Lenzing Ag · VIE:LNZ
Lenzing — Q3 2013 Earnings Presentation
61 slides from Lenzing's earnings presentation, Nov 14, 2013
Slide 1: Leading Fiber Innovation – Q3/2013 Results
Leading Fiber Innovation LENZING INVESTOR PRESENTATION – Q3/2013 RESULTS November 14, 2013
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: Executive summary
Executive summary Lenzing revises guidance for FY 2013 9-months 2013 EBITDA1 of EUR 196.0 mn in line with expectations but below previous year (9-months 2012: EUR 281.5 mn) Significantly higher sales volume of 660 kto (+12.0%) but average fiber price decrease of 14% to 1.73 EUR per kg y-o-y Re
Slide 4: Continuing volatile cotton market development
Continuing volatile cotton market development Further increase of cotton stock Cellulose fiber market remains rather difficult Cotton market1 No positive influence from better global mmt2 economic environment (Europe, USA, China) 30 New ICAC forecast sees global cotton production 28.04 26.91 2
Slide 5: Competitive viscose environment
Competitive viscose environment Cellulose fiber market remains under price pressure Global viscose market in a limbo Stable cotton prices while VSF spot prices on lower levels (12.800 RMB at the end of Q3/2013 vs. 13.180 RMB at end of H1/2013) and with negative premiums to cotton Estimated new
Slide 6: At a glance: Q3/2013
At a glance: Q3/2013 EBITDA in line with expectations EBITDA1 of EUR 61.1 mn Significantly higher sales volume of 221.5 kto y-o-y (+11.1%) vs. Q3/2012 No further effects of Plastics sale in Q3/2013 excelLENZ program continued to help partially compensating poor pricing Average fiber price
Slide 7: Lenzing can not decouple itself from market development
Lenzing can not decouple itself from market development Specialties progressing Lenzing Viscose® Further decrease in VSF spot prices results in cost and margin pressure Strategy: Improve cost situation; find markets outside China to reduce price pressure Lenzing Modal® Successful stable pr
Slide 8: Q3/2013: Volume remained on record level
Q3/2013: Volume remained on record level Downward price trend effected sales -8.2% 0.9% -5.6% 0.5% -4.4% -6.2% -3.3% -1.1% -4.6% External sales (EUR mn)1 Sales volume (kt) ASP (EUR/kg)2 ASP growth2 1) core fiber segment sales, excluding sales of co-products and external sales of pulp, wood and energ
Slide 9: Q3/2013 financials
Q3/2013 financials Increase in net financial debt due to investments Net financial debt increase of EUR 37 mn thereof5: Cash taxes: EUR -10.6 mn Net interest: EUR -6.6 mn Change in working capital: EUR -43.9 mn Total liquidity cushion of EUR 530 mn EUR 344 mn cash EUR 186 mn of unused
Slide 10: Consequences on Lenzing's business
Consequences on Lenzing’s business Restructure and safeguard cost leadership Focusing on profitable growth and cost leadership Market focused organization to react quickly to market development Stronger Asian focus Attention on production with focus on cost Push specialties More innovati
Slide 11: excelLENZ 2.0
excelLENZ 2.0 Clearly identified target: Structural cost savings of EUR 120 mn p.a. “Must-win” areas Operational excellence + procurement (lean operations and cost effective supply base) Capital excellence (review CAPEX and optimize NWC1) Effective organization (lean, clear tasks and respons
Slide 12: Revised outlook: Full Year 2013
Revised outlook: Full Year 2013 Several effects lead to adjusted guidance Changes in market environment Ongoing average fiber price decrease (28 cents Q3/2013 vs. Q3/2012) Production losses Fire in Heiligenkreuz and SPV Waste-water-pipe breakage in Nanjing Tight credit controls in Asia
