From the Sector

•  Historically difficult market environment – trade tensions put textile value chain under pressure in 2019
•  Prices for standard viscose at a historic low
•  Positive development of the specialty fiber business with a revenue share of already 51 . 6 percent
•  Strategic investment projects are progressing according to plan
•  sCore TEN targets for 2024 defined – EBITDA of EUR 800 mn

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 ).

• Historically difficult market environment – trade tensions put textile value chain under pressure in 2019
• Prices for standard viscose at a historic low
• Positive development of the specialty fiber business with a revenue share of already 51.6 percent
• Strategic investment projects are progressing according to plan
• sCore TEN targets for 2024 defined – EBITDA of EUR 800 mn

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).

• Sales were significantly down on the previous year, falling by 29% to CHF 760 million
• EBIT margin of around 11% and net profit of around 7% of sales anticipated, non-recurring profit contribution from sale of real estate in Ingolstadt (Germany)
• Order intake up 7% on previous year; order intake amounting to CHF 401.6 million booked in fourth quarter 2019 (4th quarter 2018: CHF 119.0 million)
• First half of 2020 expected to be significantly lower than previous year in terms of sales and earnings
• Further capacity adjustment measures introduced
• Start of construction of Rieter CAMPUS expected during 2020, subject to granting of building permit

The Rieter Group closed the 2019 financial year, as expected, with considerably lower sales than in the previous year. According to the first, unaudited figures, total sales of CHF 760.0 million were achieved, which is 29% down on the previous year (2018: CHF 1 075.2 million). At CHF 926.1 million, order intake was 7% higher than in the prior year period (2018: CHF 868.8 million). Rieter will publish the full annual financial statements and the 2019 Annual Report on March 10, 2020.

• Group sales increases by approximately 6 percent compared to the prior year period to 832 million euros due to organic growth in the market segments Digitization, Energy and Chemicals
• Group recurring EBIT at around 54 million euros; adjusted for a positive one-time effect in the prior year approximately on the comparable level of the prior year
• Business unit Composites – Fibers & Materials (CFM) deteriorated substantially in the third quarter 2019 due to the weak development in the market segments Textile Fibers, Wind Energy and Industrial Applications; Graphite Materials & Systems (GMS) developed better than expected on the very good level of the prior quarter reaching overall a record high level in 9M/2019
• Free cash flow from continuing operations improved significantly in the first nine months
• Impairment testing triggers a non-cash impairment charge of approximately 75 million euros in CFM in the third quarter
• Revised guidance of October 25, 2019: Recurring EBIT at CFM in a negative mid-to-high single digit million euros amount and on Group level at 45 to 50 million euros
• Countermeasures initiated to improve earnings of CFM
• Dr. Michael Majerus, Spokesman of the Board of Management of SGL Carbon: ”The structural growth drivers remain intact in our strategically relevant markets. The countermeasures to improve earnings of CFM will be implemented consistently.”

In the third quarter 2019, the business units of SGL Carbon developed very differently. While Graphite Materials & Systems (GMS) showed better than expected results, Composites – Fibers & Materials (CFM) deteriorated compared to the two previous quarters. This is attributable to the weaker development in the market segments Textile Fibers and Industrial Applications. In total, sales revenue in the first nine months 2019 grew by approximately 6 percent to reach 832 million euros. Recurring Group EBIT after nine months reached approximately 54 million euros. Adjusted for a positive one-time effect in the prior year, this was comparable to the prior year level.

In its ad-hoc notification of October 25, 2019, the company revised its guidance for recurring EBIT of CFM downwards to a negative mid to high single digit million euro amount. On the Group level the company now expects a recurring EBIT at 45 to 50 million euros. Due to the lower starting point in 2019 as well as the ongoing weakness in the market segments Textile Fibers and Industrial Applications in the business unit CFM a non-cash impairment charge in the amount of approximately 75 million euros was recorded in the third quarter 2019. In recent years acquired assets of the former joint ventures with BMW and Benteler were not affected by this impairment. In addition, the impairment charge of CFM led to a valuation allowance on deferred tax assets in the amount of 7.4 million euros. Against this background, SGL Carbon now expects a net result of approximately minus 100 million euros for fiscal year 2019.

