From the Sector

• Christian Bruch and Stefan Fida proposed to serve as new members of the Supervisory Board
• Hanno Bästlein and Christoph Kollatz will resign from their positions on the Supervisory Board at the upcoming Annual General Meeting

Prior to the Annual General Meeting of the publicly traded company Lenzing AG scheduled for April 17, 2019, the Nomination Committee dealt with the future composition of the Supervisory Board. It has proposed that the Annual General Meeting appoint Christian Bruch to serve on the Supervisory Board. Mr. Bruch has been a member of the Executive Board of Linde AG since 2015 and a member of the Management Committee of Linde plc since 2019. The graduate in mechanical engineering will contribute his extensive experience in plant engineering and various technical and management positions in internationally operating industrial companies. The Viennese lawyer Stefan Fida has also been nominated as a future member of the Supervisory Board.

As previously announced, Hanno Bästlein will resign from his position on the Supervisory Board at the upcoming Annual General Meeting in order to be able to increasingly devote his attention to his own business activities. Christoph Kollatz will also step down from the Supervisory Board for professional reasons at the Annual General Meeting in April 2019.

“We would like to thank Hanno Bästlein and Christoph Kollatz for their dedicated work on the Supervisory Board of Lenzing AG. Thanks to their expertise, they made a major contribution to important strategic decisions in the company. During his four years as Chairman of the Supervisory Board, Hanno Bästlein decisively supported the strategy of the Lenzing Group and thus contributed to the enhanced resilience of the company based on the expansion with specialty fibers”, says Stefan Doboczky, Chief Executive Officer of Lenzing AG.

• Strategic collaboration in a prominent location on Orchard Road
• TENCEL™ Studio will host showroom featuring fashion from TENCEL™ fibers
• Cooperation underpins new branding strategy to reach out to consumers
• Chain of innovation and application centers in Asia completed

Lenzing/Singapore – The Lenzing Group, world market leader in specialty fibers from wood, will partner with the Textile and Fashion Federation Singapore (TaFF) to offer Singapore’s designers a hub to present themselves and make the TENCEL™ brand more accessible to consumers. The collaboration was announced last week at the opening ceremony of Design Orchard attended by Chan Chun Sing, Minister for Trade and Industry of Singapore.

“Lenzing is excited to work with TaFF on The Cocoon Space and its programs. Our cooperation with fashion designers is an important element in showcasing the sustainability promise of our flagship brand TENCEL™ to consumers. It comprises an integral part of Lenzing’s commitment to green-up the fashion industry”, says Stefan Doboczky, Chief Executive Officer of the Lenzing Group. “Singapore is a strategic hub for Lenzing in Asia, and we are proud to contribute towards taking Singapore’s fashion scene to greater heights.”

• The Packnatur® reusable cellulose bag wins State Prize in the B2C category
• Bags are made from wood-based fibers of Lenzing AG, which are biodegradeable
• Bags were developed together with VPZ Verpackungszentrum GmbH and are utilized by Coop and REWE for fruits and vegetables

Lenzing/ Vienna – Lenzing AG was granted the Austrian State Prize 2018 for Smart Packaging this year together with its partners. The Federal Ministry of Digital and Economic Affairs and the Federal Ministry of Sustainability and Tourism bestowed the Austrian State Prize this week in the B2C category on the Packnatur® reusable wood-based bag. This reusable bag is made with fibers produced by Lenzing AG and was developed by Lenzing and its partner VPZ Verpackungszentrum GmbH. The bags are utilized in the supermarkets of the Swiss food retailer Coop and the Austrian firm REWE International AG.

The Packnatur® reusable cellulose bag is particularly suited for the packaging of fruit and vegetables and serves as an ideal replacement for plastic bags. The jury provided the following reasons to justify the selection of the winner: The Packnatur® reusable cellulose bag comprises a long-lasting, reusable packaging solution made of a renewable raw material but not at the expense of food. It has very pleasant haptics and supports longer shelf life of food.

LENZING™ fibers are made from the natural and renewable raw material wood. For this reason, they are biodegradable. Moreover, they pollute neither rivers nor seas with microparticles washed out in the process of washing.

The Austrian State Prize for Smart Packaging was granted on the occasion of the 3rd Austrian Packaging Day. This year for the 58th time, the objective of this award is to highlight modern packaging solutions and excellent projects as best practice examples and thus put the national packaging industry in the international limelight.

