Lenzing – Earnings more than doubled in first nine months of 2021

Strong operating result despite continued rise in energy, raw material and logistics costs

  • Key strategic projects on track – commissioning of the lyocell plant in Thailand from the end of the year
  • Renowned marine research institute of the University of California, San Diego, confirms that LENZING™ fibres are biodegradable – an effective alternative to reduce plastic pollution
  • Lenzing rated “sustainability champion” by MSCI ESG

 Cord Prinzhorn assumes role of interim CEO – 2021 guidance confirmed

The Lenzing Group reported a significant year-on-year improvement in revenue and earnings in the first nine months of 2021 thanks to the largely positive market environment. Growing optimism in the textile and apparel industry and the recovery in retail led to a substantial increase in demand and prices on the global fibre market, particularly at the start of the current financial year.

Revenue rose by 32.9 % to EUR 1.59 bn in the first nine months of 2021. This increase is attributable to a higher sales volume as well as higher viscose prices, which stood at more than RMB 15000 in May thanks to significantly higher demand for fibres, especially in Asia. The focus on wood-based specialty fibres such as the TENCEL™, LENZING™ ECOVERO™ and VEOCEL™ branded fibres also had a positive impact on the revenue trend; the share of specialty fibres in fibre revenue amounted to 72.4 % in the reporting period. This more than offset the negative impact of less favourable currency effects. The earnings performance essentially reflects the positive market trend and was additionally reinforced by efficiency-enhancement measures. Energy, raw material and logistics costs increased significantly during the entire reporting period. EBITDA (earnings before interest, tax, depreciation and amortization) more than doubled to EUR 297.6 mn in the first nine months of 2021 (compared to EUR 138.5 mn in the first nine months of 2020). The EBITDA margin rose from 11.6 % to 18.7 %. Net profit for the period amounted to EUR 113.4 mn (compared to a net loss of EUR minus 23.3 mn in the first nine months of 2020) and earnings per share to EUR 3.77 (compared to EUR minus 0.1 in the first three months of 2020).

“Lenzing has enjoyed a strong business performance to date in 2021. Demand for our wood-based, biodegradable specialty fibres under the TENCEL™, LENZING™ ECOVERO™ and VEOCEL™ brands is growing very well”, notes Thomas Obendrauf, Chief Financial Officer of the Lenzing Group. “We stay the course, and the largest investment program in our company’s history is still running according to schedule. With the imminent commissioning of the lyocell plant in Thailand, we will reach a highly important milestone for both the company and our goal to make the textile and nonwovens industries more sustainable”, Obendrauf comments.

Gross cash flow more than tripled to EUR 301.1 mn in the first nine months of 2021 (compared to EUR 83.3 mn in the first nine months of 2020). This increase was above all due to the earnings performance. Cash flow from operating activities amounted to EUR 307.8 mn (compared to EUR minus 14 mn in the first nine months of 2020). Free cash flow amounted to EUR minus 317.9 mn (compared to EUR minus 460.8 mn in the first nine months of 2020) due to the investment activities related to the projects in Thailand and Brazil. CAPEX (expenditures for intangible assets, property, plant and equipment, and biological assets) increased by 40.3 percent to EUR 631.1 mn during the reporting period, of which roughly half was financed out of cash flow from operating activities. The strong increase in investments is attributable to the implementation of the key projects.

Strengthening specialty fibre growth

The construction of the pulp mill in Brazil continues to proceed according to schedule despite the challenging developments related to COVID-19. The expected ramp-up of the pulp mill is still scheduled for the first half of 2022. The new mill will strengthen backward integration and, consequently, Lenzing’s specialty fibre growth in line with the sCore TEN strategy.

Specialty fibres are Lenzing’s great strength. The objective is to generate more than 75 percent of fibre revenues from business with wood-based specialty fibres such as lyocell and modal fibres by 2024. The focus of this strategic target is on the construction of a new state-of-the-art lyocell plant in Thailand. The investment for the new plant with a capacity of 100000 tons amounts to approximately EUR 400 million. Construction work started in the second half of 2019 and proceeded largely according to schedule in the reporting period, despite the challenges arising from the pandemic. The recruiting and onboarding of new employees is progressing successfully. The commissioning of the plant is scheduled for the end of the year, and the start of production for the first quarter of 2022.

