The Lenzing Group suffered a net loss in the nine months through September and sales also declined, but the third quarter saw improvement.
In a Nutshell: In the first three quarters of 2020, the Lenzing Group said it successfully responded to the extremely difficult market environment of increased pressure on prices and volume due to the Covid-19 crisis by implementing a broad package of measures and remains fully on track in terms of its strategy.
The fiber firm said cooperation with partners along the value chains was intensified and Lenzing was agile and flexible in adjusting production volume to demand. In addition, Lenzing also intensified measures for structural earnings improvement to mitigate the effect of the pressure on fiber prices and demand for fibers, and significantly reduced its operating costs as a result.
The increase in demand toward the end of the third quarter, primarily for wood-based specialty fibers such as Tencel Modal and Ecovero had a positive impact on the revenue and earnings development, but was still below the level of the previous year.
CAPEX–expenditures for intangible assets and property, plant and equipment and biological assets–roughly tripled to 449.8 million euros ($526.4 million) in the period. This increase is a consequence of the progress of major projects in Brazil and Thailand. The Lenzing Group’s investment activities continued to focus on expanding the internal production of pulp, increasing the share of specialty fibers and implementing the climate targets in line with the sCore TEN corporate strategy during the reporting period.
Sales: Revenue in the nine months through Sept. 30 declined 26.1 percent to 1.19 billion euros ($1.39 billion). Lenzing said the strategic target to generate roughly 50 percent of revenue with specialty fibers in 2020 has already been met. The company aims for further organic growth in this area in order to be even more resilient to volatile markets in the future.
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Earnings: The net loss for the period was 2.8 million euros ($3.28 million) compared to a net profit of 117.1 million euros ($137.11 million) in the year-ago period, and earnings per share (EPS) fell to negative 0.10 euros (12 cents) compared to EPS of 4.41 euros ($5.16) in the first three quarters of 2019.
Earnings before interest, tax, depreciation and amortization (EBITDA) fell 47.4 percent to 140.4 million euros ($164.39 million) in the period. The EBITDA margin decreased to 11.7 percent from 16.5 percent.
Lenzing said the earnings development essentially reflects the decline in revenue. The implementation of measures for structural earnings improvements in all regions mitigated this effect.
CEO’s Take: Stefan Doboczky, CEO, said: “Lenzing reacted quickly to the increased pressure on prices and volume caused by the COVID-19 crisis and consequently held its ground in this extremely difficult market environment due to a comprehensive set of measures. In the third quarter, we saw a broad recovery of the fiber market, in particular demand for our sustainably produced specialty fibers increased significantly. Strategically, we remain fully on track despite the pandemic, and the implementation of our key projects in Thailand and Brazil is progressing as planned.”