Austria's Lenzing reports 25.2% revenue growth in H1 2022

Energy, raw materials and logistics costs rose sharply once again in the reporting period, after cost pressure had already risen steadily throughout the 2021 financial year. Consequently, earnings before interest, tax, depreciation and amortisation (EBITDA) decreased by 13.3 per cent year-on-year to €188.9 million.

The strength of the specialty strategy and of brands based on innovation and sustainable activity as well as the continued focus on measures to improve structural earnings in all regions mitigated this negative effect. The EBITDA margin reduced from 21.1 to 14.6 per cent in H1. Net profit for the period decreased by 24.8 per cent to €72.3 million, while earnings per share amounted to €2.36 (compared to €3.06 in H1 2021), the company said in a media release.

“In the first half of 2022, we have accomplished an enormous amount together in order to achieve our ambitious growth and sustainability goals. Thanks to considerable efforts, we can be satisfied with our business performance given the extreme developments in global energy and raw material markets,” commented Stephan Sielaff, Lenzing Group CEO. “The second half of the year will continue to be characterized by elevated levels of uncertainty and extreme challenges on the energy and raw materials sides.”

Gross cash flow reduced by 14.9 per cent to €169.7 million in H1 2022, mainly reflecting the earnings trend. Due to the higher level of working capital, cash flow from operating activities amounted to €15.2 million (compared to €199.8 million in H1 2021). Free cash flow amounted to minus €372.7 million (compared to minus €224.3 million in H1 2021), which especially reflected the investment activities related to the projects in Thailand and Brazil. Capital expenditure on intangible assets, on property, plant and equipment and on biological assets (CAPEX) decreased by 8.7 per cent to €389 million.

In March 2022, the Lenzing Supervisory Board announced the appointment of Stephan Sielaff as the new CEO of the Lenzing Group. As of April 1, 2022, Sielaff succeeded Cord Prinzhorn, who took over as interim CEO in the fourth quarter of 2021. This reduces the managing board from five to four members. CFO Thomas Obendrauf informed the Lenzing supervisory board that he would not be available for a further extension of his contract, which expired in June 2022. The Lenzing Supervisory Board is currently working on a replacement for him. Until a successor is appointed, Stephan Sielaff will perform the CFO’s duties on an interim basis, while Thomas Obendrauf will assist the company in an advisory capacity.

Meanwhile, the managing board mandate of chief pulp officer Christian Skilich was extended early by a further three years until May 31, 2026. Personnel changes also occurred on the Lenzing Supervisory Board. Cord Prinzhorn took over as chairman from Peter Edelmann, who stepped down from the supervisory board at his own request with effect as of April 26, 2022, the release added.

Lenzing will continue on its profitable growth trajectory following the successful implementation of the two key projects in Thailand and Brazil. Lenzing has also adjusted its financial targets and, assuming that a healthy economic environment prevails, will significantly increase its EBITDA to over €1 billion by 2027, with an ROCE of over 12 per cent.

With the opening of the lyocell plant in Thailand in March and the investments in existing production sites in China and in Indonesia, Lenzing will already have increased specialty fibres’ share of fibre revenue to well above the 75 per cent target by the 2024 target year.

The implementation of the pulp project in Brazil secures the Group’s own supply of dissolving wood pulp and thereby also strengthens growth in specialty fibres in line with the corporate strategy. With the successful start-up on schedule, Lenzing, which holds a 51 per cent interest in the LD Celulose joint venture, reached a further important milestone. The plant ramp-up phase is scheduled to be completed by the end of 2022.

In 2019, Lenzing became the first fibre manufacturer to set a target to reduce its carbon emissions by 50 per cent by 2030 and to be climate-neutral by 2050. This carbon reduction target has been confirmed by the Science Based Targets Initiative, the release further said. To further reduce carbon emissions in line with its strategic targets, Lenzing will rely to an even greater extent in the future on electricity generation from renewable energies. It is currently working on the construction of several photovoltaic systems at its site in Upper Austria. The total capacity of the ground-mounted system and the three rooftop systems will amount to approximately 7 MW peak after the expected commissioning in the second half of 2022.

The Indonesian site has been sourcing green electricity exclusively from renewable sources since July this year and is currently being converted to biomass. In Purwarkata, Lenzing invests in reducing CO₂ emissions as well as air and water emissions. As part of this investment, Lenzing is converting its existing capacities for standard viscose entirely to capacities for specialty viscose under the Lenzing Ecovero and Veocel brands.

The Tencel brand has been supporting customers and partners in the textile and apparel industry with sustainable fibre innovations since 1992. In 2022, Lenzing is celebrating the 30^th anniversary of its premium textile brand.

The currency environment is expected to remain volatile in the regions relevant to Lenzing. In structural terms, Lenzing continues to anticipate growth in demand for environmentally responsible fibres for the textile and clothing industry as well as the hygiene and medical sectors. For this reason, Lenzing regards the further development of its strategy as having been validated and will continue to drive growth in specialty fibres and strengthen its own supply of dissolving wood pulp, including boosting the sustainable energy mix and the reduction of carbon emissions.

The Lenzing Group continues to anticipate that EBITDA for the full 2022 year will be significantly above the level of 2021.

Fibre2Fashion News Desk (KD)