The Lenzing Group said Tuesday that operational headwinds and a one-time write off will result in a decline in net profit for the 2019 fiscal year.
The cellulosic fiber manufacturer and marketer of brands such as Tencel and Modal said its management board has decided to focus in the coming years on expanding its lyocell production capacities in Asia, where Lenzing’s greenfield project in Thailand is progressing well.
Consequently, engineering costs related to the mothballed U.S. lyocell fiber expansion in Axis, Ala., near Mobile, will be fully written off. When Lenzing first said it was calling off expansion plans for the U.S. plant, the Austrian firm blamed the “rising likelihood of increasing trade tariffs, paired with the potential surge in construction costs due to the buoyant U.S. labor market.”
Lenzing first announced plans in 2016 to build a state-of-the-art plant with a production capacity of 90,000 tons per year at the site. The facility was expected to be the largest Tencel fiber plant in the world, with an investment of $293 million.
In June, Lenzing said it would invest more than 1 billion euros ($1.14 billion) to substantially increase production of lyocell fibers over the next few years. The first expansion phase of the growth plan was construction of a state-of-the art lyocell fiber production plant in Prachinburi, Thailand.
The new facility, which involved an investment of roughly 400 million euros ($455.52 million),will have an annual capacity of 100,000 tons. The plant sets a new milestone in the history of lyocell fibers as the largest production site of its kind, Lenzing said.
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In November, Lenzing officially launched construction work at the Thailand plant, which has a capacity of 100,000 tons per year and is meant to help meet the strong demand for lyocell fibers and simultaneously strengthen the company’s market leadership position for specialty fibers.
The new manufacturing facility is scheduled to be completed in the third quarter of 2021, with production of the first fibers already expected for the fourth quarter of the same year.
In addition, the company said prices for basic viscose fiber continued to decline throughout the year and are currently trading at historically unprecedented low levels. This unfavorable price development affected the fiber maker’s operating performance.
Based on these developments and decisions, Lenzing’s preliminary, unaudited results for 2019 led to a full-year revenue of 2.11 billion euros ($2.32 billion) compared to 2.18 billion euros ($2.4 billion) in 2018.
Earnings before interest, taxes, depreciation and amortization (EBITDA) came in at 327 million euros ($360.24 million), down from 382 million euros ($420.83 million) a year earlier. Net profit was reported at 114 million euros ($125.59 million), down from 148 million euros ($163 million) the prior year.
The Lenzing Group’s full-year results for 2019 will be reported on March 12.