The Lenzing Group intends to acquire the remaining 30 percent of its Chinese subsidiary Lenzing (Nanjing) Fibers Co. Ltd. (LNF) from its state-owned joint venture partner NCFC. After closing of the transaction, the Lenzing Group will hold 100 percent of LNF. The underlying structured selling process was initiated by the joint venture partner in a state controlled bidding process and today the Lenzing Group received the Share Purchase Agreement draft. The closing of the transaction documents is expected for the end of October. The acquisition will have a negative impact on net profit of the Lenzing Group of approx. EUR 21 mn for the fiscal year 2018.

The purchase of the shares supports Lenzing’s strategic growth as a producer of specialty fibers from the renewable raw material wood in China and worldwide. It paves the way to setting up further production lines for specialty fibers. Lenzing wants to convert LNF into a specialty fibers hub over time.

• 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.

• Market success above expectations
• Product and market development accelerated
• Investment up to EUR 30 mn

Lenzing – The Lenzing Group is setting another milestone as a specialist for extremely high-quality products made of the renewable raw material wood. Capacities will be significantly expanded due to strong demand for Lenzing’s TENCELTM Luxe filament yarn which was first launched on the market just a few months ago. Lenzing will invest up to EUR 30 mn in a further pilot line at the Lenzing site. Basic engineering for construction of the new facility has already been initiated.

“Thanks to TENCELTM Luxe, Lenzing is currently positioning itself in the premium luxury market and is embedding the issue of sustainability there in combination with superior aesthetics”, says Robert van de Kerkhof, Chief Commercial Officer of the Lenzing Group. “The fine filament yarn is comparable to natural silk due to its airy feeling on the skin and the matte finish. It is perfectly suited for very fine fabrics made exclusively from this yarn and as a blending partner with silk, cashmere and wool”, he adds.

“On the occasion of the launch of TENCELTM Luxe filaments, the luxury brands already realized what opportunities they would have by using this yarn made of the renewable raw material wood. For this reason, demand is already so high that we have decided to take an intermediate step to expand capacities before building a large commercial production plant. The decision to construct a new line will serve as the basis for generating a three-fold increase in capacity compared to the previous volume. The additional capacity will be available to customers at the end of next year”, states Stefan Doboczky, Chief Executive Officer and Chairman of the Management Board of the Lenzing Group. “The Lenzing site was selected because research and technological know-how in plant construction are connected in a special way, which will in turn enable us to further develop this special product”, Doboczky adds.

The new capacities will enable Lenzing to more effectively fulfil the needs of customers for TENCELTM Luxe filament yarn than in the past. At the same time, Lenzing will press ahead with technical planning for a large-scale commercial line at the Lenzing site.

This strong level of demand is further evidence of the Lenzing Group’s innovative strength. The yarn is opening up new markets for the company in the eco-couture segment, thus contributing to the successful implementation of the sCore TEN strategy.

• 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 9.4 percent to EUR 1,726.6 mn
• EBITDA improvement of 23.9 percent to EUR 397.1 mn
• Retail bond of EUR 120 mn redeemed – Lenzing with net liquidity as at end of September
• State-of-the-art application innovation center opened in Hong Kong

Lenzing – The Lenzing Group generated a substantial increase in revenue and earnings in the first nine months of the 2017 financial year compared to the prior-year period. The company is continuing the implementation of its Group strategy sCore TEN in order to further expand the offering of specialty fibers and be even closer to its customers and business partners.

Consolidated revenue climbed 9.4 percent year-on-year to EUR 1,726.6 mn. This increase is mainly attributable to higher prices for all three fiber generations. Consolidated earnings before tax, depreciation and amortization (EBITDA) rose 23.9 percent to EUR 397.1 mn, corresponding to an EBITDA margin of 23 percent, up from 20.3 percent in the prior-year period. Earnings before interest and tax (EBIT) increased by 34.6 percent to EUR 298.4 mn, resulting in a higher EBIT margin of 17.3 percent (Q1-3 2016: 14 percent). The profit for the period improved by 35.3 percent to EUR 219.3 mn, and earnings per share rose 36 percent to EUR 8.12 per share. In September Lenzing redeemed the retail bond of EUR 120 mn. At the end of the reporting period the Group had net liquidity of EUR 16.9 mn.

