The Austrian fiber manufacturer Lenzing AG recorded a 25.2 percent increase in sales to EUR 1.29 billion in the first half of 2022, but primarily due to higher fiber prices.
“The development of earnings essentially reflects the development of costs on the global energy and raw materials markets, which affected the entire processing industry,” the group said in a statement.
“In the first half of 2022, together we set an enormous amount in motion to achieve our ambitious growth and sustainability goals. Thanks to considerable efforts, we can be satisfied with the business development in view of the extreme developments on the global energy and raw material markets,” explained Stephan Sielaff, CEO of the Lenzing Group.
Sielaff has been in this position since April 1, which he took over from Cord Prinzhorn, who temporarily held it in the fourth quarter of 2021. Lenzing thus reduced the Management Board from five to four people.
After constant cost pressure in the 2021 financial year, energy, raw material and logistics costs increased again “drastically” in the first half of the year, according to the group, which led to the operating result before depreciation and amortization (EBITDA) increasing by 13.3 percent compared to the previous year previous year to 188.9 million euros.
The EBITDA margin fell from 21.1 to 14.6 percent in the first half of the year and the result for the period fell by 24.8 percent to EUR 72.3 million, with earnings per share amounting to EUR 2.36 (after 3 06 euros in the first half of 2021).
“The strength of the specialties strategy and the brands based on innovation and sustainable action as well as the continued focus on measures to structurally improve earnings in all regions mitigated this negative effect,” explains Lenzing.
Gross cash flow fell by 14.9 percent to EUR 169.7 million in the first half of 2022, which is mainly due to the development of earnings. The cash flow from operating activities was EUR 15.2 million due to the increased working capital (after EUR 199.8 million in the first half of 2021).
The free cash flow was minus EUR 372.7 million (after minus EUR 224.3 million in the first half of 2021), in particular due to the investment activity in connection with the projects in Thailand and Brazil. Investments in intangible assets, property, plant and equipment and biological assets (CAPEX) fell by 8.7 percent to EUR 389 million. “The persistently high level of investment volume is primarily due to the completion of the two key projects,” says Lenzing.
Outlook for the second half of 2022
“The second half of the year will continue to be characterized by a high level of uncertainty and extreme challenges on the energy and raw materials side. Lenzing is a company with an international footprint and is therefore partially able to balance certain local challenges globally, albeit at a significantly higher cost. Lenzing analyzed conceivable scenarios and developed appropriate responses. For months we have been preparing as best we can for the situation of acute energy shortages, rising prices and delivery bottlenecks, and we will continue to do everything in our power to ensure sustainable business development and to remain a reliable partner,” Sielaff predicts.
After the successful implementation of the two key projects in Thailand in March and in Brazil, Lenzing expects to continue on its profitable growth path. The focus remains on sustainable, high-quality premium fibers for textiles and nonwovens.
The company continues to work on the transition from a linear to a circular model. Due to this further developed corporate strategy, Lenzing adjusted the financial targets and expects to increase EBITDA, based on a healthy economic environment and with a ROCE of over 12 percent, to over 1 billion euros by 2027 and thus significantly above the 2021 level.
Personal changes
CFO Thomas Obendrauf will not renew his contract, which expires in June 2022, and Lenzing’s Supervisory Board is currently working on a replacement. Until a successor takes over, Stephan Sielaff will perform the duties of CFO on an interim basis and Thomas Obendrauf will support the company in an advisory capacity.
The board mandate of Chief Pulp Officer Christian Skilich has meanwhile been extended by a further three years until May 31, 2026. Cord Prinzhorn took over as Chairman of the Supervisory Board from Peter Edelmann, who left at his own request on April 26, 2022.