Lenzing Ag · VIE:LNZ
Lenzing — Q1 2014 Earnings Presentation
57 slides from Lenzing's earnings presentation, May 15, 2014
Slide 1: Leading Fiber Innovation – Q1/2014 Results
Leading Fiber Innovation LENZING INVESTOR PRESENTATION – Q1/2014 RESULTS May 15, 2014
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: Q1/2014: Executive summary
Q1/2014: Executive summary Volumes on track, continued tough pricing, specialties progressing New record sales volume of +9% to 235 k tons (Q1/2013: 216.1 k tons) Average fiber price down nearly 12% to EUR 1.56 (Q1/2013: EUR 1.77) Specialties with good premiums versus Q1/2013 and FY 2013 Ear
Slide 4: Q1/2014: Cotton market with a Janus face
Q1/2014: Cotton market with a Janus face China’s policy continuous to strongly distorts the market China Cotton market1 Cotton consumption declined by 17% since mmt2 start of reserve policy in 20111 30 Cotton production is expected to decline by 10% 28.04 26.88 because of restricted support fo
Slide 5: Q1/2014: Competitive viscose environment
Q1/2014: Competitive viscose environment Cellulose fiber market remains under pressure Price gap between cotton and VSF increased Cotton prices increased while VSF spot prices reached new lows (12.280 RMB/0.761 USct/Ibs on December 31, 2013, 11.580 RMB/0.701 USct/Ibs on March 31, 2014) Since h
Slide 6: Lenzing's sustainability and specialties strategy - Examples
Q1/2014: Lenzing’s sustainability and specialties strategy - Examples Lenzing’s branding program: approx. 400 mn (FY 2013) product labels, tags and stickers TENCEL® fibers get ECOCERTTM label H&M Conscious Collection (TENCEL®) ZARA Ladies‘ Basic Denim Collection (ProModal® and TENCEL®) Lev
Slide 7: Q1/2014: Financials
Q1/2014: Financials Net debt frozen as announced Net financial debt decrease of EUR 5 mn thereof2: Cash taxes: EUR 6.4 mn Net interest: EUR 2.8 mn Cash Capex: EUR 36.6 mn (Q1/2013: EUR 56.5 mn) Change in trading working capital: EUR -12.9 mn Total liquidity cushion of EUR 547 mn EUR 27
Slide 8: excelLENZ cost savings program
excelLENZ cost savings program Savings significantly exceed EUR 60 million in 2014 Q1/2014 vs. Q1/2013 Personnel cost savings Cost reduction of 9.5% (incl. wage increases) Ahead of reduction plan New organization implemented Material, processing, purchasing, etc. Material cost down addit
Slide 9: Outlook: Full Year 2014
Outlook: Full Year 2014 A year of transition No short-term improvement of market environment Good volume demand but tough pricing to continue Viscose overcapacities High cotton stock Impact of reorganization on the market Lenzing is recognized for its sustainable strategy Increased foc
Slide 10: Q1/2014 – Financial information
Q1/2014 – Financial information
Slide 11: Q1/2014: Consolidated Group P&L
Q1/2014: Consolidated Group P&L (EUR mn) Q1/2014 Q1/20131 Total external sales 451.7 496.5 Inventory change/work in progress (0.1) (6.1) Work performed by the group and capitalized 12.6 15.5 Cost of material and purchased services (301.7) (309.8) Personnel (74.6) (82.5) Other operating expenses/inco
Slide 12: Q1/2014: Topline breakdown
Q1/2014: Topline breakdown Affected by Nonwoven business (+), low pricing (-), discontinued operations (-) Change (EUR mn) Q1/2014 Q1/2013 y-oy (%) Breakdown of fibers segment sales Textile fibers 247.5 271.3 (8.8) Nonwoven fibers 119.9 111.3 7.7 Others1 12.7 12.9 (1.6) Total fibers only sales 380.1
Slide 13: Q1/2014: Cost of material down another 2.6%
