Lenzing – Despite a generally difficult demand environment for textile fibers and a drastic drop in prices for standard viscose, the Lenzing Group recorded a solid business development in 2019. The disciplined implementation of the sCore TEN corporate strategy and the accompanying focus on specialty fibers once again helped to mitigate the effect of unprecedentedly low standard viscose prices.
As a result, revenue dropped by 3.3 percent from EUR 2.18 bn to EUR 2.11 bn in 2019, driven by lower selling prices as well as standard fiber volumes. Due to positive mix effects and more resilient specialty fiber prices, the share of specialty fibers increased from 45.5 percent to 51.6 percent of revenue. The earnings development was largely influenced by the decline in revenue, but also by negative currency effects on material and personnel costs. EBITDA (earnings before interest, tax, depreciation and amortization) fell by 14.4 percent from EUR 382 mn to EUR 326.9 mn. The EBITDA margin declined from 17.6 percent to 15.5 percent. Net profit, at EUR 114.9 mn, was 22.4 percent lower than in the previous year at EUR 148.2 mn. Earnings per share amounted to EUR 4.63 (2018: EUR 5.61).
The Management Board will propose at the 76th Annual General Meeting a dividend of EUR 1.00 per share for the 2019 financial year (2018: dividend of EUR 3.00 plus a special dividend of EUR 2.00 per share), which is equivalent to a total dividend payout of EUR 26.6 mn. The Supervisory Board accepted this proposal at its meeting held on March 11, 2020.
“Lenzing and the entire textile value chain operated in a historically difficult market environment in 2019, which had a negative impact on our revenue and earnings development. The focus on specialty fibers has been contributing to the company’s resilience in the reporting period and we feel very well positioned with our corporate strategy. Our goals for 2024 underpin this confidence in our future”, says Stefan Doboczky, Chief Executive Officer of the Lenzing Group. “The implementation of the key projects in Thailand and Brazil plays a central role in further strengthening our market position and in accomplishing our ambitious climate targets. We are very satisfied with the progress of both projects,” Doboczky adds.
CAPEX (acquisition of property plant and equipment) amounted to EUR 244 mn in 2019, reflecting the Lenzing Group’s investment activities on increasing internal pulp production and raising the share of specialty fibers in line with the sCore TEN strategy. The major projects in Brazil and Thailand will have an increased impact on the CAPEX volume as of 2020.
OUTLOOK
The International Monetary Fund expects a slight recovery of global economic growth to 3.3 percent in 2020, while at the same time warning of several risks. The increased frequency of extreme weather events and currently also the coronavirus crisis could have a strong impact on the global economy in 2020. The currency environment in the regions relevant to Lenzing is also expected to remain volatile.
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, especially in China. According to preliminary calculations, cotton stock levels will remain high in the 2019/2020 season. The price levels for cotton and polyester are expected to remain subdued.
Capacity expansions for standard viscose are expected to be lower than in 2019, but will nevertheless lead to an increase in surplus capacity. The pressure on prices, which have been at a historic low for a considerable period of time, should therefore persist in 2020. Despite additional lyocell capacities in China and low visibility, the Lenzing Group expects the comparatively positive development of its specialty fiber business to continue.
Driven by the challenging situation in standard viscose and low paper pulp prices, prices for dissolving wood pulp are expected to remain at low levels. Caustic soda prices in Asia have already declined significantly over the past months; this development is now also noticeable in Europe.
The above effects significantly impact earnings visibility for 2020. The Lenzing Group currently expects the result for 2020 to be below the level of 2019.
The market developments reassure the Lenzing Group in its chosen corporate strategy sCore TEN. Lenzing will continue to put a particular focus on the strategic investment projects which will yield a significant contribution to earnings starting from 2022.
Lenzing sets ambitious goals for 2024
The Lenzing Group worked on adapting its goals as part of the sCore TEN strategy in the reporting period. The primary focus in the coming years is on the implementation and execution of set climate targets and investment projects in Thailand and Brazil. Lenzing aims to increase the share of high-quality specialty fibers in fiber revenue to 75 percent by 2024 and the share of internally produced pulp to more than 75 percent. In line with its strategic commitment for 2024, Lenzing strives to reduce CO2 emissions per ton of product by more than 40 percent compared with 2017. The EBITDA target for 2024 is EUR 800 mn.
The solid development in recent years despite very difficult market environment at times, reassures Lenzing in its strategic direction. Today, the company is substantially more resilient than it was a few years ago due to its specialty strategy and its strong brands based on innovation and acting sustainably. Lenzing continues to see strong structural growth in the global fiber market over the coming years, with demand for wood-based cellulosic fibers expected to grow 4 to 6 percent per year until 2024, thus nearly twice as fast as the global fiber market.
