Lenzing Ag · VIE:LNZ
Lenzing — FY2014 Earnings Presentation
67 slides from Lenzing's earnings presentation, Mar 24, 2015
Slide 1: Leading Fiber Innovation
Leading Fiber Innovation LENZING INVESTOR PRESENTATION – Full year 2014 March 24, 2015
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: FY 2014: Executive summary
FY 2014: Executive summary1 Better than expected organic growth; impairments due to difficult viscose market Sales nearly flat at EUR 1,864.22 mn (FY 2013: EUR 1,859.0 mn) Record sales volume increase of approx. 8% to 961 k tons (FY 2013: 891 k tons) Average fiber price down 13 cents to 1.57 E
Slide 4: FY 2014: Key issues
FY 2014: Key issues Having led to impairments at viscose sites Lenzing has a strong USP in innovation and value add and will consequently focus on the specialties TENCEL® (scaling) and Lenzing Modal® (premium) Continuing margin pressure at standard VSF will remain because of mid-term overcapacit
Slide 5: FY 2014: Fiber market
FY 2014: Fiber market Dramatic viscose price decrease within four years 1.40 EUR/kg (-54%), respectively 1.98 USD/kg (-56%) price decrease in 4 years 5
Slide 6: FY 2014: Chemicals
FY 2014: Chemicals Price increase with negative effects on Lenzing‘s business Sulfur – price development in % normalized vs. 2010 Caustic Soda – price development in % normalized vs. 2010 6
Slide 7: Q4/2014: Executive summary
Q4/2014: Executive summary1 Strong Q4 with new record sales volume New record sales volume of approx. +10.0% to 254 k tons (Q4/2013: 231 k tons) Additional TENCEL® volumes, Lenzing Modal ®/FR ® production near to capacity TENCEL® fiber jumbo line producing specified quality Financials (“like
Slide 8: Q4/2014: VSF prices regain premium
8 55.00 65.00 75.00 85.00 95.00 105.00 115.00 125.00 135.00 02.01.2013 15.01.2013 28.01.2013 08.02.2013 21.02.2013 06.03.2013 19.03.2013 01.04.2013 12.04.2013 H1/2013 1) Viscose fiber spot market price 25.04.2013 08.05.2013 21.05.2013 03.06.2013 (Index: Base = January 2, 2013) 14.06.2013 27.06.2013
Slide 9: Fiber market environment 2014
Fiber market environment 2014 Relatively stable fiber production growth with a 2.0% increase1 mn tons 1.9% 100.0 87.7 89.4 90.0 84.6 80.0 2.9% 70.0 60.0 56.0 -0.1% 51.5 54.4 50.0 40.0 2.0% 30.0 26.7 26.3 26.3 0.0% 20.0 10.0 5.4 5.9 6.0 1.1 1.1 1.1 0.0 Wool MMCF Cotton Synthetic fibers Total 2012 201
Slide 10: FY 2014: Low cotton prices putting pressure on the fiber market
FY 2014: Low cotton prices putting pressure on the fiber market Cotton production higher than demand, stock on record level Cotton market1 Cotton prices on a low level after sharp drop in July 2014 mmt2 Average Cotton A Index currently below 70 USct/lbs 30,00 China ended its reserve policy in
Slide 11: FY 2014: Competitive viscose environment
FY 2014: Competitive viscose environment Viscose spot price on low level – however regaining premium over cotton Sharpened price environment USD/kg Lower cotton and polyester prices in H2/2014 4.00 Viscose regaining premium over cotton in H2/2014 3.00 Viscose fiber spot prices have been stab
Slide 12: FY 2014: Marketing campaigns to push TENCEL and Lenzing Modal
FY 2014: Marketing campaigns to push TENCEL® and Lenzing Modal® Apparel ■ Strong promotion in denim/jeans („Natural connection“), 2/3 of the denim producers use TENCEL® fiber in their collection ■ TENCEL® and Lycra-COOLMAX® in denim sportswear ■ GAP US, co-branding activity for jeans TENCEL® fiber
Slide 13: FY 2014: Marketing campaigns to push TENCEL and Lenzing Modal
FY 2014: Marketing campaigns to push TENCEL® and Lenzing Modal® Nonwovens ■ Strong TENCEL ® wipes demand ■ Launch of brand “Sweeps” in Europe ■ Flushable wipes with TENCEL® short cut New Business Development & Technical Textiles TENCEL® short cut for filtration Lenzing FR® – highly flame retarda
Slide 14: New Segment Focus
New Segment Focus Home & Interiors Apparel Nonwovens New Business Bedlinen Innerwear Wipes Shoes Towels Denim Personal care Protective Clothing … … … … 14
Slide 15: FY 2014: Financial overview
FY 2014: Financial overview Financials improving, continued tough commodity type market pricing Only continuing operations FY/2014 FY/2013 Change Q4/2014 Q4/2013 Change (“like for like“) (%) (%) Sales volume (k tons) 961.0 891.0 7.9 254 231 9.7 Ø fiber price (EUR/kg) 1.57 1.70 (7.6) 1.61 1.61 0.0 Sa
Slide 16: FY 2014: Weak fiber prices negatively impact sales and earnings
FY 2014: Weak fiber prices negatively impact sales and earnings Only continuing operations As of As of Change As of As of Change (“like for like“)1 Q4/2014 sales % Q4/2013 sales % (%) FY/2014 sales % FY/2013 sales % (%) (EUR mn) Consolidated 506.5 461.9 9.7 1,864.2 1,859.0 0.3 sales Total opex (431.
