The Lenzing Group continued its solid development in the first quarter of 2019. Despite a much tighter market environment, the Lenzing Group even recorded a slight increase in revenue, proving once again that it has chosen the right path with its sCore TEN corporate strategy. The declining prices for standard viscose were largely offset in earnings.
Group revenue rose by 1.8 percent to Euro 560 million in the first quarter of 2019 compared with the same quarter of 2018. This increase is primarily attributable to a better product mix – the share of specialty fibres in revenue of 47.3 percent significantly exceeded the prior-year value of 42.1 percent – and more favourable exchange rates.
Consequently, declining prices for standard viscose were more than offset. EBITDA (earnings before interest, tax, depreciation and amortization) dropped by 9.5 percent to Euro 92 million. In addition to the market environment for standard viscose, this was primarily caused by currency effects, which burdened material and personnel costs. The EBITDA margin dropped from 18.5 percent in the first quarter of 2018 to 16.4 percent in the reporting period. EBIT (earnings before interest and tax) fell by 21.1 percent to Euro 54.4 million, leading to a lower EBIT margin of 9.7 percent (01-03/2018: 12.5 percent). Net profit for the period dropped by 14.5 percent from Euro 50 million in the previous year to Euro 42.8 million.
The 75th Annual General Meeting of Lenzing AG on April 17, 2019 resolved to distribute a dividend of Euro 3.00 per share as well as a special dividend totalling Euro 2.00 per share.
“Our specialty fibre business is still developing very well, which has made us significantly more resilient today than only a few years ago. In order to become even more resistant to market fluctuations, we continue to advance the implementation of the sCore TEN strategy and the planned major projects in Brazil and Thailand with great discipline”, said Stefan Doboczky, Chief Executive Officer of the Lenzing Group.
Expansion of pulp and lyocell capacities CAPEX (acquisition of property, plant and equipment) dropped by 22.4 percent to Euro 45.7 million in the first quarter of 2019. This decline is attributable to the completion of the expansion project in Heiligenkreuz (Austria) in 2018 and the ongoing planning for the major projects in Brazil and Thailand, which will only have an effect on the investment volume in the coming quarters. The basic engineering for the construction of the new lyocell plant in Prachinburi, near Bangkok, is making equally good progress as the planned establishment of the pulp plant in Minas Gerais.
The site Heiligenkreuz is at full capacity again after a fire occurred on February 1, 2019 causing a shutdown of the lyocell production for several weeks. Material damage and the damage resulting from the interruption of operations are covered by insurance. Production at the site is now running at full capacity again.
With greater focus on innovation and customer intimacy Lenzing also continues to intensify its collaboration with next generation fashion designers in Asia. Recently, with the TENCEL Studio, a design centre featuring fashion from TENCEL™ fibres was opened in Singapore. The centre is the next step in the effort to give consumers an insight into innovations and new applications. In the area of nonwovens, another milestone was set with the start of the establishment of an innovation centre in Germany. The new test facility, which is being set up in cooperation with the Hof University of Applied Sciences, enables Lenzing to work even more closely with its customers and partners in the hygiene, cosmetics and medical industries.
The International Monetary Fund expects a slowdown of global economic growth to 3.3 percent in 2019, mainly driven by increasing protectionist tendencies and growing geopolitical tensions. The currency environment in the regions relevant to Lenzing will remain volatile.
Demand on the global fibre markets is still positive. According to preliminary calculations, cotton inventory levels should decline slightly again in 2019. Over the past months, the polyester market recovered from slower growth at the beginning of the reporting year. The price levels for cotton and polyester are expected to remain stable. Capacity expansions for standard viscose should remain at a similar level as in the 2018 financial year. Despite strong demand, this will result in growing oversupply, which will cause even higher pressure on prices. The Lenzing Group expects the positive development of its specialty fibre business to continue.
Caustic soda prices in Asia have already declined significantly over the past months; however, there are no signs of such a development in Europe yet. Overall, Lenzing does not expect any significant changes for key raw materials that would be relevant to earnings.
Based on the current exchange rates, the Lenzing Group continues to expect its results for 2019 to reach a similar level as in 2018 despite a much tighter market environment for standard viscose. These developments reassure the Lenzing Group in its chosen corporate strategy sCore TEN. Lenzing is very well positioned in this market environment and will continue its consistent focus on growth with specialty fibres.