Lenzing Ag · VIE:LNZ
Lenzing — Q3 2012 Earnings Presentation
67 slides from Lenzing's earnings presentation, Nov 15, 2012
Slide 1: Leading Fiber Innovation
Leading Fiber Innovation LENZING INVESTOR PRESENTATION November 15, 2012 1
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 Q3/2012
Key highlights Q3/2012 Delivering the 6th consecutive quarter as guided EBITDA: EUR 88 mn (Guidance: EUR 85 mn - 90 mn) Average fiber price: EUR 1.95 (Guidance: EUR 1.95 - 2.00 per kg) Sales volume: 199 k tons (Guidance: around 200 k tons) Low Q3 tax rate bringing cumulated tax rate down t
Slide 4: China
China Not being helpful throughout the year China’s GDP growth/VSF Spot China Q3: Three-year low, slow down for seven straight quarters % growth over last years RMB/to Viscose staple fiber spot market price 8.1% 8 7.6% 20000 down by more than 10% over the year 7.4% 18000 7 16,802 16000 Weak de
Slide 5: The perfect storm?
The perfect storm? Short term pain, long term gain for Lenzing Market Macro Cotton stock/use ratio >65% Debt crisis in Europe (and USA) Cotton price 80 – 85 cents/Ib China: availability of capital is restricting factor Competitor Cost Postponing pulp (up to 700 kto) and Pulp price (spot
Slide 6: 2012e – in context
2012e – in context On track for the second best year in company history EBITDA in EUR mn 500 480 450 400 400 350 350 331 300 250 201 188 200 150 100 50 0 2008 2009 2010 2011 2012e 6
Slide 7: Q3/2012: Sales volume stays on record level
Q3/2012: Sales volume stays on record level Average price below EUR 2.00 first time since Q4/2010 2.29 2.33 2,50 1.8% 2.13 2.15 450 -8.6% 2.03 2.04 1.97 1.92 19.3% 0.9% -5.6% 1.95 1.91 0.5% 1.80 -4.4% 2,00 400 9.4% -3.1% 0.5% 350 1,50 300 250 399 396 405 406 1,00 382 387 389 334 334 331 200 289 0,50
Slide 8: Textile fibers
Textile fibers Prices within expectations Lenzing Viscose® TENCEL® 2.25 60 4,00 200 2.16 2,50 3.11 50 2.93 2.96 2.83 3,50 1.81 -4.0% 1.80 1.82 1.79 2.67 2.79 1.75 24.3% 1.76 1.74 2,00 2.45 5.1% 3,00 150 -16.7% 5.0% 1.0% -9.0% 3.4% 1.1% -3.3% 1.7% -2.8% 40 2.18 2.12 4.5% 9.0% 2,50 1,50 -2.8% 15.6% 10
Slide 9: Nonwoven fibers
Nonwoven fibers Increase in volumes, stable prices Increase in TENCEL® volume driven by expansion in USA Record sales in Lenzing Viscose® Lenzing Viscose® TENCEL® 80 2.02 2.06 70 1.93 1.93 2.41 2.38 2.39 1.74 1.72 1.73 1.75 1.7330 2.30 2.35 2.34 2.0% -6.3% 0.0% 60 17.4% -10.0% 2.11 2.17 4.8% -2.
