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January 28, 2020

Lenzing FY profit falls as firm writes off US engineering costs

Austrian cellulosic fibre producer Lenzing has reported a drop in its preliminary 2019 figures with both earnings and revenue affected by lower selling prices for standard viscose and the write-off of engineering costs related to its mothballed US lyocell expansion project.

By Beth Wright

Austrian cellulosic fibre producer Lenzing has reported a drop in its preliminary 2019 figures with both earnings and revenue affected by lower selling prices for standard viscose and the write-off of engineering costs related to its mothballed US lyocell expansion project.

In an ad hoc statement, Lenzing said its preliminary, unaudited results for 2019 are below the prior year’s level as net profit for the period fell 23% to EUR114m (US$125.5m) from EUR148m a year ago.  

Group revenue was also down, falling to EUR2.11bn from EUR2.18bn last year, while the group expects to report an EBITDA of EUR327m. This compares to EUR382m for 2018.

The figures compare to analyst estimates of EUR144m in net income and EUR2.11bn in revenue, according to a report published by Reuters, citing Refinitiv data.

In its statement, Lenzing said its management board has decided to focus in the coming years on expanding its lyocell production capacities in Asia, where the group’s greenfield project in Thailand is progressing well.

“Consequently, engineering costs related to the mothballed US lyocell fibre expansion will be fully written off,” it added.

The fibre producer mothballed the project in Mobile, Alabama, in September 2018, citing what it called the “rising likelihood” of increasing trade tariffs, paired with the potential surge in construction costs due to the buoyant US labour market.

In its preliminary earnings statement, Lenzing added lower selling prices for standard viscose also took a toll as prices continued to decline throughout the year and are currently trading at “historically unprecedented low levels.” 

The issue has continued to plague Lenzing as capacity expansions for standard viscose, coupled with sluggish demand due to trade conflicts, led to the firm reporting a decline in both revenue and earnings for the first three-quarters of 2019.

Lenzing will publish its full-year results on 12 March.

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