Lenzing Group is investing in increased capacities as demand and price strength underpin the fiber maker’s outlook.
In a Nutshell: The Lenzing Group reported a significant improvement in revenue and earnings in the first half of the year.
The Austria-based fiber manufacturer said growing optimism in the textile and apparel industry coupled with the ongoing recovery in retail drove a substantial increase in demand and prices on the global fiber market.
Lenzing said construction of a pulp mill in Brazil continues to proceed according to plan despite the challenging developments related to Covid-19. The start-up of the pulp mill is still scheduled for the first half of 2022. The new mill will strengthen backward integration and Lenzing’s specialty fiber growth in line with its sCore TEN strategy.
The company is also building a state-of-the-art lyocell plant in Thailand. The investment for the new plant, with a capacity of 100,000 tons, is 400 million euros ($469.76 million). Production is scheduled to start towards the end of 2021.
In addition, Lenzing is investing more than 200 million euros ($234.88 million) in its production sites in Purwakarta, Indonesia, and Nanjing, China, to convert existing standard viscose capacity into capacity for environmentally responsible specialty fibers.
Lenzing expects a continued increase in demand for sustainably produced fibers for the textile and apparel industry. With the prospect vaccinating the global population against Covid-19, 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, also due to the increased occurrence of virus mutations and the extreme occurrence of infections in countries such as Brazil and India.
Taking these factors into account combined with the positive development of the first half of the year, the Lenzing Group expects the EBITDA in 2021 to reach a level of at least 360 million euros ($422.78 million).
Sales: Revenue in the first half through June rose 27.5 percent to 1.03 billion euros ($1.21 billion). This increase was mainly attributed to higher viscose prices from significantly higher demand for fibers, especially in Asia. The focus on wood-based specialty fibers such as Tencel, Lenzing Ecovero and Veocel branded fibers also had a positive impact on the revenue development, the company said, with the share of specialty fibers in fiber revenue rising to 72.8 percent in the period.
Earnings: Earnings before interest, tax, depreciation and amortization (EBITDA) increased more than doubled and to 217.8 million euros ($255.78 million) in the first half compared to EBITDA of 95.6 million euros ($112.27 million) in the year-ago half. Lenzing said the earnings development essentially reflects the positive market development and was additionally reinforced by measures to improve efficiency. Energy and logistics costs increased significantly throughout the period.
The EBITDA margin rose to 21.1 percent from 11.8 percent year over year. Net profit for the period amounted to 96.1 million euros ($112.86 million) compared to a net loss of 14.4 million euros ($16.91 million) in the first half of 2020.
CEO’s Take: Stefan Doboczky, CEO of the Lenzing Group, said: “Lenzing had a very strong first half year. The demand for our sustainably produced specialty fibers once again developed excellently. Strategically, we remain fully on track. The largest investment program in the company’s history is proceeding according to plan and we still expect to start up the new lyocell plant in Thailand in the fourth quarter. The cooperation with Södra and our significant investment in the existing locations are the next milestones on our path toward a carbon-free future. With our climate goals, we are a frontrunner in the production industry and in the fiber industry in particular.”