Lenzing Ag · VIE:LNZ
Lenzing — Q1 2012 Earnings Presentation
66 slides from Lenzing's earnings presentation, May 10, 2012
Slide 1: Leading Fiber Innovation
Leading Fiber Innovation LENZING INVESTOR PRESENTATION May 10, 2012
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: Key highlights Q1/2012
Key highlights Q1/2012 Spot on Q1 guidance Sales of EUR 528 mn EBITDA of EUR 93 mn and EBIT of EUR 67 mn Capex EUR 53 mn World fiber market: Consolidation on a high level continues in Q1/2012 Net financial debt @ EUR 126 mn (as of March 31, 2012) 3
Slide 4: Market environment
Market environment China softer, Indonesia and Turkey strong China1: strong Chinese industrial Indonesia3: production – however on slightly expected 6-6.5% annual GDP growth over the lower level than in 2011 next two years economy not export driven 65% of GDP is domestic China Industrial Pro
Slide 5: Cellulose fiber market environment
Cellulose fiber market environment Re-establishment of premium to cotton starting slowly Historically, standard viscose fibers traded with a 15-20% premium over cotton1. Lenzing standard viscose vs. cotton prices (EUR/kg) World cotton area and 4 production expected to 3,5 decrease by -7%2 3 Chin
Slide 6: Q1 – slightly better than expected
Q1 – slightly better than expected Record sales volume at lower average price Average price per kg 405 399 396 External sales1 (EUR mn) 382 387 334 334 331 guidance of 2.29 2.33 2.13 2.15 € 2.00 2,50 289 1.97 1.8% 2.03 1.91 1.92 -8.6% 1.80 19.3% 0.9% -5.6% -3.1% 2,00 200 9.4% 0.5% 1,50 170 1,00 188
Slide 7: Textile fibers
Textile fibers Anticipated price decreases in Q1 Viscose®: leveling out, TENCEL®: stable; Modal®: price concessions Lenzing Viscose®1 TENCEL®1 200 2.25 2.16 1.87 60 2.79 2.93 2.96 1.66 1.75 1.81 24.3% -4.0% 1.80 1.82 1.76 2.45 2.67 150 -16.7% 50 5.0% 1.0% 12.7% -6.4% 3.4% 1.1% -3.3% 1.97 2.14 2.18 2
Slide 8: Nonwoven fibers
Nonwoven fibers Nonwoven viscose price follows textile viscose pricing with a delay Viscose nonwoven decreased mainly due to contracting in December 2011 and reflecting low VSF pricing environment for textile TENCEL® price continues to stay at high level Lenzing Viscose®1 TENCEL®1 8 0 2.02 2.06
Slide 9: Relative pricing
Relative pricing TENCEL® premium higher than Modal Modal: margins over viscose are adapting to the usual 40-50% range TENCEL® textile settling significantly higher than the historical range of 20-30% premium due to a much wider range of applications TENCEL® nonwoven premium continuing to incre
Slide 10: Q1/2012: Expected weakest quarter
Q1/2012: Expected weakest quarter Record volume with decreasing costs (EUR mn) Q4/2011 Q1/2012 Change in % Sales volume man-made cellulose fibers (kt) 188 191 1.6 Total external sales 547.8 528.2 (3.6) Inventory change / work in progress 14.0 3.9 (72.2) Work performed by the group and capitalized 11
Slide 11: 11.4% net gearing
11.4% net gearing Net financial debt 2008-Q1/20122 Strong OFCF helped reduce (EUR mn) net debt further to 700 653 624 EUR 126 mn 613 600 500 471 494 498 Total liquidity cushion of 441 400 EUR 749 mn consisting of 365 306 EUR 498 mn cash, plus 300 316 307 200 159 EUR 251 mn of unused 106 125
Slide 12: Outlook FY 2012 confirmed
Outlook FY 2012 confirmed Q2/2012: no major changes compared to Q1/2012 Outlook 2012 Q2/2012: no significant change Sales approx. EUR 2.2 – 2.3 bn in the pricing environment compared to Q1/2012 EBITDA approx. EUR 400 – 480 mn EBIT approx. EUR 285 – 365 mn Q2/2012 EBITDA expected around EUR 100 m
