The Lenzing Group, a major provider of manmade cellulose fiber to outdoor and other apparel makers, reported its strongest sales and profit in history and said the global cotton shortage should propel growth for years to come.
Preliminary consolidated sales increased by 45% from EUR 1.22 billion in 2009 to EUR 1.77 billion. Preliminary consolidated EBITDA rose by 76% from EUR 187.9 million to EUR 330.6 million. Preliminary consolidated income from operations (EBIT) more than doubled, increasing by 103% from EUR 114.2 million to EUR 231.9 million.
“In 2010, we benefitted from the expansion strategy we pursued in recent years,” Lenzing CEO Peter Untersperger said of the company’s preliminary results for 2010. “We could have sold even more fibers than we were able to produce. From our point of view, the 2010 business year was not a one-off event but the beginning of a long-term upward trend in the development of the manmade cellulose fiber business. The reason for this is the increasing structural shortage of cotton on the global market, which leads textile manufacturers to increasingly turn to alternatives such as Lenzing fibers.”
Global fiber production increased 8.7% to 73.2 million tons, surpassing the previous record figure of 72.3 million tons in 2007. Based on early estimates, the global production of man-made cellulose fibers reached an all-time high of 4.2 million tons (+12.9%).
While cotton production rose by 13.0% compared to the very weak output in the previous year to 24.7 million tons, this increase was insufficient to fully satisfy demand. Floodings in Pakistan, India and, most recently, Australia further aggravated the situation. Therefore, cotton prices, which serve as reference prices for the entire fiber industry, have shown an unprecedented upward trend. Since the beginning of 2010, the Cotton ”A” Index has increased by 180% to 219.50 ct/lb.
Lenzing was able to raise prices in this environment and thereby offset rising raw material prices for wood, pulp and chemicals.
“However, we intentionally decided not to fully match the cotton price increases, as we see ourselves as a long-term and responsible partner to our customers,” said COO Friedrich Weninger, who runs Lenzing's Fibers segment.
In total, Lenzing was able to increase its fiber production capacity from 605,000 tons to approx. 710,000 tons currently.
“We picked the right time to put the fourth production line at our subsidiary PT, Weninger said. “South Pacific Viscose (SPV) in Indonesia into operation. In addition, we put in place debottlenecking programs at our viscose fiber factory in Nanjing/China and at SPV. Even with this dynamic expansion, we could not fully satisfy the strong demand for Lenzing fibers.”
Concerning the pulp business, the acquisition of a 75% stake in the pulp mill Biocel Paskov (Czech Republic) was an important milestone. By means of a comprehensive investment program, Paskov is currently being converted into a swing capacity pulp plant that will be able to produce both paper and dissolving pulp.
The strong demand for Lenzing fibers applied to the all textile and nonwovens business areas. Products such as the specialty fiber TENCEL® C, which exhibits especially skin-friendly features due to the integration of micro-particles (chitosan), were newly introduced. Lenzing achieved a technical breakthrough in 2010 by developing new applications of TENCEL® powder in foam mattresses.
The pricing outlook prompted Lenzing to lay the foundation last year for the most ambitious expansion program in its history. The company plans to increase fiber production capacity from approximately 710,000 tons as of year-end 2010 by approximately 300.000 tons to more than one million tons by the end of 2014, mainly through expansion and modernization investments.
In addition, the Lenzing Group plans to increase the share of pulp, the most important raw material used in the fiber production process, that it sources from its integrated own supply from currently 40% to more than two-thirds of the Group’s total requirements. Including maintenance investments, Lenzing plans to invest approx. EUR 1.5 billion through 2014.
In 2011, Lenzing is planning to increase production 10% compared to 2010. Assuming prices remain at levels as of the beginning of the 2011 business year and a moderate increase of costs, Lenzing expects to increase sales by 15-20% and further improve EBITDA and EBIT margins.