Lenzing Ag · VIE:LNZ
Lenzing — 9M 2014 Earnings Presentation
66 slides from Lenzing's earnings presentation, Nov 13, 2014
Slide 1: Leading Fiber Innovation
Leading Fiber Innovation LENZING INVESTOR PRESENTATION – Nine-month report 2014 November 13, 2014
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: Q3/2014: Executive summary
Q3/2014: Executive summary Positive effects from excelLENZ and TENCEL® fiber production Sales volume +5.2% to 233 k tons (Q3/2013: 221.5 k tons) Average fiber price Recovery Q3/Q2/2014 from EUR 1.52 to EUR 1.57 per kg Sales increase EUR 457.7 mn (Q2/2014: EUR 448.3 mn) Earnings improvement
Slide 4: 9M/2014: Executive summary
9M/2014: Executive summary Financials improving, continued tough market pricing New record sales volume of +7.1% to 707 k tons (9M/2013: 660 k tons) TENCEL® fiber jumbo line production fully effective Successful promotion of TENCEL® fiber, focus on market penetration Efficiency gains in prod
Slide 5: 9M/2014: Chinese viscose fiber spot prices regaining premium over cotton
5 60,00 70,00 80,00 90,00 100,00 110,00 120,00 03.01.2012 23.01.2012 10.02.2012 (in USct/Ibs) 01.03.2012 21.03.2012 11.04.2012 01.05.2012 H1/2012 21.05.2012 08.06.2012 28.06.2012 18.07.2012 07.08.2012 28.08.2012 17.09.2012 05.10.2012 25.10.2012 H2/2012 14.11.2012 04.12.2012 24.12.2012 Cotton A Index
Slide 6: 9M/2014: Low cotton prices putting pressure on the fiber market
9M/2014: Low cotton prices putting pressure on the fiber market Cotton production higher than demand, stock on record level Cotton prices on a low level after sharp drop in July Cotton market1 mmt2 Average Cotton A Index still falling; currently below 70 USct/lbs 30 27.83 26.48 Chinese cotton
Slide 7: 9M/2014: Competitive viscose environment
9M/2014: Competitive viscose environment Viscose spot price stabilized on low level – regaining premium over cotton Viscose fiber spot prices stabilized in Q3/2014 on a low level around 12.000 RMB Regaining premium over cotton after sharp drop in cotton prices No change of tough viscose market
Slide 8: 9M/2014: Increased TENCEL market penetration
9M/2014: Increased TENCEL® market penetration Apparel ■ Strong promotion in denim/jeans, most of the denim producers have TENCEL® fiber in their collection ■ GAP US, co-branding activity for jeans Home ■ Market focus bed linen in China, promotion activity at Intertextile Shanghai Home in August 2014
Slide 9: 9M/2014: Lenzing MODAL marketing activities
9M/2014: Lenzing MODAL® marketing activities Apparel ■ Lidl Europe – brand co-operation in all shops, and European TV channels, 3.3 mn pieces ■ Tchibo/Eduscho: new brand licence in Lenzing Modal® with 2.6 mn pieces Home ■ A-fontane ®, China: ProModal® street- advertising ■ Akemi, South East Asia: st
Slide 10: 9M/2014: Financial overview
9M/2014: Financial overview Financials improving, continued tough market pricing Only continuing operations Q3/2014 Q3/2013 Change 9M/2014 9M/2013 Change (“like for like“) % % Sales volume k tons 233.0 221.5 5.2 707.0 660.0 7.1 Ø fiber price EUR/kg 1.57 1.67 (6.0) 1.55 1.73 (10.4) Sales (EUR mn) 457