Slide 17: FY 2014: Financials
FY 2014: Financials1 Net financial debt clearly below EUR 500 mn target 900 875 Improved cash flows 801 800 Cash flow from operating activities 730 EUR 218.8 mn (2013: EUR 82.3 mn) 700 653 613 Investment cash flow EUR (102.8) mn 600 529 (2013: EUR (152.2) mn) 500 500 471 Free cash flow (adj)
Slide 18: FY 2014: Financials – Net debt cascade
FY 2014: Financials Net debt cascade EUR mn 253.3 22.1 505 0.4 450 46.6 15.0 4.8 3 16.3 106.6 1 4.0 2,3 Net Tax Net Interest Gross CF Cash Capex Change in Change in Dividend Currency Others Net Financial (incl. Fin. Trading WC other WC Translation Financial Debts FY Ass.) Debts FY 2013 2014 1) Inclu
Slide 19: FX effects in 2014
FX effects in 2014 On P+L and equity FX and (EUR mn) 2014 Notes hedging effects Total sales 1,864.2 (4.9) 29 Inventory change/work in progress (2.6) Other operating income/expenses (164.8) 4.7 40 Cost of material and purchased services (1,199.2) Personnel (292.0) EBITDA 240.3 Depreciation & Amortiza
Slide 20: excelLENZ cost saving program
excelLENZ cost saving program A sustainable improvement of Lenzing‘s cost position 160 160 One-off 2014 40% 46% 137 Structural 140 ++ Incremental savings 14% Total Runrate 120 30 121 100 2015 35% 31% 80 33% 60 107 40 2016 32% 43% 25% 20 0 Operational excellence 2014 2015 e Total Runrate Personnel co
Slide 21: Target organization: Central Technical Services
Target organization: Central Technical Services From Mai 4, 2015 CEO Technical Services + Optimal production support – stronger value added services + Fewer interfaces by avoiding duplication in LAG und LT Global Global Lenzing Maintenance Automation Engineering Technik (LT) + Lenzing Technik
Slide 22: Outlook: Full Year 2015
Outlook: Full Year 2015 Tough commodity type pricing to continue – specialties strategy to be followed No short-term improvement of global fiber market Good volume demand but high cotton stock and low oil prices negatively affect fiber prices Long-term MMC market will stay attractive with esti
Slide 23: Quarterly financial information
Quarterly financial information
Slide 24: 2014: Consolidated Group P&L
2014: Consolidated Group P&L Quarters without impairment effect Change Change EUR mn Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q4/2013 Q4/Q3 (%) y-o-y (%) Total sales 451.7 448.3 457.7 506.5 10.7 461.9 9.7 Inventory change/work in progress (0.1) 5.9 8.4 (16.8) - 8.0 (311.1) Work performed by the group and cap
Slide 25: Q4/2014: Strong EBITDA
Q4/2014: Strong EBITDA Better product mix, excelLENZ, FX-effects 100 a 1.25 1.24 80 1.19 1.20 60 40 80.5 68.0 20 46.3 45.6 0 Q1/2014 Q2/2014 Q3/2014 Q4/2014 EBITDA VSF (TX) CCF VSF (TX) 25
Slide 26: Q4/2014: Consolidated Group P&L
Q4/2014: Consolidated Group P&L Incl. impairment (EUR mn) Q4/2014 Q4/2013 Total sales 506.5 461.9 Inventory change/work in progress (16.8) 8.0 Work performed by the group and capitalized 5.1 9.1 Other operating income 16.7 16.5 Cost of material and purchased services (302.5) (342.8) Personnel (66.2)
Slide 27: 2014: Topline breakdown
2014: Topline breakdown Quarters affected by low pricing and shift in product mix Change Change Q4/Q3 y-o-y (EUR mn) Q1/2014 Q2/2014 Q3/2014 Q4/2014 (%) Q4/2013 (%) Breakdown of fibers segment sales Textile fibers 247.5 244.3 250.6 286.0 14.1 252.9 13.1 Nonwoven fibers 119.9 118.3 114.5 123.1 7.5 11
Slide 28: Q4/2014: Total Opex
