Lenzing Ag · VIE:LNZ
Lenzing — FY2023 Earnings Presentation
49 slides from Lenzing's earnings presentation, Mar 15, 2024
Slide 1: Lenzing Investor Presentation Full-year results 2023
Lenzing Investor Presentation Full-year results 2023 March 15, 2024 www.lenzing.com
Slide 2: Disclaimer
Disclaimer ● The information contained in this document has not been independently verified and no representation or warranty expressed or implied is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of this information or opinions contained herein.
Slide 3: Today's agenda
Today’s agenda Topic Presenter 1 Executive Summary • Stephan Sielaff, CEO 2 Market update • Christian Skilich, CTO/CPO • Stephan Sielaff, CEO 3 Financials • Nico Reiner, CFO 4 Performance program • Stephan Sielaff, CEO 5 Highlights • Stephan Sielaff, CEO 6 Outlook • Stephan Sielaff, CEO • Stephan Si
Slide 4: Weak market environment heavily affected Lenzing results in 2023
Weak market environment heavily affected Lenzing results in 2023, holistic performance program leading to positive FCF in H2 2023 Key developments ● The recovery expected for the second half of 2023 in the markets relevant to Lenzing has not occurred ● Weak demand in fiber markets and still elevated
Slide 5: Market update
Market update www.lenzing.com
Slide 6: Both energy and NaOH market prices remained elevated in 2023
Both energy and NaOH market prices remained elevated in 2023 compared to historical levels Development of selected energy and NaOH market prices, 2020-2023 Indexed, Q1 2020 = 100 Energy prices NaOH prices 2,250 500 2,000 1,750 400 1,500 300 1,250 1,000 200 750 NaOH Southeast Asia Natural Gas Europe
Slide 7: Costs for energy and chemicals still on high levels
As a result, costs for energy and chemicals for Lenzing still on high levels in 2023 compared to 2021 Development of selected costs for Lenzing 2021-20231, as percentage of production costs (excl. depreciation) +7% Energy 2021 2022 2023 • Costs for both Energy and Chemicals significantly increased c
Slide 8: Global apparel retail sales increased in 2023
Global apparel retail sales increased 2023 due to China's local demand and low 2022 base FY 2023 YoY FY 2023 apparel retail sales1 breakdown by region World in %, FY 2023 vs. 2022, inflation-adjusted, seasonally adjusted, Index - 2019 = 100, +4 % 2023 YoY United States Europe -1 % +1 % 2023 YoY 2023
Slide 9: Inventory levels in the US significantly decreased in 2023
Inventory levels in the US significantly decreased in 2023 and brands continue to be cautious on inventory development US clothing inventories (retail and wholesale) …we are still seeing a fairly USD bn, in current prices promotional environment out there, Example US even with the inventory levels a
Slide 10: Inventory trends in the textile industry show path to normalization
Inventory trends in the textile industry in 2023 show path to normalization supported by high promotional activity during holiday season in Q4 Estimates Quarterly development of inventories below 0 % to +11 % +21 % above Median of percent change vs. same quarter 2019, in USD 0% +10 % to +2
Slide 11: Fiber sales volumes continuously increased since lows in H2 2022
Fiber sales volumes for Lenzing have continuously increased since lows in H2 2022 Development of fiber sales volumes for Lenzing 2022-2023, in ktons -20% +20% • Overall decline in demand for 449 fibers especially in the textile 432 408 industry led to a decline of fiber 361 sales for Lenzing in H2 2
Slide 12: Viscose prices remained under pressure in 2023
Viscose prices remained under pressure in 2023 Fiber and DWP market prices in China, 2022-2023, USD/kg (excl. VAT) 2.20 2.00 • Viscose prices were less volatile in 2023, Viscose 1.80 however, remained under pressure after a slight 1.60 rebound in the first quarter 1/22 4/22 7/22 10/22 1/23 4/23 7/23
Slide 13: Lenzing successfully defends premium for specialty fibers
