From the Sector

Lower volumes due to geopolitical developments and the sharp rise in inflation impacted the result in the first half of 2022. In a slightly declining market, Autoneum increased revenue in local currencies by 0.5%. At CHF 888.7 million, revenue in Swiss francs reached the previous year's level. Despite the challenging environment, Autoneum achieved a positive operating result of CHF 6.4 million (EBIT margin: 0.7%). The net result decreased to CHF –12.8 million. On the other hand, Autoneum was able to generate a solid free cash flow of CHF 45.2 million. A high demand for sustainable products for electric vehicles confirms that Autoneum is well positioned for this growing market of the future.

Current geopolitical developments substantially affected business performance in the first half of 2022. They are accompanied by accelerating inflation and significant price increases in the commodities markets, which the war in Ukraine has further exacerbated. These developments are also delaying market recovery in the automotive industry. Autoneum does everything it can to minimize the impact on the Group. Despite the present challenges, we will continue to implement our strategy, focusing on innovative and sustainable technologies for growing markets of the future.

• Revenue development influenced by the war in Ukraine and supply chain bottlenecks*
• Low production volumes and high inflation impact profitability*
• Solid free cash flow enables further reduction in net debt*
• Business Groups*
• Well positioned for e-mobility and sustainability*
• Expanding the product portfolio for electric vehicles*
• Autoneum joins the Science Based Targets initiative*

Outlook
According to global market forecasts¹, automobile production will pick up again in the second half of the year with growth of 8.8% compared with the first half-year 2022. For full-year 2022, global automobile production is projected to reach 80.8 million vehicles, which is equivalent to a 4.7% increase on 2021. Based on the market forecasts, Autoneum expects to improve the operating result for the second half of the year. This will be supported by ongoing customer negotiations with a view to fair sharing of costs, the accompanying contribution of vehicle manufacturers to shouldering the sharp increases in material, energy and transport costs and the foreseeable normalization of production after the easing of lockdown measures in China. On this basis, Autoneum expects substantially enhanced results for full-year 2022, as well as an improvement in the EBIT margin to 2.0% to 3.0%. Free cash flow is expected to be in the mid to high double-digit million range for the full year 2022.

*For more information see attached document

¹Source: IHS “Light Vehicle Production Forecasts” – July 15, 2022

C.L.A.S.S. Eco Hub has selected the winner of C.L.A.S.S. ICON Award 2022, the annual contest with the aim of sponsoring a visionary creative who is able to combine design, responsibility, innovation and communication. Receiving the third edition of the eye-turning award is FROY Club, an experimental and responsible fashion project born in 2018 by designer Arman Avetikyan.

Froy is rooted in Armenian culture and by mixes high quality materials and yarns. Working with a sustainable ethic, Froy reconciles traditional know how and innovative techniques to create hybrid, versatile and speaking surfaces. The brand uses Italian certified fabrics and yarns that meet European standards, selecting natural materials to create high-quality products with a circular life. Froy also chooses GOTS, FSC and OEKO-TEX certified fabrics and yarns in order to support a clear production chain.

By receiving two thousand euros for sourcing purposes, smart consultancy support and communication aid from the C.L.A.S.S. team, plus assistance to the brand in commercial activities, a physical stand in the WHITE Show and a dedicated brand page on Renoon powered by C.L.A.S.S. partners; Froy will have the opportunity to upgrade its efforts in terms of responsibility and innovation, while sharing its conscious vision and values with a wider audience. Moreover, the Italian brand with Armenian roots will become part of the C.L.A.S.S. ICON community, joining past winners such as the high fashion Italian designer Gilberto Calzolari and the Portuguese streetwear brand Duarte

SUPPLY, DEMAND, & TRADE
The latest USDA report featured reductions to figures for both world production and mill-use for both the 2021/22 and 2022/23 crop years.  For 2021/22, the global production estimate was lowered -0.7 million bales (to 116.2 million) and global consumption was lowered -1.9 million bales (to 119.8 million).  For 2022/23, the global production forecast was lowered -1.2 million bales (to 120.7 million) and global consumption was lowered -1.6 million bales (to 119.9 million).