Q4/2014: Total Opex Q4/2014 (Total Opex EUR 431.0 mn) Q4/2013 (Total Opex EUR 493.8 mn) 14.5% 11.2% 15.4% 19.4% 70.1% 69.4% Cost of material and purchased services Cost of material and purchased services Personnel expenses Personnel expenses Other operating expenses Other operating expenses 28
Slide 29: 2014: Opex breakdown
2014: Opex breakdown Positive effects from excelLENZ Change Change y-o-y Change (EUR mn) Q3/2014 Q4/2014 Q4/2013 Q4/Q3 (%) (%) 2014 2013 y-o-y (%) Total Opex (413.1) (431.0) (493.8) 4.3 (12.7) (1,704.5) (1,815.3) (6.1) Total costs of material and (296.5) (302.5) (342.8) 2.0 (11.7) (1,199.2) (1,253.4
Slide 30: 2014: Opex breakdown
2014: Opex breakdown Positive effects from excelLENZ Change Only continuing operations Change y-o-y Change (“like for like“) (EUR mn) Q3/2014 Q4/2014 Q4/2013 Q4/Q3 (%) (%) 2014 2013 y-o-y (%) Total Opex (413.1) (431.0) (491.5) 4.3 (12.3) (1,704.5) (1,766.1) (3.5) Total costs of material and purchase
Slide 31: 2014: Opex as of total sales
2014: Opex as of total sales Change Change Q4/Q3 y-o-y (EUR mn) Q1/2014 Q2/2014 Q3/2014 Q4/2014 (%) Q4/2013 (%) Total sales 451.7 448.3 457.7 506.5 10.7 461.9 9.7 Total Opex1 (430.6) (429.8) (413.1) (431.0) 4.3 (493.8) (12.7) Total cost of material and purchased services (301.7) (298.5) (296.5) (302
Slide 32: Q1-Q4/2014: Cash flow by quarter
Q1-Q4/2014: Cash flow by quarter Continuing better cash flows Change Q4/Q3 Change (EUR mn) Q1/2014 Q2/2014 Q3/2014 Q4/2014 (%) Q4/2013 y-o-y (%) Gross CF (before taxes and interest) 42.2 43.9 71.3 95.8 34.2 (29.9) - Taxes and interest (9.2) (4.6) (4.0) (4.6) 13.1 (4.8) (4.2) Gross CF (after taxes an
Slide 33: FY 2014 – Financial information
FY 2014 – Financial information
Slide 34: FY 2014: Consolidated Group P&L
FY 2014: Consolidated Group P&L (EUR mn) 2014 excl. imp. 2014 incl. imp. 20131 2013 Total sales 1,864.2 1,864.2 1,859.0 1,908.9 Inventory change/work in progress (2.6) (2.6) 12.3 11.5 Work performed by the group and capitalized 34.6 34.6 52.0 52.2 Other operating income 48.5 48.5 36.6 68.1 Cost of m
Slide 35: FY 2014: Topline breakdown
FY 2014: Topline breakdown Affected by Nonwoven business (+), low pricing (-), discontinued operations (-) Change Change (EUR mn) 2014 2013 y-o-y (%) 20134 y-o-y (%) Breakdown of fibers segment sales Textile fibers 1,028.3 1,048.7 (1.9) 1,048.7 (1.9) Nonwoven fibers 475.9 463.6 2.6 463.6 2.6 Others1
Slide 36: FY 2014: Total Opex
FY 2014: Total Opex 2014 (Total Opex EUR 1,704.5 mn) 2013 (Total Opex EUR 1,815.3 mn) 20131 (Total Opex EUR 1,766.1 mn) 12.5% 12.4% 12.3% 17.1% 18.6% 18.5% 69.0% 69.2% 70.4% Cost of material and purchased services Cost of material and purchased services Cost of material and purchased services Person
Slide 37: FY 2014: Opex as of total sales
FY 2014: Opex as of total sales Change Change (EUR mn) 2014 2013 y-o-y (%) 20132 y-o-y (%) Total sales 1,864.2 1,908.9 (2.3) 1,859.0 0.3 Total Opex1 (1,704.5) (1,815.3) (6.1) (1,766.1) (3.5) Total cost of material and purchased services (1,199.2) (1,253.4) (4.3) (1,223.4) (2.0) as % of total sales 6
Slide 38: FY 2014: Solid balance sheet
FY 2014: Solid balance sheet As of December 31, 2014 ∑ 2,375.1 EUR mn ∑ 2,375.1 EUR mn Equity (55.7%) Property, plant (44.0%) and equipment (14.5%) Inventories Financial liabilities (9.8%) Trade receivables (30.7%) (7.6%) Trade payables (11.4%) Cash and cash equivalents (8.9%) Provisions (8.6%) Othe
Slide 39: FY 2014: Cash flow
