Lenzing Responds with Savings Program to Earnings Development
Nico Reiner , Chief Financial Officer of Lenzing
The market environment deteriorated sharply, especially during the course of the third quarter, and the worsening consumer climate placed additional pressure on Lenzing’s business performance. Revenue grew by 24 percent year-on-year to reach EUR 1.97 bn in the reporting period, primarily due to higher fiber prices. In addition to lower demand, the earnings trend particularly reflects the sharp rise in energy and raw material costs. As a consequence, earnings before interest, tax, depreciation and amortization (EBITDA) decreased by 11.6 percent year-on-year to EUR 263 mn. Net profit for the period decreased by 33.9 percent to EUR 74.9 mn, while earnings per share amounted to EUR 2.16 in the first three quarters (compared to EUR 3.77 in the first three quarters of 2021).
Both the earnings trend and the significant deterioration in the market environment led the Lenzing Managing Board to launch a reorganization and cost reduction program. The program is already being implemented and is expected to save at least EUR 70 mn in costs annualized once fully implemented.
“We are experiencing distortions in energy and commodity markets which are weighing on consumer sentiment and significantly limiting our view of short- to medium-term business trends. This is prompting us to step up our efforts to cope with this situation and further extend Lenzing’s international competitiveness. For this reason we have launched a global program that will already lead to initial cost savings in the short term and also strengthens Lenzing for the long term,” comments Stephan Sielaff, Lenzing Group CEO.
Strengthening specialty fibers growth
The successful commissioning of the two key projects in Thailand and Brazil as well as the implementation of projects at the existing sites in China and Indonesia formed the focus of Lenzing’s investment activities in the first three quarters of 2022. The opening of the lyocell plant in Thailand in the first quarter of 2022 enables Lenzing to significantly boost its share of specialties and thereby better serve structurally growing demand for TenceL™ branded lyocell fibers. Despite the pandemic-related challenges, the project was realized on time and within the planned budget, and the volumes produced to date were successfully placed on the market. With a nameplate capacity of 100,000 tonnes per year, the production plant is the largest of its kind in the world.
Lenzing is currently investing more than EUR 200 mn in China and Indonesia in order to convert existing standard viscose capacities into capacities for environmentally responsible specialty fibers. In Nanjing, Lenzing is working on converting a line to modal fiber production. The Chinese location’s product portfolio will thereby consist entirely of specialty fibers by the end of 2022. In Purwakarta, Lenzing is creating additional capacity for Lenzing™ Ecovero™ branded fibers. The Indonesian site will become a pure specialty viscose supplier in 2023.
Aiming for a carbon-free future
As part of these investments, both sites will be gradually converted to renewable energy; conversion to green electricity was realized in the third quarter of 2022 in China and in Indonesia. Both the new lyocell plant in Thailand, which will be operated in a carbon-neutral manner, and the investments in existing sites will help Lenzing achieve its ambitious climate targets. Lenzing aims to reduce its carbon emissions by 50 percent by 2030 and achieve net zero by 2050. In 2019, Lenzing became the world’s first manufacturer of wood-based cellulosic fibers to have its climate targets scientifically confirmed.
Energy independence enhanced
In order to become less dependent on global energy markets and to further reduce carbon emissions in line with its strategic targets, Lenzing is also focusing to an even greater extent on electricity generated from renewable energies in Austria. During the reporting period, Lenzing constructed several photovoltaic plants at the Lenzing site in Upper Austria together with Austrian energy utility VERBUND. With a capacity of 5.6 MWp, the groundmounted plant is the largest of its kind in this entire federal state. The output of the three roof systems amounts to 1.5 MWp.
Lenzing also announced the signing of a long-term electricity supply agreement with green power producer Enery and Energie Steiermark. Once commissioned, the photovoltaic plant that has thereby been financed will supply the fiber and pulp plant at the Lenzing site with further green electricity from the fourth quarter of 2023. The plant’s output will amount to 5.5 MWp.
Nico Reiner new CFO
The Lenzing Supervisory Board also appointed Nico Reiner as the new Chief Financial Officer with effect as of January 1, 2023. Until Nico Reiner joins the company, Sielaff will continue to perform the duties of the CFO on an interim basis.