Slide 10: Relative pricing
Relative pricing Continued higher TENCEL® premium than Modal Modal: Premium over viscose in the historic 40-50% range, limited need for future adjustments TENCEL® textile still at an unhealthy 63% premium over viscose. TENCEL® textile pricing to be brought down further to stay competitive Textil
Slide 11: Q3/2012: In line with guidance
Q3/2012: In line with guidance Price pressure sets profitability back to Q1 level (EUR mn) Q3/2012 Q2/2012 Change in % Q1/2012 Sales volume man-made cellulose fibers (kt) 199 199 0.0 191 Total external sales 505.7 533.6 (5.2) 528.2 Inventory change / work in progress 11.6 (0.7) - 3.9 Work performed
Slide 12: Solid financials
Solid financials Higher equity, low gearing and healthy liquidity 900 800 Adjusted equity of EUR 1,152 mn 700 653 651 648 613 624 (48.5% equity ratio) 600 471 494 498 Net gearing of 25.6% 500 441 (Q2/2012: 24.4%) 383 400 352 365 306 Total liquidity cushion of 300 316 295 EUR 561 mn consisting
Slide 13: Successful German private placement
Successful German private placement* EUR 200 mn debt placed with institutional investors Placement: October 31, 2012 (settlement: November 14, 2012) Volume: EUR 200 mn (demand: EUR 280 mn) Average life: 6 years (average interest rate: 2.55%**) EUR 40.5 mn – 4 years fixed (2.18%) EUR 62.5 m
Slide 14: Tax rate
Tax rate Back to a historical level Profit and Loss Statement view (EUR mn) 9-months 2012 H1/2012 9-months 2011 H1/2011 Earnings before taxes 199.8 138.2 277.0 187.7 Taxes 44.6 38.1 59.0 42.5 Tax rate (in %) 22.3% 27.6% 21.3% 22.6% As announced at half-year, tax rate came down to last year’s level
Slide 15: Outlook FY 2012
Outlook FY 2012 Unchanged – driven to the low end by weaker Q4 Outlook 2012 August guidance for FY: “High end if no change in Q4 – low end if Sales approx. EUR 2.10 – 2.15 bn pricing deteriorates from Q3” EBITDA approx. EUR 350 – 400 mn Lower Q4 average fiber price expected: EBIT approx. EUR 240
Slide 16: Q3/2012 – Financial information
Q3/2012 – Financial information 16
Slide 17: Textile and nonwoven fibers
Textile and nonwoven fibers Q3 shows flat pricing for nonwoven fibers and a drop for textile fibers Textile fibers1 Nonwoven fibers1 2.39 2.42 400 2.18 2.20 2.12 1.3% 2.11 1.95 1.98 -9.9% 2.00 350 20.7% 1.3% -4.1% 0.5% -5.7% 2.05 2.10 1.5% 2.02 2.01 300 2.4% -3.8% 250 -0.5% 1.84 1.84 1.81 1.79 14.5%
Slide 18: Topline breakdown
Topline breakdown Segment development with light and shadow due to price pressure and uncertain economic framework (EUR mn) Q3/2012 Q2/2012 Change in % Q1/2012 Breakdown of fibers segment sales Textile fibers 275.9 299.5 (7.9) 281.7 Nonwoven fibers 113.3 106.6 6.3 104.9 Other1 12.4 12.2 1.6 12.3 Tot
Slide 19: Consolidated Group P&L – External sales
Consolidated Group P&L – External sales (EUR mn) Q3/2012 Q2/2012 Q1/2012 Total external sales 505.7 533.6 528.2 Cost of material and purchased services (321.9) (326.2) (318.3) Personnel (80.6) (76.3) (75.4) EBITDA 87.9 100.6 93.1 Margin (%) 17.4 18.8 17.6 Depreciation & Amortization (26.5) (27.5) (2
Slide 20: Material costs lower than sales decrease
Material costs lower than sales decrease Continuing low dissolving wood pulp prices (EUR mn) Q3/2012 Q2/2012 Change in % Q1/2012 Dissolving pulp1 134.4 129.6 3.7 131.6 as % of total cost of material and purchased services 41.7 39.7 - 41.3 Key chemicals 45.9 44.7 2.7 41.7 as % of total cost of materi
Slide 21: Remaining Opex: Decreasing with increasing personnel expenses
Remaining Opex: Decreasing with increasing personnel expenses Representing approx. 28% of total costs and are very stable (EUR mn) Q3/2012 Q2/2012 Change in % Q1/2012 Total personnel expenses 80.6 76.3 5.6 75.4 as % of external sales 15.9 14.3 11.5 14.3 Other operating expenses Freight outward 18.9
Slide 22: Cash flow by quarter
Cash flow by quarter Gross cash flow ratio back to normal (EUR mn) Q3/2012 Q2/2012 Change in % Q1/2012 Gross CF 83.2 35.22 136.4 79.01 Change in total working capital3 (30.9) (28.9) n.m. 6.41 Operating Cash flow 52.3 6.3 - 85.4 Investment Cash flow4 (83.3) (71.0) 1.2 (22.6) Free Cash flow (31.0) (64
Slide 23: Balance sheet as of September 30, 2012
Balance sheet as of September 30, 2012 ∑ 2,374.9 EUR mn ∑ 2,374.9 EUR mn 2.500,0 2.500,0 2.000,0 2.000,0 Property, plant 1,128.6 1,227.1 and equipment (47.5%) (51.7%) Property, plant Equity 1.500,0 Inventories and equipment 1.500,0 Trade receivables 1.000,0 311.4 (13.1%) Inventories 1.000,0 Cash and
