From the Sector

• Revenue grows to EUR 623.1 mn – fiber sales recovered over the course of the quarter
• EBITDA and net result for the period down compared with the first quarter of 2022
• Cost reduction program of more than EUR 70 mn being implemented according to plan
• Production of TENCEL™ brand modal fibers successfully launched in China
• Lenzing confirms guidance for 2023

The business performance of the Lenzing Group during the first quarter of 2023 largely reflected market trends. However, after the market environment had deteriorated significantly in the third and fourth quarters of the previous year, signs of recovery emerged during the first quarter in terms of demand as well as raw material and energy costs. Textile fibers recorded moderate but steadily improving demand. Business with fibers for nonwovens and with dissolving wood pulp performed better than expected. Raw material and energy costs were still at an elevated albeit decreasing level.

Outlook
The war in Ukraine and the more restrictive monetary policy pursued by many central banks in order to combat inflation are expected to continue to influence global economic activity. The IMF warns that risks remain elevated overall and forecasts growth of 2.8 and 3 percent for 2023 and 2024 respectively. The currency environment is expected to remain volatile in the regions relevant to Lenzing.

This market environment continues to weigh on the consumer climate and on sentiment in the industries relevant to Lenzing. However, the outlook has brightened somewhat recently.

Demand picked up tangibly after the Chinese New Year. As a consequence, capacity utilization improved and stocks were further reduced both at viscose producers and at downstream stages of the value chain.

In the trend-setting market for cotton, signs are emerging of a further buildup of stocks in the current 2022/23 crop season. Initial forecasts for 2023/24 anticipate a more balanced relationship between supply and demand.

However, despite signs of recovery in both demand and raw material and energy costs, earnings visibility remains limited overall.

Lenzing is fully on track with the implementation of the reorganization and cost reduction program. These and other measures are aimed at positioning Lenzing in the best possible way for the expected market recovery.

Structurally, Lenzing continues to anticipate growth in demand for environmentally responsible fibers for the textile and clothing industry as well as for the hygiene and medical sectors. As a consequence, Lenzing is very well positioned with its “Better Growth” strategy and plans to continue driving growth with specialty fibers as well as its sustainability goals, including the transformation from a linear to a circular economy model.

The successful implementation of the key projects in Thailand and Brazil as well as the investment projects in China and Indonesia will further strengthen Lenzing’s positioning in this respect.

Taking into account the aforementioned factors and assuming a further market recovery in the current financial year, the Lenzing Group continues to expect EBITDA in a range between EUR 320 mn and EUR 420 mn for 2023.

The Lenzing Group, supplier of specialty fibers for the textile and nonwovens industries, is adjusting its earnings forecast for the 2022 financial year due to one-off effects related to the accelerated savings program as well as currency effects and a further deterioration of the market environment.

Lenzing expects its earnings before interest, tax, depreciation and amortization (EBITDA) to be around EUR 250 mn, which is below market expectations.

• Lenzing again recognized for sustainable sourcing, innovation and transparency
• Lenzing achieves the highest category for the third time already

The Lenzing Group achieved first place in the “Hot Button Ranking” of the Canadian non-profit organization Canopy, thus confirming its leading role in the areas of sustainability and responsible wood and pulp sourcing. Lenzing can also once again celebrate a dark green shirt, synonymous with the highest category.

In this ranking, which receives a lot of attention in the textile and apparel industry, Canopy evaluates the world’s 34 largest producers of cellulosic fibers in terms of their sustainable wood and pulp sourcing, their efforts with regard to the use of alternative raw materials and their achievements in the protection of ancient and endangered forests. Resource preservation is a key element of Lenzing’s corporate strategy and at the core of its innovation agenda. The sustainable production of TENCEL™, VEOCEL™ and LENZING™ ECOVERO™branded specialty fibers is based on these principles.