With the decreases in use exceeding the declines in production, figures for global ending stocks increased.  For 2021/22, the projection rose +1.1 million bales (to 84.0 million).  For 2022/23, the forecast increased +1.6 million bales (to 84.3 million).

At the country-level, the largest changes to 2021/22 production were for Brazil (-400,000 bales to 12.3 million) and Uzbekistan (-100,00 bales to 2.7 million).  The largest changes for the 2022/23 harvest were for the U.S. (-1.0 million bales to 15.5 million) and Brazil (-200,000 bales to 13.0 million).

It may be notable that there were no upward country-level revisions for mill-use in either 2021/22 or 2022/23.  The largest revisions for 2021/22 included those for China (-1.0 million to 37.0 million), Vietnam (-400,000 bales to 6.9 million), Bangladesh (-300,000 to 8.0 million), Pakistan (-100,000 bales to 10.9 million), and Uzbekistan (-100,000 bales to 2.7 million).  For 2022/23, consumption estimates were lowered for China (-500,000 bales to 37.5 million), India (-500,000 bales to 25.0 million), Bangladesh (-300,000 bales to 8.6 million), and Vietnam (-300,000 bales to 7.1 million).
The global trade forecast for 2022/23 was lowered -1.1 million bales (to 46.4 million).  The most significant changes on the import side included those for China (-500,000 bales to 10.0 million), Bangladesh (-300,000 bales to 8.5 million), and Vietnam (-300,000 bales to 7.2 million).  On the export side, the largest updates included those for the U.S. (-500,000 bales to 14.0 million) and Australia (+300,000 bales to 6.0 million).
 
PRICE OUTLOOK
Recent volatility was not limited to the cotton market.  A wide range of commodities lost significant value in June.  Between June 9th and July 5th (dates chosen unsystematically to describe the magnitude of declines), cotton fell -25% (NY/ICE December futures), corn fell -19% (Chicago Board of Trade, December contract), soybeans fell -17% (Chicago Board of Trade, November contract), wheat fell -25% (Chicago Board of Trade, December contract), copper fell -20% (London Metal Exchange, nearby), and Brent crude oil fell -12% (ICE, nearby).

The breadth of losses throughout the commodity sector suggests a sea change in investor sentiment for the entire category.  The effects of inflation, the withdrawal of stimulus, rising interest rates, and concerns about a possible recession could all be reasons explaining a reversal of speculative bets, and all could be contributors to the losses.  While the macroeconomic environment can be expected to continue to weigh on prices, there are also supportive forces for the market that are specific to cotton.

The current USDA forecast for U.S. cotton production is 15.5 million bales, and it may get smaller over time because of the severe drought in West Texas.  The current harvest figure is two million bales lower than the 2021/22 number and is equal to the five-year average for U.S. cotton exports (2017/18-2021/22).  On top of exports, the U.S. will need to supply domestic mills with 2.5 million bales.  The last time the U.S. had a severely drought-impacted crop (2020/21), the harvest was only 14.6 million bales.  In that crop year, the U.S. was able to export more than it grew because it had accumulated stocks in the previous year.  The U.S. is coming into the 2022/23 crop year with low stocks.  This suggests U.S. shipments may have been rationed.  Since the U.S. is the world’s largest exporter, this may lend some support to prices internationally.

The ReHubs initiative brings together key European and world players to solve the European textile waste problem by transforming “waste” into a resource, and to boost textile circular business model at large scale.

This collaboration is set to turn the societal textile waste issue into a business opportunity and to fulfil the EU ambitions of the Green Deal, of the mandatory texile waste collection by end 2024 and the transition into Circular Economy.

In 2020 EURATEX launched the ReHubs initiative to promote collaboration across the extended textile value chain and considering all perspectives on chemicals, fibers making, textiles making, garments production, retail and distribution, textiles waste collection, sorting and recycling.

In June 2022 ReHubs completes a Techno Economic master Study (TES) which researches critical information on the feedstock (textile waste) data, on technology, organizational and financial needs to recycle 2.5 million tons of textile waste by 2030 and to effectively launch the ReHubs.