Slide 13: Q1/2012 – Financial information
Q1/2012 – Financial information
Slide 14: Textile and nonwoven fibers
Textile and nonwoven fibers Decline of standard viscose textile prices softened by TENCEL® prices Textile fibers1 Nonwoven fibers1 304 External Sales (EUR mn) 293 External Sales (EUR mn) 106 109 291 282 105 105 243 273 101 241 3 ,0 0 238 93 93 2 5 0 210 2.39 2.42 91 1.3% 2.18 2.20 2.11 2 ,5 0 2.02 1
Slide 15: Topline breakdown
Topline breakdown Reduced textile fiber sales and stable nonwoven sales Change (EUR mn) Q1/2011 Q2/2011 Q3/2011 Q4/2011 Q1/2012 Q4/Q1 (%) Breakdown of fibers segment sales Textile fibers 292.6 290.6 273.0 303.8 281.7 (7.2) Nonwoven fibers 106.2 105.4 108.7 100.8 104.9 4.1 Other1 10.3 10.8 10.9 12.1
Slide 16: Decreasing costs with slightly increasing capacity
Decreasing costs with slightly increasing capacity Pulp is key – taking advantage of lag effect of NBSK price reduction Change (EUR mn) Q1/2011 Q2/2011 Q3/2011 Q4/2011 Q1/2012 Q4/Q1 (%) Dissolving pulp1 136.2 138.4 144.2 146.1 131.6 (9.9) as % of total cost of material and purchased services 44.7 42
Slide 17: Cash flow by quarter
Cash flow by quarter Continuing strong operating cash flow Change (EUR mn) Q1/2011 Q2/2011 Q3/2011 Q4/2011 Q1/2012 Q4/Q1 (%) Gross CF 89.7 101.8 97.0 100.5 73.9 (26.5) Change in total WC1 1.0 (5.7) (30.0) (44.6) 11.6 - Operating cash flow 90.7 96.1 67.0 55.8 85.4 53.0 Investment cash flow2 (44.6) (4
Slide 18: FY 2010, 2011 – Financial information
FY 2010, 2011 – Financial information
Slide 19: Sales driver fibers
Sales driver fibers Both textile & nonwoven fibers with price increases Textile fibers1 Textile fibers have higher average selling 1,160 External Sales (EUR mn) 932 prices compared to nonwoven fibers: 1000 3 800 674 1.95 2.29 2,5 Premium pricing of Lenzing Modal® 1.60 600 21.9% 17.4% 2 purely re
Slide 20: Sales driver – textile fibers
Sales driver – textile fibers Significant price premium achieved for specialty fibers Lenzing Viscose®1 TENCEL®1 800 3 250 4 2.00 2,5 2.71 600 1.78 200 3 12.4% 2 2.10 1.36 400 30.8% 1,5 150 1.75 29.0% 20.2% 2 1 100 200 327 343 1 284 0,5 50 60 76 76 0 0 0 0 2009 2010 2011 2009 2010 2011 Sales volume
Slide 21: Sales driver – nonwoven fibers
Sales driver – nonwoven fibers Lenzing Viscose®1 Attractive and more stable pricing for 400 3 Lenzing Viscose® in nonwoven compared 1.99 2,5 300 1.45 1.74 2 to textile business unit (lower competition 14.4% 200 20.0% 1,5 due to high quality requirements) 1 100 143 165 168 0,5 TENCEL® in the nonw
Slide 22: Relative pricing
Relative pricing Textile fibers Relative price (viscose = 100%) (%) 2009 2010 2011 Lenzing Viscose® 100 100 100 Lenzing Modal® (incl. FR) 175 144 154 TENCEL® 128 118 136 Nonwoven fibers Relative price (viscose = 100%) (%) 2009 2010 2011 Lenzing Viscose® 100 100 100 TENCEL® 115 117 116 22
Slide 23: Consolidated Group P&L – external sales
Consolidated Group P&L – external sales (EUR mn) 2010 2011 Total External Sales 1,766 2,140 Fibers 1,596 1,940 Plastic Products 145 173 Engineering 94 107 Others 3 3 Consolidation (74) (82) Cost of material and purchased services (1,029) (1,275) Personnel (259) (287) Depreciation & Amortization (103
Slide 24: Stable gross margins
Stable gross margins Cost of material an purchased services increase in line with sales increase (EUR mn) 2010 2011 Change in % Dissolving pulp 435 564.9 29.9 as % of total cost of material and purchased services 42.3 44.3 Key chemicals 105 139.1 32.5 as % of total cost of material and purchased ser
Slide 25: Remaining Opex: stable development
