From the Sector

The Lenzing Group recorded a significantly improved development of its operating result in the first half of 2021. The preliminary EBITDA (earnings before interest, tax, depreciation and amortization) more than doubled year-on-year to EUR 217.8 mn (compared to EUR 95.6 mn in the first half of 2020).

The currently positive environment is still characterized by a high level of uncertainty regarding the COVID-19 pandemic. Despite the continued limited visibility, the Managing Board of the Lenzing Group raises the outlook for the 2021 financial year.

Taking into account the above factors and due to the very positive development of the first half of the year, the Lenzing Group expects the EBITDA in 2021 to reach at least a level of EUR 360 mn.

The results of the Lenzing Group for the first half of 2021 will be published on Wednesday, August 04, 2021.

• First place in the Austria’s Leading Companies business competition
• Winner of the Global Player Award for successful internationalization

Lenzing AG has two renowned national awards to celebrate. Austria’s Leading Companies (ALC), which was held on Wednesday, June 16, 2021, again recognized the country’s most successful companies. In a competition organized by PwC Austria, Die Presse newspaper and KSV1870, a credit protection firm and business platform, Lenzing won first prize in the “Climate protection” category.

At the ALC Awards, the company’s performance is what counts. Balance sheet figures and sales and earnings growth over the past three fiscal years, alongside a weighted system of key performance indicators, ensure that the results are objective. A carefully selected jury then decides on the final ranking across the various categories. “In these challenging times for the economy, the ALC Award offers valuable recognition and motivation for the future. In periods of crisis, innovation, moving with the times and a change of perspective are crucial”, added the organizers.

Successful internationalization
For no less than the 26th time, this year saw the award of the Export Prize of the Austrian Federal Economic Chamber (WKO) to companies that have been highly successful in markets abroad. The jury chose Lenzing as the winner of the Global Player Award 2020.

The prize is awarded to companies that have built up a strong position on the global market over the past several years. The Global Player Award recognizes businesses that have established an efficient network outside of Austria and are actually considered to be pioneers in exporting goods or services within a particular country or sector.

Lenzing – The Lenzing Group had a clearly positive revenue and earnings development in the first quarter of 2021. Growing optimism in the textile and apparel industry as a result of the vaccination progress and the continuing recovery in retail led to a significant increase in demand and higher prices in the global fiber market.

•    Significant increase in operating result: EBITDA at EUR 94.5 mn, cash flow from operating activities more than tripled
•    Major strategic projects continue fully on track – production start of the lyocell plant in Thailand expected in the fourth quarter 2021
•    Upper Austria’s largest photovoltaic plant at the Lenzing site
•    Lenzing exits Hygiene Austria joint venture
•    Guidance 2021: Lenzing expects operating result at least at pre-crisis level

Please read the attached document for more information.

• Successful implementation of measures to fight the COVID-19 pandemic with a focus on the safety and health of employees, customers and partners and securing sustainable business development
• Implementation of strategic investment projects progressing on schedule – financing contracts for the construction of the pulp plant in Brazil concluded according to plan
• Lenzing expands its lead in sustainability and circular economy – first TENCEL™ branded carbon-zero fibers launched
• Successful issuance of a EUR 500 mn hybrid bond further strengthens balance sheet structure
• Lenzing expects recovery of the fiber market to continue in 2021 and an operating result on pre-crisis level

Lenzing – In 2020, the Lenzing Group successfully responded to the extremely difficult market environment due to the COVID-19 crisis by implementing a broad package of measures and remains fully on track in terms of its strategy. The measures focused on protecting Lenzing’s employees and partners and on safeguarding its operations. Lenzing flexibly adjusted production volumes and was able to offer its customers the usual delivery service at any time. In addition, Lenzing also intensified measures for structural earnings improvement to mitigate the effect of the pressure on fiber prices and demand for fibers, and reduced its operating costs.

Please read the attached document for more information.

