Lenzing Group said sales and profits declined in the first quarter as higher volume failed to completely offset lower average fiber prices.
The Austrian company said the performance was in line with expectations. Average fiber selling prices, which were down 11 percent on average compared to the first quarter of 2011 (minus 5.6 percent from the fourth quarter of 2011), could be largely compensated on the revenue side by a new record level of fiber shipment volumes.
Consolidated sales amounted to EUR 528.2 million, and were at about the same level as in the prioryear period, decreasing by 0.7 percent from EUR 532.1 million in the first quarter of 2011. Earnings before interest, tax, depreciation and amortization (EBITDA) in the first quarter of 2012 was down by 19.0 percent to EUR 93.1 million (Q1 2011: EUR 114.9 million), thus at a satisfactory level and in line with the company’s guidance. The EBITDA margin thus amounted to 17.6 percent (Q1 2011: 21.6 percent). In addition to the lower average fiber selling prices, slightly higher depreciation led to a decline in the earnings before interest and tax (EBIT) of 25.9 percent to EUR 67.2 million (Q1 2011: EUR 90.7 million). This corresponds to an EBIT margin of 12.7 percent in the first quarter of 2012 (Q1 2011: 17.0 percent).
“As expected, the market environment for the global fiber industry in the first quarter was more difficult than in the first quarter of 2011, and similar to the situation prevailing in the fourth quarter of 2011,” said Lenzing CEO Peter Untersperger. “At present the global fiber market is facing a consolidation phase at a higher level. In the first three months of 2012 Lenzing succeeded in maintaining the capacity utilization of its production plants at over 95 percent, where as volume demand on the market for fibers adapted to the weak economic situation.”
The Lenzing Group is continuing with its strategic capacity expansion program. Investments in intangible assets and property, plant and equipment totaled EUR 52.9 million in the first quarter of 2012, up from the comparable prior-year level of EUR 41.9 million. These investments primarily focused on construction of the fifth fiber production line at the Indonesian subsidiary PT. South Pacific Viscose (SPV) as well as ongoing capacity expansion efforts and remodeling measures related to fiber and pulp production. The Lenzing Group will invest a total of approx. EUR 1.6 billion by 2015, in order to achieve annual production of about 1.2 million tons of cellulose fibers.
Adjusted equity at the end of March 2012 rose by 4.9 percent to EUR 1,099.5 million. This corresponded to an adjusted equity ratio of 46.8 percent of total assets. In spite of the extensive investments being made, net financial debt could be reduced to EUR 125.6 million (end of 2011: 159.1 million), confirming the high selffinancing capacity of the Lenzing Group. Accordingly, net gearing further declined to a new record low of only 11.4 percent (End of 2011: 15.2 percent).
Lenzing confirms its guidance for the 2012 fiscal year announced at its annual results press conference. Accordingly, 2012 should be a good year, but will not be able to match the record results posted in 2011. Quarterly business could develop in a mirror-inverted manner compared to 2011, with second-quarter EBITDA likely to total about EUR 100 million.
A further increase in volume demand and accompanying higher fiber prices compared to the first quarter are anticipated in the second half of 2012 against the backdrop of an improved global economic situation.
Fiber shipment volumes on the part of the Lenzing Group are likely to increase to about 810,000 tons for the entire 2012 fiscal year, serving as the basis for consolidated sales to climb to a level between EUR 2.2 billion and EUR 2.3 billion, despite the lower average fiber selling prices. Depending on the development of fiber and raw material prices as well as the global economy, Lenzing confirms its original outlook of an EBITDA between EUR 400 million and EUR 480 million, and an EBIT ranging between EUR 285 million and EUR 365 million in 2012.