EURATEX’s ReHubs initiative plans to pursue fiber-to-fiber recycling for 2.5 million tons of textile waste by 2030
According ReHubs Techno Economic Master Study (TES), the textile recycling industry could generate in Europe around 15,000 direct new jobs by 2030, and increase need for nearshoring and reshoring of textile manufacturing.

The textile recycling industry in Europe could reach economic, social and environmental benefits for €3.5 billion to €4.5 billion by 2030
“Transform Waste into Feedstock” announced as first project supported by the ReHubs, and aiming at building up a first 50,000 tons capacity facility by 2024.

Europe has a 7-7.5 million tons textile waste problem, of which only 30-35% is collected today.  

Based on the ambitious European Waste law, all EU Member States must separately collect the textile waste in 2 years and half. While some countries are designing schemes to face the waste collection challenge, currently no large-scale plan exist to process the waste.

The largest source of textile waste (85%) comes from private households and approximately 99% of the textile waste was made using virgin fibers.

Euratex  assesses that to reach a fiber-to-fiber recycling rate of around 18 to 26 percent by 2030, a capital expenditure investment in the range of 6 billion € to 7 billion € will be needed, particularly to scale up sufficient sorting and processing infrastructure. The economic, social, and environmental value which could be realized, potentially total an annual impact of €3.5-4.5 billion by 2030.

Once matured and scaled, the textile recycling industry could become a profitable industry with a total market size of 6-8 billion € and around 15,000 direct new jobs by 2030.

Next steps of the ReHubs initiative

• A European textile recycling roadmap proposing Objectives and Key Results to recycle fiber-to-fiber 2.5 million of textile waste by 2030
• A leading collaboration hub with large players and SMEs from across an extended European textile recycling value chain
• A first concrete portfolio of 4 launching projects:
  - Transform textile waste into feedstock
  - Increase the adoption of mechanically recycled fibers in the value chain
  - Expand capacity by solving technical challenges for thermo-mechanical textiles recycling
  - Create capsule collection with post-consumer recycled products

The 1^st project addresses current sorting technologies which have limits to identify materials with sufficient accuracy for the subsequent circular recycling processes. The “Transform Waste into Feedstock” project will focus on further developing and scaling such sorting technologies. The project group led by Texaid AG aims on building up a first 50,000 tons facility by the end 2024.

Suominen strengthens its capabilities in sustainable products by enhancing and upgrading one of its production lines in Nakkila, Finland. The investment is made in line with Suominen’s strategy and supports company’s vision to be a frontrunner in sustainability.

“As we foresaw in our strategy the market demand in Europe has changed remarkably towards more sustainable products. With this investment we respond to the increased demand for environmentally friendly products and also enhance our operational performance in terms of safety, quality and productivity,” says Petri Helsky, President and CEO of Suominen.

The total value of the investment is approximately EUR 6 million and the investment project will be completed in the second half of 2023.

The Reifenhäuser Group will be represented with four booths at the world's leading trade fair for plastics processing, K 2022, from October 19 to 26. Under this year's Reifenhäuser motto "The Time is Now", the extrusion specialists will show producers of films and nonwovens solutions for the three major topics of the industry: sustainability, digitalization and productivity.

The main booth showcases the Reifenhäuser Blown Film, Cast Sheet Coating and Reicofil business units. With the help of machine exhibits, visual presentations and concrete solutions for end products, visitors will learn, among other things, how they can manufacture fully recyclable products economically, process recyclates safely, increase their output and network the entire production without becoming dependent on systems, specialists or manufacturers. To ensure smooth production even after purchase, Reifenhäuser Service shows how customers can get the best out of their Reifenhäuser products and increase their productivity with rework solutions, modifications, training programs and digital services.

The component specialists of the Reifenhäuser Extrusion Systems business unit will additionally present their portfolio at two other exhibition booths. Here, everything revolves around screws, barrels and extruders - and why, especially for processing recycled material, high-performance wear protection is essential for reliability and high economic efficiency. Reifenhäuser Extrusion Systems will also showcase its innovations for flat dies and coextrusion blocks and their coordinated interaction for maximum productivity.

