Lenzing Ag · VIE:LNZ
Lenzing — Q2 2012 Earnings Presentation
71 slides from Lenzing's earnings presentation, Aug 22, 2012
Slide 1: Leading Fiber Innovation
Leading Fiber Innovation LENZING INVESTOR PRESENTATION August 22, 2012
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 Q2/2012
Key highlights Q2/2012 Delivering as guided EBITDA of EUR 101 mn and EBIT of EUR 74 mn Sales of EUR 534 mn Q2/2012 EBITDA margin (18.8%) above Q1/2012 (17.6%) Record sales volume of 199 k tons in a single quarter (guidance of 197 k tons) Viscose pricing proving to be less volatile than c
Slide 4: Macro-economic environment
Macro-economic environment Snapshot mid 2012 Selected industrial production rates Key issues: (May/June 2012 data, year-on-year in %) Continuing uncertain macro-economic outlook and European debt crisis 12,0 Impact on 2 consecutive interest rate 9.5 cuts in China yet to be seen 10,0 Chinese
Slide 5: Chinese economic development
Chinese economic development Recovery looking more like 1998-2001 Given limited policy response, this time around, growth may look more like the U-shape trajectory between 1998-2001, rather than the V-shape one in 2009 GDP growth (year-on-year in %) 16,0 14,0 12,0 10,0 8,0 6,0 December 1996 Dec em
Slide 6: Viscose spot prices China less volatile than cotton prices
Viscose spot prices China less volatile than cotton prices Cotton reduction by 22% since March 31 and viscose only by 8%1 VSF spot China and cotton price development in 2012 120,00 March 31 April 302 June 30 115,00 110,00 105,00 100,00 95,00 90,00 85,00 80,00 75,00 70,00 65,00 60,00 January 3 Januar
Slide 7: Lenzing Viscose textile prices compared to cotton price development
Lenzing Viscose® textile prices compared to cotton price development Re-establishment of premium1 to cotton Lenzing Viscose® slight price increase of 1.7% in Q2 compared to Q1 whereas cotton2 decreased by 22% in the same period Even with a 22% reduction in cotton prices and an inventory level, o
Slide 8: Q2 – As expected
Q2 – As expected Logical consequence of the expansion program: Continued increase of sales volume to nearly 200 k tons in a quarter Average price per kg 405 406 External sales1 (EUR mn) 399 +19 396 387 382 334 334 331 2.29 2.33 289 2.13 2.15 2,50 1.97 1.8% 2.03 2.04 1.91 1.92 -8.6% 1.80 19.3% 0.9% -
Slide 9: Textile fibers
Textile fibers Stable viscose price; TENCEL® with historic high price and Modal® with stable volume 300 Lenzing Viscose®1 TENCEL®1 250 2.25 2.16 60 2.93 2.96 3.11 200 1.87 1.75 1.81 1.80 1.82 1.76 1.79 50 2.67 2.79 -4.0% 2.45 24.3% -16.7% 2.14 2.18 5.0% 1.0% 5.1% 150 -6.4% 3.4% 1.1% -3.3% 1.7% 40 2.
