Lenzing Ag · VIE:LNZ
Lenzing — H1 2013 Earnings Presentation
65 slides from Lenzing's earnings presentation, Aug 21, 2013
Slide 1: Leading Fiber Innovation
Leading Fiber Innovation LENZING INVESTOR PRESENTATION – HALF YEAR RESULTS 2013 August 21, 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: Highlights Q2/2013
Highlights Q2/2013 Guidance delivered Delivered on Q2/2013 guidance Record sales volume of 222 kto (Guidance: “more than 221 kto”) EBITDA (before Plastics) of EUR 70.4 mn (Guidance: “EUR 65 – 70 mn”) Average fiber price of EUR 1.75 (Guidance: “approx. on Q1 level” = EUR 1.77) excelLENZ con
Slide 4: Difficult environment here to stay
Difficult environment here to stay Low visibility: macro-economy, fiber market, MMC1 prices Difficult environment throughout H1/2013 Q1 and Q2 did not produce catalysts for macro-economic development in the future (Asia, especially China and India; Europe) Distorted supply-demand dynamics Wo
Slide 5: Cotton market dynamics
Cotton market dynamics Short-term Production costs of cotton 2010/2011 Potential price pressure due to significant 1.2 cotton stock levels (depending on Chinese 1.0 China USA cotton reserve policy) 0.8 The cotton stock-to-use ratio is expected to West Africa & US$/lb Australia return to normal
Slide 6: Short-term pain…
Short-term pain… Adjusting our cash outflows to reduced cash inflow levels New investments under scrutiny (minimum return requirements to be achieved) Ongoing investment into jumbo TENCEL® line in Lenzing NOT affected Prioritization of projects and focus on projects with productivity improveme
Slide 7: …long-term gain
…long-term gain A compelling growth story for MMC – no change The global fiber growth is driven by population growth and increasing prosperity (Asia) Market opportunities for MMC Inherent advantages vs. cotton due to scalability and environmental efficiency (water, pesticides, insecticides, la
Slide 8: Future potentials – by fiber
Future potentials – by fiber TENCEL® with strongest upside for Lenzing Viscose Structural dynamics of a commodity (China) Exploit potential for further differentiation Overcapacities might continue in the future Long-term perspective: Largest growth opportunities in absolute terms (+4.6 mt
Slide 9: Long-term fiber strategy
Long-term fiber strategy Focus on TENCEL® Viscose – Differentiated commodity strategy Find markets with above average growth and/or profitability Best in class cost base key for success Modal – Niche strategy Premium price strategy in selected textile applications Hold premium by further spe
Slide 10: 5 key strategic imperatives
5 key strategic imperatives Lenzing is determined to capitalize its strengths Focus on customers Focus on Asia Focus on TENCEL® Focus on innovation and applications Focus on profitable growth 10
Slide 11: Back to Q2/2013 financials
Back to Q2/2013 financials Net debt almost stable Net debt increase of EUR 11 mn thereof4: 900 875 855 833 800 Net effect Plastics sale: EUR +62 mn 700 653 Dividend payment: EUR -53 mn 613 600 Cash taxes: EUR -11 mn 529 500 500 471 441 442 Net interest: EUR -5 mn 408 400 365 424 Change i
Slide 12: excelLENZ: EUR 16 mn cost savings in H1
excelLENZ: EUR 16 mn cost savings in H1 Ramp-up on track for H2 EUR mn Q2/2013 EBITDA effect of 2 cent lower average fiber price (EUR -4 mn) almost 12 11 offset by contribution margin of additional 6,000 tons sales volume 10 purchasing initiatives (222 kto vs. 216 kto) 3 (raw material cost) 8
Slide 13: Outlook: Full Year 2013