Q1/2014: Cost of material down another 2.6% Positive effects from excelLENZ Change (EUR mn) Q1/2014 Q1/2013 y-o-y (%) Dissolving wood pulp1 (140.8) (134.7) 4.5 as % of total cost of material and purchased services 46.7 43.5 - Key chemicals (44.7) (45.5) (1.8) as % of total cost of material and purch
Slide 14: Q1/2014: Total Remaining Opex
Q1/2014: Total Remaining Opex Representing approx. 30% of total Opex Change (EUR mn) Q1/2014 Q1/20131 y-o-y (%) Total personnel expenses (74.6) (82.5) (9.6) as % of external sales 16.5 16.6 - Total other operating expenses (54.3) (58.7) (7.5) as % of external sales 12.0 11.8 - Total remaining Opex (
Slide 15: Q1/2014: Cash flow by quarter
Q1/2014: Cash flow by quarter Improved cash flows Change (EUR mn) Q1/2014 Q1/20131 y-o-y (%) Gross CF (before taxes and interest) 23.8 66.1 (64.0) Taxes and interest (9.2) (40.0) (77.0) Gross CF (after taxes and interest) 33.0 26.1 26.4 Change in total working capital2 9.8 (25.0) (139.2) CF from dis
Slide 16: FY 2013 – Financial information
FY 2013 – Financial information
Slide 17: Consolidated Group P&L
Consolidated Group P&L (EUR mn) 2013 20121 Total external sales 1,908.9 2,090.4 Inventory change/work in progress 11.5 8.2 Work performed by the group and capitalized 52.2 57.7 Cost of material and purchased services (1,253.4) (1,303.7) Personnel (337.0) (309.9) Other operating expenses/income (156.
Slide 18: FY 2013: Topline breakdown
FY 2013: Topline breakdown Nonwoven fibers a stabilizing factor and effects from Plastics sale Change (EUR mn) 2013 2012 y-o-y (%) Breakdown of fibers segment sales Textile fibers 1,048.7 1,149.6 (8.8) Nonwoven fibers 463.6 435.2 6.5 Others1 54.0 49.4 9.3 Total fibers only sales 1,566.3 1,634.2 (4.2
Slide 19: FY 2013: Cost of material down approx. 4%
FY 2013: Cost of material down approx. 4% Cost switch Paskov (other/DWP) and effects from excelLenz Change (EUR mn) 2013 2012 y-o-y (%) Dissolving wood pulp1 (570.3) (529.7) 7.7 as % of total cost of material and purchased services 45.5 40.6 - Key chemicals (184.5) (181.1) 1.9 as % of total cost of
Slide 20: FY 2013: Total Remaining Opex
FY 2013: Total Remaining Opex Representing stable 31% of total Opex and fairly stable Change (EUR mn) 2013 20121 y-o-y (%) Total personnel expenses (337.0) (309.9) 8.7 as % of external sales 17.7 14.8 - Total other operating expenses (224.8) (234.0) (3.9) as % of external sales 11.8 11.2 - Total rem
Slide 21: Balance sheet as at December 31, 2013
Balance sheet as at December 31, 2013 3000 ∑ 2,439.9 EUR mn ∑ 2,632.7 EUR mn ∑ 2,439.9 EUR mn ∑ 2,632.7 EUR mn 2500 2000 1,130.7 1,089.5 (42.9%) (48.4%) (44.7%) (54.3%) 1500 (11.4%) 1000 875.1 (12.8%) (10.1%) 800.7 (33.2%) (32.8%) (10.6%) 500 176.6 (7.2%) 200.3 (7.6%) (11.8%) (18.3%) 233.2 (9.6%) 22
Slide 22: FY 2013: Cash flow
FY 2013: Cash flow Change (EUR mn) 2013 20121 y-o-y (%) Gross CF (before taxes and interest) 172.6 343.3 (49.7) Taxes and interest (78.1) (95.3) (18.1) Gross CF (after taxes and interest) 94.6 248.0 (61.9) Change in total working capital2 (13.6) (44.3) (69.3) CF from discontinued operations 1.3 5.7
Slide 23: Appendix – Equity story
Appendix — Equity story WEENZING
Slide 24: Global fiber market at a glance
Global fiber market at a glance 2013 preliminary production numbers Wool Natural Fibers 1.3% & Natural Polymers Cotton 30.2% 85.4 mn tons man-made cellulose fibers Synthetic fibers Viscose/Rayon 61.8% MMC fibers Modal 6.8% TENCEL®/Lyocell Source: CIRFS, The Fiber Year, The Fiber Organon, Lenzi