Slide 13: Revised outlook: Full Year 2013
Revised outlook: Full Year 2013 Adjusted figures (OLD) EBITDA Sales approx. EUR 1.9 bn (2.0) Includes positive net EUR 20 mn EBITDA approx. EUR 220 – 230 mn (280) Plastics effect excelLENZ compensated only partially EBIT approx. EUR 75 – 85 mn (160) for price decrease Average fiber price appro
Slide 14: Q3/2013 – Financial information
Q3/2013 – Financial information
Slide 15: Q3/2013: Sales affected by price pressure
Q3/2013: Sales affected by price pressure Continuous success in Nonwoven Sales by fiber type Sales by segment fibers (EUR mn) (EUR mn) 458.6 -5.5% 389.3 -4.8% 433.6 370.5 ® TENCEL® -3.7% Pulp, energy, others -9.1% Lenzing Nonwoven fibers +3.0% -0.9% Modal ® Textile fibers -8.0% Lenzing -6.0% Viscose
Slide 16: Q3/2013: Broadly as expected
Q3/2013: Broadly as expected EBITDA in line with guidance Q3/2013 Q3/2012 Q3/2013 Q3/2012 Change continuing continuing discontinued discontinued (EUR mn) Q3/2013 Q3/2012 y-o-y (%) operations operations operations operations Sales volume man-made cellulose fibers (kto) 221.5 199.4 11.1 221.5 199.4 0
Slide 17: Q3/2013: Topline breakdown
Q3/2013: Topline breakdown Successful Nonwoven business Change (EUR mn) Q3/2013 Q3/2012 y-o-y (%) Breakdown of fibers segment sales Textile fibers 253.9 276.0 (8.0) Nonwoven fibers 116.7 113.3 3.0 Others1 13.5 12.4 8.9 Total fibers only sales 384.1 401.7 (4.4) Other fibers segment sales2 49.5 56.9 (
Slide 18: Q3/2013: Cost of material down 5.7%
Q3/2013: Cost of material down 5.7% Cost switch Paskov (other/DWP) and further effects from excelLenz Change (EUR mn) Q3/2013 Q3/2012 y-o-y (%) Dissolving wood pulp1 (147.5) (134.4) 9.7 as % of total cost of material and purchased services 48.6 41.8 - Key chemicals (46.7) (45.9) 1.7 as % of total co
Slide 19: Q3/2013: Total Remaining Opex
Q3/2013: Total Remaining Opex Representing stable 30% of total Opex Change (EUR mn) Q3/2013 Q3/2012 y-o-y (%) Total personnel expenses (77.2) (80.6) (4.1) as % of external sales 16.9 15.9 - Other operating expenses Freight outward (19.8) (18.9) 4.8 Commissions and advertising costs (5.2) (6.3) (17.5
Slide 20: Q3/2013: Cash flow by quarter
Q3/2013: Cash flow by quarter Change (EUR mn) Q3/2013 Q3/20121 y-o-y (%) Gross CF (before taxes and interest) 66.5 106.2 (37.4) Taxes and interest (17.2) (21.9) (21.5) Gross CF (after taxes and interest) 49.3 84.3 (41.5) Change in total working capital2 (37.4) (33.7) 11.0 CF from discontinued operat
Slide 21: 9-months 2013 – Financial information
9-months 2013 – Financial information
Slide 22: 9-months 2013: Broadly as expected
9-months 2013: Broadly as expected Earnings in line 9-months 2013 9-months 2012 9-months 2013 9-months 2012 Change continuing continuing discontinued discontinued (EUR mn) 9-months 2013 9-months 2012 y-o-y (%) operations operations operations operations Sales volume man-made cellulose fibers (kto) 6
Slide 23: 9-months 2013: Topline breakdown
9-months 2013: Topline breakdown Nonwoven fibers a stabilizing factor Change (EUR mn) 9-months 2013 9-months 2012 y-o-y (%) Breakdown of fibers segment sales Textile fibers 795.8 857.1 (7.2) Nonwoven fibers 345.9 324.8 6.5 Others1 40.2 37.0 8.6 Total fibers only sales 1,181.9 1,218.9 (3.0) Other fib
Slide 24: 9-months 2013: Cost of material down approx. 6%
9-months 2013: Cost of material down approx. 6% Cost switch Paskov (other/DWP) and effects from excelLenz Change (EUR mn) 9-months 2013 9-months 2012 y-o-y (%) Dissolving wood pulp1 (419.9) (395.6) 6.1 as % of total cost of material and purchased services 46.1 40.9 - Key chemicals (138.3) (132.3) 4.
