Lenzing AG

EANS-Adhoc: Lenzing AG
Lenzing Group: Second-Best Result in the Company's History


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Financial Figures/Balance Sheet/Company Information
22.03.2013



§         New record fiber sales volumes
§         Dividend proposal of EUR 2.00 per share
§         Outlook 2013: transitional year due to low visibility
 

In spite of difficult market conditions in its core fiber business, the Lenzing
Group succeeded in achieving the second best business result in its history in
the 2012 financial year. This can be attributed to new record fiber sales
volumes and the good performance of Lenzing's specialty fiber TENCEL®.
 
Consolidated sales of the Lenzing Group were down slightly from the previous
year, declining by 2.3% to EUR 2.09 bn compared to EUR 2.14 bn in 2011. The
decline is due to the fact that more dissolving wood pulp from the Paskov pulp
plant was used internally than in 2011. Adjusted for this consolidation effect,
consolidated sales remained constant. The significant lower average fiber
selling prices compared to the boom year 2011 could be compensated by the strong
rise in fiber sales volumes, which climbed by close to 14% year-on-year, from
712,000 tons to 810,000 tons.
 
Consolidated earnings before interest, tax, depreciation and amortization
(EBITDA) amounted to EUR 358.7 mn[1], a decline of 25.3% from the record EBITDA
of EUR 480.3 mn achieved in 2011, but above the comparable level of EUR 330.6 mn
generated in the year 2010. The EBITDA margin amounted to 17.2% (2011: 22.4%).
Earnings before interest and tax (EBIT) of the Lenzing Group amounted to EUR
255.0 mn in the 2012 financial year, comprising a decline of 29.9% from the
prior-year level of EUR 364.0 mn. The EBIT margin was 12.2% (17.0% in the record
year 2011).
 
"We performed quite well in 2012 despite a very difficult market environment",
says Lenzing's Chief Executive Officer Peter Untersperger. "Naturally, our
operating margins were below those in the boom year 2011 but still at a good
level. We fully utilized our new production capacities, and were sold out
throughout the entire year. This success proves the long-term correctness of our
growth strategy in our core business of manufacturing man-made cellulose
fibers", CEO Untersperger adds.  
 
The one-off decommissioning costs for European Precursor (EPG), the joint
venture with SGL Carbon and Kelheim Fibres, amounted to EUR 23.5 mn (2011: EUR
0).  Accordingly, consolidated EBITDA after restructuring amounted to EUR 352.4
mn, corresponding to an EBITDA margin after restructuring costs of 16.9% of
sales.
 
Record investment program
CAPEX (investments in property, plant and equipment, intangible assets and non-
controlling interest) rose to the record level of EUR 346.2 mn in the 2012
financial year (2011: EUR 196.3 mn). Lenzing's investment activity focused on
the completion of the fifth production line at the Indonesian subsidiary PT.
South Pacific Viscose (SPV), the debottlenecking program at the plant in Nanjing
(China), the capacity expansion drive at the TENCEL®factory in Mobile/Alabama
(USA), expansion investments at the Lenzing site as well as the commencement of
construction of the new large-scale TENCEL®plant in Lenzing. These investments
were complemented by the further remodeling and upgrading of the Paskov plant
(Czech Republic) and the acquisition of the remaining shares.
 
"The record year 2011 must not obscure the view on the second-best result in the
company's history. As planned, 2012 represented the peak year of investments
when it comes to the implementation of our growth strategy", says Lenzing's
Chief Financial Officer Thomas G. Winkler. "Due to Lenzing's stable financial
position and low debt we can afford this investment into the future without
touching on our strategic liquidity reserve of more than half a billion euro."
 
Adjusted equity of the Lenzing Group rose to EUR 1,15 bn at the end of 2012, an
increase of 10.0% from the prior-year level of EUR 1,05 bn. This corresponded to
an adjusted equity ratio of 43.8% of total assets (2011: 44.8%) which increased
as a consequence of the record investments which were made.
 

Segment Fibers
Initial estimates[2]conclude that the rise in world fiber production only
amounted to 1.2% during the reporting year, with total volume up only slightly
from 81.0 mn tons to 82.0 mn tons. This was in contrast to the 6.4% increase
generated in 2011 and owing to the continued slow economic development.
Worldwide production of man-made cellulose staple fibers, the core business of
the Lenzing Group, climbed 9.2% in 2012 to 3.66 mn tons, thus expanding at a
considerably faster rate than the global fiber market as a whole.
 
The fiber market in 2012 was dominated by a significant decrease in selling
prices for all fibers. The average price of cotton, the benchmark for the entire
fiber industry, fell more than 40% below the prior-year level. Cotton
inventories further increased, and the global stock-to-use ratio reached a
record level of more than 70%. Spot prices for viscose fibers were down by about
15% in China, the world's largest fiber market. 
 
Lenzing achieved a new sales record in 2012 against the backdrop of a very
difficult market environment. The average fiber selling prices of the Lenzing
Group fell by 12%, decreasing from EUR 2.22 per kilogram to EUR 1.96 per
kilogram.
 
