Lenzing AG

EANS-Adhoc: Lenzing AG
First Half-Year Results 2013 as Expected

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Mid Year Results/6-month report
21.08.2013


-New record fiber sales volumes against the backdrop of declining prices
-Strategy adjusted to market conditions
-Outlook revised to take account of successful sale of Lenzing Plastics
 
The Lenzing Group was not immune to the continuous downward price development on
the marketplace in the first half-year 2013. Nevertheless, against the backdrop
of declining sales, Lenzing generated earnings in line with expectations but
considerably below the first half of 2012.
 
Consolidated sales declined by 6.8% in the first half of 2013 to EUR 989.9 mn,
down from EUR 1,061.8 mn in the previous year. The significantly lower average
fiber selling prices compared to the first half of 2012 could not be compensated
by the higher fiber shipment volumes. Furthermore, there was a loss of external
sales of about EUR 42.5 mn at the Paskov pulp plant compared to the first half
of 2012. The comparability of the performance indicators in the first half of
2013 with those in the prior-year period is limited due to Lenzing's sale of its
Business Unit Plastics (Lenzing Plastics). 
 
Consolidated earnings before interest, tax, depreciation and amortization[1]
(EBITDA) amounted to EUR 162.0 mn, down 16.3% from EUR 193.6 mn in the first
half of 2012. The EBITDA margin was 16.4% in contrast to the prior-year figure
of 18.2%. Earnings before interest and tax (EBIT) in the first half-year totaled
EUR 103.0 mn, a decrease of 27.0% from the previous year's EBIT of EUR 141.1 mn.
This corresponded to an EBIT margin of 10.4% in the first half of 2013 (H1 2012:
13.3%). The disposal of the Business Unit Plastics by the Lenzing Group resulted
in a cash inflow of EUR 61.7 mn and a gain on disposal before taxes (affecting
EBITDA and EBIT) of EUR 25.9 mn at the half-year reporting date.
 
In the first half-year 2013, the market was characterized by ongoing high
inventories of cotton and surplus production capacities for viscose fibers in
China, the most important sales market, and thus globally declining prices for
man-made cellulose fibers. The average fiber selling prices of the Lenzing Group
totaled EUR 1.76/kg (H1 2012: EUR 2.03/kg).
 
"We have reacted and already initiated a cost optimization program at the
beginning of the year. In addition, we have adjusted our short- and medium-term
strategy to the changed market environment. We will more strongly focus on our
specialty fibers TENCEL®and Modal in the future. Viscose fibers will remain an
important pillar of our business, but further expansion projects for viscose
fibers will only be implemented if correspondingly high profitability is
achieved" reports Lenzing's Chief Executive Officer Peter Untersperger. Current
large-scale strategic investments such as the new TENCEL®production plant
located at the Lenzing site will continue as planned. Moreover, Lenzing will
rapidly press ahead with scaling TENCEL®to ensure more widespread use.  
 
Double-digit cost savings
"The excelLENZ program launched at the beginning of 2013 is bearing fruit. We
succeeded in generating savings of EUR 16 mn in the first half-year", adds
Lenzing's Chief Financial Officer Thomas G. Winkler. These cost reductions were
primarily achieved in purchasing as well as maintenance investments.
 
Investments in intangible assets and property, plant and equipment totaled EUR
134.4 mn[2]in the first half of 2013, compared to EUR 130.0 mn in the first six
months of 2012. The focal point of the new investments was almost exclusively
the construction of the new TENCEL®production plant at the Lenzing site.
According to CFO Winkler, the priority is on optimal cash management. The level
of investments is not expected to rise in the second half of the year.
Accordingly, CAPEX for the entire year 2013 will amount to approximately EUR 260
mn (2012: EUR 346.2 mn). "In the future Lenzing will only spend as much as we
earn", Winkler says. And this is also a consequence of the excelLENZ program.
 
