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Lenzing reports ongoing difficult market situation in the first half of 2014

The cost reduction programme was only able to partially offset the decline in sales and earnings in the first six months of 2014.

22nd August 2014

Innovation in Textiles
 |  Lenzing

Sports/​Outdoor, Clothing/​Footwear

The business development of the Lenzing Group in the first half of 2014 was impacted by the ongoing difficult market conditions featuring considerably lower average fibre selling prices.

Lenzing has reported a 9.1% decline in sales and a 28.8% drop in EBITDA comparing with the same period last year.

The cost reduction programme excelLENZ successfully initiated in 2013 was only able to partially offset the decline in sales and earnings in the first six months of 2014, the company reports.

Figures

Consolidated sales in the first half-year 2014 declined by 9.1% to EUR 900.0 million from the prior-year level of EUR 989.9 million. On a like-for-like basis involving a year-to-year comparison of continuing operations, consolidated sales were down by 4.3% to EUR 900.0 million from EUR 940.0 million in the previous year.

The significantly lower average fibre selling prices could not be offset by higher fibre shipment volumes and an improved product mix. Average fibre selling prices of the Lenzing Group in the first half of 2014 equalled EUR 1.54/kg, comprising a drop of 12.5%.

Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations in the first half-year totalled EUR 91.9 million. This represents a decrease of 28.8% from the first half of 2013. The consolidated half-year earnings before interest and taxes (EBIT) from continuing operations amounted to EUR 32.4 million, a drop of 56.1% from EUR 73.8 million in the previous year.

Cost optimization programme excelLENZ 2.0

Due to the continuing tense price development on the global market for viscose fibres, additional cost savings were initiated within the context of the efficiency enhancement programme excelLENZ 2.0.

“The previously implemented measures have already proven to be effective. Once again we were able to increase the savings generated in the year 2014. In light of the continuing market weakness we have to further sharpen the targeted annual cost savings of up to EUR 160 million. Moreover, we want to reach these targets more quickly”, explained CEO Peter Untersperger. Cost savings of up to EUR 90 million are now expected for the current financial year, one-third higher than originally budgeted.

Tencel plant in Lenzing

In the first half of 2014 the Lenzing Group completed and successfully initiated production at its new Tencel jumbo production facility at the Lenzing site. The plant is in the midst of a stable ramp-up phase.

This facility comprises the first time in which a single production line with an annual nominal capacity of 67,000 tons was installed. Previous Tencel production lines were usually only one-quarter as large.

The new plant design incorporates lessons learned from the longstanding experience of the three existing Lenzing Group Tencel production plants located in Austria, USA and Great Britain. As a consequence, the new Tencel plant in Lenzing represents the world’s leading generation of Tencel technology.

Outlook

There are no perceptible signs of any easing of the situation on the global fibre market in the second half of 2014, the company reports. The expectation of a cotton harvest, which is lower than in the previous year but still exceeds annual consumption, is triggering further pressure on global cotton prices and thus on all fibre prices.

In its operating business, Lenzing will continue to determinedly promote its specialty fibres Lenzing Modal and Tencel. In this case, the focus will be on ramping up the new Tencel plant at the Lenzing site to achieve a production volume of 30,000 tons in 2014, and to sell these additional fibre volumes.

www.lenzing.com

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