Lenzing has continued on its dynamic growth path by posting record results for 2011. Despite a significant weakening of the global fibre market in the second half of 2011, Lenzing again achieved double-digit growth rates in sales and earnings, and surpassed the threshold of EUR 2 billion in consolidated sales for the first time in the company’s history. Operating margins also improved from a 2010 high and set a new record.

Consolidated sales in the 2011 reporting year rose by 21.2% to EUR 2.14 billion, up from EUR 1.77 billion in the previous year. The company’s dynamic sales growth can be attributed to higher average selling prices in its core fibre business, higher fibre shipment volumes, the first-time full-year consolidation of the pulp plant Biocel Paskov acquired in May 2010, and higher sales in all other business areas.

Consolidated EBITDA (earnings before interest, tax, depreciation and amortization) amounted to EUR 480.3 million, a rise of 45.3% from the comparable figure of EUR 330.6 million in the previous year. Earnings before interest and tax (EBIT) climbed by 56.9% to EUR 364.0 million (2010: EUR 231.9 million). The EBITDA and EBIT margins reached an all-time high in 2011 at 22.4% (2010: 18.7%) and 17.0% (2010: 13.1%) respectively.

Speciality strategy pays off

“Our dynamic growth path and specialty strategy led by the fibres Lenzing Modal and Tencel once again paid off in 2011. Whereas sales with standard viscose fibres increased by close to 20% year-on-year, we sold some 30% more Tencel fibres and close to 40% more Lenzing Modal fibres than in the prior year”, explains Lenzing Chief Executive Officer Peter Untersperger.

The large-scale market success of these two specialty fibres enabled Lenzing to partially detach itself from the volatile market trends of 2011, according to CEO Untersperger.

Capacity expansion

Lenzing rigorously pressed ahead with its capacity expansion program in 2011. As a result, the annual nominal production capacity of the Lenzing Group rose by about 8%, from 710,000 tons of man-made cellulose fibres at the beginning of 2011 to 770,000 tons at the turn of the year 2011/12.

Capital expenditure at Lenzing totalled EUR 196.3 million in the 2011 financial year, somewhat below the comparable prior-year figure of EUR 230.0 million which had also included the acquisition costs for Biocel Paskov. This development was due to the postponement of investment projects as at the reporting date.

Despite the current level of investments, the net financial debt of the Lenzing Group was reduced by almost half, declining to EUR 159.1 million at the end of 2011 from the previous year’s figure of EUR 307.2 million. Cash flow still reached a level of EUR 113.4 million despite the investments made.

“With an adjusted equity ratio of close to 45% and a net financial debt comprising one-third of annual EBITDA, we are very well positioned financially. Lenzing is largely autonomous with respect to its ability to finance growth steps in the upcoming years,” says Chief Financial Officer Thomas G. Winkler.

Full capacity

According to preliminary estimates, global fibre production rose by 4.1% to a new record level of 79.1 million tons in 2011. The production of man-made cellulose fibres also reached an all-time high of 4.6 million tons, up 4.2% from 2010.

The business development of Lenzing’s ‘Segment Fibers’ in 2011 was characterized by strong demand for Lenzing fibres, which was fuelled even more by record cotton prices in the first half of the year. The market for standard textile viscose fibres significantly cooled off in the second half of 2011, which did not impact fibre shipment volumes but affected selling prices.

The specialty fibres Lenzing Modal and Tencel as well as the nonwovens sector were hardly impacted by this development. Throughout the year Lenzing succeeded in raising average prices for all Lenzing fibres by close to 17% compared to the previous year, to EUR 2.22 per kilogram.

“All our fibre production facilities were running at full capacity throughout the entire year. The additional fibre volumes generated in the course of the year by the second expansion stage of the plant in Nanjing (China), the capacity expansion for Lenzing Modal fibres produced at the Lenzing site and Tencel fibres manufactured at the Heiligenkreuz (Burgenland) facility were very successfully placed on the market”, reports Chief Operating Officer Friedrich Weninger, Member of the Management Board.

The pulp plant Biocel Paskov (Czech Republic) acquired within the context of the Lenzing Group’s further backward integration was rapidly expanded in the reporting year to enable the production of both paper pulp and dissolving pulp. Some 60,000 tons of dissolving pulp were already produced in Paskov in 2011 and largely used for fibre production within the Lenzing Group.

Outlook

Lenzing commented on the outlook for 2012 in a statement this morning:

“Once again the Lenzing Group expects a good year in 2012, which should see quarterly development in a mirror-inverted manner. However, in terms of margins the current financial year will not be able to fully match the exceptional record year of 2011.

For the time being prices for Lenzing’s standard viscose fibres should stabilize at a low level. In the course of 2012 Lenzing anticipates a higher price level than in the first quarter as a result of rising demand for both textile and nonwoven applications.

Good volume demand is expected for Lenzing Modal, which should continue to ensure a fair price premium vis-à-vis standard viscose fibres and cotton. However, the considerable increase in the supply of modal is resulting in temporary price adjustments compared to 2011 price levels. With respect to Tencel, Lenzing foresees ongoing strong demand for textile and nonwoven applications and a largely stable price premium vis-à-vis standard viscose fibres.

As a consequence of significantly higher fibre shipment volumes but in the light of lower average prices in comparison to the prior-year level, sales should rise to a level between EUR 2.2 billion and EUR 2.3 billion in 2012. EBITDA should range between EUR 400 million and EUR 480 million and EBIT is expected to range between EUR 285 million and EUR 365 million, depending on the development of fibre and raw material prices as well as the overall global economic environment.

Lenzing will press ahead with its dynamic expansion program as planned, involving investments totalling approximately EUR 350 million in 2012. The good earnings situation and continued high liquidity will enable the company to propose a dividend to the Shareholders’ Meeting amounting to EUR 2.50 per share, i.e. about 25% of the consolidated net income for the 2011 financial year.”