The sale of Lenzing's Business Unit Plastics led to a 2.9% decrease in the
balance sheet total to EUR 2,556.5 mn. Adjusted Group equity[3]as of the end of
June 2013 remained largely unchanged at EUR 1,154.8 mn compared to the level of
EUR 1,153.1 mn at the end of 2012. Net financial debt totaled EUR 424.4 mn in
the middle of 2012 (December 31, 2012: EUR 346.3 mn). This still corresponded to
a moderate 36.8% ratio of net financial debt to equity (December 31, 2012:
30.0%), hardly a change from the first quarter of the year.  
 

Segments Fibers and Engineering
Lenzing successfully increased fiber production and shipment volumes in its core
Segment Fibers in the first half of 2013, and also reported ongoing attractive
price premiums for Modal and TENCEL®. Lenzing achieved a new record level of
fiber sales, which amounted to 438,000 tons in the first half of 2013. However,
the price development for viscose fibers was less favorable than previously
expected.
 
The Business Unit Textile Fibers carried out a large number of measures in the
first half-year 2013 which were designed to promote the sales of the specialty
fibers Lenzing Modal®and TENCEL®. The comparatively high cotton price in China,
the most important sales market for Modal, also helped support demand for
Lenzing Modal®as a fiber blend.  
 
The global nonwovens fiber market developed robustly in the first half of 2013
against the backdrop of very good volume demand. However, the declining textile
fiber selling prices also led to some price pressure in the nonwovens sector,
even if this was to a moderate extent.  
 
"Our specialty strategy and quality leadership proved their value in this
difficult market environment. The volume demand for our fibers continues
unabatedly. Lenzing's inventories are low, even if the achievable selling prices
for standard viscose fibers are currently disappointing", explains Friedrich
Weninger, Member of Lenzing's Management Board with responsibility for the fiber
business. "Modal, TENCEL®and all nonwoven products made a significant
contribution to stabilizing our business in the first half-year. Furthermore, we
moved ahead with increasing our capacities to produce our own pulp thanks to the
conversion of the Paskov plant from paper pulp to dissolving pulp. The targeted
monthly production level could already be achieved six months ahead of
schedule".  
 
The Segment Engineering developed well, with new contract orders somewhat below
the comparable prior-year level.
 
Sale of Business Unit Plastics
The disposal of the Business Unit Plastics (Lenzing Plastics GmbH) was finalized
effective June 27, 2013. The buyer is an Austrian consortium led by Invest AG,
the investment company of the Raiffeisen Banking Group Upper Austria. The sale
is the result of Lenzing's strategic focus on its core business of manufacturing
man-made cellulose fibers.
 
Outlook for the global fiber market
The state of the global economy will not substantially change in the second half
of 2013 compared to the first half of the year. This is likely to lead to a
largely stable volume demand for the world's fiber industry in relation to the
first half-year. However, the high ongoing cotton inventories will prevent any
further increase of cotton prices and thus of all other fibers. Excess
production capacities in the man-made cellulose fiber industry are expected to
continue although expansion projects planned by competitors have already been
delayed. This situation is accompanied by lower prices for dissolving pulp, the
most important raw material for fiber production. Accordingly, a further price
adjustment for viscose fibers cannot be excluded in the coming months.
 
Outlook Lenzing Group
In the light of the current market environment, Lenzing is adjusting its short-
term and medium-term corporate strategy to market conditions prevailing at the
present time. Due to the fact that Lenzing continues to anticipate a dampened
level of fiber selling prices in the upcoming quarterly periods, short- and
medium-term investments will be adjusted in accordance with income. Ongoing
large-scale investments such as the construction of the new TENCEL®production
facility at the Lenzing site will not be affected by this development. However,
major new investments will first begin when a minimum return on the capital
employed is achieved.
 