FY 2014: Cash flow Considerably improved cash flows Change (EUR mn) 2014 2013 y-o-y (%) Gross CF (before taxes and interest) 253.3 172.6 46.7 Taxes and interest (22.5) (78.1) (71.2) Gross CF (after taxes and interest) 230.8 94.6 144.1 Change in total working capital1 (12.0) (13.6) (11.9) CF from dis
Slide 40: Appendix – Equity story
Appendix — Equity story QEENZING
Slide 41: Global fiber market at a glance
Global fiber market at a glance 2014e production numbers Wool Natural Fibers 1.3% & Natural Polymers Cotton 29.4% 89.4 mn tons man-made cellulose fibers Synthetic fibers Viscose/Rayon 62.6% MMC fibers Modal 6.7% TENCEL®/Lyocell Source: CIRFS, The Fiber Year, The Fiber Organon, Lenzing estimate
Slide 42: Lenzing: >75 years of innovation
Lenzing: >75 years of innovation Only producer of three fiber generations – increased share of TENCEL® sales Market Position % of and Market Share Unique Selling Proposition Key End Markets Fiber Sales in 20141 20142 #1 ...the new age fiber – outstanding sustainability Jeans, bed linen, Environme
Slide 43: Lenzing: Global market leader in VSF
Lenzing: Global market leader in VSF1 (2014e) Lenzing with 21% share of production2 Lenzing with 18% share of capacities3 Lenzing Lenzing 21% 18% Others 31% Others 33% Grasim4 9% 4.60 mn tons Grasim4 5.49 mn tons 9% Thai Rayon4 Tangshan 2% Thai Rayon4 Helon Tangshan 3% 9% 3% Indo 9% Helon Bharat4 3%
Slide 44: Lenzing: Only global player
Lenzing: Only global player Sales volume by region1 – strong footprint in Asia RoW Americas 2% 8% Europe incl. Turkey 28% Asia 62% Source: Company information 1) Fiber sales by volume in metric tons, 2014 44
Slide 45: Capacity 2015
Capacity 20151 ~ 1 mn tons TENCEL® plant with 67 k tons Europe2 China CAGR 6.1% CAGR 22.1% 444 444 355 357 373 172 103 1053 105 172 1788 178 160 178 103 103 107 110 110 140 149 149 161 162 162 2011 2012 2013 2014 2015e 2011 2012 2013 2014 2015e USA CAGR 5.7% 40 50 50 50 40 100 Total capacity at Indo
Slide 46: Capacities by site and year
Capacities by site and year Investment in TENCEL® jumbo line – full production in 2015 Planned Capacity – Capacity – Capacity – capacity – YE 2012 YE 20131 YE 2014 YE 2015 Plant location (metric tons) (metric tons) (metric tons) (metric tons) Lenzing / Austria 252,000 268,000 339,000 339,000 Lenzing
Slide 47: Capacity by site 2015
Capacity by site 2015 Capacity per Capacity per Capacity per Capacity per (metric tons) March 31, 2015 June 30, 2015 September 30, 2015 December 31, 2015 Lenzing 339,000 339,000 339,000 339,000 Indonesia 320,000 320,000 320,000 323,000 Nanjing 178,000 178,000 178,000 178,000 Heiligenkreuz 65,000 65,
Slide 48: Lenzing has cost advantages
Lenzing has cost advantages Through pulp integration and long-term pulp supply contract Pulp is the main input factor with 50% 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 49: 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 50: 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 51: Sales and marketing
Sales and marketing Customer concentration Textiles % of sales by customers Nonwoven % of sales by customers (Q1 - Q4/2014) (Q1 - Q4/2014) 61.4% 46.4% 42.5% 31.6% 29.1% 19.4% Top 5 Top 10 Top 20 Top 5 Top 10 Top 20 Source: LAG 51
Slide 52: Lenzing is the innovation leader
Lenzing is the innovation leader Industry leading R&D spend (EUR 20.61 mn in 2014) R&D expenses (2000-2014) Intellectual property As of December 2014, Lenzing owned 35 3,5 approx. 1,500 patent applications and 30 3 patents in 63 countries belonging to 250 patent families 25 2,5 All significant p
