Fiber giant Lenzing Group saw revenue and earnings rise in the first quarter as demand in the textile sector bounced back.
In a Nutshell: The Lenzing Group said growing optimism in the textile and apparel industry led to a significant increase in demand and higher prices in the global fiber market and had a “clearly positive revenue and earnings development” in the first quarter of 2021.
Lenzing expects a continued increase in demand for sustainably produced fibers from the textile and apparel industry, as well as from the hygiene and medical sector. The company said with the prospect of active immunization for the broad population against COVID-19, optimism and confidence in an early return to normality are growing within the textile value chain.
However, the currently positive environment is still characterized by a high level of uncertainty due to the increased occurrence of virus mutations and the spread of infections in countries such as Brazil and India. Therefore, visibility remains limited.
Taking these factors into account, Lenzing expects operating results in 2021 to reach at least the level of the pre-crisis year 2019. In view of these developments, Lenzing considers itself well-positioned with its sCore TEN corporate strategy and will continue to drive the completion of major strategic projects that will make a significant contribution to earnings beginning in 2022.
In addition to its targets for earnings before interest, tax, depreciation and amortization (EBITDA) of 800 million euros ($960.38 million) and return on capital employed (ROCE) of less than 10 percent, Lenzing confirmed other medium-term targets including: share of specialty fibers of greater than 75 percent of fiber revenue; internal production of dissolving wood pulp of more than 75 percent, and greater than 40 percent fewer CO2 emissions per ton of product.
CAPEX (expenditures for intangible assets, property, plant and equipment, and biological assets) rose 52.5 percent to 211.5 million euros ($253.90 million) in the period. The start-up of the pulp mill in Brazil is scheduled for the first half of 2022. The new mill will strengthen backward integration and, consequently, Lenzing’s specialty fiber growth in line with its sCore TEN strategy.
The objective is to generate more than 75 percent of fiber revenues from business with wood-based specialty fibers such as lyocell and modal fibers by 2024. The focus of this target is on the construction of a state-of-the-art lyocell plant in Thailand. The investment for the new plant with a capacity of 100,000 tons amounts to roughly 400 million euros ($480.19 million).
Sales: Revenue in the first quarter ended March 31 rose 4.9 percent to 489.3 million euros ($587.39 million) compared to a year earlier. This was mainly attributable to a strong increase in demand from China and the resulting higher viscose prices.
The focus on wood-based specialty fibers, such as Tencel and Lenzing Ecovero branded fibers, had a positive impact on revenue development, with the share of specialty fibers in fiber revenue rising to 72.6 percent from 72.2 percent in the first quarter of 2020.
Earnings: EBITDA increased 36.8 percent to 94.5 million euros ($94.5 million) in the quarter year over year. Lenzing said the strong earnings reflect the increase in revenue and a continued focus on structural earnings improvements in all regions.
The EBITDA margin rose to 19.3 percent from 14.8 percent. Net profit for the period amounted to 29.9 million euros ($35.89 million) compared to 17.7 euros ($21.25 million) in the year-earlier quarter and earnings per share rose to 1.06 euros ($1.27) from 0.84 euros ($1.01) in the year-ago period.
CEO’s Take: Stefan Doboczky, CEO of the Lenzing Group, said: “Lenzing benefited from the growing optimism in the textile value chain and the strong recovery of the fiber markets in the first quarter of 2021. Demand for our sustainably produced specialty fibers, such as Tencel and Lenzing Ecovero saw a clearly positive development again. Strategically, we remain fully on track. The implementation of the pulp project in Brazil is proceeding according to plan despite the challenges related to COVID-19 and the new lyocell plant in Thailand will start up as planned in the fourth quarter of 2021.”