Slide 11: 9M/2014: Weak fiber prices negatively impact sales and earnings in Q1-Q3
9M/2014: Weak fiber prices negatively impact sales and earnings in Q1-Q3 Only continuing operations As of As of Change As of As of Change (“like for like“)1 Q3/2014 sales % Q3/2013 sales % % 1-9/2014 sales% 1-9/2013 sales% % (EUR mn) Consolidated 457.7 457.1 0.1 1,357.7 1,397.1 (2.8) sales Total ope
Slide 12: 9M/2014: Financials
9M/2014: Financials Net financial debt below EUR 500 mn target Improved cash flows 900 875 801 Cash flow from operating activities 800 771 EUR 159.1 mn (9M/2013: EUR 57.3 mn) 739 731 700 653 Investment Cash flow EUR (84.1) mn 613 600 529 (9M/2013: EUR (97.2) mn) 500 505 500 511 484 500 471 441
Slide 13: 9M/2014: Financials
9M/2014: Financials Net debt cascade 15.5 157.5 505 2.4 484 7.2 2.1 46.6 85.2 19.6 1.4 Net Tax Net Interest Gross CF Cash Capex Change in Change in Dividend Currency Others Net Financial before (incl. Fin. Trading WC other WC Translation Financial Debts FY interest and Ass.) Debts 2013 taxes Q3/2014
Slide 14: excelLENZ cost saving program
excelLENZ cost saving program A sustainable improvement of Lenzing‘s cost position Total estimated 2013 2014 e 2015 e runrate 0 20 40 28% 2014 40% 40 32% 60 60 Operational excellence 80 35% 31% Personnel cost 100 2015 Material cost 30++ 33% 120 140 90++ 30 2016 32% 33% 160 ++ 180 30++ 160++ 35% Base
Slide 15: Outlook: Full Year 2014
Outlook: Full Year 2014 Tough pricing to continue - focus on cost savings and fiber specialties No short-term improvement of global fiber market Good volume demand but tough pricing to continue Low cotton prices and high cotton stock to increase pressure on all fiber prices Chinese competito
Slide 16: Q3/2014 – Financial information
Q3/2014 – Financial information
Slide 17: Q3/2014: Consolidated Group P&L
Q3/2014: Consolidated Group P&L (EUR mn) Q3/2014 Q3/20131 Total sales 457.7 457.1 Inventory change/work in progress 8.4 18.9 Work performed by the group and capitalized 6.4 13.5 Other operating income 8.6 6.4 Cost of material and purchased services (296.5) (303.4) Personnel (73.0) (77.3) Other opera
Slide 18: Q3/2014: Topline breakdown
Q3/2014: Topline breakdown More volume but low pricing Change (EUR mn) Q3/2014 Q3/2013 y-o-y (%) Breakdown of fibers segment sales Textile fibers 250.6 253.9 (1.3) Nonwoven fibers 114.5 116.7 (1.9) Others1 14.1 13.5 4.4 Total fibers only sales 379.2 384.1 (1.3) Other fibers segment sales2 53.1 49.4
Slide 19: Q3/2014: Total Opex
Q3/2014: Total Opex Q3/2014 (Total Opex EUR 413.1 mn) Q3/2013 (Total Opex EUR 434.0 mn) 10.6% 12.3% 17.7% 17.8% 69.9% 71.8% Cost of material and purchased services Cost of material and purchased services Personnel expenses Personnel expenses Other operating expenses Other operating expenses 19
Slide 20: Q3/2014: Opex breakdown
Q3/2014: Opex breakdown Positive effects from excelLENZ Change (EUR mn) Q3/2014 Q3/20131 y-o-y (%) Total Opex (413.1) (434.0) (4.8) Total costs of material and purchased services (296.5) (303.4) (2.3) Dissolving wood pulp2 (154.2) (147.5) 4.5 as % of total cost of material and purchased services 52.
