Austrian cellulosic fibre producer Lenzing has reported a fall in both full-year earnings and revenue, but warns the coronavirus (Covid-19) outbreak continues to cloud visibility on the year ahead.
“Demand on the global fibre markets is currently difficult to predict due to the spreading of the coronavirus, which is paralysing large parts of the textile value chain, especially in China,” the company says in its outlook. “According to preliminary calculations, cotton stock levels will remain high in the 2019/2020 season. The price levels for cotton and polyester are expected to remain subdued.”
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It also notes that capacity expansions for standard viscose are expected to be lower than in 2019, “but will nevertheless lead to an increase in surplus capacity. The pressure on prices, which have been at a historic low for a considerable period of time, should therefore persist in 2020.”
Despite additional lyocell capacities in China and low visibility, the Lenzing Group expects its focus on specialty fibres to help mitigate the effect of unprecedentedly low standard viscose prices. It adds that prices for dissolving wood pulp and caustic soda are at low levels.
The company currently expects its performance in 2020 to be below that of 2019. In its last year the company booked a 22.4% drop in net profit to EUR114.9m (US$127.7m) from EUR148.2m a year ago. The decline was largely due to a fall in sales, negative currency effects on material and personnel costs.
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The firm said “engineering costs related to the mothballed US lyocell fibre expansion will be fully written off.” The fibre producer abandoned the project in Mobile, Alabama, in September 2018, amid the rising likelihood of new trade tariffs and a surge in construction costs.
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By GlobalDataRevenue for the year declined 3.3% to EUR2.11bn, driven by lower selling prices as well as standard fibre volumes. The share of specialty fibres increased from 45.5% to 51.6% of revenue.
EBITDA fell by 14.4% from EUR382m to EUR326.9m, while EBITDA margin declined from 17.6% to 15.5%.
Looking ahead, Lenzing aims to increase the share of specialty fibres in fibre revenue to 75% by 2024 and the share of internally produced pulp to more than 75% and to reduce CO2 emissions per tonne of product by more than 40% compared with 2017.
Last year it started construction on a EUR400m state-of-the-art lyocell production facility in Thailand, which will have a capacity of 100,000 tons and is due to be finished at the end of 2021.
The company is also expanding and modernising the dissolving wood pulp plants in Lenzing and Paskov, increasing pulp production capacities by roughly 35,000 tons annually. And a joint venture dissolving wood pulp plant with Duratex in Brazil will increase its self-supply by 500,000 tons annually and boost backwards integration.
