Interview with Mr Friedrich Weninger

Like all other branches of industry we were confronted with a severe downturn following the worldwide recession last year. Usually the man-made fiber industry is an early bird in terms of reacting to worldwide economic developments and so it was in 2008. We saw a sharp decline in fiber demand starting at the beginning of the second half 2008 which was accelerating in the fourth quarter 2008. As the general fiber demand slumped, viscose fiber prices fell by almost 30% to 40%, prices for standard fibers in Asia decreased even more. Within one year the viscose fiber industry hand turned from undersupply into an overcapacity situation, leading to standstills and production cuts at many factories, especially in Asia. Since a couple of weeks we have seen signs of bottoming out, as stocks in the textile chain were decreasing and confidence in the market reappeared. Speaking for the viscose fiber industry in general, demand has picked up but prices are still depressed.

Asia’s importance as a market is still predominant, due to the fact that population numbers are still growing considerably, as is prosperity in general. As a consequence per capita consumption is still on the increase, which is a major growth factor for our industry. This, by the way, is also true for other emerging markets such as Brazil or India. This is not to say that Europe, Turkey or the United States, or even the Caribbean based countries have nothing to contribute. There are certainly very attractive individual niche players all over the place – innovation and technical competence are still very important factors for a market.

The nonwovens industry covers a wide variety of applications ranging from commodity products to specialty fabrics. The commodity sectors such as wet wipes have provided an excellent basis of growth for Lenzing in the western world. With the increase of personal income, the importance of nonwovens has also been growing in the emerging countries. Asia is still the key market, with the BRIC countries already starting to develop, promising an excellent basis for the future.

Lenzing Viscose® and TENCEL® are used in the technical as well as in hygiene segments for specialty fabrics. A typical hygiene application is the use of Lenzing Viscose® in tampons where high quality fibers provide comfort and protection in an extremely sensitive application. In the technical area Lenzing fibers are used in automotive applications, in filters and in specialty papers.

This mix of commodity and tailor-made specialty products makes the nonwovens business an extremely important sector for Lenzing, with continuing high growth rates and potential for innovative new products and applications.

As already said, the driving force and major influencing factor for our business is GDP and its growth. This explains why Asian countries are where they are and at the same time makes me expect that in the Asian world per capita consumption rate is definitely on the rise.

I am generally optimistic that the worst is over, but it has still to bee seen in the second half of 2009 whether the recovery is sustainable. In the Western industrialised countries consumers are not yet fully aware of the consequences the crisis will have. I am more optimistic for the demand in the Emerging Markets. But as we have learned in the past, every downturn is followed by an upswing – so we are well prepared. We never stopped supplying our customers, not even in the worst situation at year-end 2008 and have proven to be a reliable partner. We continue to focus on innovative uses for our broad range of fibers, thus helping our customers to bring new, high quality products on the market. Our strategy to offer the full range of cellulosic fibers in addition to the best customer service and technical support worldwide has led to a gain in market share in the last few months. This is the best starting point for us not only to follow but even to lead any coming upswing.

Lenzing R&D is the worldwide leading center of competence for the extraction of high valued raw materials from wood, one of the most important renewable sources provided by nature for mankind. We have turned the cellulosic fiber plant at Lenzing, the world’s largest integrated cellulosic fiber site into a kind of “wood refinery”. We extract not only cellulose but also a number of highly valuable by-products and finally thermal energy from wood. This was possible due to years of intensive R&D work of our team leading to a deep understanding of the wood pulping process. The Lenzing site today works almost CO2-neutral. Lenzing will continue its R&D activities to optimise the cellulosic production process. This is the starting point and core of our understanding as a company committed to the principles of sustainability.

Lenzing does not use wood from unsustainable sources such as illegal deforestation in tropical regions and we do not use tropical hard wood for pulp production. In Europe, where we purchase about one million tons of beech wood we have very strict forestry-regulations following the principle that for every tree cut at least one new tree has to be planted.

The term “sustainability” itself is derived from European forestry principles reaching as far back as the 17th and 18th centuries. It originally described the idea that we cannot take more from the living resource forest than natural regeneration provides, if we want to pass this foundation of life on to future generations. The Club of Rome in 1972 extended the meaning to “a state of global balance” in its report “The Limits to Growth” and the concept was termed “sustainability” in English.

As a result, although wood has always been used as an industrial resource in Europe, the quantity of wood has increased in the last decade, and forested area has increased significantly. When Lenzing purchases wood pulp for its non-integrated fiber plants, we pay high attention that our suppliers work in line with the principles of sustainable forestry. In general we use wood pulp from eucalyptus plantations where we can follow the whole production chain from planting the trees to the shipping of the wood pulp.

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