Slide 10: Nonwoven fibers
Nonwoven fibers Nonwoven showing its price stability Viscose nonwoven remains stable on lower level compared to viscose textile TENCEL® price continues to stay at a healthy premium over viscose Lenzing Viscose®1 TENCEL®1 2.41 2.38 2.39 2.35 2.30 -2.5% 0.4% 4.8% 1.3% 2.17 2.02 2.06 1.93 1.93 2.12
Slide 11: Relative pricing
Relative pricing Continuing higher TENCEL® premium than Modal Modal: Margins over viscose returned to the usual 40-50% range, limited need for future adjustments TENCEL® textile at an unhealthy 74% premium above viscose. TENCEL® textile pricing has to be brought down to be more in line with comp
Slide 12: Q2/2012: Better than Q1
Q2/2012: Better than Q1 Volume increase drives profitability (EUR mn) Q1/2012 Q2/2012 Change in % Sales volume man-made cellulose fibers (kt) 191 199 4.2 Total external sales 528.2 533.6 1.0 Inventory change / work in progress 3.9 (0.7) - Work performed by the group and capitalized 3.1 14.5 - Cost o
Slide 13: Solid balance sheet – Higher net debt
Solid balance sheet – Higher net debt Net financial debt 2008-Q2/20123 Net financial debt increased by (EUR mn) EUR 142 mn, mainly due to Dividend payments of EUR 67.7 mn 700 653 651 613 624 Tax payments of EUR 44.2 mn 600 471 494 498 Change in WC of EUR 28.9 mn 500 441 383 Total liquidity
Slide 14: Tax rate
Tax rate Comparatively high H1/2012 tax rate not going to continue in H2/2012 Profit and Loss Statement view Three major reasons for a 5 ppt difference (EUR mn) H1/2011 H1/2012 Dividend payments by Indonesian Earnings before taxes 187.7 138.2 plant are taxed with 10% at the Taxes 42.5 38.1 sourc
Slide 15: Revised outlook FY 2012
Revised outlook FY 2012 Q3/2012: weakest quarter and limited visibility for Q4 Outlook 2012 old Q3/2012: Weaker than expected pricing environment hitting with a lag effect Sales approx. EUR 2.10 – 2.15 bn 2.20 – 2.30 bn Q3/2012: Average fiber price expected EBITDA approx. EUR 350 – 400 mn 400 –
Slide 16: Q2/2012 – Financial information
Q2/2012 – Financial information
Slide 17: Textile and nonwoven fibers
Textile and nonwoven fibers Anticipated “flat” Q2 pricing environment Textile fibers1 Nonwoven fibers1 304 External Sales (EUR mn) 300 External Sales (EUR mn) 109 293 107 291 106 105 105 282 101 273 243 241 238 93 93 2.39 2.42 91 200 2.18 2.20 160 3,00 2.02 1.98 2.11 2.12 1.95 1.3% -9.9% 140 2.10 20
Slide 18: Topline breakdown
Topline breakdown Increased textile fiber and very stable nonwoven sales but decreased other fibers segment sales due to reduced pulp prices (EUR mn) Q1/2012 Q2/2012 Change in % Breakdown of fibers segment sales Textile fibers 281.7 299.5 6.3 Nonwoven fibers 104.9 106.6 1.6 Other1 12.3 12.2 (0.8) To
Slide 19: Consolidated Group P&L – External sales
Consolidated Group P&L – External sales (EUR mn) Q1/2012 Q2/2012 Total external sales 528.2 533.6 Cost of material and purchased services (318.3) (326.2) Personnel (75.4) (76.3) EBITDA 93.1 100.6 Margin (%) 17.6 18.8 Depreciation & Amortization (26.7) (27.5) Other operating expenses (58.2) (52.3) Ot
Slide 20: Costs increase below production increase
Costs increase below production increase Continuing low dissolving wood pulp prices (EUR mn) Q1/2012 Q2/2012 Change in % Dissolving pulp1 131.6 129.6 (1.5) as % of total cost of material and purchased services 41.3 39.7 - Key chemicals 41.7 44.7 7.2 as % of total cost of material and purchased servi
Slide 21: Remaining Opex: Decreasing with increasing production
Remaining Opex: Decreasing with increasing production Representing approx. 28% of total cost and are very stable (EUR mn) Q1/2012 Q2/2012 Change in % Total personnel expenses 75.4 76.3 1.2 as % of external sales 14.3 14.3 - Other operating expenses Freight outward 18.4 20.5 11.4 Commissions and adve
Slide 22: Cash flow by quarter
Cash flow by quarter Reduced gross CF relates to tax pre-payment (EUR mn) Q1/2012 Q2/2012 Change in % Gross CF 79.01 35.22 (55.4) Change in total WC3 6.41 (28.9) - Operating cash flow 85.4 6.3 (92.6) Investment cash flow4 (22.6) (71.0) - OFCF 62.9 (64.7) - Gross CF as % of external sales 15.0 6.6 -