Slide 25: Innovation drives specialties
Lenzing: 75 years of innovation Only producer of three fiber generations Market Position % of and Market Share Unique Selling Proposition Key End Markets Fiber Sales in 20131 Q1/20142 #1 ...the new age fiber – outstanding sustainability Jeans, bed linen, Environmentally friendly process underwear
Slide 26: Lenzing: Global market leader in VSF
Lenzing: Global market leader in VSF1 (2013e) Lenzing with 20% share of production2 Lenzing with 18% share of capacities3 Lenzing Lenzing 20% 18% Others Others 33% 35% Fulida Fulida 9% 9% 5.16 mn tons 4.43 mn tons Grasim4 Grasim4 Thai Rayon4 8% 8% 2% Thai Rayon4 Sateri Aoyang Aoyang 3% 6% 4% 6% Sate
Slide 27: Lenzing: Only global player
Lenzing: Only global player Sales volume by region1 – strong footprint in Asia RoW Americas 2% 8% Europe incl. Turkey 29% Asia 61% Source: Company information 1) fiber sales by volume in metric tons, Q1/2014 27
Slide 28: Textile: Building barriers to entry
Textile: Building barriers to entry Global branded supplier to blue chip customer base Knitting & Dyeing & Spinning Yarn Garment Making Retail Weaving Finishing Fabric Manufacturer Blue Chip Customers – Textiles Push Pull Trusted, long-term partner for global consumer brands Global integrated ma
Slide 29: Nonwoven value chain
Nonwoven value chain Private label Roll-good Lenzing Converter or Retailer Consumer producer brand Direct customers Lenzing contribution Price Price per kg Price per m² Price per packs (wipe count) reference: Blue Chip Customers – Nonwoven Lenzing is very close to the customer due to short value c
Slide 30: Fiber strategy recalibrated
Fiber strategy recalibrated Focus on TENCEL® Strategic measures Strategic direction Priority focus area of Lenzing’s growth strategy Gain market share in applications/regions by Tencel Scale scaling up Textile and Nonwoven applications Exploit first mover advantage Expansion of selected high
Slide 31: Sales and marketing
Sales and marketing Customer concentration Textiles % of sales by customers Nonwoven % of sales by customers (Q1/2014) (Q1/2014) 70,0% 70,0% 61.4% 60,0% 60,0% 50,0% 50,0% 46.4% 40.4% 40,0% 40,0% 33.4% 27.7% 30,0% 30,0% 17.8% 20,0% 20,0% 10,0% 10,0% 0,0% 0,0% Top 5 Top 10 Top 20 Top 5 Top 10 Top
Slide 32: Sales and marketing: Blue chip companies drive demand
Sales and marketing Blue chip companies drive demand in specialties – TENCEL®, Lenzing Modal® Lenzing is a trusted, long-term partner for global consumer brands Approx. 45% of textile and approx. 60% of nonwoven sales for specialty fibers (TENCEL®, Lenzing Modal®) can be attributed to key accoun
Slide 33: Lenzing is the innovation leader
Lenzing is the innovation leader Industry leading R&D spend (EUR 31.11 mn in 2013) R&D expenses (2000-2013) Intellectual property As of December 2013, Lenzing owned 35 3,5 approx. 1,400 patent applications and 30 3 patents in 63 countries belonging to 25 2,5 248 patent families All significant p
Slide 34: Lenzing: Unique innovation model
Lenzing: Unique innovation model Strong R&D organization Organization structure Unique innovation model Close collaboration with sales & marketing to develop Breakthrough innovation applications for customers Focus: Leap technologies (e.g. Lenzing Modal®, TENCEL®) 15% of total 2013 projects De
Slide 35: Lenzing has cost advantages