Remaining Opex: stable development Representing approx. 28% of total cost and are very stable (EUR mn) 2010 2011 Change in % Total personnel expenses 259 287 10.8 as % of external sales 15 13 Other operating expenses Freight outward 62 68 9.7 Commissions and advertising costs 22 29 31.8 Service and
Slide 26: Cash flow
Cash flow (EUR mn) 2010 2011 Change in % Gross CF 293 389 32.8 Change in total WC1 11 (79) n.a. Discontinued operations (9) - n.a. Operating cash flow 294 310 5.3 Investment cash flow2 (280) (216) (23.0) Discontinued operations (1) - n.a. OFCF 13 94 n.a. Gross CF as % of external sales 16.6 18.2 n.a
Slide 27: December 31, 2011 balance sheet – assets
December 31, 2011 balance sheet – assets (EUR mn) 31/12/2010 31/12/2011 Change in % Intangible assets 87.7 90.1 2.7 Property, plant and equipment 1,002.8 1,091.7 8.9 Investments in associates 24.7 30.3 22.4 Other financial assets 67.3 93.6 39.1 Deferred taxes 10.1 10.8 6.9 Other long-term assets 2.5
Slide 28: December 31, 2011 balance sheet – equity & liabilities
December 31, 2011 balance sheet – equity & liabilities (EUR mn) 31/12/2010 31/12/2011 Change in % Common stock 26.7 27.6 3.2 Capital reserves 63.6 133.9 110.6 Retained earnings and other reserves 613.6 828.2 35.0 Share of shareholders of Lenzing AG 703.9 989.7 40.6 Non-controlling interests 28.1 34.
Slide 29: Double-digit growth profile
Double-digit growth profile Lenzing has managed growth successfully in the past Double-digit growth p.a. over last 11 years Fiber production Total external sales1 EBITDA1 EBIT1 (1,000‘s metric tons) (EUR mn) (EUR mn) (EUR mn) 800 2500 500 480 400 364 705 2,140 700 2000 400 600 300 CAGR 500 7.0% CA
Slide 30: Appendix – Company information
Appendix – Company information
Slide 31: Clear targets and framework
Clear targets and framework 2011 - 2015 Growth Innovation Financial framework Double-digit topline CAGR Spend industry leading Net debt/EBITDA not approx. 1.5% of sales on above 2.5x Invest EUR 1.6 bn R&D ROCE not below 12% >33% of total MMC fibers Expand fiber capacity to approx. 1.2
Slide 32: Complementary Management Team
Introduction Complementary Management Team Peter Untersperger Friedrich Weninger Thomas G. Winkler Chief Executive Officer Chief Operating Officer Chief Financial Officer Age 52 55 48 Education Master of law and business Master of Business Administration IMD Master of law (LLM) administr
Slide 33: Key investment highlights
Key investment highlights A straightforward story of leadership and growth 1 Global market leader Cellulose Gap: Strong 8 2 a growth financials opportunity Resistant 7 3 Sustainability to crisis Double digit High barriers 6 4 growth profile Cost to entry 5 leadership 33
Slide 34: Global fiber market 2011
Global fiber market 2011 Global fiber production 2011E1 Wool Natural Fibers 1.5% & Natural Polymers Cotton 31.2% 79.1 mn tons man-made MMC fibers Synthetic fibers cellulose fibers 6.0% 61.3% Source: The Cellulose Gap, Gherzi, February 2011 1) assuming a population of 7.0 bn and a per capita fiber co
Slide 35: Global market leader in a fragmented market
Global market leader in a fragmented market Only true global player – Lenzing with 17% market share1 sales by region4 RoW Americas 3% Lenzing 17% 7% Others 30% Fulida 11% Europe incl. Turkey 33% Thai Rayon2 Grasim2 Asia 3% 8% 57% Sateri 4% Aoyang 6% FCFC Indo Tangshan Helon3 4% Bharat2 6% 6% 4% Sour
Slide 36: Innovation drives specialties