Lenzing successfully defends premium for specialty fibers despite challenging market environment Cellulosic fiber prices in China 6-months average, percent from January 2017, converted at constant FX rates 100 Lenzing specialties1 Viscose (TX) CCF high 1/17 1/18 1/19 1/20 1/21 1/22 1/23 1/24 1) Lenz
Slide 14: Financials
Financials www.lenzing.com
Slide 15: Revenues were stagnant in 2023 while EBITDA increased by 25%
Revenues were stagnant in 2023 while EBITDA increased by 25 % vs. 2022 Group revenue in EUR mn EBITDA1,2,3 in EUR mn, EBITDA margin in % of revenue Quarterly development Quarterly development +10% 107 83 84 623 627 616 655 (17%) 596 (13%) (13%) 30 (5%) -21 (-4%) Q4/2022 Q1/2023 Q2/2023 Q3/2023 Q4/20
Slide 16: EBIT and net profit in 2023 heavily affected by impairment in Q4
EBIT and net profit in 2023 heavily affected by impairment in Q4 2023 EBIT1 in EUR mn, EBIT margin in % of revenue Group net profit after minorities and hybrid bond2, in EUR mn Quarterly development EPS2 in EUR 29 1 Quarterly development (5%) (0%) -4.91 -3.03 -0.89 -0.97 -15.13 -1 -41 -96 (-7%) 466
Slide 17: Annual valuation of assets resulted in impairment of EUR 465 mn
Annual valuation of assets resulted in impairment of EUR 465 mn on five of Lenzing’s sites Asset impairment breakdown 2023, EUR mn 465 • The annual valuation of assets in accordance 210 with IFRS resulted in an asset impairment of EUR 465 mn on five of Lenzing’s sites • Reasons for the impairments w
Slide 18: Free cash flow was positive in Q3 and Q4 2023
Free cash flow was positive in Q3 and Q4 2023 – trading working capital improved by 13 % vs. Q1 2023 Free cash flow, in EUR mn Trading working capital, in EUR mn 1 -3% 394 245 160 571 551 49 -43 -244 -283 404 384 387 -664 -698 -123 -839 22% 24% 21% 21% 16% -615 -741 -445 2019 2020 2021 2022 2023 201
Slide 19: Net financial debt reduced to EUR 1.56 bn
Net financial debt reduced to EUR 1.56 bn Net financial debt1,2, in EUR mn Balance sheet metrics Change 1,799 According to IFRS (EUR mn) 31 Dec. 2023 31 Dec. 2022 in % 1,563 Total assets 5,214.6 5,525.0 (5.6) Liquid assets3 731.0 453.3 61.3 914 Total liabilities 3,472.4 3,499.1 (0.8) 364 410 thereof
Slide 20: Liquidity position remains solid
Liquidity position remains solid Liquidity cushion, EUR mn Debt maturities1 as of 31.12.2023, EUR mn 934 203 536 3772 333 302 731 292 207 88 78 31.12.2023 2024 2025 2026 2027 2028 2029 2030 2031 Liquid assets Unused credit facilities • Solid liquidity position after capital increase consisting of li
Slide 21: Performance program
Performance program www.lenzing.com
Slide 22: Holistic performance program launched in Q3 2023 with three pillars
Holistic performance program launched in Q3 2023 with three pillars: top line growth, cost excellence and cash flow generation Lenzing’s holistic performance program 1 Strengthening top line growth with defined sales initiatives in push and pull • Dedicated sales initiatives and strengthened sales p
Slide 23: Holistic performance program is ahead of schedule and target
Holistic performance program is ahead of schedule and target Cost Excellence Envisaged impact composition by bucket Full target Ramp-up (2025) (2024) Illustrative • Implementation is ahead of schedule and target − Efficiency and cost improvement measures across all production sites with already ~300
Slide 24: Numerous initiatives have already been started across the company
Numerous initiatives have already been started across the company Integration of ongoing performance initiatives and projects 1 2 3 Top line growth Cost excellence FCF generation Processual cost Direct / indirect spend > 500 opportunities ~300 initiatives ~200 initiatives ~80 initiative buckets • Mo
Slide 25: Highlights
Highlights www.lenzing.com
Slide 26: Capacity expansions and site conversions are fully invested and operational
Capacity expansions and site conversions are fully invested and fully operational Fully invested and fully operational 100 kt Lyocell plant 500 kt single line Upgrade and conversion of fiber sites in in Thailand DWP mill in Brazil1 Nanjing, China and Purwakarta, Indonesia EUR 400 mn capex USD 1.38 b