Slide 25: 9-months 2013: Total Remaining Opex
9-months 2013: Total Remaining Opex Representing approx. 31% of total Opex and fairly stable Change (EUR mn) 9-months 2013 9-months 2012 y-o-y (%) Total personnel expenses (240.4) (232.3) 3.5 as % of external sales 16.6 14.8 - Other operating expenses Freight outward (64.2) (57.8) 11.1 Commissions a
Slide 26: 9-months 2013: Cash flow
9-months 2013: Cash flow Change (EUR mn) 9-months 2013 9-months 20121 y-o-y (%) Gross CF (before taxes and interest) 202.5 283.3 (28.5) Taxes and interest (73.3) (84.8) (13.6) Gross CF (after taxes and interest) 129.2 198.5 (34.9) Change in total working capital2 (68.1) (62.3) 9.3 CF from discontinu
Slide 27: Appendix – Equity story
Appendix — Equity story LENZING
Slide 28: Global fiber market at a glance
Global fiber market at a glance 2012 preliminary production numbers Wool Natural Fibers 1.3% & Natural Polymers Cotton 32.0% 84.0 mn tons man-made cellulose fibers Synthetic fibers Viscose/Rayon 60.5% MMC fibers Modal 6.2% TENCEL®/Lyocell Source: Lenzing estimates 28
Slide 29: Lenzing: years of innovation
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 Q3/20131 Q3/20132 #1 ...the new age fiber Jeans, bed linen, Environmentally friendly process underwear Breathable, next to ski
Slide 30: Lenzing: Global market leader in VSF
Lenzing: Global market leader in VSF1 (2012p) Lenzing with 21% share of production2 Lenzing with 18% share of capacities3 Lenzing Lenzing 21% 18% Others Others 32% 37% Fulida 10% 3.80 mn tons Fulida 4.99 mn tons 10% Thai Rayon4 Grasim4 3% 7% Sateri 3% Grasim4 Thai Rayon4 Aoyang 9% 3% 6% Indo Sateri
Slide 31: Lenzing: Only global player
Lenzing: Only global player Sales volume by region1 – strong footprint in Asia RoW Americas 2% 7% Europe incl. Turkey 28% Asia 63% Source: Company information 1) fiber sales by volume in metric tons, as at September 30, 2013 31
Slide 32: 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 33: 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 34: Fiber strategy recalibrated
Fiber strategy recalibrated Focus on TENCEL® Strategic measures Strategic direction Focus on differentiation Differentiated VSF Investments in selected markets with above commodity industry returns Expansion of selected high end target markets / applications Modal Niche Hold premium by furth
Slide 35: Sales and marketing: Customer concentration
Sales and marketing Customer concentration Textiles % of sales by customers Nonwoven % of sales by customers (Q3/2013) (Q3/2013) 70,0% 70,0% 61.9% 60,0% 60,0% 50,0% 50,0% 46.5% 44.6% 40,0% 40,0% 32.7% 30.2% 30,0% 30,0% 19.3% 20,0% 20,0% 10,0% 10,0% 0,0% 0,0% Top 5 Top 10 Top 20 Top 5 Top 10 Top
Slide 36: Blue chip companies drive demand in specialties
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 37: Lenzing is the innovation leader
Lenzing is the innovation leader Industry leading R&D spend (EUR 28.3 mn in 2012) R&D expenses (2000-2012) Intellectual property As of December 2012, Lenzing owned 30 3 approx. 1,380 patent applications and 25 2,5 patents in 57 countries belonging to 226 patent families 20 2 All significant pate
Slide 38: Lenzing: Unique innovation model
Lenzing: Unique innovation model Strong R&D organization 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 39: Lenzing is the cost leader
Lenzing is the cost leader Through pulp integration and long-term pulp supply contract Pulp is the key cost driver with 49% 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
Slide 40: 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% 444 350 355 357 369 172 90 103 105 105 178 178 140 160 75 103 103 103 111 80 185 149 149 161 161 2010 2011 2012 2013e 2014e 2010 2011 2012 2013e 2014e USA CAGR 5.7% 40 50 50 50 40 1
Slide 41: Double-digit growth profile
Double-digit growth profile Lenzing has managed growth successfully in the past Double-digit growth p.a. over last 12 years Fiber production1 Total external sales2 EBITDA2,3 EBIT2,3 (1,000‘s metric tons) (EUR mn) (EUR mn) (EUR mn) 779 2,090 800 400 300 2000 359 255 700 600 300 CAGR 1500 200 500 7.