In addition, Lenzing is investing more than EUR 200 mn in its production sites in Purwakarta (Indonesia) and Nanjing (China) to convert existing standard viscose capacity into capacity for eco-friendly specialty fibres. In Nanjing, Lenzing will establish the first wood-based fibre complex in China that does not depend on coal as an energy source. At the same time, a line of standard viscose will be converted to a TENCEL™ branded modal fibres line, making the Chinese plant a completely wood-based specialty fibre site by the end of 2022.

Investments in Lenzing’s site in Indonesia will make this facility fully compliant with EU Ecolabel standards. As a consequence, the site will become a pure specialty viscose supplier as of 2023. Once these investments have been completed, Lenzing will boost specialty fibres as a percentage of its fibre revenues to well above the targeted 75 % by as early as 2023.

Vision of a zero-carbon future

With the implementation of its science-based targets, the Lenzing Group is actively contributing to combating problems caused by climate change. In 2019, Lenzing made a strategic commitment to reducing its greenhouse gas emissions per ton of product by 50 percent by 2030. The vision is to be climate-neutral by 2050. The two key projects in Brazil and Thailand represent important milestones on this journey. Thanks to its excellent infrastructure, the location in Thailand can be supplied with sustainable biogenic energy. In addition, the mill in Brazil will feed more than 50 percent of the electricity generated into the public grid as renewable energy. The investments at the existing Asian locations are also in line with Lenzing’s decarbonisation goals.

The cooperation with Södra, a Swedish pulp producer, marks a further milestone in Lenzing’s efforts to achieve its ambitious climate and sustainability goals. The two leading global suppliers, which have been proactively driving the closed-loop economy in the fashion industry for many years, are joining forces to give the issue a further boost and to make a decisive contribution to addressing the challenges posed by textile waste globally. A capacity expansion for pulp from textile waste is also planned. The goal is to recycle 25000 tons of textile waste per year by 2025.

For Lenzing, sustainability represents both a core value of its strategy and a guiding principle for innovation and product development. Lenzing further expanded its product offering for the textile and nonwovens industries in the reporting period. The first TENCEL™ branded lyocell fibre made of orange pulp and wood sources was presented in the third quarter. The first fabrics are being developed in cooperation with Orange Fibre, an Italian specialist textile producer. The upcycling of orange peel as part of the TENCEL™ Limited Edition initiative represents another successful attempt by Lenzing to develop new recycling solutions with partners along the value chain. The launch of the first carbon-neutral fibres on the global nonwovens market under the VEOCEL™ brand offers a further example of product innovation in the reporting period, reflecting the ambitious path pursued by Lenzing and its partners in the areas of climate change and the closed-loop economy.

Alternative to fossil-based fibres

With its wood-based, biodegradable VEOCEL™ fibres, Lenzing is also benefiting from new legislation such as the Single-Use Plastics Directive (EU) 2019/904.1 The EU Commission published implementation guidelines in the second quarter specifying which products fall within the directive’s scope. Lenzing welcomes the measures taken by the EU in a joint effort of the Member States to combat plastic pollution. The Single-Use Plastics Directive stipulates uniform labelling requirements for some of the single-use plastic products either on the packaging or on the product itself from July 3, 2021. They encompass feminine hygiene products and wet wipes for personal and household care containing plastic.

In a study published in October 20212, scientists from the renowned academic research institute Scripps Institution of Oceanography (SIO) of the University of California, San Diego, confirmed that wood-based cellulosic fibres are quickly degraded in the ocean at the end of their lifecycle, which makes them a clearly superior alternative to fossil-based synthetic fibres. The study arose from an independent project aiming to understand “end-of-life” scenarios for textiles and nonwovens discarded in the environment. While wood-based cellulosic fibres fully biodegraded within 30 days, the fossil-based fibres tested were practically unchanged after more than 200 days.

Plastic pollution represents one of the great problems of our time, and it might have a long-term impact on multiple generations. The fashion industry, with its “fast fashion” business model, has an extremely negative effect on the environment. The use of fossil-based synthetic fibres in clothes has roughly doubled over the last 20 years, Fossil-based fibres represent approximately two thirds of global fibre consumption today, and this share is constantly increasing3.

