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Lenzing’s Branded Fibers Set Sales Records in 2017, But Tougher Times Could Be Coming

Driven by the strength of its branded fibers and its commitment to sustainable technology, Lenzing Group saw a record sales and earnings year in 2017, although it cautioned of more challenging times ahead.

Lenzing Group

In a Nutshell: As it moves forward with a new brand architecture centered around its Tencel brand, the Lenzing Group reported what it said was its best financial performance ever in 2017, with record revenue and earnings credited to a better product mix and higher selling prices, along with what the cellulosic fiber producer called “a generally favorable market environment.”

The Austrian-based company touted “a number of game changing sustainability innovations” achieved in 2017. They included the introduction of Tencel branded lyocell fibers with Refibra technology, the launch of Lenzing Ecovero viscose fibers and the presentation of Tencel Luxe lyocell filament fibers it said allow for further inroads in the premium segment of the fabrics market.

Capacity expansion is under way, with a facility in Heiligenkreuz, Austria to be completed in the second quarter, a new plant in Mobile, Ala., set for a 2019 start-up and a plan to construct a major manufacturing facility to produce Lenzing lyocell fibers in Thailand.

However, Lenzing did warn that factors like protectionist tendencies, currency fluctuations and higher raw material prices could lead to a “challenging market environment in the standard viscose fiber business during the coming quarters” and noted it expects results for 2018 to be lower than the strong performance of the last two years.

Sales: Lenzing said revenue for the year ended Dec. 31 grew 5.9% to 2.26 billion euros ($2.79 billion) from 2.13 billion euros ($2.63 billion) the prior year. Lenzing posted fiber sales volume of 942,000 tons in 2017 and said it aims to increase the share of specialty fibers as a percentage of revenue to 50 percent by 2020, moving away from more commodity-oriented viscose.

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Earnings: Group earnings before interest, tax, depreciation and amortization (EBITDA) improved 17.3% to 502.5 million euros ($620.69) from 428.3 million euros ($529.04 million) in fiscal 2016. The corresponding EBITDA margin rose to 22.2% for the year from 20.1% a year earlier. Earnings before interest and tax (EBIT) increased 25.2% to 371 million euros ($458.26), leading to a higher EBIT margin of 16.4% compared to 13.9% in 2016. The net profit for the year rose 23 percent to 281.7 million euros ($347.96 million) from 229.1 million euros ($282.99) in the prior-year period.

CEO’s Take: Stefan Doboczky, CEO of Lenzing Group, said: “We continued to implement our corporate strategy sCore TEN with great discipline and focus on our investment projects, and successfully captured value in a positive market environment. Our commitment to innovation and customer centricity was underpinned by the opening of an application innovation center in Hong Kong and the creation of the new sales and marketing office in Turkey. In line with sCore TEN, we decided to revamp our brand architecture and image to sharpen Lenzing’s corporate and product profiles for customers and consumers. We want to put a stronger emphasis on our ambition to make the textile and nonwoven market more sustainable. We are very positive about our chosen strategy, as it will help us to be more resilient as we expect more headwinds in the upcoming quarters.”