Slide 42: Fiber market environment: Stock-to-use-ratio
Fiber market environment Highest-stock-to-use-ratio ever at approx. 80% (2012/2013) World cotton production of 26.9 mn tons, consumption of 23.4 mn tons and ending stocks of 18.6 mn tons Massive increase of Chinese national cotton reserve of estimated 9.6 mn tons (>50% of world inventories) Usc/
Slide 43: 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 1 1) Cotton Future calculated on the basis of the most liquid next future compared with the actual Cotton A Index data 43
Slide 44: Cellulose Gap: A growth opportunity
Cellulose Gap: A growth opportunity 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 45: 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 Structural limitations in cotton production: within historical narrow band (1960-2012) effects from yield expansion leveling out Million hectares Mil
Slide 46: Cellulose Gap: A growth opportunity
Cellulose Gap: A growth opportunity 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 201
Slide 47: 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 48: 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 September 30, 2013 EUR 54.90 Privatstiftung Market capitalization 1,4
Slide 49: Back-up
Back-up
Slide 50: Where our fibers end up
Where our fibers end up Ladies wear – close to skin Cowl neck tee Lightly padded bra top maxi dress Sequined knit cardigan USD 39.50 USD 79.50 USD 88.00 TENCEL® / Spandex Ecosil® Lenzing Modal® / Spandex 58% Viscose / 42% TENCEL® 50
Slide 51: Where our fibers end up
Where our fibers end up Soft denim – can be sold in retail with a high premium Vintage flare jeans Five pocket skinny jeans Denim shirt Nixon USD 98.00 USD 240.00 EUR 39.95 100% TENCEL® Lenzing Modal® / TENCEL® / 100% TENCEL® Cotton / Elastane 51
Slide 52: Where our fibers end up
Where our fibers end up USD 33.00 (tank top), Armani collezioni sportcoat USD 38.00 (V-neck) USD 645.00 MicroModal® / Spandex TENCEL® 52
Slide 53: Nonwoven applications
Nonwoven applications Wipes Sustainable convenience Medical Naturally pure Hygiene Safety in sensitive areas Technical Leading fiber innovation 53
Slide 54: 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) 54
Slide 55: Capacities by site and year
Capacities by site and year Result of significant investments over the past years Planned Planned Capacity – Capacity – capacity – capacity – YE 2011 YE 2012 YE 2013 YE 2014 Plant location (metric tons) (metric tons) (metric tons) (metric tons) Lenzing / Austria 252,000 252,000 264,000 339,000 Lenzi
Slide 56: Capacity by site 2012 - 2013
Capacity by site 2012 - 2013 Capacity Capacity Capacity Capacity Capacity Capacity Capacity Capacity per March per June per September per December per March per June per September per December (metric tons) 31, 2012 30, 2012 30, 2012 31, 2012 31, 2013 30, 2013 30, 2013 31, 2013 Lenzing 260,000 260,0
Slide 57: Capacity by site 2014
Capacity by site 2014 Capacity per March Capacity per Capacity per Capacity per (metric tons) 31, 2014 June 30, 2014 September 30, 2014 December 31, 2014 Lenzing 264,000 331,000 331,000 339,000 Indonesia 325,000 325,000 325,000 330,000 Nanjing 178,000 178,000 178,000 178,000 India - - - - Heiligenkr
Slide 58: 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 Even with a 20% reduction in cotton prices and an inventory level of >75% , there is no return to historic cotton prices of < 70 cents/Ibs EUR/kg 19.1% -33.0% -20.6%
Slide 59: 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 60: DWP industry – cash cost curve
DWP industry – cash cost curve* A lot of new capacity added on the right side of the curve 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. projec
Slide 61: 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