In a Nutshell: In reporting first half financial results on Wednesday, the Lenzing Group said it’s sharpening its focus on sustainable and high-quality premium textile fibers and nonwoven fibers, and accelerating its transition from a linear to a circular economy model.
Consequently, the Austrian firm also adjusted its financial targets and, assuming that a healthy economic environment prevails, will significantly increase its earnings before interest, tax, depreciation and amortization (EBITDA) to more than 1 billion euros ($1.02 billion) by 2027.
The cellulosic fiber manufacturer said the recovery in global retail sales of textiles and apparel continued in the first half of 2022, although the pandemic-related lockdowns in China caused a regional slump in demand. The rising inflation rate is depressing consumer sentiment, particularly in Europe and the United States, which is also leading to a noticeable deterioration in sentiment in the textile value chain, Lenzing noted, while high stock levels across the entire industry are adding to the pressure on demand.
Given these factors, and the first earnings contributions from key projects in Thailand and Brazil, Lenzing said it continues to anticipate that EBITDA for the full 2022 year will be significantly above 2021.
Lenzing said a comprehensive review of corporate strategy was conducted in the reporting period and, as a consequence, it will continue on its profitable growth trajectory following the successful implementation of the two key projects in Thailand and Brazil.
The new, state-of-the-art lyocell plant in Thailand opened in March. The production plant, with a nominal capacity of 100,000 tons per year, will enable Lenzing to better meet growing customer demand for lyocell fibers.
By 2024, more than 75 percent of fiber revenue is to be generated from the business with wood-based, biodegradable specialty fibers under the Tencel, Lenzing Ecovero and Veocel brands. With the opening of the lyocell plant in Thailand and the investments in existing production sites in China and in Indonesia, Lenzing will already have increased specialty fibers’ share of fiber revenue to well above the 75 percent target by the 2024 target year.
The implementation of the pulp project in Brazil secures the company’s own supply of dissolving wood pulp and strengthens growth in specialty fibers in line with the corporate strategy. The plant ramp-up phase is scheduled to be completed by the end of the year.
With the implementation of the two key projects in Brazil and Thailand, as well as with the investments at the existing Asian sites in China and Indonesia amounting to 200 million euros ($203.48 million), Lenzing continues to advance toward climate neutrality. In 2019, Lenzing set a target to reduce its carbon emissions 50 percent by 2030 and to be climate-neutral by 2050. This carbon reduction target has been confirmed by the Science Based Targets Initiative.
Sales: The Lenzing Group’s revenue increased 25.2 percent year-on-year to reach 1.29 billion euros ($1.31 billion) in the first half of 2022, primarily due to higher fiber prices.
Earnings: EBITDA decreased 13.3 percent compared to the first half of 2021 to 188.9 million euros ($192.19 million).
This mainly reflected the cost trend in global energy and raw material markets, which affected the whole manufacturing sector. Energy, raw materials and logistics costs rose sharply once again in the reporting period, after cost pressure had already risen steadily throughout the 2021 financial year, Lenzing noted.
The strength of the specialty strategy and of brands based on innovation and sustainable, as well as the continued focus on measures to improve structural earnings in all regions helped to mitigate this. The EBITDA margin reduced to 14.6 percent from 21.1 in the first half of the year.
Net profit for the period decreased 24.8 percent to 72.3 million ($73.56 million), while earnings per share amounted to 2.36 euros ($2.40) compared to 3.06 euros ($3.11) in the first half of 2021.
CEO’s Take: Stephan Sielaff, Lenzing Group CEO said: “In the first half of 2022, we have accomplished an enormous amount together in order to achieve our ambitious growth and sustainability goals. Thanks to considerable efforts, we can be satisfied with our business performance given the extreme developments in global energy and raw material markets, The second half of the year will continue to be characterized by elevated levels of uncertainty and extreme challenges on the energy and raw materials sides. Lenzing is a company with an international footprint and for this reason is partly able to offset certain local challenges globally, albeit at significantly higher costs.”
“Lenzing has analyzed conceivable scenarios and developed appropriate responses,” Sielaff added. “For months, we have been preparing as best we can for a situation of acute energy shortages, rising prices and supply constraints, and we will continue to do everything within our power to ensure sustainable business performance and to continue to be a reliable partner.”