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Lenzing Battles Cost Pressures for ‘Solid Start’ to 2022

Boosted by high demand for its specialty fibers and higher prices, Lenzing Group’s first quarter revenue rose 25.7 percent to $648.91 million.

In a Nutshell: The Lenzing Group said it was significantly affected by the extreme developments in global energy and commodity markets in the first quarter, as well as global supply chain constraints that are posing a major challenge for the entire manufacturing industry.

The currency environment is expected to remain volatile in the regions of relevance to Lenzing, the company said Wednesday. Otherwise, a positive textile market environment and the strategic focus on specialty fibers such as those of the Tencel Lenzing Ecovero and Veocel brands drove a solid revenue and earnings trend, with the impact of higher costs largely offset.

Lenzing said recovery in demand in the global textile and apparel industry has continued through 2022, although geopolitical developments and the current Omicron wave in China dampened sentiment in the textile value chain toward the end of the period. Extensive lockdowns in parts of China caused demand to slump regionally.

The fiber giant said it expects demand for environmentally responsible fibers for the textile and clothing industry to grow. However, earnings visibility remains limited.

With those factors in mind, and the first earnings contributions from key projects in Thailand and Brazil, Lenzing said it continues to anticipate that earnings before interest, taxes, depreciation and amortization (EBITDA) for the 2022 will come in “significantly above” 2021.

In March, a new state-of-the-art lyocell plant in Thailand was officially opened. The production facility, with a capacity of 100,000 tons per year, will enable Lenzing to better meet growing customer demand for lyocell fibers.

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Sales: Revenue in the first quarter ended March 31 grew 25.7 percent year-on-year to reach 615 million euros ($648.91 million), primarily due to continued high demand for wood-based biodegradable specialty fibers and higher fiber prices.

Specialty fibers’ share of fiber revenue stood at 73.3 percent.

Earnings: Net profit for the quarter rose 14 percent to 34.1 million euros ($35.98 million) from 29.9 million euros ($31.55 million) in the year-earlier period.

EBITDA decreased 7 percent year-on-year to 88 million euros ($92.85 million). EBITDA margin reduced to 14.3 percent from 19.3. Net profit for the quarter increased 14.3 percent to 34.1 million euros ($92.85 million), while earnings per share amounted to 0.87 euros (92 cents) compared to 1.06 euros ($1.02) in the first quarter of 2021.

Lenzing said the earnings reflected trends in energy, raw materials and logistics costs, although the company’s continued focus on measures to improve structural earnings in all regions mitigated the negative impact.

CEO’s Take: Stephan Sielaff, Lenzing Group CEO, said: “Lenzing made a solid start to the 2022 financial year thanks to considerable efforts in an environment of sharply rising costs. Demand for our wood-based, biodegradable specialty fibers also recorded a positive trend in the first quarter. Strategically, we remain fully on track with the opening of our lyocell plant in Thailand and the commissioning of the pulp mill in Brazil…We now aim to take the next step and continue our shift from a linear to a circular economy model. As a sustainability champion, we are aware that the textile and nonwovens industries cannot continue to operate as they do at present.”