In addition to its own booths, Reifenhäuser will also be present as a partner of the R-Cycle initiative as part of a joint pavilion on the open-air site in the so-called Circular Economy Forum. R-Cycle is a cooperation project of various technology companies and organizations along the entire life cycle of plastic packaging.

Aanother highlight for visitors to the Reifenhäuser trade fair booths is the opportunity to additionally participate in the in-house exhibition on October 20, 21 and 24 at the Reifenhäuser Technology Center.

As a leading company in the collecting, sorting, reselling and recycling of post-consumer textile waste, TEXAID has enabled the recycling of post-consumer textile waste into new textiles and clothing. After two years of development, the company has developed a fabric including 50 % of post-consumer textile waste from used clothing, collected and prepared for recycling by TEXAID.

Today’s linear system of «take – make – waste» needs to change. New textiles are produced, used and discarded instead of putting them to a second use. The production of new textiles requires natural resources that are limited, and the current system has a significant negative impact on our planet. The transition to a circular system, where garments are kept in use for longer, is an opportunity to harness untapped potential around customer loyalty, economic growth, and ecological sustainability.

To move away from the linear system and enable products to be made out of post-consumer textile waste, TEXAID invested in the textile-to-textile recycling and product development.

Collaboration enables recycling
After two years of research, product development, and most important, building partnerships in the value chain, TEXAID has been able to develop a fabric made of 100 % recycled fiber in close collaboration with our value chain partners.

The fabric is a blend of 50 % post-consumer textile waste that TEXAID has collected in Germany and Switzerland. White cotton textiles which cannot be worn, have been sorted out in a sorting facility in Apolda, Germany. The other 50% is made from ocean-bound plastic waste which is plastic with a high risk of entering the ocean which has been saved and recycled by Unifi. The fabric and bag have been produced in Italy. The cotton material has been shredded by Marchi & Fildi in Biella, IT, who then spun the recycled cotton and recycled polyester fibers into a yarn. This yarn has been woven into a fabric by Tessitura Casoni.T.F.C.

Through this proof of concept, it has been showcased that making fabrics of 100 % recycled content and with 50 % of post-consumer textiles is possible. TEXAID is looking for strong industry partners to push high-value textile to textile recycling technologies in joint projects like these.

The Italian company presented its newest innovations and synergies, among the introduction of SMART O3, a new Ozone Booster improving the bleaching on indigo, and the educational experience Circular Explorations: Recipe for Change, in collaboration with Adriana Galijasevic’s Cocircular Lab at Denim Première Vision.

The Trustainable™ collection FW 23 presents the SMART 03
For Officina39, “Trustainable” is a term that expresses the company’s approach based on honesty, transparency and social responsibility: this attitude once again characterizes the technologies that have given shape to the Trustainable™ collection FW 23.

The latest technological addition to the line is represented by the new Ozone Booster SMART 03,
which assures more final bluish indigo shades, activating the reaction of Ozone on indigo without any strong oxidizing agent. Better results, less aggressive bleaching.

Less water, plus sustainability, empowered result
The new collection also marks the debut of Aqualess Fade, a technology that recreates the bleaching effect of chlorine on fabrics, a waterless special compound for the discoloration of denim on indigo/black garments which reduces resource consumption and environmental impact. This newest innovation completes and integrates Aqualess Mission, a combination of technologies that allows garment laundry processes to reduce 75% of the water use.

Officina39 and Adriana Galijasevic join forces
Circular Explorations: Recipe for Change is the collaborative and educational project developed by Officina39 and Adriana Galijasevic’s Cocircular Lab, showcasing the use of waste as a resource and prolonging the life of the garment through color. Several brands (C.P. Company, Tommy for Life/PVH Corp., Organic Basics, Asics, Lenzing and Camo) donated overstock garments as well as second-grade production or damaged, unsold pieces to be updated with newly developed applications made with Officina39’s Recycrom™, patented dyestuffs range made from textile waste.