Lenzing has cost advantages Through pulp integration and long-term pulp supply contract Pulp is the main input factor with 47% share of total costs of material and purchased services 90+% of long-term pulp supply secured through own production (vertical integration) and long-term supply contract
Slide 36: Our production sites
Our production sites Lenzing AG – PT. South Pacific Viscose – Biocel Paskov a.s. – Austria (Fiber and pulp) Indonesia (Viscose) Czech Republic (Pulp) Grimsby – Heiligenkreuz – Mobile – Lenzing (Nanjing) Fibers Great Britain (TENCEL®) Austria (TENCEL®) USA (TENCEL®) Co. Ltd. – China (Viscose) 36
Slide 37: Capacity expansion to 2014
Capacity expansion to 20141 ~ 1 mn tons What is there (or under construction) today Europe2 China CAGR 6.1% CAGR 22.1% 444 350 355 357 373 172 90 103 105 105 178 178 140 160 75 103 103 107 110 80 185 149 149 161 162 2010 2011 2012 2013 2014e 2010 2011 2012 2013 2014e USA CAGR 5.7% 40 50 50 50 40 100
Slide 38: Capacities by site and year
Capacities by site and year Result of significant investments over the past years Planned Capacity – Capacity – Capacity – capacity – YE 2011 YE 2012 YE 20131 YE 2014 Plant location (metric tons) (metric tons) (metric tons) (metric tons) Lenzing / Austria 252,000 252,000 268,000 339,000 Lenzing Visc
Slide 39: Capacity by site 2011 - 2013
Capacity by site 2011 - 2013 Capacity Capacity Capacity Capacity Capacity Capacity per March 31, per June 30, per September per December (metric tons) YE 2011 YE 2012 2013 2013 30, 2013 31, 2013 Lenzing 252,000 252,000 264,000 264,000 264,000 268,000 Indonesia 240,000 320,000 320,000 320,000 320,000
Slide 40: Capacity by site 2014
Capacity by site 2014 Capacity per Capacity per Capacity per Capacity per (metric tons) March 31, 2014 June 30, 2014 September 30, 2014 December 31, 2014 Lenzing 268,000 335,000 337,000 339,000 Indonesia 320,000 320,000 320,000 320,000 Nanjing 178,000 178,000 178,000 178,000 India - - - - Heiligenkr
Slide 41: Where our fibers end up
Where our fibers end up NORDSTROM Ge bl, HRD ATA, actin zone ute NeiLparrert 729008" Splendih ey pr ham ke § Ql REVOLVE alo (ermcov’ — TRUE RELIGION patagonia cee AOEHOR @ © ATHLETA bla@mingcales ; SUNDRY ellaqmoss) SOLOW Nein acus & toad @ bd Y/OSEM ITE BM] orcas tras athe = _—s*VICTORIA’S SECRET a
Slide 42: Where our fibers end up
Where our fibers end up Ladies’ wear – close to skin 100% TENCEL® 100% TENCEL® Jacket: 35% TENCEL® / 18% Ramie / 47% Organic cotton, Jumpsuit: 100% TENCEL® 42
Slide 43: Where our fibers end up
Where our fibers end up Ladies’ wear – close to skin Asymmetric Hem Dress 100% TENCEL® 65% TENCEL® / 35% Cotton EUR 29.95 100% TENCEL® 43
Slide 44: Where our fibers end up
Where our fibers end up Ladies’ wear – close to skin 100% TENCEL® T-shirt Dri-Fit Sprint Crew EUR 10.71 USD 90.00 43% Lenzing Modal® / 57% Cotton 53% TENCEL® / 39% Polyester / 8% Spandex 44
Slide 45: Nonwoven applications
Nonwoven applications Wipes Sustainable convenience Medical Naturally pure Hygiene Safety in sensitive areas Technical Leading fiber innovation 45
Slide 46: Our growth opportunity: Cellulose Gap
Our growth opportunity: Cellulose Gap MMC: Strong fiber demand through three megatrends Input factor Megatrends Input factor Supply trend Cellulosic fibers Population Arable land 1. Growth Cotton CAGR*) ‘11 – ’20: Water 1.1%1 Fiber Prosperity Consumption Man-made Cellulose 2. CAGR*) ‘112 – ’20
Slide 47: Cellulose Gap
