Difficult first quarter for Lenzing

8 May 2009, Lenzing – The decline of the global economy has massively affected the world fibre industry and the sales and financial results of the Lenzing Group for the first quarter of 2009 reflect this. In comparison to last year’s first quarter, consolidated quarterly sales dropped by 18.1%, from EUR 346.8 million to EUR 284.0 million. The dramatic collapse of fibre prices, particularly in Asia, and lower quantity sales were said to be the main reason for the downturn. Fibre prices for the first quarter 2008 had been above the annual average, the decline is therefore particularly pronounced when compared to the fourth quarter of 2008 where sales only dropped by about 10%.

First quarter 2009 EBIT was minus EUR 1.9 million (2008: plus EUR 42.1 mill.). Increased interest expenses and highly volatile currency markets resulted in a financial result of minus EUR 4.6 million (2008: minus EUR 3.6 million) and EBT of minus EUR 6.5 million (2008: plus EUR 38.5 mill.) and a net loss attributable to shareholders of EUR 3.6 million (2008: net attributable income EUR 26.5 million). Earnings per share fell to minus EUR 0.98 (2008: plus EUR 7.22).

Commenting on the current situation, Peter Untersperger, Chairman of the Lenzing said:  “The recession already left a very clear mark on the fourth quarter of 2008 and this negative trend has become even more pronounced with the beginning of 2009. The Lenzing Group could not defy this situation, either. But precisely in this environment Lenzing will maintain its position as a solid and reliable supplier and partner, a fact that is very much appreciated by our customers. It is a strategy that currently gains market share for Lenzing fibres in a recessive climate and from which we will benefit with the next economic upswing.”

The period EBIT margin came to minus 0.7% (2008: 12.1%) and the EBITDA margin to 6.0% (2008: 17.2%). The Group at the reporting date, 31 March 2009, employed a staff of 5,824 (31 December 2008: 5,945). The decline is mainly attributable to structural changes in Segment Plastics.

Textile Fibers and Nonwoven Fibers Business Units

The first weeks of 2009 brought a decline in fibre prices which was in part dramatic. Lenzing production capacity had to be adjusted to market demand, in particular in Asia, with the turn of the year due to the difficult market situation. Full production shut-down, as implemented by some competitors, was not considered an option. The general fibre price level and quantity demand showed tentative signs of consolidation by the end of the first quarter. Nonwovens report slightly rising sales volumes after a steep decline. Here too, however, the price level is very low.

Outlook

2009 will be a difficult and volatile business year for the Lenzing Group, in particular in view of the further marked decline of the global economy in the first months of 2009. Domestic demand in western industrialized nations remains weak. There are first signs of quantity demand in the fibres business firming up. There is, however, no indication to which extent this will lead to sustainable stabilization. Prices remain at absolutely unsatisfactory levels and margins are depressed. The global market situation remains uncertain, highly volatile and currently unpredictable.

As unsatisfactory is the situation for Segment Plastics. The recent easing of raw material prices and the expected comprehensive spending by the public sector may have positive impact on the construction industry and by implication the business development of Lenzing Plastics. Due to good order bookings, Segment Engineering expects a stable development of its business.

Further cost optimization and savings potential in the double-digit million euro range will be realized in all business units and at all sites, in production as well as in sales and administration. Segment Plastics will press ahead with optimizing its products and restructuring its organization. Business development is expected to recover slightly at a low level with the end of the second half-year 2009, provided the global economy becomes less volatile and provided that the perceptible stabilization of demand will endure throughout the summer months.