Slide 27: Innovation is Lenzing's DNA
Innovation is Lenzing’s DNA Selected innovation and branding highlights in 2023 ITMF Award for Lenzing and Lenzing contributes to Carbon neutral1 VEOCEL™ VEOCEL™ upgrades lyocell Södra’s pioneering cooperation circular-based fashion Viscose fibers to support carbon shortcut fiber offering for the in
Slide 28: Sustainability champion with best in class ratings and updated climate target
Sustainability champion with confirmed best in class ratings as well as updated climate target Overview of sustainability credentials (selected) Updated climate target ● Updated greenhouse gas emissions reduction Recognized with triple “A” score for third year in a row targets recognized and confirm
Slide 29: Outlook
w.lenzing.com Outlook e | Lenzing Innovative by nature
Slide 30: Current situation in the TX industry remained nearly unchanged
Current situation in the TX industry remained nearly unchanged with increasing forward looking expectations TX industry sentiment by survey date, balance index Percent of respondents, balance between good vs. poor Six months expectations increasing 40 36 32 28 29 28 29 30 23 22 21 18 20 20 26 14 13
Slide 31: Cautious ordering by apparel brands and retailers felt along value chain
Cautious ordering by apparel brands and retailers is felt along the entire value chain Not exhaustive Brands/retailers Cautious but inventories have improved Value chain Report cautious ordering Fiber companies Market remains challenging Feb 8, 2024 CFO Under Armour Jan 18, 2024 Bombardo SA (Spain)
Slide 32: Climate commitments and regulatory changes support long-term view
Brands/retailers' climate commitments and regulatory changes continue to support fundamental long-term view Regulatory pushes Climate commitments (selection only) Developments in global Regulations span entire value chains, e.g. Emissions reduction target of Emissions reduction target EU 56 %
Slide 33: Recovery is taking time, fiber demand expected to increase in 2024
After the “perfect storm” built up in H2 2022, recovery is taking time – fiber demand expected to increase in the course of 2024 H2 2022 – a “perfect storm” 2023 Expected 2024 Costs for energy and chemicals are Unprecedented increase in expected to remain on elevated levels Declining – but still ele
Slide 34: Lenzing remains cautious with market expectation for 2024
Lenzing remains cautious with market expectation for 2024, however, positive impact from performance program Cautious outlook on fiber market development in 2024 ● Stable demand in pulp (incl. co-products) and increasing demand for fibers expected in the course of 2024 ● Fiber prices are assumed to
Slide 35: Lenzing is uniquely positioned to take full advantage of market rebound
Lenzing is uniquely positioned to take full advantage of market rebound Best positioned in terms of megatrends • Benefitting from increased sustainability awareness Strong brand portfolio • Growing demand for WBCF 1 due to the widening of the cellulosic gap driven by cotton supply constraints • High
Slide 36: Thank you for your attention!
for your attention! www.lenzing.com
Slide 37: Backup
w.lenzing.com Backup e | Lenzing Innovative by nature
Slide 38: Group revenue breakdown
Group revenue breakdown Fiber revenue by application, % Specialties share of fiber sales in 2023 Standard Fibers 41% 35% 38% 36% 32% 59% 65% 62% 64% 68% 21% Q4/2022 Q1/2023 Q2/2023 Q3/2023 Q4/2023 Textile fibers Nonwoven fibers 79% 30% 38% 31% 35% 35% Specialty Fibers1 70% 62% 69% 65% 65% 1) LENZING
Slide 39: Group P&L
Group P&L EUR m Q4-c 2023 Q4-c 2022 Change Revenues 2 521.2 2 565.7 (44.5) (1.7%) Cost of Sales (2 597.6) (2 162.6) (435.1) 20.1% % of Revenue (103.0%) (84.3%) Gross Profit (76.5) 403.1 (479.6) < -100,0% % of Revenue (3.0%) 15.7% Selling Expenses (274.9) (286.7) 11.9 (4.1%) % of Revenue (10.9%) (11.