The Saxon Textile Research Institute (STFI) will be presenting innovative highlights from research and development at Techtextil 2022, the international trade fair for technical textiles and nonwovens. In addition to a warp-knitted textile façade greening in a modular system and textile lightweight construction elements for the building sector made from hemp as a renewable raw material, the STFI will also be showing innovations from nonwovens research. The project optiformTEX is an example of the nonwovens competence: in this project, the mass per unit area was specifically influenced for the production of semi-finished products in the automotive sector. Furthermore, the Chemnitz Institute exhibits an ecological foam coating for protective textiles. Central highlight of the STFI's presence at the fair is also a mobile robot system, which demonstrates the automated loading of a small-scale bobbin creel.

Highlights at Techtextil 2022
The greened façade tile is a system with which large building surfaces can be cost-effectively greened through a simple, modular segment structure. In addition to insulating the building, the system has been created to meet the design requirements of a modern city centre; low-maintenance greening is made possible through functional integration in the textile carrier layer and coordinated plant selection.

Moulded components made of natural fibre nonwovens are increasingly used in the automotive sector. Conventional nonwovens currently have uniform masses per unit area. Technical solutions for load-oriented component reinforcement and the resulting optimised use of materials represent an enormous economic potential. The basic idea of “optiformTEX” was therefore to specifically influence the mass per unit area distribution in the pile before the semi-finished product is consolidated. As a result, a textile-technological process and the corresponding plant component were successfully developed.

Future-oriented materials are offered by developments from the field of renewable raw materials in combination with bio-based resin systems: In the “Gro-Coce” project, an innovative ceiling system was developed by combining sustainable building products and methods. Currently, a high-performance hemp-based semi-finished product as well as the steps for its reproducible production by means of textile surface formation is developed by the research team. Initial application and load tests of the hemp-based semi-finished products on wooden beams confirmed the high performance potential of the natural fibre materials.

Special functional textiles are based on composite materials with coatings or membranes. The previous production of the coatings/membranes poses ecological and health risks. At STFI, solvent-free, purely aqueous coating systems and a technology for their application were therefore developed for the protective textile sector, resulting in a breathable, waterproof and wash-resistant textile coating.

The central highlight of the STFI's presence at the fair is a mobile robot system, which demonstrates the automated loading of a small-scale bobbin creel. At the STFI, the robot is part of the “textile factory of the future”, where a play mat is woven and processed step by step along the textile chain.

Under the United Nations Economic Commission for Europe (UNECE) initiative to enhance transparency and traceability in the garment and footwear industry, Haelixa realizes a pilot project with Costach Cooperative and Peruvian textile company Creditex to give sustainable rural cotton producers in Peru more visibility in the value chain.

In 2019, UNECE and United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) have set up an initiative to drive transparency and traceability for sustainable value chains in the garment and footwear industry. The initiative is jointly implemented with the International Trade Centre (ITC) with financial support by the European Union. Haelixa is proud to be part of the group of experts that develops policy recommendations, traceability standards, and conducts projects to set traceability benchmarks. With the support of the +Cotton Project, implemented by the Food and Agriculture Organization of the United Nations (FAO) and the Brazilian Cooperation Agency (ABC) a pilot is being realized in this context to mark and trace the finest Pima cotton for Creditex directly at the gin in Piura, Peru. Haelixa’s DNA marker connects the actual lint cotton to the entry on a blockchain system provided by UNECE. The Haelixa technology ensures that the information about the product’s origin and the journey of the product along the value chain is always safely embedded into the product itself. The marked cotton will be used to make exclusive pajamas sets for Cat´s Pajamas. DNA traceability will enable the verification of the premium origin of Peruvian Pima cotton in the final garment produced using sustainable practices by family farmers associated with the Costach cooperative.

Costach is the main cooperative of cotton farmers in Peru. The cooperative consists of 5,200 family farmers in the Piura region, producing mostly extra-long fiber of Pima Cotton. Since 2017, the +Cotton project has been supporting the farmers with training on sustainable practices and has been providing technical assistance for improved markets access.

Creditex is vertically integrated from cotton ginning to fine thread, up to the production of high quality apparel for international premium brands. The company takes social responsibility and environmental stewardship very seriously and therefore makes a strong partner for this project, empowering the cotton family farmers that hold the majority of cotton production in Peru.