In a Nutshell: The Lenzing Group reported a significant year-on-year improvement in revenue and earnings in the first nine months of 2021, thanks to the largely positive market environment.
The fiber firm said growing optimism in the textile and apparel industry and the recovery in retail led to a substantial increase in demand and prices on the global fiber market.
Lenzing said Wednesday that Cord Prinzhorn has been appointed interim CEO, after the Supervisory Board of Lenzing AG came to a mutual agreement in September with longstanding CEO Stefan Doboczky to terminate his contract before the end of his term.
Prinzhorn has been a member of Lenzing’s Supervisory Board since April. When Prinzhorn assumes the role of CEO on Thursday, his Supervisory Board mandate will be suspended for the time being.
Turning to operations, the company said the construction of a pulp mill in Brazil continues to proceed according to schedule despite the challenging developments related to Covid-19. The expected ramp-up of the pulp mill is still scheduled for the first half of 2022.
Lenzing noted that 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 strategic target is on the construction of a new state-of-the-art lyocell plant in Thailand. The investment for the new plant with a capacity of 100,000 tons amounts to approximately 400 million euros ($463 million). Construction work started in the second half of 2019 and proceeded largely according to schedule in the reporting period, despite the challenges arising from the pandemic. The commissioning of the plant is scheduled for the end of the year and the start of production for the first quarter of 2022.
In addition, Lenzing is investing more than 200 million euros ($231 million) in its production sites in Purwakarta, Indonesia, and Nanjing, China, to convert existing standard viscose capacity into capacity for eco-friendly specialty fibers. In Nanjing, Lenzing will establish the first wood-based fiber complex in China that does not depend on coal as an energy source. At the same time, a line of standard viscose will be converted to a Tencel branded modal fibers line, making the Chinese plant a completely wood-based specialty fiber site by the end of 2022.
Investments in Lenzing’s site in Indonesia will make this facility fully compliant with EU Ecolabel standards. As a consequence, the site will become a pure specialty viscose supplier as of 2023.
Following significant cost increases in the year to date, further cost pressure on energy, raw materials and logistics is expected in the coming quarters, Lenzing said. Given these factors and the positive performance during the first nine months, the Lenzing Group continues to expect EBITDA to reach at least 360 million euros ($416.60 million) in 2021.
The fiber maker said the completion of the major strategic projects are expected to make a significant contribution to earnings from 2022.
Red Carpet Green Dress
Lenzing also announced on Tuesday that Red Carpet Green Dress (RCGD), in partnership with Tencel and CLO, have named this year’s global design contest winners. Open to emerging and established designers over the age of 21, this year applicants submitted a digital sketch of their sustainable red carpet design before the international contest closed on Aug, 23.
One gown and one suit design were selected by the international contest judging panel, which named Yuriko Fukuda and Zhi Hong Benjamin Koh as this year’s winning duo.
Born in Japan, U.K.-based Fukuda is this year’s women’s wear winner. As a current Regents University London student, she strongly believes in sustainable fashion.
Singapore-based fashion, textile and product designer Koh is this year’s men’s wear winner. He embarked on his journey in design during his studies at Singapore Polytechnic.
The two designs chosen by the winners will be put into production in early 2022 with sustainable eco-couture textiles in collaboration with Tencel and sponsored by CLO. The looks will be showcased as part of an exhibition to leading sustainable advocates in Los Angeles. The winners will also receive business mentorship with RCGD’s CEO Samata Pattinson, support and access to RCGD’s extensive network, and creative support for their fledgling careers.
“Yuriko and Benjamin present a strong statement of sustainability with beautiful and elegant designs which aim to improve other people’s lives by reducing carbon footprint,” Harold Weghorst, vice president of global marketing and branding at Lenzing, said.
The contest winners’ designs will be produced and worn at the Red Carpet Green Dress Pre-Oscars Gala in 2022, with a showcasing opportunity to present their work to an audience of sustainability leaders and innovators at the RCGD Evening of Sustainable Innovation. They will also receive a monetary award.
Sales: Revenue in the first nine months of 2021 rose 32.9 percent to 1.59 billion euros ($1.84 billion). This increase was attributed to a higher sales volume, as well as higher viscose prices.
The focus on wood-based specialty fibers such as the Tencel, Lenzing Ecovero and Veocel branded fibers also had a positive impact on the revenue trend, with the share of specialty fibers in fiber revenue amounting to 72.4 percent in the reporting period.
Earnings: Earnings before interest, taxes, depreciation and amortization (EBITDA) in the period more than doubled to 297.6 million euros ($334.39 million).
The EBITDA margin rose to 18.7 percent from 11.6 percent. Net profit for the period amounted to 113.4 million euros ($132.23 million) compared to a net loss of 23.3 million euros ($26.96 million) in the first nine months of 2020.
Lenzing said the earnings performance essentially reflects the positive market trend and was additionally reinforced by efficiency enhancement measures. Energy, raw material and logistics costs increased significantly during the entire reporting period.
CAPEX–expenditures for intangible assets, property, plant and equipment, and biological assets–increased 40.3 percent to 631.1 million euros ($730.32 million) during the reporting period, of which roughly half was financed out of cash flow from operating activities. The strong increase in investments is attributable to the implementation of the key projects.
CFO’s Take: Thomas Obendrauf, chief financial officer of the Lenzing Group, said: “Lenzing has enjoyed a strong business performance to date in 2021. Demand for our wood-based, biodegradable specialty fibers under the Tencel, Lenzing Ecovero and Veocel brands is growing very well. We stayed the course and the largest investment program in our company’s history is still running according to schedule. With the imminent commissioning of the lyocell plant in Thailand, we will reach a highly important milestone for both the company and our goal to make the textile and nonwovens industries more sustainable.”