Slide 40: Quarterly P&L development
Quarterly P&L development Delta Q3 - Q4 Delta % Q3 - EUR mn Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 2023 Q4 2023 Revenues 655.4 615.5 627.1 623.1 595.5 39.9 6.5% Cost of Sales (972.3) (561.0) (502.4) (562.0) (568.8) (411.3) 73.3% % of Revenue (148.3%) (91.1%) (80.1%) (90.2%) (95.5%) Gross Profit (31
Slide 41: Cash flow and trading working capital development
Cash flow and trading working capital development Free cash flow, in EUR mn Trading working capital, in EUR mn 27 15 -11% 632 621 617 90 99 571 551 18 -48 -52 -63 -78 -84 -33 -85 24.0% 25.4% 24.7% 25.1% 21.0% -132 -167 Q4/2022 Q1/2023 Q2/2023 Q3/2023 Q4/2023 -245 Q4/2022 Q1/2023 Q2/2023 Q3/2023 Q4/2
Slide 42: Division EBITDA 2023 vs 2022
Division EBITDA 2023 vs 2022 EBITDA per Division in EUR mn 2023 2022 462 310 303 -60 242 -101 33 -99 Fiber Pulp Other1 Group Fiber Pulp Other1) Group 1) Incl. consolidation www.lenzing.com 14 March 2024 - 42
Slide 43: Topline Breakdown Q4-c 2023 vs Q4-c 2022
Topline Breakdown Q4-c 2023 vs Q4-c 2022 EUR mn Q4-c 2023 Q4-c 2022 Change Wood-based cellulosic fibers 1 753.5 2 013.8 (260.3) (12.9%) Co-Products Fibers 61.1 55.9 5.2 9.3% Mechanical and plan engineering, engineering services and 26.4 others 24.1 2.3 9.6% Fiber 1 841.0 2 093.8 (252.8) (12.1%) Pulp
Slide 44: Quarterly cash flow development
Quarterly cash flow development Change Change Q4/Q4 Change (EUR mn) Q4/2023 Q3/2023 Q4/Q3 (%) Q4/2022 (%) 01-12/2023 01-12/2022 y-o-y (%) Gross cash flow (after taxes and interest) 53.3 54.5 (2.2) (3.4) - 88.5 244.8 (63.9) Change in total working capital1 45.9 35.8 28.5 (74.6) - 71.8 (288.0) - Opera
Slide 45: FY2023: Net debt bridge
FY2023: Net debt bridge Net Cash Net Financial Capex2 Change Financial Debt FY Net (incl. Fin. in Trading Change in Currency IFRS 16 Capital Debt FY 2022 Tax Interest Gross CF 1 Ass.) WC other WC Dividend Translation Leasing Increase Others 2023 1,562.6 1,799.4 Change in total working capital EUR 71
Slide 46: Q4 2023: Net debt bridge
Q4 2023: Net debt bridge Net Cash Net Financial Capex2 Change Financial Debt Q3 Net (incl. Fin. in Trading Change in Currency IFRS 16 Capital Debt Q4 2023 Tax Interest Gross CF 1 Ass.) WC other WC Dividend Translation Leasing Increase Others 2023 1,574.1 Change in total 1,562.6 working capital EUR 4
Slide 47: Balance sheet structure and return on capital employed
Balance sheet structure and return on capital employed Balance sheet positions, in EUR mn Capital employed, in EUR mn EUR 5,215 mn 3,748 3,542 1,742.2 Equity 2,767 3,195.0 2,216 1,923 PP&E1 5.4% 5.4% 2.0% -0.5% 2,435.7 Financial liabilities -14.2% 552.9 2019 2020 2021 2022 2023 294.5 Inventories Tra
Slide 48: Contact and financial calendar
Contact and financial calendar Investor contact Financial calendar Sébastien Knus Annual results 2023 March 15, 2024 VP Investor Relations 80th Annual General Meeting April 18, 2024 Results 01-03/2024 May 8, 2024 Phone: +43 7672 701 3599 E-mail: s.knus@lenzing.com Half-year results 2024 August 7, 20
Slide 49: Only through this trifold approach can we achieve innovative solutions
Only through this trifold approach can we achieve innovative solutions on the scale the world needs. Are you ready to join? Find out more at reports.lenzing.com. www.lenzing.com 49