Slide 21: Q3/2014: Opex as of total sales
Q3/2014: Opex as of total sales Positive effects from excelLENZ Change (EUR mn) Q3/2014 Q3/20131 y-o-y (%) Total sales 457.7 457.1 0.1 Total Opex2 (413.1) (434.0) (4.8) Total cost of material and purchased services (296.5) (303.4) (2.3) as % of total sales 64.8 66.4 - Total personnel expenses (73.0)
Slide 22: Q3/2014: Cash flow by quarter
Q3/2014: Cash flow by quarter Considerably better cash flows Change (EUR mn) Q3/2014 Q3/20131 y-o-y (%) Gross CF (before taxes and interest) 71.3 66.5 7.3 Taxes and interest (4.0) (17.2) (76.7) Gross CF (after taxes and interest) 67.3 49.3 36.6 Change in total working capital2 (11.5) (37.4) (69.4) C
Slide 23: 9M/2014 – Financial information
9M/2014 – Financial information
Slide 24: 9M/2014: Consolidated Group P&L
9M/2014: Consolidated Group P&L (EUR mn) 9M/2014 9M/20131 Total sales 1,357.7 1,447.0 Inventory change/work in progress 14.2 3.6 Work performed by the group and capitalized 29.6 43.1 Other operating income 31.8 51.6 Cost of material and purchased services (896.7) (910.7) Personnel (225.8) (241.2) Ot
Slide 25: Q1-Q3/2014: Consolidated Group P&L
Q1-Q3/2014: Consolidated Group P&L (EUR mn) Q3/2014 Q2/2014 Q1/2014 Total sales 457.7 448.3 451.7 Inventory change/work in progress 8.4 5.9 (0.1) Work performed by the group and capitalized 6.4 10.6 12.6 Other operating income 8.6 10.7 12.5 Cost of material and purchased services (296.5) (298.5) (30
Slide 26: 9M/2014: Topline breakdown
9M/2014: Topline breakdown Affected by Nonwoven business (+), low pricing (-), discontinued operations (-) Change (EUR mn) 9M/2014 9M/2013 y-o-y (%) Breakdown of fibers segment sales Textile fibers 742.3 795.8 (6.7) Nonwoven fibers 352.8 345.9 2.0 Others1 40.6 40.2 1.0 Total fibers only sales 1,135.
Slide 27: Q1-Q3 Topline breakdown
Q1-Q3 Topline breakdown Affected by low pricing and discontinued operations (EUR mn) Q3/2014 Q2/2014 Q1/2014 Breakdown of fibers segment sales Textile fibers 250.6 244.3 247.5 Nonwoven fibers 114.5 118.3 119.9 Others1 14.1 13.8 12.7 Total fibers only sales 379.2 376.4 380.1 Other fibers segment sale
Slide 28: 9M/2014: Total Opex
9M/2014: Total Opex 9M/2014 (Total Opex EUR 1,273.5 mn) 9M/2013 (Total Opex EUR 1,321.5 mn) 11.9% 12.8% 17.7% 18.3% 68.9% 70.4% 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: 9M/2014: Opex breakdown
9M/2014: Opex breakdown Positive effects from excelLENZ Change (EUR mn) 9M/2014 9M/20131 y-o-y (%) Total Opex (1,273.5) (1,321.5) (3.6) Total costs of material and purchased services (896.7) (910.7) (1.5) Dissolving wood pulp2 (444.1) (419.9) 5.8 as % of total cost of material and purchased services
Slide 30: 9M/2014: Opex breakdown
9M/2014: Opex breakdown Positive effects from excelLENZ Change Change Only continuing operations Q3/2014 Q3/2013 y-o-y (%) 9M/2014 9M/20131 y-o-y (%) (“like for like“)1 (EUR mn) Total Opex (413.1) (434.0) (4.8) (1,273.5) (1,274.6) (0.1) Total costs of material and (296.5) (303.4) (2.3) (896.7) (880.