Slide 24: 9-months 2012 – Financial information
9-months 2012– Financial information 24
Slide 25: Solid 9-months on healthy level
Solid 9-months on healthy level Slow down in profitability but still excellent double digit margins (EUR mn) 9-months 2012 9-months 2011 Change in % Sales volume man-made cellulose fibers (kt) 589.3 524 12.5 Total external sales 1,567.5 1,592.2 (1.6) Inventory change / work in progress 14.8 14.5 2.1
Slide 26: 9-months 2012: Topline breakdown
9-months 2012: Topline breakdown Fiber volume increase compensates price decrease (EUR mn) 9-months 2012 9-months 2011 Change in % Break down of fiber segment sales Textile fibers 857.1 856.3 0.1 Nonwoven fibers 324.8 320.6 1.3 Other1 36.9 32.1 15.0 Total fibers only sales 1,218.8 1,209.1 0.8 Other
Slide 27: Material costs under control
Material costs under control Production increased by 12% and cost only by 4.6% (EUR mn) 9-months 2012 9-months 2011 Change in % Dissolving pulp1 395.6 418.7 (5.5) as % of total cost of material and purchased services 40.9 45.0 - Key chemicals 132.3 99.0 33.6 as % of total cost of material and purcha
Slide 28: Remaining Opex
Remaining Opex Representing approx. 29% of total costs (EUR mn) 9-months 2012 9-months 2011 Change in % Total personnel expenses 232.3 208.8 11.3 as % of external sales 14.8 13.1 - Other operating expenses Freight outward 57.8 47.7 21.2 Commissions and advertising costs 18.2 12.8 42.2 Service and ma
Slide 29: Cash flow 9-months 2012
Cash flow 9-months 2012 Reflecting tax pre-payments in Q2 and lower profitability (EUR mn) 9-months 2012 9-months 2011 Change in % Gross CF 198.5 317.41 (37.5) Change in total working capital2 (54.5) (63.6)1 - Operating Cash flow 144.0 253.8 (43.3) Investment Cash flow3 (176.8) (123.5) - Free Cash f
Slide 30: Appendix – Equity story
Appendix — Equity story QLENZING
Slide 31: Global fiber market at a glance
Global fiber market at a glance Long-term share synthetic fibers ~ 60% : natural fibers ~ 40% Wool Natural Fibers 1.5% & Natural Polymers Cotton 31.2% 79.1 mn tons man-made Synthetic fibers cellulose fibers Viscose/Rayon 61.3% MMC fibers Modal 6.0% TENCEL®/Lyocell Source: The Cellulose Gap, Gh
Slide 32: Lenzing at a glance
Lenzing at a glance Global market leader in producing man-made cellulosic fibers Growth opportunity through 3 mega-trends leading to the cellulose gap Global market leader in producing man-made cellulosic fibers (MMCF) 22% market share Innovation, technology and quality leader Cost leader
Slide 33: Growth opportunity: cellulose Gap
Growth opportunity: cellulose Gap MMCF: Strong demand and limitations on cotton supply 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*) ‘11 – ’20: Cellulosic
Slide 34: 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 (1960-2012e) effects from yield expansion leveling out Million hectares Million metric
Slide 35: 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 2011 20
Slide 36: Mega-trend: Sustainability
Mega-trend: 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 o
Slide 37: Lenzing is the global market leader
Lenzing is the global market leader Viscose staple fiber market Lenzing with 22% share of production1 Lenzing with 17% share of capacities2 Lenzing Lenzing 22% 17% Others Others 30% 36% Fulida 11% 3.23 mn tons Fulida 4.68 mn tons 10% Thai Rayon3 Grasim3 4% 8% Thai Rayon3 Sateri 3% Grasim3 3% Aoyang
Slide 38: Only true global player
Only true global player Sales by region1 RoW Americas 3% 7% Europe incl. Turkey 33% Asia 57% Source: Company information; The Cellulose Gap, Gherzi, February 2011 1) fiber sales by volume in metric tons FY 2011 38
Slide 39: Innovation drives specialties
Technology leadership secures leading market shares Market Position % of and Market Share Unique Selling Proposition Key End Markets Fiber Sales in Q3/20121 Q3/20122 # 1 – Quantum leap ...the new age fiber High-end technology consumer Environmentally friendly process applications Breathable, ne
Slide 40: Lenzing is the innovation leader
Lenzing is the innovation leader Industry leading R&D spend R&D expenses (2000-2011) Intellectual property 30 3 As of December 2011, Lenzing owned approx. 1,300 patent applications and 25 2,5 patents in 57 countries belonging to 218 patent families 20 2 All significant patents are filed and 15 1