Slide 53: Innovation process adapted to new functional organization
Innovation process adapted to new functional organization Idea Feasibility Review New innovation Development Launch process „PRO” CCO Central R&D Business Product Process New R&D Development Development Development organization Lenzing Lenzing Apparel Home/ Non- New TENCEL® Pulp Co-Products Viscose®
Slide 54: Long-term opportunity: Cellulose Gap
Long-term 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 55: 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 (1960-2015e) effects from yield expansion leveling out Million hectares Million metric tones 45
Slide 56: 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 57: Lenzing share information
Lenzing share information ISIN LNZ / AT0000644505 Oberbank AG Bloomberg LNZ:AV 5.0% Reuters LNZNF.PK ATX Prime, ATX Global Players, Indices VÖNIX Sustainability Index Number of shares 26,550,000 mn Share price December 30, 2014 EUR 52.74 Free float 27.4% Market capitalization 1,400.2 mn December 30,
Slide 58: Back-up
Back-up
Slide 59: Lenzing Viscose textile prices compared to cotton price development
Lenzing Viscose® textile prices compared to cotton price development VSF gained back premium over cotton in Q3/20141 EUR/kg 3.5 3 2.5 19.1% 2 5.4% -33.0% 8.3% 3.5% 17.0%17.6% 28.7% -20.6% 16.4% 5.3% -24.6% 7.8% 15.7% 1.5 15.1% -2.17% 21.5%16.8% 15.2% -4.5% -3.3% -8.0% -10.1% 1 -7.0% 0.5 0 1. Q. 09 2
Slide 60: Stock-to-use-ratio (%)
Fiber market environment Highest stock-to-use-ratio ever at approx. 88.6% (2014/2015*) World cotton production of 26.27 mn tons, consumption of 24.29 mn tons and ending stocks of 21.52 mn tons Huge Chinese national cotton reserve of estimated 12.08 mmt1 tons (>56% of world inventories) Usc/Ib St
Slide 61: 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) 61
Slide 62: Where our fibers end up
Where our fibers end up NORDSTROM Ge fol, SAD ACTA, Dactivuc zobha’ Lilies NEIL BOMTETI ans Splandith uy Grshan ke Spener QE + REVOLVE alo (Aepmcov’ TRUE RELIGION’ patagonia RALPH LAUREN seopeop Q GATHLETA bdia@mingdales SUNDRY ella moss) SOLOW CAP Neiman Mancu we toa e@°oe@ Y/OSEMITE € Jot JAMES PE
Slide 63: Where our fibers end up
Where our fibers end up Apparel - Ladies’ wear – close to skin 100% Jacket: 35% TENCEL® / Asymmetric Hem Dress 100% TENCEL® 65% TENCEL® / TENCEL® 18% Ramie / 47% 100% TENCEL® 35% Cotton Organic cotton, Jumpsuit: 100% TENCEL® 63
Slide 64: Where our fibers end up
Where our fibers end up Home and Interiors 100% TENCEL® Lenzing Modal® bedlinen towels duvets bathrobes mattresses …. 64
Slide 65: Where our fibers end up
Where our fibers end up Nonwovens TENCEL® TENCEL® TENCEL® wash cloth face masks hygiene articles 65
Slide 66: Where our fibers end up
Where our fibers end up New Business Development & Technical TENCEL® Lenzing Modal® COLOR TENCEL® car seats vegetable and fruit nets laces tires eg. at REWE Austria soles injection moldings outer/inner layer … 66
Slide 67: Contacts and financial calendar
Contacts and financial calendar Investor Relations contact Financial calendar Financial calendar 2015 Stephanie Kniep Full year results March 24, 2015 Head of Investor Relations 70th Annual General Meeting April 22, 2015 Phone: +43 7672 701 4032 Results 1st quarter May 18, 2015 Half year resul