After posting a net loss and revenue decline in 2020, Lenzing said its operating results are poised to return to pre-crisis 2019 levels this year.
In a Nutshell: The Lenzing Group said Thursday that it responded to the “extremely difficult market environment” due to the coronavirus crisis in 2020 by implementing a broad package of measures and remains “fully on track” with it strategic plans.
Lenzing flexibly adjusted production volumes and was able to offer its customers the usual timely delivery service, the Austria-headquartered fiber firm said in reporting its full year financial results and review of operations. Lenzing also intensified measures for structural earnings improvement to mitigate the effect of the pressure on fiber prices and demand for fibers, and reduced its operating costs.
The company said the immediate effects of the Covid-19 crisis increased the pressure on prices and volume in the textile fiber segment, particularly in the second quarter. The recovery of demand in the second half of the year, primarily for wood-based specialty fibers such as Tencel Modal and Lenzing Ecovero, had a positive impact on revenue and earnings, but could not overcome overall losses for the year.
The focus of the coming years will clearly be on the construction of a new, state-of-the-art lyocell plant in Thailand, with the objective to increase the share of specialty fibers in the revenue generated to more than 75 percent by 2024. The investment for the new plant with a capacity of 100,000 tons amounts to roughly 400 million euros ($478.40 million). Construction work started in the second half of 2019 and production is expected to begin at the end of 2021.
The building of a dissolving wood pulp plant in Brazil continues to progress according to plan. After the final investment decision in December 2019, the Duratex Group acquired a 49 percent share in the joint venture LD Celulose in the first quarter of the year, with Lenzing holding 51 percent of the shares. The commissioning of the pulp plant is scheduled for the first half of 2022.
Capex nearly tripled to 668.8 million euro ($799.88 million) in 2020, a consequence of the implementation of the 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 year.
The introduction of the first Tencel-branded Carbon Neutral fibers and the establishment of the Renewable Carbon Initiative with the aim of speeding up the transition to renewable carbon are further important events from the reporting year, which serve as examples of the successful path that Lenzing and its partners are taking toward carbon neutrality.
Lenzing said the global fiber and pulp markets came under considerable pressure as a result of the Covid-19 crisis. The significant recovery of demand from the third quarter of 2020 onward, starting in China, continued into the first quarter of 2021 and is providing a friendly market environment.
Lenzing expects a continued increase in demand for sustainably produced fibers for the textile and apparel industry. With the prospect of a broad population being vaccinated against Covid-19 in the near future, optimism and confidence in an early return to normality are also growing within the textile value chain. However, the currently positive environment is still characterized by a high level of uncertainty due to the pandemic.
Taking those factors into account, the Lenzing Group expects the operating result to develop at a similar level in 2021 as in the pre-crisis year 2019.
Sales: Revenue for the year declined 22.4 percent to 1.63 billion euros ($1.95 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 to be even more resilient to volatile markets in the future.
Earnings: Lenzing reported a net loss for the year of 10.6 million euros ($12.68 million) compared a net earnings of 114.9 million euros ($137.42 million) in 2019. The earnings development essentially reflects the decline in revenue, but was supported by measures for structural earnings improvements in all regions.
Earnings per share (EPS) attributable to Lenzing shareholders was 0.24 euros (29 cents) versus EPS of 4.63 euros ($5.54) in 2019.
Earnings before interest, tax, depreciation and amortization (EBITDA) fell 39.9 percent to 196.6 million euros ($235.13 million). The EBITDA margin decreased to 12 percent from 15.5 percent.
CEO’s Take: Stefan Doboczky, CEO of the Lenzing Group, said: “2020 was largely dominated by the Covid-19 pandemic, also at Lenzing. Lenzing responded quickly and with determination to the increased pressure on prices and volumes. In the second half of the year, 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 and the implementation of our key projects in Brazil and Thailand continues to proceed according to plan. With our corporate priorities, we are consistently pursuing a major goal, namely to make a zero-carbon future come true.”