"The fiber market rewarded Lenzing for its high product and service quality as
well as its close cooperation with and integration in the textile chain", states
Friedrich Weninger, Member of the Management Board and Chief Operating Officer.
"In particular, our specialty fibers Lenzing Modal®and TENCEL®enabled us to
successfully differentiate ourselves from standard products manufactured by
Asian producers. In addition, we successfully attracted new customers and opened
up new markets while launching new innovative fiber applications on the
marketplace", COO Weninger says.
  
Lenzing Modal®and TENCEL®achieved price premiums of 40% - 60% in 2012 compared
to standard viscose fibers. Specialty fibers accounted for approximately 35% of
fiber sales in 2012. However, in the course of the year, selling prices for
Lenzing's specialty fibers had to be continually adjusted downwards in line with
general price levels as a result of the significant drop in cotton and viscose
fiber prices. 

Segments Plastics Products and Engineering
The Segment Plastics Products showed a satisfactory development during the year
under review. Lenzing reported very good volume demand, especially in the
thermoplastics business area.
 
The Segment Engineering profited from the positive mood in the capital goods
market in 2012. Lenzing Technik equally took advantage of the extensive
investment activity within the Lenzing Group as well as growing demand on the
part of external customers.
 
Outlook Lenzing Group
The current market situation featuring many uncertainty factors only allows for
low visibility with respect to further developments in the year 2013. From
Lenzing's perspective the most likely scenario is a sideways trend, with 2013
considered to be a transitional period.  
 
The additional production capacities which will be available to the Lenzing
Group for an entire year for the first time will serve as the basis for an
increase in sales volumes by about 13.5% to 920,000 tons. As a result, sales are
expected to climb to a range between EUR 2.15 bn and EUR 2.25 bn. This includes
the decline in the external sales of the Business Unit Pulp totalling a further
EUR 50 mn, which in turn is the consequence of the full-scale conversion of the
Paskov pulp plant to manufacturing dissolving wood pulp for the Group's internal
requirements. 
 
The anticipated decrease in average fiber selling prices in a year-on-year
comparison to EUR 1.80 to EUR 1.90 per kilogram (2012: EUR 1.96/kg) will impact
earnings directly. The earnings contribution achieved by the additional sales
volumes is expected to be largely offset by cost increases for personnel,
chemicals and other input factors.
 
For this reason, in the light of the assumed development of fiber prices, EBITDA
of the Lenzing Group should range between EUR 260 mn and EUR 290 mn in 2013, and
EBIT is expected to be in the range of EUR 140 - EUR 170 mn from today's
perspective. This corresponds to an expected EBITDA margin of about 12% - 13%
and an expected EBIT margin of approximately 6% - 8% in the 2013 financial year.
 

Investments (CAPEX) are likely to total approx. EUR 260 mn, significantly below
the comparable level of EUR 346 mn in 2012. Sales negotiations focusing on the
divestment of the Business Unit Plastics, which is not part of Lenzing's core
business, are already at an advanced stage. Binding offers were submitted.
 
Lenzing will respond to the low market visibility in 2013 by optimizations of
market activities, cost structures as well as replacement and maintenance
investments. The targeted volume growth of the Lenzing Group reaching the
threshold of about one million tons of annual fiber capacity by the year 2014
remains unchanged. However, new investment projects will be subject to scrutiny
with respect to the planned timeline. In the medium- and long-term, all three
megatrends on the fiber market (population growth, increasing wealth and
sustainability) driving growth of the man-made cellulose fiber industry will
continue uninterrupted. "However, we intend to flexibly adapt our pace of growth
to current market conditions and place additional emphasis on cash management",
says Lenzing CEO Peter Untersperger.
 
 

Key Group indicators
(IFRS)  

(EUR mn)                                    1-12/2012                  1-12/2011
Consolidated sales                            2,090.4                    2,140.0
EBITDA1                                         358.7                      480.3
EBITDA margin1in %                               17.2                       22.4
EBIT1                                           255.0                      364.0
EBIT margin1in %                                 12.2                       17.0
Profit for the year1                            191.9                      267.4
CAPEX (investments in

property, plant and
equipment, intangible                           346.2                      196.3
assets and non-controlling
interest)


                                           31.12.2012                 31.12.2011
Adjusted equity ratio2in %                       43.8                       44.8
Number of employees at                          7,033                      6,444
period-end

1) Before restructuring

2) Equity incl. government grants less prop. deferred taxes


Segment reporting

(EUR mn)                               1-12/2012                       1-12/2011
Segment Fibers                                                                  
Sales                                    1,896.0                         1,939.5
EBITDA                                     338.7                           458.6


Segment Plastics Products                                                       
Sales                                          159.9                       172.6
EBITDA                                          15.9                        16.5
Segment Engineering                                                             
Sales                                          121.8                       107.0
EBITDA                                          10.2                         9.0



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[1]All earnings indicators before restructuring, unless explicitly stated
otherwise
[2]Source: Lenzing Market Intelligence


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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