter of 2022).
In order to face the situation, Lenzing launched a reorganization and cost-cutting program in the third quarter of 2022 and is fully on track with its implementation.
More than €70 million in annual cost savings are targeted once the program has been fully implemented. Moreover, further measures were launched to bolster free cash flow.
“After the crisis year of 2022, the negative after-effects were still clearly evident in the first quarter of 2023. However, we noted signs of recovery in terms of demand as well as energy and raw material costs during the quarter. Lenzing has successfully made great efforts in relation to both costs and liquidity and is well-prepared for an upturn in demand,” noted Stephan Sielaff, CEO, Lenzing Group.
“In the medium and long term, we continue to anticipate a strong growth in demand for Lenzing’s sustainable products. We are convinced that our two investment projects in China and Indonesia will further strengthen our positioning in this respect.”
In addition to the continued implementation of the reorganization and cost-cutting program, the implementation of the “Better Growth” corporate strategy was also advanced in the first quarter of 2023.
The corporate strategy aims to better serve the structurally strong growth in demand for biodegradable and responsibly produced specialty fibers under the Tencel, Lenzing Ecovero and the newly developed Veocel.
In accordance with the strategy and following the successful implementation of the two key projects in Thailand and Brazil, Lenzing will continue on its profitable growth trajectory, sharpen its focus on sustainable and high-quality premium textile fibers and non-woven fibers, and in parallel further advance the transition from a linear to a circular economy model.
Since 2021, Lenzing has invested more than €200 million in production sites in China and in Indonesia in order to convert existing capacities for generic viscose into capacities for environmentally responsible specialty fibers.
In Nanjing (China), the conversion of a production line to Tencel brand modal fibers for textiles and apparel was successfully completed in the first quarter of 2023. For the first time, Lenzing can thereby also offer locally produced Tencel fibers to its Chinese customers and consequently serve structurally growing demand on an even better basis.
Changes on the managing board
Lenzing also recently announced personnel changes on its managing board. Robert van de Kerkhof, chief commercial officer fiber and a managing board member since 2014 will not be available for a further extension of his contract, which runs until December 31, 2023.
He will continue to drive forward the sustainability area, including the Carbon Roadmap, as Chief Sustainability Officer until the end of his current term of office.
CEO Stephan Sielaff will essentially assume responsibility for sales in the Fibers Division. The Lenzing Managing Board will thereby be reduced from four to three members as of January 1, 2024.
As part of its implementation toward recovery, Lenzing continues to anticipate growth in demand for environmentally responsible fibers for the textile and clothing industry, as well as for the hygiene and medical sectors. As a consequence, it continues its “Better Growth” strategy and plans to continue driving growth with specialty fibers as well as its sustainability goals, including the transformation from a linear to a circular economy model.
The successful implementation of the key projects in Thailand and Brazil as well as the investment projects in China and Indonesia will further strengthen Lenzing’s positioning in this respect.
Taking into account the aforementioned factors and assuming a further market recovery in the current financial year, the Lenzing Group continues to expect EBITDA in a range between €320 million and €420 million for 2023.
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