“In the first three quarters of 2017, we successfully captured value in a very positive market environment and we continue to implement the sCore TEN strategy with great discipline. The opening of our new application innovation center in Hong Kong is an important step to boost our regional innovation capabilities. We were particularly proud to launch TENCELTM Luxe as a sign of Lenzing’s ongoing commitment to innovation and sustainability”, states Stefan Doboczky, Chief Executive Officer of the Lenzing Group. “After three excellent quarters we are confident to deliver substantially better operating results in 2017 compared to 2016, but at the same time we do expect more headwinds in 2018.”

Focus on customer intimacy

In September 2017, the Lenzing Group opened a new application innovation center (AIC) in Hong Kong, thus setting a further milestone in strengthening its innovation offering to all partners along the value chain. New applications for Lenzing fibers will be developed and tested at the new facility, among them applications for recent innovations such as the TENCELTM Luxe branded lyocell filament, the RefibraTM branded lyocell fiber and the EcoVeroTM branded viscose fiber.

Furthermore, new sales and marketing offices were opened in Turkey and South Korea in the first half of 2017. The direct contact to customers and well-equipped showrooms featuring products made of LenzingTM fibers serve as the basis for providing even better customer support.

Investment program in progress

The Lenzing Group aims to increase the share of specialty fibers as a percentage of revenue to 50 percent by 2020. Following the capacity expansion initiatives in Heiligenkreuz (Austria) and Mobile, Alabama (USA) which are both underway, Lenzing announced its intention to construct the next plant to produce TENCEL® fibers in Thailand.

A new era of sustainable production

In October 2017, the Lenzing Group presented a new product, TENCELTM Luxe, at an exclusive event held in Paris. The TENCELTM Luxe branded filament yarn represents Lenzing’s entry in the filament market. This fiber will support the Lenzing Group’s path towards becoming a true specialty player in the market for botanic materials derived from the sustainable raw material wood.

The launch volumes of TENCELTM Luxe are being produced at the Lenzing site. The basic engineering for a commercial scale plant was commenced.

Outlook
Demand development on the global fiber market remains positive within the context of a generally friendly macroeconomic environment. Lenzing expects wood-based cellulose fibers to grow at an even higher rate than the overall fiber market. After three excellent quarters, the Lenzing Group will achieve an operating result in 2017 that is significantly better than 2016.

For 2018, Lenzing sees a number of somewhat opposing factors that limit visibility regarding fiber price developments. Overall market demand is expected to remain high. However, the Group expects a substantial increase on the supply side, especially for viscose but also for cotton. Price trends for selected key raw materials, especially caustic soda, are difficult to predict. Against this background the Lenzing Group expects a much more challenging market environment for standard viscose during the upcoming quarters.

The above-mentioned development reassures the Lenzing Group in its chosen corporate strategy sCore TEN. The Group initiated its transformation from a volume-oriented viscose player to a value-oriented specialty fiber player at the end of 2015, and will continue the disciplined implementation of its business strategy.

Lenzing – The Lenzing Group aims to substantially increase its share of specialty fibers as a proportion of total revenue. Following the expansion drive already underway in Lenzing and Heiligenkreuz (both in Austria), Grimsby (Great Britain) and Mobile, Alabama (USA), the Supervisory Board of Lenzing AG approved the proposal of the Management Board yesterday to build the next state-of-the-art facility to produce lyocell fibers in Thailand. For this purpose, Lenzing is establishing a subsidiary in Thailand and purchasing a commercial property in Industrial Park 304 located in Prachinburi near Bangkok. In the coming months, the required permits and licenses as well as technical planning will be finalized. A definitive decision on constructing the new production plant will be made in the first quarter of 2018. Completion is scheduled for the end of 2020.
The selection of Industrial Park 304 in Prachinburi was based on its excellent overall infrastructure, outstanding expansion opportunities and the sustainable biogenic energy supply. Similar to the plant in Mobile, the planned production facility will be constructed on the basis of the latest state-of-the-art technology and feature a capacity of up to 100,000 tons annually. This site will strengthen the worldwide lyocell network of the Lenzing Group and enable its global customers to source TENCEL® branded fibers from Europe, North America and Asia.