Lenzing AG

EANS-Adhoc: Lenzing AG
Lenzing Group: Good Half-Year Results in a Difficult Market Environment


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quarterly report

22.08.2012

-New record fiber shipment volume in Q2
-Earnings at the level of the 2010 financial year
-Guidance adjusted to current market expectations

The Lenzing Group performed very well in the first half of 2012 against the
backdrop of a difficult market environment. The ambitious business targets were
fully achieved. However, as expected, the record levels generated in the first
half of 2011 were not reached again. Due to the changed market expectation the
guidance for the full year 2012 has been adapted.
 
Consolidated sales at EUR 1,061.8 mn in the first half of 2012 remained stable
for the most part (H1 2011: EUR 1,076.2 mn, a drop of 1.3%). In spite of lower
average fiber selling prices, Lenzing succeeded in maintaining a constant level
of sales due to the increased fiber shipment volumes made possible by the recent
capacity expansion measures. 

Consolidated EBITDA (earnings before interest, tax, depreciation and
amortization) in the first half of 2012 totaled EUR 193.6 mn, down from the
all-time high of EUR 247.8 mn in the first six months of 2011. Accordingly, the
EBITDA margin continued to be at an attractive level of 18.2% (H1 2011: 23.0%).
EBIT (earnings before interest and tax) in the first half-year 2012 also
amounted to EUR 141.1 mn, a drop of 29.2% from the EBIT of EUR 199.2 mn
generated in the first six months of 2011. This corresponded to an EBIT margin
of 13.3% (H1 2011: 18.5%). The slightly more pronounced decrease in EBIT in
percentage terms in comparison to EBITDA is due to the increased amortization of
intangible assets and depreciation of property, plant and equipment within the
context of the enhanced investment activity. Thus the EBITDA and EBIT margins in
the first half of 2012 were at about the same level as in the 2010 financial
year, a year featuring a top performance in a comparison of the last ten years. 

"We managed to successfully counteract the weak market conditions throughout the
entire first half of 2012. Demand for Lenzing fibers continued unabatedly and
all our fiber and pulp production plants were operating at full capacity. We
even managed to achieve a new record in the first half-year with a fiber
shipment volume of 390,000 tons", says Peter Untersperger, Chief Executive
Officer of Lenzing. 

In any case, Lenzing remains firmly committed to its long-term objectives, and
will invest approximately EUR 1.6 bn by 2015 in order to expand fiber production
capacity to about 1.2 mn tons per year. "We think in the long-term and
anticyclically," Lenzing CEO Peter Untersperger states. Amongst other projects,
construction work began in June 2012 on the first TENCEL® production facility at
the Lenzing site within the framework of this expansion program. The new plant
also represents the world's largest TENCEL® production line to date.
 
Investments in intangible assets and property, plant and equipment totaled EUR
130.0 mn in the first half of 2012, compared to EUR 82.1 mn in the prior-year
period. The investment focus was on construction of the fifth fiber production
line at the Indonesian subsidiary PT. South Pacific Viscose (SPV), the expansion
of TENCEL® production capacities in the USA, the remodeling and expansion of the
Paskov pulp plant and  as well as infrastructure investments at the Lenzing
site.  

Adjusted equity1)  climbed by 4.6% to EUR 1,096.6 mn (December 31, 2011: EUR
1,048.1 mn). Net financial debt amounted to EUR 268.0 mn in the middle of 2012
(December 31, 2011: EUR 159.1 mn).  In particular, the distribution of the
dividend to shareholders of Lenzing AG (EUR 66.4 mn) and a tax prepayment (EUR
42.5 mn) in Austria were responsible for the higher net financial debt.  

"We were able to finance the investments in the first half-year on our own. With
a net gearing below 25% and flexibility on the basis of the available liquidity
of EUR 600 mn, we are in a position of carrying out our investments as planned,
even under difficult market conditions", says Lenzing's Chief Financial Officer
Thomas G. Winkler in commenting on the current half-year results.    

Positive development of all segments
In the core fiber segment, the Business Unit Textile Fibers registered an
ongoing strong demand in all markets in the light of the expected lower selling
prices for fibers. Textile demand for TENCEL® fibers developed particularly
gratifyingly, for example for soft denim applications, sportswear and home
textiles.  

In the first half of 2012, the Business Unit Nonwoven Fibers also succeeded in
further increasing sales volumes from the prior-year level, although Lenzing
nonwovens were not immune to the downward price trend for viscose fibers.
Whereas newly-installed production capacities in Europe for wipes ended up
leading to overcapacity, the market in the USA showed itself to be stable. The
Asian nonwovens sector, particularly in China, continues to clearly be on a
growth path.  

The average fiber selling price of the Lenzing Group bottomed out at EUR 2.03
per kilogram in the first half of 2012, which represents a decline of about 12%
from the very strong first half of 2011 with all-time high prices in the entire
fiber industry. However, compared to the fourth quarter of 2011, the average
fiber selling price in the second quarter only dropped by 5%, and remained
unchanged compared to the first quarter of 2012. 

