Lenzing blames challenging market conditions for Q1 revenue decline

Revenue and earnings decreased compared to the first quarter of the previous year at Lenzing, which the company said is against the backdrop of a challenging market environment for standard viscose combined with changes in currency exchange rates. Group revenue in the first three months of 2018 decreased by 6.1 percent to 550.3 million euros (656.1 million dollars), mainly attributable to less favorable currency exchange rates.

“Following the record year of 2017, Lenzing began the expected challenging 2018 financial year with a decline in revenue and earnings. Market headwinds were clearly noticeable in the first quarter but still we are pleased with the solid results given the more demanding market environment. At the same time, we are forging ahead with implementation of our corporate strategy sCore TEN. Expansion of production capacities for our specialty fibers is also progressing,” said Stefan Doboczky, Chief Executive Officer of the Lenzing Group in a media statement.

Lenzing posts decline in Q1 EBITDA and earnings

Group EBITDA fell 24.8 percent to 101.6 million euros (121.1 million dollars), which Lenzing said, were due to softening prices for commodity viscose and increasing costs for key raw materials. The EBITDA margin decreased to 18.5 percent in the first quarter of 2018 compared to 23 percent in the first quarter of 2017.

EBIT declined by 32.7 percent to 68.9 million euros (82.1 million dollars), which resulted in a lower EBIT margin of 12.5 percent. The net profit for the period dropped by 33.3 percent to 50 million euros (59.6 million dollars), while earnings per share equalled 1.89 euros (2.25 dollars) against 2.75 euros (3.28 dollars) last year’s first quarter.

The company added that capital expenditures (CAPEX) more than doubled in the first quarter due to the expansion of production capacities for specialty fibers in Heiligenkreuz, Burgenland and Mobile, Alabama in the USA as well as the expansion and modernization of the dissolving pulp plants in Lenzing, Austria and Paskov, Czech Republic. In line with the corporate strategy Score Ten, the company said, it is pressing ahead with these projects as well as with planning work on construction of the next state-of-the-art lyocell production facility in Prachinburi, Thailand.

Lenzing expects lower revenue growth for FY18

On the company’s forecast for the year ahead, Lenzing said, the International Monetary Fund expects a further acceleration in global economic growth to 3.9 percent in 2018. However, growing protectionist tendencies in the political arena represent a source of uncertainty and export-oriented companies in the Eurozone will also be faced with an additional challenge from the currency environment.

While developments on the fiber markets should remain positive, Lenzing added that there would be a continuing volatility. The rising demand for cotton should support prices and will help inventory levels to remain at the current levels despite the increase in production. Polyester fiber prices have stabilized after the increase in previous years. The wood-based cellulose fiber segment, which is relevant for Lenzing, should see further strong demand. After years of moderate capacity expansion in the viscose sector, significant additional volumes are expected to enter the market in 2018. Coupled with anticipated exchange rate fluctuations, the Lenzing Group expects its results for 2018 to be lower than the outstanding results in the last two years.

Picture credit:Lenzing newsroom

 

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