Global market leader Technology leadership secures leading market shares Market Position % of and Market Share Unique Selling Proposition Key End Markets Fiber Sales in FY 20111 Q1/20122 # 1 – Quantum leap ...the new age fiber High-end technology consumer Environmentally friendly process applicat
Slide 37: Cellulose Gap: a growth opportunity
Cellulose Gap: a growth opportunity Limited potential to increase cotton supply increases demand for MMC fibers Cotton planted area expected to remain Limited growth in cotton production: stable within narrow band (1960-2011E) effects from yield expansion leveling out Million hectares Million metric
Slide 38: Cellulose Gap: a growth opportunity
Cellulose Gap: a growth opportunity MMCF: strong demand and limitations on cotton supply Megatrends Input factor Supply trend Cellulosic fibers Population Arable land Growth Cotton CAGR*) ‘11 – ’20: 1.1%1 Water Fiber Prosperity Consumption Man-made Cellulose CAGR*) ‘11 – ’20: Cellulosic Wood
Slide 39: Cellulose Gap: a growth opportunity
Cellulose Gap: a growth opportunity 9% p.a. forecast for MMCF over next 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) Million metric tons CAGR % 2000 2005 2010 2011E 2
Slide 40: Sustainability
Sustainability Green footprint: 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 production of one metric
Slide 41: High barriers to entry
High 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 marketing and s
Slide 42: Sales and marketing
Sales and marketing Textiles % of sales by customers1 Nonwoven % of sales by customers (2011) (2011) 50% 70% 62.1% 40.8% 60% 40% 50% 47.4% 30% 26.4% 40% 35.9% 20% 30% 16.4% 20% 10% 10% 0% 0% Top 5 Top 10 Top 20 Top 5 Top 10 Top 20 Source: LAG 1) no single customer with a share of more than 5% 42
Slide 43: Blue chip companies drive demand in specialties
Sales and marketing Blue chip company’s 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 44: Innovation
Innovation R&D organization and unique innovation model Organization structure Unique innovation model Integration into business units Breakthrough innovation Close collaboration with sales & marketing to develop Focus: Leap technologies (e.g. Lenzing applications for customers Modal®, TENCEL®
Slide 45: Innovation
Innovation Industry Leading R&D Spend R&D Expenses (2000-2011) Intellectual Property As of December 2011, Lenzing owned 30 3 approx. 1,300 patent applications and patents in 57 countries belonging to 25 2,5 218 patent families 20 2 All significant patents are filed and maintained in Asia, the Eu
Slide 46: Innovations 2011
Innovations 2011 Lenzing Modal® Edelweiss technology Lenzing Modal® (already carbon neutral) became even more eco-friendly Makes the fiber even purer and more natural TENCEL®C Features oceanic micro particles Opens up a new dimension in skin care Cell-renewing effects, moisturizing, sk
Slide 47: Cost leadership
Cost leadership Through integration and long-term supply contract Pulp is the key cost driver with approx. 44% 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 contracts Long-term con
Slide 48: State-of-the-art production
State-of-the-art production Technological know-how maximizing efficiency Illustrative recovery process at Lenzing site Wood (1,000kg) Pulp production Quantity Use Pulp (dry weight) 381kg Captive Acetic acid 36kg Merchant market Furfural 8kg Merchant market Xylose 35kg Merchant market At Lenzing si
Slide 49: Sourcing/Vertical integration
