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Lenzing Warns of COVID-19 Impact as Economic Woes Penetrate Supply Chain

The negative impact of the global COVID-19 pandemic is reaching deep into the apparel and textile supply chain.

Following a slew of publicly traded companies warning of the coronavirus’ effect on their businesses now and into the near future, as well as store closures and factory shutdowns, fiber manufacturer Lenzing Group weighed in on Wednesday.

The Austrian-based producer of cellulosic fibers such as Tencel and Modal, with global operation and sales, said as a result of the COVID-19 crisis, it expects a negative impact on its textile sales volume.

“The potential impact cannot yet be reliably estimated, as it strongly depends on the duration of the crisis, as well as its further effects on the global economy and textile markets,” Lenzing said.

That led to the company suspending its sales and earnings forecast for 2020, as it disclosed on March 12, when it expected the result for 2020 to be below the level of 2019.

“Demand on the global fiber markets is currently difficult to predict due to the spreading of the coronavirus, which is paralyzing large parts of the textile value chain,” Lenzing said at that time.

Since then, companies from H&M to Gildan Activewear have shut down production, as have countries from India to Honduras. Many U.S. apparel and textile companies have shifted production to set up production lines to manufacture medical masks and other products to aid in the crisis.

Lenzing’s revenue for the year ended Dec. 31 fell 3.3 percent to 2.11 billion euros ($2.35 billion), driven by lower selling prices and standard fiber volumes. Earnings before interest, taxes, depreciation and amortization (EBITDA) declined 14.4 percent to 326.9 million euros ($364.51 million). Lenzing said the earnings development was largely influenced by the decline in revenue, as well as by negative currency effects on material and personnel costs.

“In order to mitigate a potentially stronger-than-expected decline in earnings, Lenzing has already started to implement cost saving measures across its sites globally,” the company added.