Outlook: Full Year 2013 Including effects of the sale of 85% of Plastics business (OLD) Sales: EUR -150 mn consist of deconsolidation of approx. EUR 60 mn in H2 Plastics sales and a Sales approx. EUR 2.0 bn (2.15 – 2.25) lower average fiber price and sales volume compared with the old outlook EBIT
Slide 14: Q2/2013 – Financial information
Q2/2013 – Financial information
Slide 15: Q2/2013: Volume and prices as guided
Q2/2013: Volume and prices as guided Downward price trend continues despite sales volume record 2,90 600 2.29 2.33 2.15 2,40 1.3% 2.13 500 -8.2% 2.03 2.04 0.9% -5.6% 1.95 0.5% -4.4% 1.83 1.77 -6.2% 1.75 1,90 400 -3.3% -1.1% 1,40 300 406 0,90 200 399 396 382 405 387 389 403 383 389 100 199 199 221 21
Slide 16: Q2/2013: Textile fibers
Q2/2013: Textile fibers Viscose prices remain under pressure, Modal sales volume record Lenzing Viscose® TENCEL® 2.25 2.16 2 -4.0% 1.80 1.82 1.76 1.79 1.74 2.93 2.96 3.11 -16.7% 1.59 1.54 1.50 2 2.67 2.79 2.83 1.1% -3.3% 1.7% -2.8% 2.45 5.1% -9.0% 2.45 2.26 2.25 -8.6% 5.0% 1.0% -3.1% -2.6% 1 9.0% 4.
Slide 17: Q2/2013: Nonwoven fibers
Q2/2013: Nonwoven fibers A stabilizing factor (again) Lenzing Viscose®: Another record in sales volume with 10% higher price level than Textile (EUR 1.50) TENCEL®: Stable volumes and stable prices Lenzing Viscose® TENCEL® 2.02 2.06 2.41 2.38 2.39 1.93 1.93 2.30 2.35 2.34 2.0% 1.73 1.75 1.73 1.70
Slide 18: Q2/2013: Relative pricing
Q2/2013: Relative pricing Low viscose price level preserves high Modal and TENCEL® premiums Modal: Premium over viscose above historic 40 – 50% range Steady TENCEL® premiums at high level Textile fibers Relative price (viscose = 100%) (%) FY 2010 FY 2011 Q1/2012 Q2/2012 Q3/2012 Q4/2012 FY 2012 Q
Slide 19: Q2/2013: Increased volumes at lower prices
Q2/2013: Increased volumes at lower prices Textile and nonwoven fiber sales volumes 2.39 2.42 2.18 2.20 400 1.3% -9.9% 1.3% 2.11 2.12 2.00 1.84 2,50 Textile fibers1 350 -4.1% 0.5% -5.7% 1.78 1.75 -8.0% 2,00 300 -3.3% -1.7% 250 1,50 200 1,00 150 293 291 304 282 299 276 292 273 271 271 0,50 100 159 13
Slide 20: Q2/2013: Sales affected by price pressure
Q2/2013: Sales affected by price pressure Modal with higher sales due to volume increase and stable prices. Continuous success in Nonwoven Sales by fiber type Sales by segment fibers (EUR mn) (EUR mn) 500 600 406.1 -4.3% 388.6 481.5 -7.4% 445.9 400 500 86.6 71.2 75.4 300 400 57.4 57.9 66.6 106.6 300
Slide 21: Q2/2013: As expected
Q2/2013: As expected EBITDA slightly above high-end of Guidance Q2/2013 Q2/2012 Q2/2013 Q2/2012 Change continuing continuing discontinued discontinued (EUR mn) Q2/2013 Q2/2012 y-o-y (%) operations operations operations operations Sales volume man-made cellulose fibers (kt) 222.3 199.4 11.5 222.3 199
Slide 22: Q2/2013: Topline breakdown
Q2/2013: Topline breakdown Textile fiber sales: Volume increase could not compensate price decrease Change (EUR mn) Q2/2013 Q2/2012 y-o-y (%) Breakdown of fibers segment sales Textile fibers 270.6 299.5 (9.6) Nonwoven fibers 117.9 106.6 10.6 Others1 13.8 12.2 12.9 Total fibers only sales 402.4 418.3
Slide 23: Q2/2013: Cost of material down 8.8%
Q2/2013: Cost of material down 8.8% Cost switch Paskov (other/DWP) and further effects from excelLenz Change (EUR mn) Q2/2013 Q2/2012 y-o-y (%) Dissolving wood pulp1 (137.7) (129.6) 6.3 as % of total cost of material and purchased services 46.3 39.7 - Key chemicals (46.1) (44.7) 3.1 as % of total co
Slide 24: Q2/2013: Total Remaining Opex