Cellulose Gap Limited potential to increase cotton supply increases demand for MMC fibers Cotton planted area expected to remain Structural limitations in cotton production: within historical narrow band (1960-2013) effects from yield expansion leveling out Million hectares Million metric tones 45 2
Slide 48: Cellulose Gap
Cellulose Gap 9% p.a. forecast for MMC over current decade The demand gap of cellulosic fibers opening due to limited cotton supply can best be filled by MMC fibers as substitute Fiber market growth by type of fiber (1960-2020e) % CAGR Million metric tons 2000 2005 2010 2011 2012 2013e 2015e 2020e
Slide 49: Mega-trend: Sustainability
Mega-trend: Sustainability Green footprint of MMC: Significantly more environmentally friendly than cotton More than 50% of Lenzing’s fuel consumption sourced from renewable resources Lenzing Group environmental impact of production relative to cotton only approx. 5.7% Required acreage for produ
Slide 50: Lenzing share information
Lenzing share information Oberbank AG ISIN LNZ / AT0000644505 5.0% Bloomberg LNZ:AV Reuters LNZNF.PK ATX Prime, ATX Global Players, Indices VÖNIX Sustainability Index Free float Number of shares 26,550,000 mn 27.4% B&C Share price March 31, 2014 EUR 40,00 Privatstiftung Market capitalization 1,062.0
Slide 51: Back-up
WEENZING
Slide 52: Stock-to-use-ratio (%)
Fiber market environment Highest-stock-to-use-ratio ever at approx. 85% (2013/2014) World cotton production of 25.7 mn tons, consumption of 23.6 mn tons and ending stocks of 20.0 mn tons Massive increase of Chinese national cotton reserve of estimated 11.5 mmt1 tons (>57% of world inventories) U
Slide 53: Viscose spot prices China below cotton prices since March 2013
Viscose spot prices China below cotton prices since March 2013 VSF spot China and cotton price development (in cents/Ibs) Q1/2012 Q2/2012 Q3/2012 Q4/2012 Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 30.04.2014 1 1) Cotton Future calculated on the basis of the most liquid next future compared with the act
Slide 54: Lenzing Viscose textile prices compared to cotton price development
Lenzing Viscose® textile prices compared to cotton price development VSF-price lower than cotton price after end of reporting period EUR/kg 19.1% 8.3% 3.5% 17.0% 17.6% 5.4% -33.0% 28.7% -20.6% 16.4% 5.3% -24.6% -2.17% 21.5% 16.8% 15.2% 15.1% -4.5% -3.3% -7.0% -8.0% 1) historically, standard viscose
Slide 55: Viscose fiber industry cost curve
Viscose fiber industry cost curve Lenzing placed in an excellent position* Index 100 = Lenzing** Other Chinese competitors 140 135 130 125 120 Other Asian competitors 115 Chinese competitor No. 2 110 105 Lenzing** 100 Chinese competitor No. 1 95 90 * Based on publicly available information (Sales mi
Slide 56: DWP industry – cash cost curve
DWP industry – cash cost curve* Lenzing with advantages through pulp integration Cost Competitiveness1 USD/ton 1200 1000 Canada III 800 China Scandinavia Canada II 600 Paskov Canada I South Africa Lenzing Brazil 400 Sumatra 200 0 * Cash cost (excl. freight, interest, taxes) 1) Incl. projects until 2
Slide 57: Contacts and financial calendar
Contacts and financial calendar Investor Relations contact Financial calendar Financial calendar 2014 Stephanie Kniep Full year results March 21, 2014 Head of Investor Relations 70th Annual General Meeting April 28, 2014 Phone: +43 7672 701 4032 Results 1st quarter May 15, 2014 Half year resul