Slide 41: 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 42: 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 42% 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 43: 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 44: 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 45: 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 46: 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 47: 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 2011 2012
Slide 48: 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 49: 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 31, 2012 30, 2012 30, 2012 31, 2012 31, 2013 30, 2013 30, 2013 31, 2013 Lenzing 250,000 250,000 250,000 250
Slide 50: Capacity by site 2014 - 2015
Capacity by site 2014 - 2015 Capacity Capacity Capacity Capacity Capacity Capacity Capacity Capacity per March per June per September per December per March per June per September per December 31, 2014 30, 2014 30, 2014 31, 2014 31, 2015 30, 2015 30, 2015 31, 2015 Lenzing 260,000 250,000 250,000 310
Slide 51: Our production sites
Our production sites Lenzing AG – PT. South Pacific Viscose – Austria (fiber and pulp) Indonesia 51
Slide 52: Our production sites
Our production sites Lenzing (Nanjing) Fibers Co. Ltd. – Heiligenkreuz – China Austria 52
Slide 53: Our production sites
Our production sites Grimsby – Mobile – Great Britain USA Biocel Paskov a.s. – Czech Republic (pulp) 53
Slide 54: Where our fibers end up
Where our fibers end up Ladies wear – close to skin Cowl neck tee Lightly padded bra top maxi dress USD 39.50 USD 79.50 TENCEL® / Spandex Ecosil® Lenzing Modal® / Spandex 54
Slide 55: Where our fibers end up
Where our fibers end up Miraculous push-up bra top dress Suzi Chin for Maggy boutique draped USD 98.00 organza dress Ecosil® MicroModal® / Spandex USD 98.00 TENCEL® / Polyester 55
Slide 56: Where our fibers end up
Where our fibers end up New Venus dressing-gown and tank Burberry elbow sleeve reversible EUR 275.00 (dressing-gown) and check tee EUR 130.00 (tank) USD 250.00 90% Lenzing Modal® / 5% Elastane / 100% Lenzing Modal® 5% Polyester 56
Slide 57: 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 USD 98.00 USD 240.00 100% TENCEL® Lenzing Modal® / TENCEL® / Cotton / Elastane 57
Slide 58: 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® 58
Slide 59: Key investment highlights
Key investment highlights Lenzing is 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 59
Slide 60: Lenzing Management Board team and shareholder structure
Lenzing Management Board team and shareholder structure Peter Untersperger/CEO Friedrich Weninger/COO Thomas G. Winkler/CFO Lenzing AG shareholder structure Oberbank AG Overview of the B & C Privatstiftung 5.1% The owner is the B & C Privatstiftung (B & C Private Foundation). Its purpose is to pro
Slide 61: Sales and marketing
Sales and marketing Textiles % of sales by customers1 Nonwoven % of sales by customers (Q3/2012) (Q3/2012) 50% 70% 44.7% 59.5% 60% 40% 50% 45.4% 31.0% 30% 40% 32.6% 19.3% 30% 20% 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
Slide 62: 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 63: Back-up
Back-up 63
Slide 64: Viscose spot prices China trending down since September
Viscose spot prices China trending down since September Stock-to-use-ratio on a high level > 65% VSF spot China and cotton price development in 2012 (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 Q1/2012 Q2/2012 Q3/2012 65,00 60,00 03.01.12 15.01.12 27.01.12 08
Slide 65: Lenzing Viscose textile prices compared to cotton price development
Lenzing Viscose® textile prices compared to cotton price development Re-establishment of premium1 to cotton in 2012 Even with a 20% reduction in cotton prices and an inventory level, of 65+% , there is no return to historic cotton prices of < 70 cents/Ibs EUR/kg 3,5 3 2,5 19.1% 8.3% 17.0% 2 5.4% -
Slide 66: Chinese economic development
66 10,0 12,0 14,0 16,0 6,0 8,0 June 1994 April 1995 February 1996 (year-on-year in %) GDP growth December 1996 October 1997 since 2009 Aug ust 1998 June 1999 April 2000 February 2001 Source: Deutsche Bank; China: a very weak recovery; August, 2012 Dec ember 2001 October 2002 August 2003 June 2004 Re
Slide 67: 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 Results 1st quarter May 8, 2013 Phone: +43 7672 701 2047 Half year result