Lenzing rated “sustainability champion”

Lenzing received several awards for its achievements during the reporting period, most notably in the field of sustainability: The renowned rating agency MSCI upgraded Lenzing Group from “A” to “AA” as of September 2021. This places Lenzing among the top 6 percent of rated companies in its peer group. Due to the improved MSCI ESG rating, Lenzing will benefit from lower interest expenses. Lenzing placed a EUR 500 millionn bonded loan (Schuldschein loan) in November 2019 that is linked to its sustainability performance. In accordance with its commitment under the bonded loan placement, the company will donate the full amount of the interest expense saving as a consequence of the rating revision to a project it supports. MSCI cited the company’s ambitioclimate targets, its approach to promoting a closed-loop economy and exceptionally good governance structures as the main reasons for the upgrade.

Lenzing was awarded Platinum CSR status by EcoVadis for the first time in 2021 and now ranks among the top one percent of companies worldwide rated with regard to the environment, fair working conditions and human rights, as well as ethics and sustainable procurement.

Cord Prinzhorn assumes role of interim CEO

Lenzing AG Shooting mit CEO Cord Prinzhorn Foto: Neumayr/Leopold 14.10.2021

In September, the Supervisory Board of Lenzing AG came to a mutual agreement with its longstanding Chief Executive Officer Stefan Doboczky to terminate his contract before the end of his term. Doboczky informed the Supervisory Board that he will not be available for a further extension of his contract. The Supervisory Board accepted his resignation with great regret and the parties mutually agreed to end the contract with effect as of the end of the reporting period. Cord Prinzhorn has been appointed interim Chief Executive Officer. He has been a member of Lenzing’s Supervisory Board since the Annual General Meeting in April. When Prinzhorn assumes the role of Chief Executive Officer on November 04, 2021, his Supervisory Board mandate will be suspended for the time being.

Outlook and guidance for 2021

The International Monetary Fund forecasts global growth of 5.9 percent for 2021. However, the economic recovery after the deep recession caused by COVID-19 is subject to risks, and largely depends on further progress made with vaccination campaigns and the successful global containment of the pandemic, particularly in developing countries. The currency environment is expected to remain volatile in the regions relevant to Lenzing.

The global fibre markets saw a significant recovery from the CoV crisis from the third quarter of 2020, starting in China. However, the market turned in February/March this year and took a downward trend until well into the third quarter. In the last few weeks, fibre prices have risen sharply again. In the cotton market, the current 2020/2021 harvest points to a tightening in production volume and, consequently, a slight decrease in inventory levels. The prices for dissolving wood pulp remain at a high level despite the decline in the third and at the start of the fourth quarter.

Lenzing expects continued growth in demand for sustainably produced fibres for the textile and apparel industries as well as for the hygiene and medical industries. This trend is likely to continue unabated after the COVID-19 pandemic, not least due to a number of legislative initiatives.

With the prospect of a progressing active immunization of a broad population against COVID-19, optimism and confidence in a speedy return to normality are also rising within the textile value chain. However, the currently positive environment continues to be characterized by a high level of uncertainty, also due to the increased occurrence of virus mutations and the extremely high infection rates in parts of South America and in South and South-East Asia. For this reason, visibility remains limited.

Following significant cost increases in the year to date, further cost pressure on energy, raw materials and logistics is expected in the coming quarters.

Given the above factors and the very positive performance during the first nine months, the Lenzing Group therefore continues to expect EBITDA to reach at least EUR 360 mn in 2021.

In light of these trends, Lenzing considers itself well-positioned with its sCore TEN corporate strategy, and will continue to drive the completion of the major strategic projects, which are to make a significant contribution to earnings from 2022. In addition to its targets for EBITDA (EUR 800 mn) and ROCE (>10 %4), Lenzing also confirms its four other medium-term targets for 2024: net debt/EBITDA (<2.5 x), share of specialty fibres (>75 % of fibre revenue), own supply of dissolving wood pulp (>75 %), decarbonisation (>40 % fewer CO2 emissions per ton of product).


1 Directive (EU) 2019/904 of the European Parliament and of the Council of 5 June 2019 on the reduction of the impact of certain plastic products on the environment

2 https://www.sciencedirect.com/science/article/pii/S0048969721031314

3 http://changingmarkets.org/wp-content/uploads/2021/01/FOSSIL-FASHION_Web-compressed.pdf

4 To be adjusted for assets under construction