Costs for energy, raw materials and logistics increased sharply again in the reporting period, after cost pressure had already increased steadily throughout fiscal 2021. As a result, earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 13.3% year-on-year to €188.9 million.
Austrian group Lenzing’s revenue increased 25.2% year-on-year to €1.29 billion in the first half of 2022, mainly due to higher fiber prices. The earnings development mainly reflects cost developments in the global energy and raw materials markets, which affected the entire manufacturing industry. Its EBITDA decreased by 13.3% year-on-year to reach 188.9 million euros.
The strength of the specialty strategy and brands based on innovation and sustainable business as well as the continued focus on structural improvement measures for results in all regions mitigated this negative effect. The EBITDA margin fell from 21.1 to 14.6% in the first half. Net profit for the period decreased by 24.8% to 72.3 million euros, while earnings per share amounted to 2.36 euros (compared to 3.06 euros in the first half of 2021), a the company said in a press release.
“During the first half of 2022, we have achieved a great deal together in order to achieve our ambitious growth and sustainability objectives. With tremendous efforts, we can be satisfied with our business performance given the extreme development in the global energy and commodity markets,” commented Stephan Sielaff, CEO of the Lenzing Group. “The second half of the year will continue to be characterized by high levels of uncertainty and extreme challenges on the energy and commodities side.”
Gross cash flow decreased by 14.9% to 169.7 million euros in the first half of 2022, mainly reflecting the profit trend. Due to the increase in working capital requirement, cash flow from operating activities amounted to 15.2 million euros (compared to 199.8 million euros in H1 2021). Free cash flow amounted to minus €372.7 million (vs. minus €224.3 million in the first half of 2021), reflecting in particular investment activities related to projects in Thailand and the Brazil. Capital expenditure on intangible assets, property, plant and equipment and biological assets (CAPEX) decreased by 8.7% to 389 million euros.
In March 2022, Lenzing’s Supervisory Board announced the appointment of Stephan Sielaff as the new CEO of the Lenzing Group. Effective April 1, 2022, Sielaff succeeded Cord Prinzhorn, who took over as interim CEO in the fourth quarter of 2021. This reduces the board of directors from five to four members. Chief Financial Officer Thomas Obendrauf has informed Lenzing’s supervisory board that he will not be available for a further extension of his contract, which expired in June 2022. Lenzing’s supervisory board is currently working on a replacement for him. Until a successor is appointed, Stephan Sielaff will serve as interim CFO, while Thomas Obendrauf will assist the company in an advisory capacity.
In the meantime, the term of the board of directors of pulp and paper director Christian Skilich has been extended by three years until May 31, 2026. Personnel changes have also taken place on the supervisory board of Lenzing. Cord Prinzhorn took over as chairman from Peter Edelmann, who resigned from the supervisory board at his own request with effect from April 26, 2022, the statement added.
Lenzing will continue its profitable growth trajectory after the successful implementation of the two key projects in Thailand and Brazil. Lenzing has also adjusted its financial targets and, assuming a healthy economic environment prevails, will significantly increase its EBITDA to over €1 billion by 2027, with a ROCE of over 12%.
With the opening of the lyocell plant in Thailand in March and the investments in the existing production sites in China and Indonesia, Lenzing will have already increased the fiber revenue share of specialty fibers well above the target of 75% by 2024.
The implementation of the pulp project in Brazil secures the Group’s supply of dissolving wood pulp and thus also strengthens the growth of specialty fibers in line with the company’s strategy. With the successful start-up on schedule, Lenzing, which owns a 51% stake in the LD Celulose joint venture, has reached another important milestone. The ramp-up phase of the plant should be completed by the end of 2022.
In 2019, Lenzing became the first fiber manufacturer to set a target of reducing carbon emissions by 50% by 2030 and being climate neutral by 2050. This carbon reduction target was confirmed by the Science Based Targets Initiative. said. In order to further reduce carbon emissions in line with its strategic goals, Lenzing will rely even more in the future on electricity generation from renewable energies. It is currently working on the construction of several photovoltaic installations at its site in Upper Austria. The total capacity of the ground system and the three rooftop systems will amount to approximately 7 MW peak after the commissioning scheduled for the second half of 2022.
The Indonesian site has been sourcing green electricity exclusively from renewable sources since July this year and is currently in the process of converting to biomass. In Purwarkata, Lenzing invests in CO reduction2 as well as emissions to air and water. As part of this investment, Lenzing is fully converting its existing standard viscose capacities into specialty viscose capacities under the Lenzing Ecovero and Veocel brands.
The Tencel brand has been supporting its customers and partners in the textile and apparel industry with sustainable fiber innovations since 1992. In 2022, Lenzing celebrates the 30e anniversary of its high-end textile brand.
The monetary environment should remain volatile in regions relevant to Lenzing. Structurally, Lenzing continues to anticipate the growth in demand for environmentally friendly fibers for the textile and clothing industry as well as the hygiene and medical sectors. For this reason, Lenzing considers the further development of its strategy to have been validated and will continue to drive the growth of specialty fibers and strengthen its own dissolving wood pulp supply, in particular by stimulating the sustainable energy mix and the reduction of carbon emissions.
The Lenzing Group continues to expect EBITDA for the full year 2022 to be significantly above the level of 2021.
Fibre2Fashion (KD) News Desk