The expected recovery did not materialize in 2023, summarizes the head of the fiber manufacturer Lenzing. There is still no all-clear for 2024 either.
Due to changed economic conditions, the listed fiber manufacturer Lenzing is writing down the value of five production plants by 465 million euros and is reporting a total net loss of 593 million euros for 2023. The company announced on Friday that the negative market environment had a significant impact on the business results. For comparison: In 2022, earnings after taxes amounted to minus 37.2 million euros.
The Lenzing plants affected by depreciation are located in Indonesia, Austria, China, Thailand and the USA. According to the Upper Austrian fiber manufacturer, the reasons for the special depreciation are, on the one hand, ongoing uncertainties in the economic environment and, on the other hand, continued increased raw material and energy costs as well as increased discount rates due to the changed interest rate environment.
Lenzinh boss Sielaff “not satisfied”
Lenzing processes wood into pulp and uses it to produce fibers for the fashion, retail, industrial, cosmetics and hygiene sectors. Group sales in 2023 were almost unchanged at 2.5 billion euros. Earnings before interest, taxes, depreciation and amortization (EBITDA) rose by a quarter to 303.3 million euros in the previous year.
“From the second half of 2022 there was a ‘perfect storm’ because textile companies were sitting on a lot of inventory and demand for fibers collapsed,” said Lenzing boss Stephan Sielaff. “The expected recovery of the markets relevant to the Lenzing Group has so far failed to materialize.” The subdued demand and higher raw material and energy costs led to a result in 2023 that we are “not satisfied with”.
“Despite the losses, the equity ratio only fell from 37.8 percent (end of 2022) to 34.7 percent (end of 2023) because Lenzing raised around 400 million euros from shareholders with a capital increase in mid-2023,” said Lenzing CFO Nico Reiner .
500 people will be laid off
The reduction of 500 full-time positions announced in November is currently underway at Lenzing, including retirements and no replacements. “The job cuts are well advanced, but not complete. Beyond that, no reduction program is currently planned,” said the CEO. At the end of 2023, the fiber manufacturer employed around 7,900 people (full-time equivalents) worldwide.
In recent years, Lenzing has clearly felt the strongly fluctuating demand for textile fibers for fashion, home textiles and outdoor clothing and has had to adjust the number of staff upwards or downwards. In order to reduce business fluctuations somewhat, the company boss announced that the fiber area for cosmetics and hygiene products (nonwovens) will be further expanded.
Shares fell sharply last year
Lenzing shares have suffered a lot on the Vienna Stock Exchange over the past twelve months, with the share price falling by almost 50 percent to around 30 euros. However, the Lenzing board does not want to give the all-clear for 2024 at the moment. The visibility of earnings remains “very limited overall”, but “a higher EBITDA is expected compared to the previous year”. In the medium term, Lenzing expects an increasing need for environmentally friendly fibers for the textile and clothing industry as well as the hygiene and medical sectors. Lenzing offers, among other things, specialty fibers under the brand names Tencel, Ecovero and Veocel.
This year, the board wants to continue to focus on free cash flow generation, strengthening sales and margin growth, and cost management. “The textile market is currently difficult to predict, but we are ready for the turnaround,” says Lenzing boss Sielaff. (APA)
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