Slide 23: Balance sheet – Assets
Balance sheet – Assets (EUR mn) 31/12/2011 30/06/2012 Change in % Intangible assets 90.1 92.0 2.1 Property, plant and equipment 1,091.7 1,177.4 7.8 Investments in associates 30.3 33.1 9.3 Other financial assets 93.6 57.1 (39.0) Deferred taxes 10.8 7.4 (30.8) Other long-term assets 9.3 10.8 15.9 Long
Slide 24: Balance sheet – Equity & liabilities
Balance sheet – Equity & liabilities (EUR mn) 31/12/2011 30/06/2012 Change in % Common stock 27.6 27.6 - Capital reserves 133.9 133.9 - Retained earnings and other reserves 828.2 876.5 5.8 Share of shareholders of Lenzing AG 989.7 1,037.9 4.9 Non-controlling interests 34.0 34.2 0.6 Equity 1,023.7 1,
Slide 25: H1/2012 – Financial information
H1/2012– Financial information 25
Slide 26: Solid H1/2012 on healthy level
Solid H1/2012 on healthy level As expected no repetition of record H1/2011 (EUR mn) H1/2011 H1/2012 Change in % Sales volume man-made cellulose fibers (kt) 344 390 13.4 Total external sales 1,076.2 1,061.8 (1.3) Inventory change / work in progress 11.6 3.2 (72.4) Work performed by the group and capi
Slide 27: Topline breakdown
Topline breakdown Expected non repetition of extraordinary H1/2011 but similar sales with 13% volume increase (EUR mn) H1/2011 H1/2012 Change in % Break down of fiber segment sales Textile fibers 583.2 581.2 (0.3) Nonwoven fibers 211.6 211.5 0.0 Other1 21.1 24.5 16.1 Total fibers only sales 815.9 81
Slide 28: Costs under control
Costs under control Production increased by 13% and costs only by 2.5% (EUR mn) H1/2011 H1/2012 Change in % Dissolving pulp1 274.6 261.2 (4.9) as % of total cost of material and purchased services 43.7 40.5 - Key chemicals 61.9 86.4 39.6 as % of total cost of material and purchased services 9.8 13.4
Slide 29: Remaining Opex
Remaining Opex Representing approx. 28% of total costs (EUR mn) H1/2011 H1/2012 Change in % Total personnel expenses 137.3 151.7 10.5 as % of external sales 12.8 14.3 - Other operating expenses Freight outward 33.6 38.9 15.8 Commissions and advertising costs 7.1 11.9 67.6 Service and maintenance and
Slide 30: Consolidated Group P&L – External sales
Consolidated Group P&L – External sales (EUR mn) H1/2011 H1/2012 Total external sales 1,076.2 1,061.8 Cost of material and purchased services (628.8) (644.5) Personnel (137.3) (151.7) EBITDA 247.8 193.6 Margin (%) 23.0 18.2 Depreciation & Amortization (50.5) (54.3) Other operating expenses (115.6) (
Slide 31: Cash flow
Cash flow Reflecting tax pre-payments and lower profitability (EUR mn) H1/2011 H1/2012 Change in % Gross CF 218.71 114.22 (47.8) Change in total WC3 (31.9)1 (22.5) (29.5) Operating cash flow 186.8 91.7 (50.9) Investment cash flow4 (85.0) (93.5) 10.0 OFCF 101.8 (1.8) - Gross CF as % of external sales
Slide 32: Appendix – Company information
Appendix – Company information
Slide 33: Introduction: Complementary management team
Introduction Complementary management team Peter Untersperger Friedrich Weninger Thomas G. Winkler Chief Executive Officer Chief Operating Officer Chief Financial Officer Age 52 55 49 Education Master of law and business Master of Business Administration IMD Master of law (LLM) administr
Slide 34: Key investment highlights
Key investment highlights 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 34
Slide 35: Global fiber market 2011
Global fiber market 2011 Global fiber production 2011E1 Wool Natural Fibers 1.5% & Natural Polymers Cotton 31.2% 79.1 mn tons man-made MMC fibers Synthetic fibers cellulose fibers 6.0% 61.3% Source: The Cellulose Gap, Gherzi, February 2011 1) assuming a population of 7.0 bn and a per capita fiber co
Slide 36: Global market leader in a fragmented market
Global market leader in a fragmented market Only true global player – Lenzing with 17% market share1 sales by region4 RoW Americas 3% Lenzing 17% 7% Others 30% Fulida 11% Europe incl. Turkey 33% Thai Rayon2 Grasim2 Asia 3% 8% 57% Sateri 4% Aoyang 6% FCFC Indo Tangshan Helon3 4% Bharat2 6% 6% 4% Sour
Slide 37: Innovation drives specialties