Promoting the circular economy
With its REFIBRA™ and Eco Cycle technologies, Lenzing offers solutions for transforming the textile and nonwovens industries towards a circular economy. In line with its vision for the circular economy, “We give waste a new life. Every day.” Lenzing is driving the industry toward a full circular economy by striving to give waste a new life in all aspects of its core business and developing circular solutions together with potential partners inside and outside the current value chain. A milestone on this path is the cooperation with the Swedish pulp producer Södra. The two global market leaders, who have been proactively promoting the circular economy in the fashion industry for many years, are joining forces to give the topic a further boost and make a decisive contribution to solving the global textile waste problem by making fibers from post-consumer textiles.

Today, Lenzing offers lyocell fibers made from 30 percent recycled cotton waste. The company aims to launch lyocell, modal and viscose staple fibers with up to 50 percent recycled post-consumer content on a commercial scale by 2025 and to develop a new circular business model by closing the loops for post-consumer waste. By 2025, the company plans to enter into further partnerships with 25 key supply chain companies.

The Supervisory Board of Lenzing AG, a world-leading provider of sustainably produced specialty fibers for the textile and nonwoven industries, has appointed Nico Reiner as its new Chief Financial Officer. Mr. Reiner will join Lenzing’s Managing Board led by Chief Executive Officer Stephan Sielaff on January 1, 2023. He will succeed Chief Financial Officer Thomas Obendrauf, who is leaving the company of his own volition after seven years.

Nico Reiner has held several positions in his professional career to date, including CFO at globally operating companies such as Schüco Group, AL-KO Group and Pfleiderer Group, as well as management consultant roles. His most recent appointment was as CFO of Vacuumschmelze GmbH & Co. KG, a global player with headquarters in Hanau that specializes in the development, production and marketing of magnetic materials.

The Lenzing Group and VERBUND, an energy transition company, launched the first development stage of the largest ground-mounted photovoltaic system in Upper Austria. Together with its energy partner VERBUND, Lenzing is also paving the way for the transition to zero-emission mobility. The installation of electric vehicle charging infrastructure at the company’s premises underlines Lenzing’s commitment to the energy transition process.

Thanks to the ground-mounted photovoltaic system at the “Ofenloch” landfill site, Lenzing, in conjunction with VERBUND, is consistently moving forward on the path to a carbon-free energy supply and has commissioned the first half of the new photovoltaic system with a peak power of 2,780 kWp. Full commissioning of the system with a peak power of 5,560 kWp is envisaged in mid-October. Annual electricity production will amount to 6,000,000 kWh, which is expected to cut CO₂ emissions by some 4,400 tonnes per year. The Austrian pioneer in fiber production already commissioned three rooftop photovoltaic systems in spring/summer of 2022, with a peak power of 1,454 kWp and annual electricity production of some 1,508,000 kWh. The electricity flows directly into the company’s on-site production and will also power electric charging stations in future. In the first development stage, 16 wallboxes are set to be installed by the end of the year. A further 32 charging points are planned for 2023. The charging stations will be accessible to staff, visitors and the company’s own vehicle fleet.

“VERBUND’s photovoltaic operator model allows us to make the transition to solar power without incurring investment costs or risks. Thanks to the constant expansion in renewable energy, we remain on course to ecologize the value chain, while optimizing our carbon footprint, cutting costs and reducing the load on the grid, as we are using nearly 100 percent of photovoltaic power in our production,” explains Christian Skilich, Chief Pulp Officer of the Lenzing Group.

The Lenzing Group, a leading provider of wood-based specialty fibers, is expanding its global clean electricity portfolio by gradually transitioning to green energy at its production site in Nanjing. This will enable its Chinese subsidiary Lenzing Nanjing Fibers to use electricity derived solely from renewable sources from 2023 onwards and reduce the site’s carbon emissions by 100,000 tonnes annually. Lenzing only recently announced the transition to green electricity at its Indonesian production facility.

In 2019, Lenzing became the first fiber producer to set a target of halving its carbon emissions by 2030 and becoming climate neutral by 2050. This carbon reduction target has been recognized by the Science Based Targets Initiative. In Nanjing, Lenzing is currently investing in cutting its carbon emissions and converting a standard viscose production line to 35,000 tonnes of TENCEL™ branded modal fibers. Thanks to this move, the Chinese site will exclusively produce eco-friendly specialty fibers.