Q2/2013: Total Remaining Opex Representing approx. 32% of total Opex and fairly stable Change (EUR mn) Q2/2013 Q2/2012 y-o-y (%) Total personnel expenses (81.1) (76.3) 6.3 as % of external sales 16.4 14.3 - Other operating expenses Freight outward (22.4) (20.5) 9.3 Commissions and advertising costs
Slide 25: Q2/2013: Cash flow by quarter
Q2/2013: Cash flow by quarter Change (EUR mn) Q2/2013 Q2/20121 y-o-y (%) Gross CF (before taxes and interest) 69.9 91.6 (23.7) Taxes and interest (16.1) (56.6) (71.6) Gross CF (after taxes and interest) 53.8 35.0 53.7 Change in total working capital2 (5.7) (30.6) (81.4) CF from discontinued operatio
Slide 26: H1/2013 – Financial information
H1/2013 – Financial information
Slide 27: H1/2013: Broadly as expected
H1/2013: Broadly as expected Lower average fiber price compensated by excelLENZ savings H1/2013 H1/2012 H1/2013 H1/2012 Change continuing continuing discontinued discontinued (EUR mn) H1/2013 H1/2012 y-o-y (%) operations operations operations operations Sales volume man-made cellulose fibers (kt) 43
Slide 28: H1/2013: Topline breakdown
H1/2013: Topline breakdown Nonwoven fibers a stabilizing factor Change (EUR mn) H1/2013 H1/2012 y-o-y (%) Breakdown of fibers segment sales Textile fibers 541.9 581.2 (6.8) Nonwoven fibers 229.2 211.5 8.4 Others1 26.7 24.5 9.0 Total fibers only sales 797.8 817.2 (2.4) Other fibers segment sales2 95.
Slide 29: H1/2013: Cost of material down approx. 6%
H1/2013: Cost of material down approx. 6% Cost switch Paskov (other/DWP) and effects from excelLenz Change (EUR mn) H1/2013 H1/2012 y-o-y (%) Dissolving wood pulp1 (272.4) (261.2) 4.3 as % of total cost of material and purchased services 44.9 40.5 - Key chemicals (91.6) (86.4) 6.0 as % of total cost
Slide 30: H1/2013: Total Remaining Opex
H1/2013: Total Remaining Opex Representing slightly above 31% of total Opex and fairly stable Change (EUR mn) H1/2013 H1/2012 y-o-y (%) Total personnel expenses (163.2) (151.7) 7.6 as % of external sales 16.5 14.3 - Other operating expenses Freight outward (44.4) (38.9) 14.1 Commissions and advertis
Slide 31: H1/2013: Cash flow by quarter
H1/2013: Cash flow by quarter Change (EUR mn) H1/2013 H1/20121 y-o-y (%) Gross CF (before taxes and interest) 136.0 177.1 (23.2) Taxes and interest (56.1) (62.9) (10.8) Gross CF (after taxes and interest) 79.9 114.2 (30.0) Change in total working capital2 (30.7) (28.6) 7.3 CF from discontinued opera
Slide 32: Appendix – Equity story
Appendix — Equity story QLENZING LEADING FIBER INNOVATION
Slide 33: Global fiber market at a glance
Global fiber market at a glance 2012 preliminary production numbers Wool Natural Fibers 1.3% & Natural Polymers Cotton 31.6% 83.5 mn tons man-made cellulose fibers Synthetic fibers Viscose/Rayon 60.9% MMC fibers Modal 6.2% TENCEL®/Lyocell Source: Lenzing estimates 33
Slide 34: Lenzing at a glance
Lenzing at a glance Global market leader in a growing niche Structural growth opportunity through 3 megatrends leading to a cellulose gap Global market leader in producing man-made cellulosic fibers (MMCF) 21% market share (of world wide production) Innovation, technology and quality leader
Slide 35: 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 36: 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 37: 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 38: 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 39: 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 40: Lenzing: Only global player
