Friday, 14 November 2014 07:10

Lenzing Group: Persistently Difficult Market Environment, Cost Savings Measures Positively Impact Results

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len logoThe Lenzing Group is working to counteract the ongoing difficult market environment prevailing in the fiber industry. 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. 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.

  • Q1-3 EBITDA of EUR 159.8 mn (down 16% from the previous year)

Ongoing weak fiber prices burden Q1-3 sales and earnings
The decline in the average fiber selling prices and the high volatility on the fiber market continue to negatively impact the company’s business operations. Consolidated sales decreased by 6.2% to EUR 1,357.7 mn in the first three quarters of 2014, down from EUR 1,447.0 mn in the previous year. 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 fiber 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 fiber production and sales volumes, in part as a result of the successful start-up of the new TENCEL® fiber manufacturing facility at the Lenzing site. Fiber sales volumes rose by 7% year-on-year to 706,900 tons in the first nine months of 2014.

In a like-for-like comparison of continuing operations, consolidated EBITDA1 in the first nine months of the year amounted to EUR 159.8 mn, a 16.0% decrease compared to EUR 190.2 mn for Q1-3 2013. This corresponded to an EBITDA margin of 11.8% (Q1-3 2013: 13.6%). Consolidated nine-month earnings before interest and taxes (EBIT) amounted to EUR 69.5 mn, a drop of 34.8% from EUR 106.6 mn in the previous year. This comprised an EBIT margin of 5.1% (Q1-3 2013: 7.6%). As a consequence of the excelLENZ program, the number of employees working for the Lenzing Group fell to 6,352 people as at September 30, 2014 (December 31, 2013: 6,675) despite the full operation of the new TENCEL® fiber production plant in Lenzing.

    1 Earnings before interest, taxes, depreciation on property, plant and equipment and amortization of intangible assets and before income from the release of investment grants.

Third-quarter earnings reflect cost reductions
The third-quarter 2014 performance of the Lenzing Group was marked by a slight year-on-year earnings improvement as well as in comparison to the second quarter of 2014. “The measures are succeeding. The earnings improvement is mainly attributable to the excelLENZ cost-cutting drive but also from the first fiber sales volumes produced by the new TENCEL®  fiber plant in Lenzing”, says Lenzing CEO Peter Untersperger.

In  spite  of  higher  sales  volumes,  consolidated  sales  in  the  third  quarter  of  2014  stagnated  at EUR 457.7 mn compared to the prior-year level of EUR 457.1 mn, which is due to the lower average fiber  selling  prices.  Nevertheless,  third-quarter  EBITDA  rose  to  EUR  68.0  mn  (Q3  2013: EUR 61.8 mn), and EBIT in the third quarter of 2014 totaled EUR 37.1 mn (Q3 2013: EUR 33.4 mn), whereas EBT improved to EUR 33.3 mn from the figure of EUR 28.2 mn in the prior-year quarter.

Implementation of further cost savings
“We expect cost savings exceeding EUR 90 mn 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”, adds CEO  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 mn 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 Lenzing Group
The global market for man-made cellulose fibers will continue to be impacted in the upcoming months by low pulp prices and surplus fiber production capacities against the backdrop of good volume demand.

The successful ramp-up of the TENCEL®  fiber plant in Lenzing, the initiated improvements in the product mix, and the strong expansion of marketing and sales activities along the entire value chain will improve the company’s market position and its relative competitive strength. In addition to an intensification of the excelLENZ cost reduction program, the realignment initiative in the fields of Lenzing Technik, site maintenance and repair services will make an important contribution towards achieving operational improvements at Lenzing.

The Lenzing Group
The Lenzing Group is a world market leader with headquarters in Austria, production sites in all major markets as well as a worldwide network of sales and marketing offices. Lenzing supplies the global textile and nonwovens industry with high-quality man-made cellulose fibers. The portfolio ranges from dissolving pulp, standard and specialty cellulose fibers to engineering services.

Lenzing quality and innovative strength set global standards for man-made cellulose fibers. With 75 years of experience in fiber production, the Lenzing Group is the only company worldwide combining the manufacturing of all three man-made cellulose fiber generations on a large industrial scale under one roof – from the classic viscose to modal and lyocell (TENCEL®) fibers. The success of the Lenzing Group results from a unique combination of consistent customer orientation together with its leadership in innovation, technology and quality. Lenzing is committed to the principle of sustainable management and very high environmental standards.

Lenzing's core business fibers is complemented by our activities in the business field engineering.

The Interim Report 01-09/2014 is available for download via this link

Key Figures Lenzing Group 2013:
Sales: EUR 1.91 bn
Export share: 90,8%
Fiber sales volumes: 890,000 tons
Staff: 6,675

for more info please contact:
Stephanie Kniep
Head of Investor Relations
Phone: +43 (0) 7672 701-4032
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