• Continued positive development of specialties business with revenue share of already more than 48 percent
• Commitment to long-term growth plan – investment in new 100,000 tons plant in Thailand approved
• Significantly more challenging market environment for standard viscose with historically low prices
• Outlook for 2019 confirmed

The Lenzing Group continued its solid business development in the first half of 2019. Despite a significantly more challenging market environment with historically low prices for standard viscose, Lenzing recorded a slight increase in revenue. The disciplined implementation of the sCore TEN strategy and the focus on specialty fibers continue to have a positive impact. Thanks to ongoing high demand for sustainably produced specialty fibers and positive currency effects, the impact of low standard viscose prices was largely offset in earnings.

• Challenging market environment due to low prices for standard viscose, less favorable exchange rates and higher raw material and energy prices
• Very positive development of specialty fiber business with revenue share exceeding 45 percent
• Dividend proposal of EUR 3.00/share plus a special dividend of EUR 2.00/share
• Results for 2019 expected at about the level of 2018 despite a significantly more demanding market environment

The Lenzing Group’s business developed well in the 2018 financial year. A significantly more challenging market environment led to a decline in revenue as well as earnings compared with the record results of the previous year. This was primarily caused by lower selling prices for standard viscose, exchange rate effects as well as higher raw material and energy costs.

Group revenue declined by 3.7 percent compared with the previous year to EUR 2.18 bn. The predicted challenging market environment for standard viscose, plus less favorable exchange rates and a slight decline in sales volume were the key contributing factors. EBITDA (earnings before interest, tax, depreciation and amortization) was down by 24 percent to EUR 382 million due to price increases for key raw materials and higher energy and personnel costs. The EBITDA margin dropped from 22.2 percent in the 2017 financial year to 17.6 percent in the reporting year. EBIT (earnings before interest and tax) fell by 36 percent to EUR 237.6 mn, leading to a lower EBIT margin of 10.9 percent (2017: 16.4 percent). Net profit for the year after one-off effects dropped by 47.4 percent from EUR 281.7 mn in the previous year to EUR 148.2 mn. Earnings per share equaled EUR 5.61 (2017: EUR 10.47).

The Management Board and the Supervisory Board will propose a stable dividend of EUR 3.00 per share plus a special dividend of EUR 2.00 per share at the upcoming Annual General Meeting. In total, the paid dividend will amount to EUR 5.00 per share, corresponding to a dividend payment to shareholders of roughly EUR 133 mn.

• Decline in revenue due to volatile standard viscose prices and currencies
• Prices for key raw materials still high
• New production line in Heiligenkreuz in start-up phase
• Backward integration into dissolving wood pulp to be strengthened via joint venture in Brazil

Lenzing – The Lenzing Group generated solid results in a challenging market environment in the first half of 2018. The decline in revenue and earnings compared with the first half of the previous year, which was the best half-year in the company’s history, was based on a mix of volatile prices for standard viscose and price increases for key raw materials, coupled with currency effects. The Lenzing Group’s strategic orientation with a focus on specialty fibers had a positive impact in this environment and is increasingly bearing fruit. The corporate strategy sCore TEN is being implemented with great discipline in order to expand the company’s offering of specialty fibers and even more extensively support customers and business partners.

Revenue declined by 6.4 percent compared with the first half of the previous year to EUR 1,075.4 mn. This decrease is primarily attributable to less favorable currency exchange rates. EBITDA (earnings before interest, tax, depreciation and amortization) decreased by 28.1 percent to EUR 194.8 mn, especially due to price increases for key raw materials and higher energy prices. The EBITDA margin fell from 23.6 percent in the first half of 2017 to 18.1 percent in the first half of 2018. EBIT (earnings before interest and tax) declined by 37 percent to EUR 128.7 mn, leading to a lower EBIT margin of 12 percent (H1 2017: 17.8 percent). The net profit for the period dropped by 39.3 percent from EUR 150.3 mn in the previous year to EUR 91.3 mn. Earnings per share equaled EUR 3.44 (H1 2017: EUR 5.55).

“So far, the financial year 2018 proved to be as challenging as expected, and market headwinds were clearly noticeable. In this market environment, we are satisfied with the solid results we report. We are proud that with our corporate strategy sCore TEN and the focus on growth with specialty fibers we show big steps in the right direction. The recently announced joint venture with Duratex is another important step in executing this corporate strategy,” says Stefan Doboczky, Chief Executive Officer of the Lenzing Group. “We will continue to implement our strategy with great discipline and are convinced that this will steadily improve the long-term profitability of Lenzing,” Doboczky adds.