An impairment charge has become necessary based on the current status of the new 5 year plan.

(Market Abuse Regulation N° 596/2014)
•    Impairment loss amounting to €80-100 million in the fourth quarter 2020 in the business unit CFM
•    Restructuring program resolved with savings target of more than €100 million until 2023
•    Guidance 2020 for Group sales and operating recurring Group EBIT confirmed
•    Guidance 2020 for net result reduced to minus €130-150 million

In the current status of the 5 year plan, which is at present under preparation, significant deviations have already become apparent today, particularly in the market segments Automotive, Aerospace and Wind Energy in the business unit Composites – Fibers & Materials (CFM). Partially also due to the pandemic, Automotive and Aerospace is developing slower than anticipated in the last 5 year plan. In contrast, business with Wind Energy is growing much stronger than previously planned. These changes in the product mix lead to lower mid-term earnings at CFM compared to the prior 5 year plan. Following these deviations from the last 5 year plan, an event-driven impairment test was undertaken. This results in a non-cash impairment charge amounting to €80-100 million, which will be recorded in the fourth quarter 2020.

The Board of Management of SGL Carbon SE today also resolved the implementation of a restructuring program, with which the Company is targeting savings of more than €100 million until 2023 (compared to the base year 2019). These savings consist of a planned socially compatible reduction in personnel of more than 500 employees and substantial reduction in indirect spend, particularly in the areas of travel, consulting and external services. Costs of approximately €40 million are anticipated for the implementation of this restructuring program. A little more than half of this is expected to be recorded as expenses in the fourth quarter 2020, while the associated cash outflows are mainly forecasted for 2021.

This requires a partial adjustment of the guidance for 2020. The solid operational development in the third quarter 2020 with Group sales between €220 and €230 million and operating recurring EBIT1 between €13 and €15 million (plus approximately €9 million positive one-time effects) is within the framework of our expectations for the full year 2020. However, the Group net result is likely to develop below the prior year level of minus €90 million and reach approximately between minus €130 and €150 million due to the restructuring provisions as well as the impairment charge (prior guidance: improvement to a negative low double-digit million € amount).

With liquidity of €167 million as of September 30, 2020 (compared to €137 million at year-end 2019) and further cash inflows in the fourth quarter 2020 from successfully implemented additional funding measures, the Company’s position is solid. This liquidity is more than sufficient for the payment of the purchase price for SGL Composites USA in the amount of USD 62 million at the end of 2020 as well as the restructuring-related cash outflows expected mainly in 2021. The Company continues to have access to the revolving credit facility (RCF) in the amount of €175 million, which remains undrawn.

The quarterly statement as of September 30, 2020 will be published on November 12, 2020 as scheduled. Further details on the new 5 year plan as well as the guidance on the fiscal year 2021 will be presented with the publication of the Annual Report 2020 on March 25, 2021.

*The use of KPIs in this notification is aligned to the annual report 2019 and the interim report for the first half year 2020. There were no changes to the scope of consolidation or to valuation methods compared to the previous guidance.

• Since the end of March 2020, COVID-19 has led to very low demand in all Business Groups
• Comprehensive crisis management implemented
• Loss in the mid double-digit million range expected in the first half of 2020
• Plans to introduce short-time working to adjust capacity in Switzerland and Germany
• Strategy will continue to be implemented

Due to COVID-19, a large number of spinning mills have stopped production worldwide. Since the end of March 2020, this has led to low demand for spare parts and wear & tear parts and delays in testing programs during the development of new machines. Customers are postponing investment projects or unable to implement them due to restrictions imposed by national governments. This results in low demand for new machines.

