Lenzing Group Reports Further Improvement in Operating Result

• Revenue up 4.8 percent year-on-year to EUR 1.31 bn in the first half of 2024
• Performance program shows effect: EBITDA up 20.4 percent year-on-year to EUR 164.4 mn in in the first half of 2024
• Free cash flow of EUR 141.5 mn (compared with minus EUR 165.4 mn in in the first half of 2023)
• Lenzing confirms EBITDA guidance for 2024

Lenzing – The Lenzing Group, a leading supplier of regenerated cellulose fibers for the textile and nonwovens industries, reports a gradual improvement in its business performance in the first half of 2024. As expected, the recovery of the markets relevant to Lenzing proved to be sluggish. Although fiber sales volumes increased, fiber prices remained at a low level. The cost of raw materials and energy remained high. At the same time, logistics costs rose significantly in the reporting period.

Revenue grew by 4.8 percent year-on-year to EUR 1.31 bn in the first half of 2024, primarily thanks to higher revenue from fibers (+9.3 percent).

The trend in the operating result primarily reflects the positive effects of the comprehensive performance program. Earnings before interest, tax, depreciation and amortization (EBITDA) rose by 20.4 percent from EUR 136.5 mn in the first half of 2023 to EUR 164.4 mn in the same period of 2024. The EBITDA margin increased from 10.9 to 12.5 percent.

The operating result (EBIT) amounted to EUR 18.9 mn (compared with minus EUR 12 mn in the first half of 2023) and the EBIT margin stood at 1.4 percent (compared with minus 1 percent in the previous year). Earnings before tax (EBT) amounted to minus EUR 22.3 mn (compared with minus EUR 76.1 mn in the prior-year period). Earnings per share stood at minus EUR 1.84 (compared with minus EUR 3.92 in the first half of 2023). Cash flow from operating activities amounted to EUR 202.8 mn in the first half of the year (compared with minus EUR 29.2 mn in the same period of 2023). Free cash flow shows a clearly positive trend with an increase to EUR 141.5 mn (compared with minus EUR 165.4 mn in the first half of 2023).

“The Lenzing Group’s business performance continues to point in the right direction, even without a significant recovery in the relevant markets,” comments Stephan Sielaff, Lenzing Group CEO. “We are continuing to place pressure on expenditure within the organization, and at the same time we are focusing on measures to strengthen our global sales activities. We are taking action on a consistent and proactive basis, and we are making the Lenzing Group not only more profitable but also more resilient in the medium term.”

Since the end of 2022, the Lenzing Group has been implementing measures to reduce costs and, building on this, has developed a comprehensive performance program with the overriding objective of significantly enhanced long-term resilience to crises and greater agility in the face of market changes. Nico Reiner, Lenzing Group CFO, notes: “The performance initiatives are showing visible results and are primarily aimed at improving EBITDA and generating free cash flow through stronger revenue and margin growth as well as sustainable cost excellence. We expect an excess amount of EUR 100 mn, of which more than 50 percent will be effective from this financial year. The performance program is currently ahead of schedule.”

Capital expenditure on intangible assets, property, plant and equipment, and on biological assets (CAPEX) amounted to EUR 61.6 mn in the first half of 2024 (compared with EUR 136.5 mn in the first half of 2023), which is partly due to reduced investment activities. Compared to December 31, 2023, cash and cash equivalents increased by 13.0 percent, from EUR 731 mn as of December 31, 2023, to EUR 825.9 mn as of June 30, 2024.

Changes to dividend policy, ownership structure and Managing Board

On April 11, the Lenzing Group Managing Board passed a resolution to indefinitely suspend the existing dividend policy of at least EUR 4.50 per share.

B&C Group and Suzano S.A. announced on June 12 that they are entering a long-term partnership in relation to B&C’s majority interest in Lenzing AG. On the basis of this agreement, Suzano is acquiring a 15 percent interest in Lenzing from B&C.

Also, Lenzing recently announced personnel changes on its Managing Board. The Supervisory Board of Lenzing AG has appointed Walter Bickel as member of the Managing Board and Chief Transformation Officer of Lenzing AG until December 31, 2025, with effect as of April 15, 2024. Stephan Sielaff, Lenzing AG CEO, will leave the company, at the latest, when his contract expires at the end of March 2025, in order to devote himself to new tasks. The Lenzing Group Supervisory Board has appointed Rohit Aggarwal as a new member of the Managing Board of the Lenzing Group. He will take over responsibility for the fibers business area in the course of the third quarter and will succeed Stephan Sielaff as CEO of the Lenzing Group after his Onboarding. Mr. Aggarwal, a graduate in business administration, possesses decades of professional experience in leading positions in markets relevant to Lenzing and is consequently fully familiar with Lenzing’s core business in all its content-related and geographical facets.

Outlook

The IMF left its growth forecast for 2024 unchanged at 3.2 percent and raised it to 3.3 percent for 2025. Nevertheless, a number of risks for the global economy remain.

Forecasting future economic growth is rendered more difficult by smoldering global conflicts, trade disputes, and the uncertain outcome of elections, including the USA and the EU.

Consumers are holding back on unnecessary purchases in an environment of rising prices, falling real wages in some cases, and concerns about economic growth. This is hampering a revival of the consumer apparel market, which is important for Lenzing.

The currency environment is expected to remain volatile in the regions relevant to Lenzing.

In the trend-setting market for cotton, a reduction in stock levels and a stable price trend at a low level is expected for the remainder of the 2023/2024 harvest season.

Earnings visibility remains limited overall.

Revenue and earnings in the first half of the year exceeded Lenzing’s expectations, despite the persistently difficult market. Lenzing is ahead of schedule with the implementation of its performance program. The company expects that the measures will make a greater contribution to further improving earnings in the coming quarters.

Taking the aforementioned factors into consideration, the Lenzing Group confirms its guidance for the 2024 financial year of year-on-year higher EBITDA.

Structurally, Lenzing continues to anticipate growth in demand for environmentally responsible fibers for the textile and clothing industry as well as for the hygiene and medical sectors. As a consequence, Lenzing is very well positioned with its strategy and is pushing both profitable growth with specialty fibers and the further expansion of its market leadership in the sustainability area.

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