Lenzing: Only global player Sales volume by region1 – focus on Asia RoW Americas 2% 7% Europe incl. Turkey 29% Asia 62% Source: Company information 1) fiber sales by volume in metric tons, as at June 30, 2013 40
Slide 41: Lenzing: Technology leadership secures leading market shares
Lenzing: Technology leadership secures leading market shares Market Position % of and Market Share Unique Selling Proposition Key End Markets Fiber Sales in H1/20131 Q2/20132 #1 ...the new age fiber Jeans, bed linen, Environmentally friendly process underwear Breathable, next to skin characteri
Slide 42: 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 43: 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 44: 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 46% 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 45: 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 46: 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 47: 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 48: 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 49: 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 7.3% 200 5
Slide 50: Building barriers to entry
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 marketing a
Slide 51: Sales and marketing
Sales and marketing Customer concentration Textiles − % of sales by customers Nonwoven − % of sales by customers (H1/2013) (H1/2013) 70% 70% 60.3% 60% 60% 50% 45.2% 50% 45.0% 40% 40% 30.6% 30.8% 30% 30% 18.2% 20% 20% 10% 10% 0% 0% Top 5 Top 10 Top 20 Top 5 Top 10 Top 20 Source: LAG 51
Slide 52: 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 53: 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® 53
Slide 54: 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 54
Slide 55: 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® 55
Slide 56: Nonwovens applications
Nonwovens applications Wipes Sustainable convenience Medical Naturally pure Hygiene Safety in sensitive areas Technical Leading fiber innovation 56
Slide 57: 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) 57
Slide 58: Lenzing Management Board and shareholder structure
Lenzing Management Board and shareholder structure Peter Untersperger/CEO Friedrich Weninger/COO Thomas G. Winkler/CFO Lenzing AG shareholder structure Oberbank AG 5.0% Overview of B & C Privatstiftung1 67.6% owner of Lenzing is B & C Privatstiftung (B & C Private Foundation). Its purpose is the p
Slide 59: Back-up
QLENZING LEADING FIBER INNOVATION
Slide 60: Fiber market environment
Fiber market environment Highest-stock-to-use-ratio ever at approx. 73% (2012/2013) World cotton production of 26.4 mn tons, consumption of 23.5 mn tons and ending stocks of 18.2 mn tons Massive increase of Chinese national cotton reserve of estimated 9.4 mn tons (>50% of world inventories) USc/
Slide 61: 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) 120,00 115,00 110,00 105,00 100,00 95,00 90,00 85,00 80,00 75,00 70,00 65,00 Q1/2012 Q2/2012 Q3/2012 Q4/2012 Q1/2013 Q2/2013 60,00 03.01.2012 25.01.2012 16.02.2012 09.03.2012 02.
Slide 62: 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 63: 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 64: 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 3,5 3 2,5 19.1% 8.3
Slide 65: Contacts and financial calendar
Contacts and financial calendar Investor Relations contact Financial calendar Financial calendar 2013 Stephanie Kniep Full year results March 22, 2013 Head of Investor Relations 69th Annual General Meeting April 24, 2013 Phone: +43 7672 701 4032 Results 1st quarter May 8, 2013 Half year result