Slide 31: Q1-Q3/2014: Opex breakdown
Q1-Q3/2014: Opex breakdown Positive effects from excelLenz (EUR mn) Q3/2014 Q2/2014 Q1/2014 Total Opex (413.1) (429.8) (430.6) Total costs of material and purchased services Dissolving pulp1 (154.2) (149.1) (140.8) as % of total cost of material and 52.0 50.0 46.7 purchased services Key chemicals (4
Slide 32: 9M/2014: Opex as of total sales
9M/2014: Opex as of total sales Change (EUR mn) 9M/2014 9M/20131 y-o-y (%) Total sales 1,357.7 1,447.0 (6.2) Total Opex2 (1,273.5) (1,321.5) (3.6) Total cost of material and purchased services (896.7) (910.7) (1.5) as % of total sales 66.0 62.9 - Total personnel expenses (225.8) (241.2) (6.4) as % o
Slide 33: Q1-Q3/2014: Opex as of total sales
Q1-Q3/2014: Opex as of total sales (EUR mn) Q3/2014 Q2/2014 Q1/2014 Total sales 457.7 448.3 451.7 Total Opex1 (413.1) (429.8) (430.6) Total cost of material and purchased services (296.5) (298.5) (301.7) as % of total sales 64.8 66.6 66.8 Total personnel expenses (73.0) (78.3) (74.6) as % of total s
Slide 34: 9M/2014: Solid balance sheet
9M/2014: Solid balance sheet As of September 30, 2014 ∑ 2,415.5 EUR mn ∑ 2,415.5 EUR mn 2.500,0 2.000,0 1,110.5 Equity (55.6%) Property, plant (46.0%) and equipment 1.500,0 (15.0%) Inventories 1.000,0 Financial liabilities 730.5 (8.1%) Trade receivables (30.2%) 500,0 171.8 (7.1%) Trade payables (9.9
Slide 35: 9M/2014: Cash flow
9M/2014: Cash flow Considerably improved cash flows Change (EUR mn) 9M/2014 9M/20131 y-o-y (%) Gross CF (before taxes and interest) 157.5 202.5 (22.2) Taxes and interest (17.9) (73.3) (75.6) Gross CF (after taxes and interest) 139.6 129.2 8.0 Change in total working capital2 19.5 (68.1) - CF from di
Slide 36: Q1-Q3/2014: Cash flow by quarter
Q1-Q3/2014: Cash flow by quarter (EUR mn) Q3/2014 Q2/2014 Q1/2014 Gross CF (before taxes and interest) 71.4 43.9 23.8 Taxes and interest (4.0) (4.6) (9.2) Gross CF (after taxes and interest) 67.4 39.3 33.0 Change in total working capital1 (11.5) 21.1 9.8 CF from discontinued operations 0.0 0.0 0.0 O
Slide 37: Appendix – Equity story
Appendix — Equity story QEENZING
Slide 38: Global fiber market at a glance
Global fiber market at a glance 2013 production numbers Wool Natural Fibers 1.3% & Natural Polymers Cotton 30.2% 85.4 mn tons man-made cellulose fibers Synthetic fibers Viscose/Rayon 61.8% MMC fibers Modal 6.8% TENCEL®/Lyocell Source: CIRFS, The Fiber Year, The Fiber Organon, Lenzing estimates
Slide 39: Innovation drives specialties
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 20131 Q3/20142 #1 ...the new age fiber – outstanding sustainability Jeans, bed linen, Environ
Slide 40: Lenzing: Global market leader in VSF
Lenzing: Global market leader in VSF1 (2013) Lenzing with 20% share of production2 Lenzing with 18% share of capacities3 Lenzing Lenzing 20% 18% Others Others 33% 35% Fulida Fulida 9% 9% 5.16 mn tons 4.43 mn tons Grasim4 Grasim4 Thai Rayon4 8% 8% 2% Thai Rayon4 Sateri Aoyang Aoyang 3% 6% 4% 6% Sater
Slide 41: 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, 9M/2014 41
Slide 42: 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 43: 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 44: Sales and marketing
Sales and marketing Customer concentration Textiles % of sales by customers Nonwoven % of sales by customers (Q1 – Q3/2014) (Q1 – Q3/2014) 70,0% 70,0% 62.1% 60,0% 60,0% 50,0% 50,0% 46.8% 42.8% 40,0% 40,0% 32.2% 28.6% 30,0% 30,0% 18.6% 20,0% 20,0% 10,0% 10,0% 0,0% 0,0% Top 5 Top 10 Top 20 Top 5 T
Slide 45: Fiber strategy with focus on TENCEL
Fiber strategy with focus on TENCEL® Essential strategic review of site production, market positioning and innovation (till Q1/2015) Strategic measures Strategic direction Priority focus area of Lenzing’s growth strategy Gain market share in applications/regions by Tencel Scale scaling up Textil
Slide 46: Lenzing is the innovation leader