Comprehensive crisis management
Rieter has implemented comprehensive crisis management. Priorities are being given to protecting employees, fulfilling customer commitments and ensuring liquidity. The necessary measures to protect employees have been implemented worldwide.
The order backlog of well in excess of CHF 500 million is being processed largely according to plan, despite the existing bottlenecks in the supply chains. Less than 5% of the orders in the order backlog have been canceled.
Rieter has already implemented measures to ensure liquidity and reduce costs. The company has good net liquidity and undrawn credit lines in the mid three-digit million range.
Loss expected in the first half of 2020
As already reported, Rieter expects sales and earnings in the first half of 2020 to be significantly below the prior year level.

Loss expected in the first half of 2020
As already reported, Rieter expects sales and earnings in the first half of 2020 to be significantly below the prior year level. The effects of COVID-19 will place an additional burden on the first half of 2020. Rieter therefore expects sales in the first half of 2020 to be less than CHF 300 million. Despite the countermeasures implemented at the net profit level, this will lead to a loss in the mid double-digit million range.

Plans to introduce short-time working to adjust capacity
Rieter plans to apply for short-time working for the areas with forecasted low capacity utilization at the locations in Switzerland and Germany. The application will be for 40% short-time working in the third quarter of 2020. Talks with staff representatives will begin next week.
As a sign of solidarity, Rieter’s Board of Directors, Group Executive Committee and the senior management will waive 10%-20% of their salaries temporarily.

Implementation of the strategy
In recent years, Rieter has consistently implemented the strategy based on innovation leadership, strengthening the business in components, spare parts and services and the adjustment of cost structures. The company intends to forge ahead with the implementation of the strategy in the coming months, thus strengthening its market position for the time after the COVID-19 pandemic.
The next information on the course of business is planned with the publication of the half-year results on July 16, 2020
 

• All motions approved
• Dividend of CHF 4.50 agreed
• COVID-19

In relation to participation in the Annual General Meeting on April 16, 2020, the Board of Directors of Rieter Holding Ltd. arranged exclusively written or electronic voting and the granting of power of attorney to the independent proxy. In taking this approach, the Board of Directors relied on Article 6a, lit. b of Ordinance 2 of the Swiss Federal Council (Measures to Combat the Coronavirus of March 16, 2020). Physical participation by the shareholders was therefore not possible. The Annual General Meeting was held on the premises of Rieter Holding Ltd. at the company’s headquarters in Winterthur.

At the Annual General Meeting of Rieter Holding Ltd. on April 16, 2020, the independent proxy represented a total of 2 025 shareholders who hold 64.3% of the share capital.

A dividend of CHF 4.50 per share was agreed. The shareholders approved the proposed maximum total amounts of the remuneration of the members of the Board of Directors and of the Group Executive Committee for fiscal year 2021.

The Chairman of the Board, Bernhard Jucker, and the members of the Board of Directors This E. Schneider, Michael Pieper, Hans-Peter Schwald, Peter Spuhler, Roger Baillod, Carl Illi and Luc Tack were confirmed for an additional one-year term of office.
Furthermore, This E. Schneider, Hans-Peter Schwald and Bernhard Jucker, the members of the Remuneration Committee who were standing for election, were also each re-elected for a one-year term of office.

Shareholders also adopted all other motions proposed by the Board of Directors, namely approval of the annual report, the financial statements and the consolidated financial statements for 2019, and formal approval of the actions of the members of the Board of Directors and those of the Group Executive Committee in the year under review. In addition, the authorized capital was extended for a further two years.

COVID-19
At present, it is not possible to predict how the global COVID-19 pandemic will affect Rieter’s sales and earnings in the first and second half of 2020, and thus also for 2020 as a whole.

Rieter therefore refrains from providing an outlook for financial year 2020 and will issue the relevant information as part of the semi-annual report on July 16, 2020.
The company has taken the necessary measures to protect employees and to meet commitments to customers as far as possible.

Thanks to long-standing customer relationships, a focus on innovation, global positioning and the company’s financial stability, Rieter will successfully overcome the challenges.

