Cellulosic fibre producer Lenzing reports that an anticipated recovery in the markets relevant to its business has so far failed to materialise.

A continued sharp increase in raw materials and energy costs and very subdued demand is having a negative impact on the company’s sales, which in the first three quarters of 2023 fell by 5.3% year-on-year to €1.87 billion, primarily due to lower fibre revenues, although pulp revenues were up. Earnings for the period fell by 16.7% year-on-year to €219.1 million and the company recorded a net loss of €96.7 million, compared to profit of €74.9 million in the first three quarters of 2022.

“We already launched an ambitious cost-cutting programme at the end of 2022 which has delivered the expected results ahead of schedule,” said Lenzing Group CEO Stephan Sielaff. “Building on this, we are currently implementing a holistic performance programme with a focus on measures to boost profitability and cash flow generation as well as leveraging growth potential in the fibre markets through targeted sales activities.”

Cost reductions will now derive in part from a reduction in personnel costs, which will be reduced by up to €30 million by not filling positions that fall vacant due to retirement and natural attrition, as well as by staff reductions. For the Austrian sites in Lenzing and Heiligenkreuz, negotiations are currently underway with the works council concerning a social plan which is scheduled to commence in the first quarter of 2024.

In addition, after the successful conversion of a production line in Nanjing, China, in the first quarter of 2023, Lenzing has now completed its conversion and modernisation measures at its site in Purwakart, Indonesia, to convert to speciality viscose and significantly reduce emissions. Viscose fibres produced in Indonesia under the Lenzing Ecovero and Veocel brands now carry the EU Ecolabel for environmentally responsible products and services.

According to the IMF, a full return of the global economy to pre-pandemic growth rates appears increasingly out of reach in the coming quarters. In addition to the consequences of the pandemic and the ongoing war in Ukraine, growth is also being influenced by restrictive monetary policy and extreme weather events. The consequences of the renewed military confrontation in the Middle East are not yet foreseeable. Overall, the IMF warns of greater risks to global financial stability, and expects the growth rate to decrease to 3% this year and to 2.9% in 2024.

The currency environment is expected to remain volatile in the regions of relevance to Lenzing.

www.lenzing.com