AUSTRIA: Weak fibre prices undermine Lenzing FY results
- FY EBITDA dropped to EUR225.4m from EUR352.4m
- Consolidated sales fell 8.7% from EUR2.09bn to EUR1.91bn
- Fibre selling prices declined 13% to EUR1.70 per kilogram
Weak selling prices have continued to weigh on full-year sales and earnings at cellulose fibre producer Lenzing Group, which has also warned the "difficult market environment" may continue into 2015.
The company on Friday (21 March) said it was operating at capacity and reached new record sales volumes in 2013. But a 13% year-on-year fall in fibre selling prices to EUR1.70 (US$2.3) per kilogram led to an 8.7% drop in consolidated sales to EUR1.91bn.
Results were also impacted by the divestment of its plastics business and the conversion of the Paskov pulp plant from paper to dissolving pulp used within the Lenzing Group.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) fell to EUR225.4m from EUR352.4m, and was in line with lowered guidance. The EBITDA margin was 11.8%, compared to 16.9% the year before.
As part of ongoing efforts to cut costs, Lenzing in November said it would axe up to 600 jobs. The plans should see the firm save EUR120m (US$162m) a year over the next two years.
As well as strengthening its sales and marketing teams, the fibre firm plans to focus more strongly on key end-use markets such as Asia and Turkey. It will also invest in developing Tencel for high quality textile applications and sustainable nonwoven applications.
The company expects the cost-cutting measures to have a positive impact in the first half of the current year.
"The uninterrupted strong volume demand for Lenzing fibres shows that against the backdrop of a difficult business environment we are offering the right products in a sustainably attractive growth market," noted CEO Peter Untersperger.
He added that the company intends to boost the promotion of its Tencel and Lenzing Modal brands, but has postponed its construction of a viscose fibre facility in India.
The company is also battling historically high cotton inventories, high cotton production and surplus capacities in China for manufacturing manmade cellulose fibres.
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