Lenzing is the innovation leader Industry leading R&D spend (EUR 31.11 mn in 2013) R&D expenses (2000-2013) Intellectual property As of December 2013, Lenzing owned 35 3,5 approx. 1,400 patent applications and 30 3 patents in 63 countries belonging to 25 2,5 248 patent families All significant p
Slide 47: Innovation process adapted to new functional organization
Innovation process adapted to new functional organization Idea Feasibility Review New innovation Development Launch process „PRO² CCO CEO Central R&D Business Product Process New R&D Development Development Development organization Lenzing Lenzing Apparel Home Hygiene Technical TENCEL® Pulp Co-Produ
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 52% 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: 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) 49
Slide 50: Capacity expansion to 2014
Capacity expansion to 20141 ~ 1 mn tons Successful start-up of TENCEL® plant (07/2014) Europe2 China CAGR 6.1% CAGR 22.1% 444 350 355 357 373 172 90 103 105 105 178 178 140 160 75 103 103 107 110 80 185 149 149 161 162 2010 2011 2012 2013 2014e 2010 2011 2012 2013 2014e USA CAGR 5.7% 40 50 50 50 40
Slide 51: Capacities by site and year
Capacities by site and year Result of significant investments over the past years Planned Capacity – Capacity – Capacity – capacity – YE 2011 YE 2012 YE 20131 YE 2014 Plant location (metric tons) (metric tons) (metric tons) (metric tons) Lenzing / Austria 252,000 252,000 268,000 339,000 Lenzing Visc
Slide 52: Capacity by site 2014
Capacity by site 2014 Capacity per Capacity per Capacity per Capacity per (metric tons) March 31, 2014 June 30, 2014 September 30, 2014 December 31, 2014 Lenzing 268,000 335,000 337,000 339,000 Indonesia 320,000 320,000 320,000 320,000 Nanjing 178,000 178,000 178,000 178,000 Heiligenkreuz 65,000 65,
Slide 53: 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 54: Where our fibers end up
Where our fibers end up Ladies’ wear – close to skin 100% TENCEL® 100% TENCEL® Jacket: 35% TENCEL® / 18% Ramie / 47% Organic cotton, Jumpsuit: 100% TENCEL® 54
Slide 55: Where our fibers end up
Where our fibers end up Ladies’ wear – close to skin Asymmetric Hem Dress 100% TENCEL® 65% TENCEL® / 35% Cotton EUR 29.95 100% TENCEL® 55
Slide 56: Where our fibers end up
Where our fibers end up Ladies’ wear – close to skin 100% TENCEL® T-shirt Dri-Fit Sprint Crew EUR 10.71 USD 90.00 43% Lenzing Modal® / 57% Cotton 53% TENCEL® / 39% Polyester / 8% Spandex 56
Slide 57: Where our fibers end up
Where our fibers end up Nonwoven applications Wipes Sustainable convenience Medical Naturally pure Hygiene Safety in sensitive areas Technical Leading fiber innovation 57
Slide 58: Our growth opportunity: Cellulose Gap
Our growth 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 59: 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 (1960-2014e) effects from yield expansion leveling out Million hectares Million metric tones 45
Slide 60: Cellulose Gap
Cellulose Gap 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 2011 2012 2013e 2015e 2020e
Slide 61: 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 62: 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 September 30, 2014 EUR 49.00 Free float 27.4% Market capitalization 1,301.0 mn September 3
Slide 63: Back-up
Back-up
Slide 64: Stock-to-use-ratio (%)
Fiber market environment Highest stock-to-use-ratio ever at approx. 83.6% (2013/2014) World cotton production of 25.98 mn tons, consumption of 23.49 mn tons and ending stocks of 19.64 mn tons Massive increase of Chinese national cotton reserve of estimated 12.07 mmt1 tons (>61% of world inventor
Slide 65: 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 2 19.1% 5.4% 8.3% 3.5% 28.7% 17.0% 16.4% 20.8% -33.0% 5.3% 1,5 21.5%16.8% 15.2% 15.1% -24.6% -20.6% -2.17% 1 -4.5% -3.3% -7.0% -8.0%-10.1% 0,5 0 1. Q. 09 2. Q. 09 3.
Slide 66: 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