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Lenzing Profits and Revenue Fall on High Raw Material Prices and Weak Viscose Market

While the outlook for specialty fibers is strong, higher raw material costs and a difficult market environment for basic viscose cut into the top and bottom lines for Lenzing Group.

In a Nutshell: The Lenzing Group posted a decline in revenue and earnings in the nine months through September compared with the same period last year, dragged down by lower prices for standard viscose, unfavorable exchange rates and price increases for key raw materials, according to the fiber company.

Key strategic measures were implemented during the period, in line with its sCore TEN corporate efficiency and sustainability strategy, including starting up new capacities for lyocell fibers in Heiligenkreuz, Austria; beginning production of Lenzing Ecovero fibers at the Nanjing, China, site; and investment in another pilot line for Tencel Luxe filaments. Each marked an important step in accomplishing the goal of increasing the share of specialty fibers in total revenue, the company said.

Lenzing noted it created a joint-venture with Duratex at the end of June to build a dissolving wood pulp plant in Brazil for better vertical integration. The joint-venture is investigating construction of a 450,000-ton plant, which is expected to become the world’s largest and most competitive single-line dissolving wood pulp plant.

The company said demand in the global fiber market remains positive and expects wood-based cellulosic fibers to continue to grow at a rate higher than the fiber market overall. Despite a challenging market environment, the Lenzing Group said it expects solid results for 2018, although lower than in the past two years.

For 2019, Lenzing said it expects standard viscose markets to remain under pressure due to ongoing oversupply and high prices for raw materials. Lenzing’s specialty fiber business is expected to continue to grow.

Sales: Revenue fell 5.2 percent, to 1.64 billion euros ($1.88 billion) from the year-ago period. Lenzing said the decrease was due to difficult comparisons, a challenging market environment for standard viscose, less favorable exchange rates and lower production volume.

Earnings: Net profit for the period dropped 39 percent, to 133.8 million euros ($153.01 million), from 219.3 million euros ($250.79) in the previous year period. Earnings before interest, tax, depreciation and amortization (EBITDA) declined 26.8 percent, to 290.6 million euros ($332.33 million), as a result of price increases for key raw materials, along with higher energy and dissolving wood pulp prices. EBITDA margin fell to 17.8 percent, from 23 percent in the first three quarters of the previous year.

CEO’s Take: CEO Stefan Doboczky said: “The Lenzing Group is currently operating in a challenging environment. Against this background, we are satisfied with the solid business development, and the corporate strategy sCore TEN has had a positive impact. The new production line in Heiligenkreuz started up successfully and customers’ feedback has been positive. While many viscose producers are faced with a very tense profit situation, we are well positioned due to our specialty strategy and still expect a satisfactory full year.”

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