The company aims to generate more than 75 percent of its fiber revenue from the wood-based, biodegradable specialty fibers business under the TENCEL™, LENZING™, ECOVERO™ and VEOCEL™ brands by 2024. With the launch of the lyocell plant in Thailand in March 2022 and the investments in existing production sites in China and Indonesia, the share of specialty fibers in Lenzing’s fiber revenue is set to exceed the 75 percent target by a significant margin as early as 2023.

• Gradual transformation of production capacities to LENZING™ ECOVERO™ and VEOCEL™ branded specialty viscose

The Lenzing Group, provider of wood-based specialty fibers, is expanding its global clean electricity portfolio and transitioning its production site in Purwakarta to green electricity. The Indonesian subsidiary PT. South Pacific Viscose (SPV) has been using electricity generated solely from renewable sources since July this year, which will reduce its specific carbon emissions by 75,000 tonnes annually.

In 2019, Lenzing became the first fiber producer to set a target of halving its carbon emissions by 2030 and becoming climate neutral by 2050. This carbon reduction target has been recognized by the Science Based Targets Initiative. In Purwakarta, Lenzing is currently investing in the reduction of carbon emissions, as well as air and water emissions. Thanks to its EUR 100 million investment in this area, Lenzing is gradually transitioning its existing capacities for standard viscose to LENZING™ ECOVERO™ and VEOCEL™ branded specialty viscose.

“Demand for our wood-based, biodegradable specialty fibers is constantly rising. We see enormous growth potential, especially in Asia. The switch to green, renewable electricity marks a huge step forward in converting our Indonesian site into a specialty fiber supplier. This makes us better positioned to meet the growing demand for sustainably produced fibers,” comments Robert van de Kerkhof, Chief Commercial Officer for Fiber at Lenzing.

The company aims to generate more than 75 percent of its fiber revenue from the wood-based, biodegradable specialty fibers business under the TENCEL™, LENZING™ ECOVERO™ and VEOCEL™ brands by 2024. With the launch of the lyocell plant in Thailand in March 2022 and the investments in existing production sites in Indonesia and China, the share of specialty fibers in Lenzing’s fiber revenue is set to exceed the 75 percent target by a significant margin as early as 2023.

• Collaboration with Red Points addresses consumers’ increasing expectations on transparency and highlights Lenzing’s commitment to trademark protection
• Protects interest of Lenzing customer and partners who are making real efforts to enhance the transparency of their value chains
• Builds upon Lenzing’s overall brand protection efforts that verify the authenticity of fibers up to the end products

Lenzing Group, a global producer of wood-based specialty fibers, has announced a partnership with Red Points, a company in online IP infringement detection and removal, to strengthen Lenzing’s existing brand protection efforts globally and enable round-the-clock brand monitoring services. As Lenzing’s textile brands TENCEL™, LENZING™, ECOVERO™, as well as nonwovens brand VEOCEL™ continue to generate widespread demand from industry partners and customers worldwide, it is becoming increasingly important to protect the company’s trademarks and provide full visibility into the brands’ presence online.

Protecting the interest of Lenzing’s partners and consumers
Red Points provides the ideal technology solution to help Lenzing monitor and remove unauthorized use of its trademarks and counterfeits online. The technology works by using Artificial Intelligence (AI) to automatically detect intellectual property infringements of Lenzing’ trademarks with high accuracy and efficiency.

Brand protection is just one of Lenzing’s ongoing proactive measures aimed at enhancing transparency in the supply chain and protecting the interest of Lenzing’s partners by ensuring they are purchasing genuine Lenzing fibers which meet their high standards.

In 2018, Lenzing launched the Lenzing E-Branding Service which allows Lenzing’s customers, retailers and brand partners to effectively use trademarks in their marketing materials. The platform has been welcomed by partners globally as it continues to deliver value to the fashion, textile and nonwoven sectors by facilitating the traceability of Lenzing’s fibers and enabling customers to promote them effectively.

• Lenzing continues to focus on partnering for systemic change

• Clear commitment to improving the environmental footprint of textile and nonwoven industries

• Global initiative TfS promotes sustainable design of global supply chains

The Lenzing Group, a world-leading provider of wood-based specialty fibers for the global textile and nonwoven industries, has joined the chemical industry’s sustainable supply chain initiative, Together for Sustainability (TfS). Together with Lenzing, numerous internationally active chemical companies have joined the initiative. Their common goal is to make the global supply chains of the chemical industry sustainable.

