- Very positive development of the specialty fibre business with a 47 % share in revenue
- Market environment for standard viscose still very tight
- Resolution on dividend: EUR 3.00 plus special dividend of EUR 2.00 per share
- Outlook confirmed: Earnings for 2019 expected at a similar level as in 2018
The Lenzing Group continued its solid development in the first quarter of 2019. Despite a much tighter market environment, the Lenzing Group even recorded a slight increase in revenue, proving once again that it has chosen the right path with its sCore TEN corporate strategy. The declining prices for standard viscose were largely offset in earnings.
Group revenue rose by 1.8 % to EUR 560 million in the first quarter of 2019 compared with the same quarter of 2018. This increase is primarily attributable to a better product mix – the share of specialty fibres in revenue of 47.3 % significantly exceeded the prior-year value of 42.1 % – and more favourable exchange rates. Consequently, declining prices for standard viscose were more than offset. EBITDA (earnings before interest, tax, depreciation and amortization) dropped by 9.5 % to EUR 92 million. In addition to the market environment for standard viscose, this was primarily caused by currency effects, which burdened material and personnel costs. The EBITDA margin dropped from 18.5 % in the first quarter of 2018 to 16.4 % in the reporting period. EBIT (earnings before interest and tax) fell by 21.1 % to EUR 54.4 million, leading to a lower EBIT margin of 9.7 % (01-03/2018: 12.5 %). Net profit for the period dropped by 14.5 % from EUR 50 million in the previous year to EUR 42.8 million. Earnings per share amounted to EUR 1.65 (01-03/2018: EUR 1.89).
The 75th Annual General Meeting of Lenzing AG on April 17, 2019 resolved to distribute a dividend of EUR 3.00 per share as well as a special dividend totalling EUR 2.00 per share.
“Our specialty fibre business is still developing very well, which has made us significantly more resilient today than only a few years ago. In order to become even more resistant to market fluctuations, we continue to advance the implementation of the sCore TEN strategy and the planned major projects in Brazil and Thailand with great discipline”, says Stefan Doboczky, Chief Executive Officer of the Lenzing Group.
Expansion of pulp and lyocell capacities
CAPEX (acquisition of property, plant and equipment) dropped by 22.4 % to EUR 45.7 mn in the first quarter of 2019. This decline is attributable to the completion of the expansion project in Heiligenkreuz (Austria) in 2018 and the ongoing planning for the major projects in Brazil and Thailand, which will only have an effect on the investment volume in the coming quarters. The basic engineering for the construction of the new lyocell plant in Prachinburi, near Bangkok, is making equally good progress as the planned establishment of the pulp plant in Minas Gerais.
Heiligenkreuz at full capacity again
At the site in Heiligenkreuz a fire occurred on February 1, 2019 causing a shutdown of the lyocell production for several weeks. Material damage and the damage resulting from the interruption of operations are covered by insurance. Production at the site is now running at full capacity again.
Even greater focus on innovation and customer intimacy
Lenzing also continues to intensify its collaboration with next generation fashion designers in Asia. Recently, with the TENCEL™ Studio, a design center featuring fashion from TENCEL™ fibers was opened in Singapore. The center is the next step in the effort to give consumers an insight into innovations and new applications. In the area of nonwovens, another milestone was set with the start of the establishment of an innovation center in Germany. The new test facility, which is being set up in cooperation with the Hof University of Applied Sciences, enables Lenzing to work even more closely with its customers and partners in the hygiene, cosmetics and medical industries.
Sustainability: Partner for Change
For the Lenzing Group, sustainability is not only a core value of the corporate strategy but also a key business driver and stimulus for innovation. The focus of the Sustainability Report 2018, which was published in March of this year, is on the wide range of activities the company is engaged in pursuing its mission of greening up the value chain. The Report is entitled “Partner for Change“, with the most recent example of this concept being the cooperation with the Swiss retailer Coop and the Austrian supermarkets of REWE International AG. Together their new reusable net bags for fruit and vegetables, Lenzing and its partners offer consumers an eco-friendly alternative to plastic packaging. Reusable net bags made from LENZING™ modal fibers offer a significant ecological advantage over conventional plastic packaging because of their natural origin, which makes them biodegradable and compostable.
IMF, the International Monetary Fund expects a slowdown of global economic growth to 3.3 % in 2019, mainly driven by increasing protectionist tendencies and growing geopolitical tensions. The currency environment in the regions relevant to Lenzing will remain volatile.
Demand on the global fibre markets is still positive. According to preliminary calculations, cotton inventory levels should decline slightly again in 2019. Over the past months, the polyester market recovered from slower growth at the beginning of the reporting year. The price levels for cotton and polyester are expected to remain stable. Capacity expansions for standard viscose should remain at a similar level as in the 2018 financial year. Despite strong demand, this will result in growing oversupply, which will cause even higher pressure on prices. The Lenzing Group expects the positive development of its specialty fibre business to continue.
Caustic soda prices in Asia have already declined significantly over the past months; however, there are no signs of such a development in Europe yet. Overall, Lenzing does not expect any significant changes for key raw materials that would be relevant to earnings.
Based on the current exchange rates, the Lenzing Group continues to expect its results for 2019 to reach a similar level as in 2018 despite a much tighter market environment for standard viscose. These developments reassure the Lenzing Group in its chosen corporate strategy sCore TEN. Lenzing is very well positioned in this market environment and will continue its consistent focus on growth with specialty fibres.