Lenzing announces €70m cost cutting exercise

LENZING – Austrian speciality fibre manufacturer, Lenzing, has announced a major reorganisation cost reduction programme. The business wants to trim €70m from its costs amid the soaring prices in global energy and raw materials markets which are hitting profitability. Lenzing notes in its latest trading statement that the market environment “deteriorated sharply, especially during the course of the third quarter, and the worsening consumer climate placed additional pressure on Lenzing’s business performance.”

Revenue grew by 24 per cent year-on-year to reach €1.97 bn in the reporting period, primarily due to higher fibre prices. However, earnings before interest, tax, depreciation and amortization (EBITDA) decreased by 11.6 per cent year-on-year to €263m. Net profit for the period decreased by 33.9 per cent to €74.9m, while earnings per share amounted to €2.16 in the first three quarters (compared to €3.77 in the first three quarters of 2021).

Adjusted equity grew by 6.9 per cent to €2.26bn as a consequence of the operating profit trend as well as positive currency effects. As a consequence, the adjusted equity ratio is at 37.7 per cent

Both the earnings trend and the significant deterioration in the market environment led the Lenzing board to launch a reorganisation and cost reduction programme. The program is already being implemented and is expected to save at least €70m in costs annually once fully implemented.

“We are experiencing distortions in energy and commodity markets which are weighing on consumer sentiment and significantly limiting our view of short- to medium-term business trends. This is prompting us to step up our efforts to cope with this situation and further extend Lenzing’s international competitiveness. For this reason we have launched a global programme that will already lead to initial cost savings in the short term and also strengthens Lenzing for the long term,” said Stephan Sielaff, Lenzing Group CEO.

The successful commissioning of the two key projects in Thailand and Brazil as well as the implementation of projects at the existing sites in China and Indonesia formed the focus of Lenzing’s investment activities in the first three quarters of 2022. The opening of the lyocell plant in Thailand in the first quarter of 2022 enables Lenzing to boost its share of specialties and better serve structurally growing demand for Tencel branded lyocell fibres. Despite the pandemic-related challenges, the project was finished on time and within the planned budget, and the volumes produced to date were successfully placed on the market. With a nameplate capacity of 100,000 tonnes per year, the production plant is the largest of its kind in the world.