Global market leader Technology leadership secures leading market shares Market Position % of and Market Share Unique Selling Proposition Key End Markets Fiber Sales in H1/20121 Q2/20122 # 1 – Quantum leap ...the new age fiber High-end technology consumer Environmentally friendly process applicat
Slide 38: 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 (1960-2011E) effects from yield expansion leveling out Million hectares Million metric
Slide 39: Cellulose Gap: A growth opportunity
Cellulose Gap: A growth opportunity MMCF: Strong demand and limitations on cotton supply Megatrends Input factor Supply trend Cellulosic fibers Population Arable land Growth Cotton CAGR*) ‘11 – ’20: 1.1%1 Water Fiber Prosperity Consumption Man-made Cellulose CAGR*) ‘11 – ’20: Cellulosic Wood
Slide 40: 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 2011E 2
Slide 41: Sustainability
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 of one metric
Slide 42: 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 43: Sales and marketing
Sales and marketing Textiles % of sales by customers1 Nonwoven % of sales by customers (H1/2012) (H1/2012) 50% 70% 43.2% 60% 58.1% 40% 50% 43.9% 30% 28.7% 40% 31.7% 20% 18.2% 30% 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 44: Blue chip company's 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 45: Innovation
Innovation Industry Leading R&D spend R&D expenses (2000-2011) Intellectual property As of December 2011, Lenzing owned 30 3 approx. 1,300 patent applications and patents in 57 countries belonging to 25 2,5 218 patent families 20 2 All significant patents are filed and maintained in Asia, the Eu
Slide 46: Cost leadership
Cost leadership Through integration and long-term supply contract Pulp is the key cost driver with 41% 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 Long-term contract l
Slide 47: 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 48: 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 49: Our production sites
Our production sites QLENZING
Slide 50: Lenzing AG – Austria
Lenzing AG — Austria tan Reta QLENZING 50 LEADING FIBER INNOVATION
Slide 51: PT. South Pacific Viscose – Indonesia
PT. South Pacific Viscose – Indonesia 51
Slide 52: Lenzing (Nanjing) Fibers Co. Ltd. – China
Lenzing (Nanjing) Fibers Co. Ltd. – China 52
Slide 53: Heiligenkreuz – Austria
Heiligenkreuz — Austria QLENZING
Slide 54: Grimsby
QLENZING 54 LEADING FIBER INNOVATION
Slide 55: Mobile – USA
Mobile – USA 55
Slide 56: Biocel Paskov a.s. – Czech Republic
Biocel Paskov a.s. – Czech Republic 56
Slide 57: 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 58: 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 59: 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 60: 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 61: Where our fibers end up
Where our fibers end up QLENZING
Slide 62: Sexy tee midi dress
Sexy tee midi dress USD 59.50 TENCEL® / Spandex 62
Slide 63: Sequin tee and dream tees one shoulder tee
Sequin tee and dream tees one shoulder tee USD 49.50 (sequin tee) and USD 39.50 (solid tee) Ecosil® Lenzing Modal® / Spandex 63
Slide 64: New Venus dressing-gown and tank
New Venus dressing-gown and tank EUR 275.00 (dressing-gown) and EUR 130.00 (tank) 90% Lenzing Modal® / 5%Elastane / 5% Polyester 64
Slide 65: Tommy John 'second skin' tank top, V-neck t-shirt, crewneck
Tommy John ‘second skin’ tank top, V-neck t-shirt, crewneck USD 33.00 (tank top), USD 38.00 (V-neck), USD 38.00 (crewneck) MicroModal® / Spandex 65
Slide 66: Helmut Lang long dress with slit
Helmut Lang long dress with slit USD 275.00 Lenzing MicroModal® 66
Slide 67: Vintage flare jeans
Vintage flare jeans USD 98.00 100% TENCEL® 67
Slide 68: TENCEL summer dress
TENCEL® summer dress EUR 35.99 100% TENCEL® 68
Slide 69: Modal lace-trim gown, modal pants, modal lace-trim romper
Modal lace-trim gown, modal pants, modal lace-trim romper USD 39.95 (each) 94% Lenzing Modal® , 6% Spandex 69
Slide 70: Armani collezioni sportcoat
Armani collezioni sportcoat USD 645.00 TENCEL® 70
Slide 71: Burberry elbow sleeve reversible check tee
Burberry elbow sleeve reversible check tee USD 250.00 100% Lenzing Modal® 71