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8th August 2018, Lenzing

Demanding market environment for Lenzing

The Lenzing Group has reported what it calls 'solid results in a demanding market environment’.

Revenue declined by 6.4% compared with the first half of the previous year to EUR 1,075.4 million. Net profit for the period dropped by 39.3% from EUR 150.3 million in the previous year to EUR 91.3 million. EBITDA decreased by 28.1% to EUR 194.8 million, especially due to price increases for key raw materials and higher energy prices.

The decline in revenue and earnings compared with the first half of the previous year, which was the best half-year in the company’s history, was based on a mix of volatile prices for standard viscose and price increases for key raw materials, coupled with currency effects. The Lenzing Group’s strategic orientation with a focus on specialty fibres had a positive impact in this environment and is increasingly bearing fruit, according to the company.

Management Board: Heiko Arnold, CTO, Robert van de Kerkhof, CCO, Stefan Doboczky, CEO, Thomas Obendrauf, CFO. © Lenzing AG

“So far, the financial year 2018 proved to be as challenging as expected, and market headwinds were clearly noticeable. In this market environment, we are satisfied with the solid results we report. We are proud that with our corporate strategy sCore TEN and the focus on growth with specialty fibres we show big steps in the right direction. The recently announced joint venture with Duratex is another important step in executing this corporate strategy,” said Stefan Doboczky, CEO of the Lenzing Group. “We will continue to implement our strategy with great discipline and are convinced that this will steadily improve the long-term profitability of Lenzing.”

Largest dissolving wood pulp line

In June, the Lenzing Group and Duratex, the largest producer of industrialized wood panels of the southern hemisphere, agreed on the terms and conditions to form a joint venture to investigate building the largest dissolving wood pulp plant (single line concept) in the state of Minas Gerais, Brazil. The joint venture will investigate the construction of a 450,000 t dissolving wood pulp plant, which is expected to become the largest and most competitive single line dissolving wood pulp plant in the world.

Focus on sustainable products

As a pioneer in sustainable fibre solutions, the Lenzing Group is committed to higher standards in the textile and nonwoven sectors. More than EUR 100 million will be invested in sustainable manufacturing technologies and production facilities by 2022 in order to realise this vision.

Stefan Doboczky, CEO of the Lenzing Group. © Lenzing AG

In line with the Group’s specialty strategy, another two milestones were set in the first half of 2018: Lenzing announced an investment of up to EUR 30 million in another pilot line for the production of Tencel Luxe filaments at the Lenzing site. In addition, the company also introduced the environmentally friendly process for the production of Lenzing Ecovero branded viscose fibres at its Chinese site.

Expansion of capacities

CAPEX (investments in intangible assets and property, plant and equipment) rose by 60.8% year-on-year to EUR 117.2 million in the first half of 2018. This is primarily attributable to the capacity expansions in Heiligenkreuz, Austria, and Mobile, AL, US, and the expansion of the existing dissolving wood pulp plant in Lenzing. The company is pressing ahead with these projects, as well as with planning work on the construction of the next state-of-the-art lyocell production facility in Prachinburi, Thailand.

Outlook

The Lenzing Group still sees challenging market conditions for the second half of 2018. In addition to the price pressure on standard viscose, the prices of some key raw materials, such as caustic soda are still at a very high level and exchange rates continue to be volatile.

“Our specialty fibres are expected to continue their very positive development. In this context, the Lenzing Group is satisfied with the earnings development to date but underlines its estimate that the results for the year 2018 will be lower than the outstanding results in the last two years,” the company concludes.

www.lenzing.com

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