Largest dissolving wood pulp line worldwide

In June, the Lenzing Group and Duratex, the largest producer of industrialized wood panels of the southern hemisphere, announced that they had agreed on the terms and conditions to form a joint venture to investigate building the largest dissolving wood pulp plant (single line concept) in the state of Minas Gerais, (Brazil). This decision supports the self-supply with dissolving wood pulp and the growth in specialty fibers, defined in Lenzing’s sCore TEN strategy. The joint venture will investigate the construction of a 450,000 t dissolving wood pulp plant, which is expected to become the largest and most competitive single line dissolving wood pulp plant in the world. The final investment decision to build the dissolving wood pulp plant is subject to the outcome of the basic engineering studies and the approval by the respective supervisory boards.

Even stronger focus on sustainable products

As a pioneer in sustainable fiber solutions, the Lenzing Group is committed to higher standards in the textile and nonwoven sectors. More than EUR 100 mn will be invested in sustainable manufacturing technologies and production facilities by 2022 in order to realize this vision. In line with the Group’s specialty strategy, another two milestones were set in the first half of 2018: Lenzing announced an investment of up to EUR 30 mn in another pilot line for the production of TENCEL™ Luxe filaments at the Lenzing site. In addition, the company also introduced the environmentally friendly process for the production of LENZING™ ECOVERO™ branded viscose fibers at its Chinese site. Both decisions contribute to better meeting the strong demand for environmentally compatible products.

Expansion of capacities

CAPEX (investments in intangible assets and property, plant and equipment) rose by 60.8 percent year-on-year to EUR 117.2 mn in the first half of 2018. This is primarily attributable to the capacity expansions in Heiligenkreuz (Austria) and Mobile, Alabama (USA) and the expansion of the existing dissolving wood pulp plant in Lenzing. The company is pressing ahead with these projects as well as with planning work on the construction of the next state-of-the-art lyocell production facility in Prachinburi (Thailand).

New brand identity

With the new positioning of its master brand and its product brands, the Lenzing Group started a new phase of branding and brand communication in the first half of 2018. Lenzing decided to carry out a new brand strategy in order to sharpen its company and product profile as a sustainable innovation leader for customers and partners along the value chain as well as for consumers. The most important pillar of this new brand strategy is a brand architecture with a focus on fewer brands and a strong message to consumers. With the TENCEL™ brand as an umbrella brand for all specialty products in the textile segment and the VEOCEL™ brand as the umbrella brand for all specialty fibers in the nonwoven segment as well as the new master brand, which was presented in March, Lenzing showcases its strengths in a targeted manner.

Outlook

The International Monetary Fund expects a further acceleration in global economic growth to 3.9 percent for 2018. However, growing protectionist tendencies in the political arena represent a source of uncertainty. Export-oriented companies in the Eurozone are faced with additional challenges from the currency environment.

Developments on the fiber markets should remain positive, but with continuing volatility. The rising demand for cotton should support prices despite the increase in production. Polyester fiber prices have stabilized after the increase in previous years.

The wood-based cellulosic fiber segment, which is relevant for Lenzing, should see further strong demand. After years of moderate capacity expansion in the viscose sector, significant additional volumes will enter the market in 2018 and 2019. As a result, standard viscose prices will remain under pressure. The Lenzing Group is very well positioned in this market environment with its corporate strategy sCore TEN and will continue its consistent focus on growth with specialty fibers.

The Lenzing Group still sees challenging market conditions for the second half of 2018. In addition to the price pressure on standard viscose, the prices of some key raw materials such as caustic soda are still at a very high level and exchange rates continue to be volatile. Our specialty fibers are expected to continue their very positive development. In this context, the Lenzing Group is satisfied with the earnings development to date, but underlines its estimate that the results for the year 2018 will be lower than the outstanding results in the last two years.