Lenzing is revising its performance indicators for the entire year 2013 as a
result of the sale of the Business Unit Plastics as of the end of June 2013.
Accordingly, due to the deconsolidation of sales generated by Lenzing Plastics
as of the middle of 2013 as well as the expected average fiber selling price of
EUR 1.70/kg in the second half of the year (H1 2013: EUR 1.76/kg), consolidated
sales of the Lenzing Group in 2013 are predicted to total approximately EUR 2.0
bn for 2013 as a whole (guidance before the sale of Lenzing Plastics: EUR 2.15
bn - EUR 2.25 bn). Based on the full availability of production capacities,
fiber shipment volumes will likely amount to about 910,000 tons for the entire
year 2013 (original guidance: 920,000 tons), which comprises an impressive
increase of more than 12% compared to the prior-year level of 810,000 tons. In
the second half of 2013, Lenzing will implement intensive marketing and sales
efforts to promote its specialty fibers Lenzing Modal®and TENCEL®in order to
stabilize the business.
 
From today's perspective, EBITDA of EUR 280 mn is expected for the entire year
2013 (last guidance excl. the sale of Lenzing Plastics: EUR 260 mn - EUR 290
mn). EBIT is likely to reach a level of EUR 160 mn (previous guidance excl the
sale of Lenzing Plastics: EUR 140 mn - EUR 170 mn). 
 
For Lenzing, the ongoing volume demand for its fibers and the stable world
market price for cotton is a clear indication that the long-term growth
perspectives for the man-made cellulose fiber industry remain intact. However,
an upward movement in selling prices is first expected when volume growth
manages to create a more balanced market situation compared to the current
excess production capacities in the fiber and pulp industries. Until that time,
Lenzing will adjust its investment policy to revenue and counteract market
developments on the basis of further internal optimization measures. Lenzing
will place additional emphasis on enhancing innovation and intensifying its
marketing and sales efforts on behalf of the specialty fibers Lenzing Modal®and
TENCEL®as well as nonwovens.
 
 
 

Key Group indicators

(IFRS) in EUR mn                          1-6/2013                    1-6/2012
Consolidated sales                           989.9                     1.061.8
EBITDA1                                      162.0                       193.6
EBITDA-margin1 in %                           16.4                        18.2
EBIT1                                        103.0                       141.1
EBIT margin1 in %                             10.4                        13.3
Profit for the period1                        65.3                       100.1
CAPEX (Incl. Plastics)                       134.4                       130.0

 

                                        June 30, 2013              Dec. 31, 2012
Adjusted equity ratio2in %                       45.2                       43.8
Number of employees at                          6,744                      7,033
period-end

 

 
1) After restructuring
2) Equity incl. government grants less prop. deferred taxes
 
 
 
 
 
 

Segment reporting3

(EUR mn)                                 1-6/2013                       1-6/2012
Segment Fibers                                                                  
Sales                                       893.0                          955.9
EBITDA                                      125.4                          182.9
Segment Engineering                                                             
Sales                                        66.0                           58.3
EBITDA                                        4.3                            4.1
Segment Other                                                                   
Sales                                        27.6                           28.1
EBITDA                                        4.0                            1.7

 

3) The disposal of the Business Unit Plastics resulted in a restructuring of the
Lenzing Group's segment reporting. Lenzing will now report on its Segment
"Fibers", which encompasses the internal business units Textile Fibers, Nonwoven
Fibers, Pulp and Energy. The activities of Lenzing Technik are assigned to the
Segment "Engineering". The Segment "Discontinued Operations" includes the
disposed Business Unit Plastics as well as European Precursor (EPG), the
terminated joint venture with SGL Carbon and Kelheim Fibres. The Segment "Other"
mainly encompasses the activities of Dolan GmbH/Kelheim (synthetic fibers, part
of the Segment Plastics Products up until now) as well as the training center
Bildungszentrum Lenzing (BZL)

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[1]All earnings figures are provided after restructuring, except where
explicitly stated otherwise
[2] Incl. EUR 2.7 mn of Business Unit Plastics
[3] Including 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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