Sourcing/Vertical integration The dissolving pulp market is characterized by volatility Pulp prices historically highly volatile, while wood costs have remained comparatively stable Lenzing LT contracts for dissolving pulp indexed to relatively stable paper pulp prices Pulp price development (20
Slide 50: Cost leadership
Cost leadership Through economies of scale Lenzing is the only company to operate production lines with an annual capacity of 80,000 metric tons Biggest MMC fiber plants worldwide1 Benefits from scale Company Site Capacity 10-15% lower Capex requirements compared to Lenzing, 250k mt smaller plan
Slide 51: Capital expenditure 2011/2012
Capital expenditure 2011/2012 Slightly lower capital expenditure in Capital expenditure 2011 shift of invoicing into 2012 (EUR mn) approx. Projects completed in 2011: 400 230.0 350.0 300 196.3 Second expansion stage and 200 100 debottlenecking at Lenzing Nanjing 0 Fibers, China (capacity dou
Slide 52: Capacity expansion to 2015
Capacity expansion to 2015 Accelerating the fiber expansion in the future Europe1 China CAGR 4.7% CAGR 15.6% 420 420 350 350 370 100 100 110 170 170 250 100 100 100 140 140 140 170 170 170 150 150 160 110 110 2011 2012E 2013E 2014E 2015E 2011 2012E 2013E 2014E 2015E India USA CAGR 28.8% 80 80 2011 2
Slide 53: Expansion program
Expansion program Significant investments envisaged to support growth strategy Planned Planned Planned Planned Planned capacity – capacity – capacity – capacity – capacity – YE 2011 YE 2012 YE 2013 YE 2014 YE 2015 Plant location (metric tons) (metric tons) (metric tons) (metric tons) (metric tons) L
Slide 54: Capacity by site 2012 - 2013
Capacity by site 2012 - 2013 Capacity per Capacity per Capacity per Capacity per Capacity per Capacity per Capacity per Capacity per 31.03.2012 30.06.2012 30.09.2012 31.12.2012 31.03.2013 30.06.2013 30.09.2013 31.12.2013 Lenzing 250,000 250,000 250,000 250,000 250,000 260,000 260,000 260,000 Indones
Slide 55: Capacity by site 2014 - 2015
Capacity by site 2014 - 2015 Capacity per Capacity per Capacity per Capacity per Capacity per Capacity per Capacity per Capacity per 31.03.2014 30.06.2014 30.09.2014 31.12.2014 31.03.2015 30.06.2015 30.09.2015 31.12.2015 Lenzing 260,000 250,000 250,000 310,000 310,000 310,000 310,000 310,000 Indones
Slide 56: Where our fibers end up
Where our fibers end up QLENZING
Slide 57: Sexy tee midi dress
Sexy tee midi dress USD 59.50 TENCEL® / Spandex 57
Slide 58: Sequin tee and dream tees one shoulder tee
Sequin tee and dream tees one shoulder tee USD 49.50 (sequin tee) and USD 39.50 (solid tee) Ecosil® Lenzing Modal® / Spandex 58
Slide 59: New Venus dressing-gown and tank
New Venus dressing-gown and tank EUR 275.00 (dressing-gown) and EUR 130.00 (tank) 90% Lenzing Modal® / 5%Elastane / 5% Polyester 59
Slide 60: Tommy John 'second skin' tank top, V-neck t-shirt, crewneck
Tommy John ‘second skin’ tank top, V-neck t-shirt, crewneck USD 33.00 (tank top), USD 38.00 (V-neck), USD 38.00 (crewneck) MicroModal® / Spandex 60
Slide 61: Helmut Lang long dress with slit
Helmut Lang long dress with slit USD 275.00 Lenzing MicroModal® 61
Slide 62: Vintage flare jeans
Vintage flare jeans USD 98.00 100% TENCEL® 62
Slide 63: TENCEL summer dress
TENCEL® summer dress EUR 35.99 100% TENCEL® 63
Slide 64: Modal lace-trim gown, modal pants, modal lace-trim romper
Modal lace-trim gown, modal pants, modal lace-trim romper USD 39.95 (each) 94% Lenzing Modal® , 6% Spandex 64
Slide 65: Armani collezioni sportcoat
Armani collezioni sportcoat USD 645.00 TENCEL® 65
Slide 66: Burberry elbow sleeve reversible check tee
Burberry elbow sleeve reversible check tee USD 250.00 100% Lenzing Modal® 66