• Revenue increased by 5.9 percent to EUR 2.26 bn
• EBITDA up 17.3 percent to EUR 502.5 mn
• Dividend proposal of EUR 3.00/share plus a special dividend of EUR 2.00/share
• New brand strategy to generate a strong message to consumers
• Limited visibility for coming quarters

In 2017, the Lenzing Group reports its best financial performance ever with record revenue and earnings due to a better product mix and higher selling prices in combination with a generally favorable market environment.

Group revenue grew by 5.9 percent in the 2017 financial year to EUR 2.26 bn (2016: EUR 2.13 bn). Group earnings before interest, tax, depreciation and amortization (EBITDA) improved by 17.3 percent to EUR 502.5 mn (2016: EUR 428.3 mn). The corresponding EBITDA margin rose to 22.2 percent (2016: 20.1 percent). Earnings before interest and tax (EBIT) increased by 25.2 percent to EUR 371 mn, resulting in a higher EBIT margin of 16.4 percent (2016: 13.9 percent). The net profit for the year totaled EUR 281.7 mn, a rise of 23 percent from the prior-year figure of EUR 229.1 mn. Earnings per share in the 2017 financial year amounted to EUR 10.47 (2016: EUR 8.48).

The Management Board and the Supervisory Board will propose at the upcoming Annual General Meeting a stable dividend of EUR 3.00 per share plus an increased special dividend of EUR 2.00 per share (2016: EUR 1.20 per share). In total, the dividend will amount to EUR 5.00 per share, corresponding to a dividend payment to shareholders of EUR 132.75 mn.

“The Lenzing Group looks back at a very successful year 2017. We continued to implement our corporate strategy sCore TEN with great discipline and focus on our investment projects and successfully captured value in a positive market environment. Our commitment to innovation and customer centricity was underpinned by the opening of an application innovation center in Hong Kong and the creation of the new sales and marketing office in Turkey. In line with sCore TEN we decided to revamp our brand architecture and image to sharpen Lenzing’s corporate and product profiles for customers and consumers. We want to put a stronger emphasis on our ambition to make the textile and nonwoven market more sustainable”, says Stefan Doboczky, Chief Executive Officer of the Lenzing Group.

“We are very positive about our chosen strategy as it will help us to be more resilient as we expect more headwinds in the upcoming quarters”, he adds.

• Revenue up 11 percent to EUR 1,149.1 mn
• EBITDA increase of 38.8 percent to EUR 270.7 mn
• Detailed planning for new production plant for TENCEL® fibers in Thailand in Progress
• New sales offices opened in Turkey and Korea
• New EcoVeroTM branded viscose fibers with very favorable ecological footprint launched

The Lenzing Group generated new record highs in the first half of the 2017 financial year for both revenue and earnings. The key underlying factors were good capacity utilization, higher selling prices and an attractive product mix. Lenzing will continue to focus on the disciplined implementation of the Group strategy sCore TEN, in order to be even closer to the customer and to further expand the offering of specialty fibers.

Consolidated revenue increased by 11 percent from the first half of the previous financial year to EUR 1,149.1 mn. Consolidated earnings before interest, tax, depreciation and amortization (EBITDA) were up 38.8 percent to EUR 270.7 mn, corresponding to an EBITDA margin of 23.6 percent in comparison to 18.9 percent in the prior-year period. Earnings before interest and tax (EBIT) increased by 57.4 percent to EUR 204.2 mn, resulting in a higher EBIT margin of 17.8 percent (H1 2016: 12.5 percent). The profit for the period improved by 58.9 percent to EUR 150.3 mn, and earnings per share climbed 59 percent to EUR 5.55 per share.

“The first half-year developed very well for the Lenzing Group, and we are pleased with the best half-year period in the company’s history. We will continue our disciplined implementation of the sCore TEN strategy. The expansion of new state-of-the-art production capacities for our specialty fibers is proceeding well and will support our customers in their own expansion efforts for products made of our botanic fibers. The decision to set up a subsidiary and acquire a respective landplot in Thailand is the next step in the implementation of this strategy. On the innovation side we are proud that after the introduction of RefibraTM branded lyocell fibers, we launched now EcoVeroTM. This is a particularly high-performance fiber featuring a very favorable ecological footprint and sets the new benchmark for the entire industry – from fiber to garment”, states Stefan Doboczky, Chief Executive Officer of the Lenzing Group. “Assuming that fiber market conditions remain at current levels, we expect a substantial earnings improvement in 2017 compared to 2016.”