As a result of the global COVID-19 crisis, the Lenzing Group expects based on recent developments a negative impact on its textile sales volume. The potential impact cannot yet be reliably estimated, as it strongly depends on the duration of the crisis as well as its further effects on the global economy and textile markets. Consequently, Lenzing suspends its result forecast for 2020 as disclosed on March 12, 2020, when it expected the result for 2020 to be below the level of 2019. In order to mitigate a potentially stronger than expected decline in earnings, Lenzing has already started to implement cost saving measures across its sites globally.

Diverging development in the two business units impact fiscal year 2019 of SGL Carbon – Group guidance for 2020 confirmed

• Consolidated sales revenues in fiscal year 2019 up by 4 percent to around 1.1 billion euros
• Consolidated recurring EBIT down by 25 percent to 48 million euros; record results of graphite specialities business did not fully compensate for the weak development in the carbon fiber business
• Composites – Fibers & Materials (CFM): Cyclical und structural weaknesses impact the result of the market segments Wind Energy, Textile Fibers and Industrial Applications, which have limited strategic significance in the medium term
• Graphite Materials & Systems (GMS): Sales and earnings on record level due to strong growth in the market segments Semiconductors and Automotive
• Non-cash impairment charge of around 75 million euros was recorded at CFM in the third quarter of 2019
• Free cash flow significantly improved
• Issue of a new corporate bond and early redemption of the 2015/2020 convertible bond has significantly improved the maturity profile
• SGL Carbon confirms guidance for fiscal year 2020: sales expected slightly below previous year; recurring EBIT approximately 10 to 15 percent below previous year level
• Dr. Michael Majerus, Spokesman of the Board of Management of SGL Carbon: “The financial development of the fiscal year 2019 conceals the fact that our strategic orientation is correct. This is evident from our growth and the increasing number of contracts and projects we acquired in our strategic core markets. Main drivers are the topics of sustainable mobility and energy as well as digitization. Therefore, we expect that we can grow our consolidated revenue by a mid to high single-digit percentage per year on average between 2020 and 2024.“

The fiscal year 2019 developed very differently in the two business units of SGL Carbon. The record results in the graphite specialities business could not fully compensate for the weak development in the market segments Wind Energy, Textile Fibers and Industrial Applications in the carbon fiber business. Group sales grew by 4 percent to 1.1 billion euros. Recurring Group EBIT declined by 25 percent to 48 million euros. Due to the ongoing weakness in the market segments Textile Fibers and Industrial Applications the business unit CFM recorded a non-cash impairment loss of 75 million euros in the third quarter of 2019. With minus 90 (prior year: plus 41) million euros, consolidated Group result declined significantly compared to last year’s good results. The Group confirms its guidance for 2020 published in October 2019.

Group sales are expected to decline slightly compared to the prior-year level, whereas Group recurring EBIT is expected to reach a result around 10 to 15 percent below the prior-year level. Consolidated net result of the Group in 2020 should strongly improve compared to prior-year level to a low double-digit loss.

Within the framework of the preparations for the Group annual financial statements and based on preliminary results, SGL Carbon confirms its guidance for 2019 as revised in October 2019. Accordingly, the Company continues to expect Group sales between €1.05 and €1.1 billion and Group EBIT before extraordinary items between €45 and 50 million. In addition, net financial debt as of December 31, 2019 has also developed as expected, increasing by a mid double digit million € amount and thus remaining below the €300 million mark.

SGL Carbon also confirms the initial outlook for 2020 as presented in October 2019. Group sales is anticipated slightly below the 2019 level and Group EBIT before extraordinary items 10-15% below the 2019 level. To reflect the lower earnings expectations and within the context of a conservative free cash flow management, the Company will restrict capital expenditures to €70-80 million in 2020 (previous guidance: approximately €100 million) and thus approximately on the level of depreciation.

As usual, SGL Carbon will communicate further details on the guidance for 2020, particularly relating to the guidance on the level of the reporting segments, with the publication of the annual report 2019 on March 12, 2020.

The Company will also publish statements on the new mid-term plan on this date.