Home / Knowledge / News / Results/Reports / Lenzing Group revenue declines 16.7% to €466.3 mn in Q1

Lenzing Group revenue declines 16.7% to €466.3 mn in Q1

May '20
Pic: Lenzing
Pic: Lenzing
In the first quarter of 2020, revenue for Lenzing Group declined by 16.7 per cent in comparison with prior-year quarter and amounted to €466.3 million. The reason was development of prices for standard viscose (due to significant overcapacity in market) and other standard fibres. The impact of COVID-19 crisis further increased pressure on prices and volumes.

The prices for standard viscose dropped to a new all-time low of 9,150 RMB/tonne by March 31 – up to 33 per cent lower than in the prior-year quarter. The comparatively positive development of the specialty fibre business and slightly higher demand for fibres in the medical and hygiene segments partially offset the decline in revenue. The share of specialty fibers increased from 47.3 per cent in the first quarter of the previous year to 60.9 per cent.

The earnings development reflects the decline in revenue: EBITDA (earnings before interest, tax, depreciation and amortisation) decreased by 24.3 per cent to €69.6 million. The EBITDA margin declined from 16.4 per cent to 14.9 per cent. Net profit for the period was down 58.6 per cent to €17.7 million.

“The COVID-19 crisis has a severe impact on the entire textile and apparel industry and has further increased the pressure on prices and volumes in the global fibre market. Lenzing held its ground in this extremely difficult market environment and continues to drive the implementation of its key projects in Brazil and Thailand,” said Stefan Doboczky, chief executive officer of the Lenzing Group. “To meet the strong demand for hygiene and protective products for the population and for medical personnel, we intensified the collaboration with partners along the value chain in the first quarter of 2020. Today we are proud that we have achieved our goal of an industrial production of high-quality protective masks together with our partner Palmers and have therefore been able to support Austria and Europe in combating the pandemic as best possible.”

CAPEX (expenditures for intangible assets and property, plant and equipment and biological assets) more than tripled to €138.6 million in the first quarter of 2020. This increase is a consequence of the progress of the major projects in Brazil and Thailand. The implementation of the two most important long-term investment projects to strengthen internal pulp supply and to increase the share of specialty fibres in line with the sCore TEN corporate strategy is progressing according to plan. After the decision to build the dissolving wood pulp plant in Brazil with a capacity of 500,000 tonnes, the Duratex Group acquired a 49 per cent share in the joint venture LD Celulose as agreed in the first quarter of 2020. Lenzing holds 51 per cent of the shares.

In the first quarter of 2020, Lenzing completed the second pilot production plant for its Tencel Luxe branded filament yarn. The new facility at the Lenzing site with a total investment of €30 million provides sufficient capacity for the development of commercial programmes and further fibre applications.

On March 21, Lenzing presented its Sustainability Report 2019, which was also the International Day of Forests. The report sets out how the company is actively dealing with the global challenges. Under the motto ‘Stand up! Against business as usual’, Lenzing emphasises its wider responsibilities over and above its products. With the implementation of the science-based target, Lenzing actively contributes to mastering the problems caused by climate change. The Lenzing Group is committed to reducing its greenhouse gas emissions per tonne of product by 50 per cent by 2030 (baseline: 2017) and to become climate-neutral by 2050.

Lenzing intensified its collaboration with partners along the value chain in the first quarter of 2020 to meet the increased demand for high-quality hygiene and protective products. In late April, Lenzing AG and Palmers Textil AG founded ‘Hygiene Austria LP GmbH’, in which Lenzing AG holds 50.1 percent and Palmers Textil AG 49.9 per cent. The newly founded company started producing and selling protective masks for the domestic and European markets from May 2020. The two companies invested several million euros in a modern production infrastructure at the Wiener Neudorf location and secured the corresponding raw materials for protective masks production. In a first step, the company produces so-called mouth-nose protective masks (MNS) and surgical protective masks of class EN14683. Hygiene Austria LP GmbH plans to increase its capacities to over 25 million masks per month and to expand this business geographically as well.

The Lenzing Group’s 76th Annual General Meeting has been rescheduled for June 18, 2020 after it was postponed on March 17 against the backdrop of further measures taken by the Austrian government to contain the coronavirus.

The Lenzing Group suspended on March 24 its result forecast for 2020 as a consequence of the COVID-19 crisis.

The impact of the COVID-19 crisis on the business of the Lenzing Group can still not be reliably estimated and strongly depends on the duration of the crisis and its impact on the global economy and textile markets. Consequently, the guidance for 2020 remains suspended.

The comparatively solid business development in the first quarter reassures the Lenzing Group in its chosen corporate strategy sCore TEN. Lenzing will continue to implement its strategy with great discipline with a particular focus on the strategic investment projects which both will yield to a significant contribution to earnings starting from 2022.

The Lenzing Group stands for ecologically responsible production of specialty fibres made from the renewable raw material wood. As an innovation leader, Lenzing is a partner of global textile and nonwoven manufacturers and drives many new technological developments.

The Lenzing Group’s high-quality fibres form the basis for a variety of textile applications ranging from elegant ladies clothing to versatile denims and high-performance sports clothing. Due to their consistent high quality, their biodegradability and compostability Lenzing fibres are also highly suitable for hygiene products and agricultural applications. The business model of the Lenzing Group goes far beyond that of a traditional fibre producer. Together with its customers and partners, Lenzing develops innovative products along the value chain, creating added value for consumers. The Lenzing Group strives for the efficient utilisation and processing of all raw materials and offers solutions to help redirect the textile sector towards a closed-loop economy.

Fibre2Fashion News Desk (PC)

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September 2020

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