Global economic decline burdens fiber industry - Lenzing

08 May '09

4 min read

The decline of the global economy, triggered by the financial crisis, has massively affected the world fiber industry, too. The sales and results figures of the Lenzing Group for the first quarter of 2009 reflect this process. In comparison to the excellent result of last year's first quarter, consolidated quarterly sales dropped by 18.1%, from EUR 346.8 mill. to EUR 284.0 mill.

The dramatic collapse of fiber prices, particularly in Asia, and lower quantity sales were the main reason for this development. The fiber prices of the first quarter 2008 had been above the annual average, the decline is therefore particularly pronounced: compared to the fourth quarter of 2008 sales only dropped by about 10%. First quarter EBIT came to minus EUR 1.9 mill. (2008: plus EUR 42.1 mill.).

Increased interest expenses and highly volatile currency markets resulted in a financial result of minus EUR 4.6 mill. (2008: minus EUR 3.6 mill.) and EBT of minus EUR 6.5 mill. (2008: plus EUR 38.5 mill.) and a net loss attributable to the shareholders of Lenzing AG of EUR 3.6 mill. (2008: net attributable income EUR 26.5 mill.). Earnings per share fell to minus EUR 0.98 (2008: plus EUR 7.22).

Peter Untersperger, chairman of the Lenzing management board comments on the current situation “The recession already left a very clear mark on the fourth quarter of 2008 and this negative trend has become even more pronounced with the beginning of 2009. The Lenzing Group could not defy this situation, either.

But precisely in this environment Lenzing will maintain its position as a solid and reliable supplier and partner, a fact that is very much appreciated by our customers. It is a strategy that currently gains market share for Lenzing fibers in a recessive climate and from which we will benefit with the next economic upswing.”

The period EBIT margin came to minus 0.7% (2008: 12.1%) and the EBITDA margin to 6.0% (2008: 17.2%). The Group at the reporting date, 31 March 2009, employed a staff of 5,824 (31 December 2008: 5,945). The decline is mainly attributable to structural changes in Segment Plastics.

Business Units Textile Fibers and Nonwoven Fibers
The first weeks of 2009 brought a decline in fiber prices which was in part dramatic. Lenzing production capacity had to be adjusted to market demand, in particular in Asia, with the turn of the year due to the difficult market situation. Full production shut-down, as implemented by some competitors, was not considered an option. The general fiber price level and quantity demand showed tentative signs of consolidation by the end of the first quarter. Nonwovens report slightly rising sales volumes after a steep decline. Here too, however, the price level is very low.

Segment Plastics was considerably affected by the general decline of the European economy, despite lower raw material prices. The segment immediately adapted production to the difficult market situation. Short work hours had to be introduced at some German sites. The US demand for special products, on the other hand, remained fairly stable. Segment Engineering reached its set business targets for the first quarter.

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