Image: Lenzing
The operating result before depreciation (EBITDA) deteriorated from EUR 88 million to EUR 29.7 million, the result for the period turned into the red to EUR 64.9 million – after a profit of EUR 34.1 million in the first quarter of 2022. Most recently Lenzing announced that demand had increased noticeably.
Both at the viscose manufacturers and at the downstream stages of the value chain, capacity utilization has improved due to the stronger demand and inventories have further reduced. In the trend-setting market for cotton, there are signs of a further build-up of inventories in the current harvest season. Initial forecasts for 2023/24 suggested a more balanced relationship between supply and demand.
In the 2022 financial year, the listed company had written a loss of EUR 37.2 million. Sales Director Robert van de Kerkhof announced that he did not want to extend his contract, which ran until the end of 2023. CEO Stephan Sielaff will take over sales in the Fiber division, the Lenzing Management Board will be reduced from four to three members as of January 1, 2024.
A program for reorganization and cost reduction was started in the third quarter of 2022 and the implementation is right on schedule, according to the press release. Once the program has been fully implemented, the annual costs should be more than 70 million euros lower. The first quarter of 2023 was already much better than the final quarter of 2022.
In addition, further measures have been introduced to strengthen free cash flow, which was negative at EUR 132.3 million in the first quarter (after minus EUR 102.9 million in the first quarter of 2022). However, Lenzing refers to a liquidity reserve of EUR 639.5 million.
“After the crisis year 2022, the negative after-effects were still clearly noticeable in the first quarter of 2023,” said CEO Sielaff. “However, during the quarter we saw signs of a recovery in both demand and energy and raw material costs. Lenzing has successfully made major efforts on the cost and liquidity side and is well prepared for an increase in demand.” In the medium and long term, a strong increase in demand for sustainable products from Lenzing is expected. “We are convinced that the two investment projects in China and Indonesia will further strengthen our positioning in this regard.”
For the current financial year, the Lenzing Group continues to expect EBITDA in a range of EUR 320 million to EUR 420 million – provided that the market continues to recover as expected.
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