Cellulose fibre producer Lenzing is to axe up to 600 jobs as part of "massive, far-reaching" cost cuts over the next two years as it tries to see off increasingly fierce competition from cotton producers.

The plans, which should see the firm save EUR120m (US$162m) a year over the next two years, were revealed as it lowered its full-year earnings and sales guidance after reporting a 44.2% decline in third quarter net profit.

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 new cost-cutting programme expands on efforts that have been underway since the beginning of the year.

Savings in material costs and "massive reductions" in operating expenses and overheads - as well as a reduction in the total number of employees - are part of the new plan.

All global sites will be affected, including the group's largest production site in Lenzing in Austria where around 15% of the 2,600 workforce will go.

While Lenzing said its fiber production facilities were operating at full capacity during the first three-quarters of the year, selling prices were 14% lower than the year before.

The company blamed "price and margin pressure in China as a consequence of surplus production capacities" - and added that the continuing high level of cotton inventories has unfavorable effects on the entire fiber industry. 

The changes were announced as the company said profit stood at EUR86.6m (US$116.7m) during the third quarter, down from EUR155.1m in the same period of last year, and sales fell 7.7% to EUR1.45bn from EUR1.57bn last year.

"The difficult market situation will continue in 2014 and possibly well into 2015. We will resolutely counteract this unfavourable situation and adjust our cost structures to the new circumstances as quickly as possible," said CEO Peter Untersperger.

"We continue to see attractive growth potential for our products, but we are already preparing ourselves today as optimally as possible for the increasingly tough competition. Cost discipline and cash generation will be our targets over the coming years."

The company now expects full-year sales to be EUR1.9bn, down from its earlier guidance of EUR2bn. EBITDA is forecast to reach EUR220-230m due to restructuring costs, compared to its previous guidance of EUR280m.