"The first half of 2012 demonstrated that Lenzing fiber prices develop much less
cyclically than cotton prices and spot market prices for viscose fibers produced
by our competitors", explains Friedrich Weninger, Member of the Management Board
and Chief Operating Officer responsible for the fiber business. "This is the
result of our consistent quality orientation, the high share of specialty fibers
and the above-average level of service provided by Lenzing", he adds.  

The Segments Plastics Products and Engineering developed solidly. The Segment
Plastics Products profited from strong demand on the part of the construction
industry, for example high-tech multi-layer laminates for the cladding of
insulated pipelines and ventilation ducts as well as laminated films for
insulating materials. In the Segment Engineering the order intake was at a high
level throughout the entire first half of the year. 

Outlook 
New guidance for EBITDA and EBIT
A continuation of the consolidation phase in the global fiber industry is
expected in the second half of 2012. The textile pipeline is well filled due to
the limited dynamics provided by private consumption in the industrialized
countries. As a consequence, the quick reduction of cotton inventories which are
currently at a disproportionately high level will likely take longer than
expected. 

Hopes of a market upturn as of the middle of the year have not been fulfilled.
We expect global fiber prices to decline slightly in the third quarter of 2012.
Accordingly, the average selling prices for Lenzing fibers should be lower in
the third quarter than in the second quarter, and end up ranging between EUR
1.95 and EUR 2.00 per kilogram. 

The Lenzing Group has correspondingly adapted its outlook for the entire year
2012 in the light of the fact that business is no longer expected to develop in
a mirror-inverted manner compared to 2012. From today's perspective consolidated
sales will likely be at approximately the prior-year level and amount to EUR 2.1
to 2.15 bn. Fiber shipment volumes are expected to reach about 810,000 tons,
corresponding to a considerable rise of 14%. On the basis of the early
completion of the new fifth production line at its Indonesian subsidiary SPV,
Lenzing is confident of already achieving initial sales revenue from this new
production facility in the fourth quarter of 2012. Additional fiber volumes will
also be derived from the plant optimization program and expansion of the TENCEL®
site in Mobile/Alabama (USA).

As a consequence of this ongoing dynamic development, Lenzing now forecasts a
new EBITDA range of between EUR 350 mn and EUR 400 mn (previous guidance: EUR
400 - 480 mn). In addition, Lenzing expects EBIT in 2012 to be within a range of
EUR 240 - 290 mn (previous guidance: EUR 285 - 365 mn). Capital expenditure in
2012 will likely total approximately EUR 325 mn. 

The overall global economic development could have both positive and negative
effects on the company's business in the second half of the year. Furthermore,
expectations relating to the upcoming cotton harvest in the upcoming 2012/13
cotton crop year comprise an important but still unclear factor impacting
further market development. The long-term trend towards man-made cellulose
fibers remains intact. This has been underlined by the nascent rally in
agricultural raw material prices since June 2012 as well as the recent stable
cotton price level which is significantly higher than in past years despite the
temporary surplus in the cotton supply. The Lenzing Group is very well prepared
to meet these challenges. For this reason, Lenzing will remain committed to its
growth path for the coming years.  



Key Group indicators (IFRS) 
in EUR mn                                             1-6/2012     1-6/2011
Consolidated sales                                     1.061.8      1.076.2
EBITDA                                                   193.6        247.8
Earnings before interest and tax (EBIT)                  141.1        199.2
Earnings before tax and minority interest (EBT)          138.2        187.7
Profit for the period                                    100.1        145.3
EBITDA margin in %                                        18.2         23.0
EBIT margin in %                                          13.3         18.5
Gross cash flow                                          114.2        218.7
Investments in intangible assets and property, 
plant and equipment                                      130.0         82.1

                                                    30.06.2012   31.12.2011
Adjusted equity ratio* in %                               46.7         44.8
Employees at the end of the period                       6,724        6,593

*Equity incl. government grants less prop. deferred taxes 

Segment reporting in EUR mn                           1-6/2012     1-6/2011
Segment Fibers      
Sales                                                    955.9        967.9
EBITDA                                                   182.9        235.8
Earnings before interest and tax (EBIT)                  132.6        189.9
Segment Plastics Products      
Sales                                                     86.9         92.2
EBITDA                                                     7.8          8.7
Earnings before interest and tax (EBIT)                    4.9          5.3
Segment Engineering      
Sales                                                     58.3         53.7
EBITDA                                                     4.1          4.9
Earnings before interest and tax (EBIT)                    3.3          4.2


1) Incl. investment grants, less prop. deferred taxes


Further inquiry note:
Lenzing AG
Mag. Angelika Guldt
Tel.: +43 (0) 7672-701-2713
Fax: +43 (0) 7672-918-2713
mailto:a.guldt@lenzing.com

end of announcement                               euro adhoc 
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issuer:      Lenzing AG
               
             A-A-4860 Lenzing
phone:       +43 7672-701-0
FAX:         +43 7672-96301
mail:     a.guldt@lenzing.com
WWW:      http://www.lenzing.com
sector:      Chemicals
ISIN:        AT0000644505
indexes:     WBI, ATX, Prime Market
stockmarkets: free trade: Berlin, official market: Wien 
language:   English
 

 

 



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