“Joining the TfS initiative is another clear commitment to improving the environmental footprint of the global textile and nonwoven industries and proves that sustainability is taken very seriously at Lenzing – so much so that sustainability is at the heart of our business strategy. So much so, it sits at the core of the Group’s business strategy. The industry needs innovation in order to transition from linear to circular ways of working, and Lenzing will continue to partner across the supply chain to bring this vision to life,” says Robert van de Kerkhof, Chief Commercial Officer Fiber at Lenzing.

Partnering for systemic change
Complex global sustainability challenges require a collaborative approach to developing systemic solutions, involving many stakeholder groups. In order to make the global textile and nonwovens industries more sustainable and bring about systemic change, Lenzing has therefore also been building on partnerships within its sustainability strategy “Naturally Positive” for many years.

“I am very proud to welcome Lenzing to the TfS family, bringing the TfS membership to 37 companies. Together and with our strategic partners we continue to expand our reach and increase our impact on the sustainability performance in chemical supply chains. Given the regulatory landscape, climate challenges and market conditions, the need for sustainable businesses only intensifies. TfS is the crucial enabler to make supply chains and businesses at large more sustainable and contribute to developing a better world”, says TfS President Bertrand Conquéret.

The global TfS initiative follows the principles of the UN Global Compact and Responsible Care.

• Dividend of EUR 4.35 per share approved
• Lenzing Supervisory Board reduced from ten to nine elected members
• Dipl.-Bw. Peter Edelmann steps down from the Supervisory Board at his request
• Cord Prinzhorn, MBA, elected Chairman of the Supervisory Board

The 78th Annual General Meeting of Lenzing AG on April 26, 2022, passed a resolution to pay a dividend of EUR 4.35 per share in accordance with the Managing Board’s profit distribution proposal, which had been approved by the Supervisory Board. As a consequence, the payment of the dividend amounts to a total of EUR 115,492,500. The payment will be made on May 03, 2022.

The Annual General Meeting formally discharged the members of the Managing Board and the Supervisory Board from liability for the 2021 financial year, and set in advance the remuneration for the members of the Supervisory Board for the 2022 financial year. In addition, a vote was hold concerning the principles for the remuneration of the members of the Managing Board and the Supervisory Board (remuneration policy). The remuneration policy of Lenzing AG for the performance-based remuneration of the Managing Board is linked not only to financial performance criteria but also to non-financial sustainability criteria (ESG), which further promote the sustainable business strategy.

Elections to the Supervisory Board
Dipl.-Bw. Peter Edelmann stepped down from the Supervisory Board upon his own request, at the end of the Annual General Meeting. Mr. Edelmann has served as a member of the Supervisory Board since 2018 and as its Chairman since 2019, as well as on all committees of Lenzing AG.

The Annual General Meeting passed a resolution to extend the Supervisory Board mandates of Mag. Patrick Prügger (until the AGM that passes related resolutions concerning the 2022 financial year) and of Dr. Astrid Skala-Kuhmann (until the AGM that passes related resolutions concerning the 2025 financial year).

The Supervisory Board of Lenzing AG now consists of nine members elected by the AGM: Mag. Helmut Bernkopf, Dr. Christian Bruch, Dr. Stefan Fida, Dr. Markus Fürst, Dr. Franz Gasselsberger, Melody Harris-Jensbach, Cord Prinzhorn, MBA, Mag. Patrick Prügger and Dr. Astrid Skala-Kuhmann. Herbert Brauneis, Ing. Daniela Födinger, Helmut Kirchmair, Georg Liftinger und Johann Schernberger were appointed to the Supervisory Board by the Works Council.

At the constitutive Supervisory Board meeting following the AGM, Cord Prinzhorn, MBA, who had returned to the Supervisory Board after serving as CEO on an interim basis, was elected Chairman, and Dr. Stefan Fida was elected Deputy Chairman of the Supervisory Board.