Lenzing Ag · VIE:LNZ
Lenzing — FY2017 Earnings Presentation
65 slides from Lenzing's earnings presentation, Mar 14, 2018
Slide 1: Lenzing Investor Presentation Full Year Results 2017
Lenzing Investor Presentation Full Year Results 2017 March 14, 2018 www.lenzing.com 14.03.2018 - 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: Highlights 2017
Highlights 2017 ● Lenzing with best financial year in history ● Group revenue up 5.9% to EUR 2.26 bn ● Record earnings ● EBITDA up 17.3% to EUR 502 mn ● Net profit up 23.0% to EUR 282 mn (translates into EPS of EUR 10.47) ● ROCE at 18.6% ● Strong balance sheet ● Retail bond redeemed (EUR 120 mn) on
Slide 4: Execution of sCore TEN strategy in full swing
Execution of sCore TEN strategy in full swing ● Pulp and lyocell expansions progress well ● Excellent innovation progress with high profile launches ● EUR 55.4 mn R&D1 investment in 2017 fuel sustainability driven innovation power ● 36 new patent filings in 2017 ● High profile brand launches with TE
Slide 5: Target achievement ahead of plan
Target achievement ahead of plan 2015 2016 2017 2020 Targets EBITDA growth 21%1 34%1 28%1 10% p.a. (vs 2014 baseline) ROCE 8.1 15.1 18.6 ≥10% Net financial 1.1 0.0 0.1 <2.5 debt/EBITDA Overachievement thanks to disciplined strategy implementation helped by positive market environment 1) CAGR; baseli
Slide 6: Fiber Market
2017 Fiber Market www.lenzing.com 14.03.2018 - 6
Slide 7: Fiber market 2017
Fiber market 2017 Fiber production in mn tons ● World fiber production 2017e up 5.0% 5.1% to 105 mn tons 105.0 ● For the first time since two years 100.0 slightly higher than consumption 3.9% (2017e: 104.8 mn tons; +3.2%) 64.8 67.4 ● Cotton production growth as driver for the fiber market 10.6% ● St
Slide 8: Interfiber price development
Interfiber price development Staple fiber prices - Development in China USD/kg (incl. VAT) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 01/2015 06/2015 11/2015 04/2016 09/2016 02/2017 07/2017 12/2017 Viscose Baumwolle Polyester Sources: China Cotton Association, China Chemical & Fiber Economic Information Network, C
Slide 9: Cotton market with promising outlook
Cotton market with promising outlook Cotton market ● In 2017 the average Cotlook A-Index was mn tons at USD 83.5 cents/lbs which was 12.4% higher y-o-y 30 25.8 25.4 25.4 26.5 24.5 25 23.1 ● Outlook current season 2017/2018p 20 18.8 19.3 18.2 ● Cotlook A-Index with 78 cents/lbs better than 15 estimat
Slide 10: High volatility in Chinese VSF market in 2017
High volatility in Chinese VSF market in 2017 ● Strong prices from Q1 to Q3 due to VSF1 price trend and inventory of China general strong demand and tight supply due to increasing pressure from yuan/MT day environmental inspections in China 18,000 30 ● Q4 prices dropped to RMB 14,380 17,000 mainly d
Slide 11: Financial information
2017 Financial information www.lenzing.com 14.03.2018 - 11
Slide 12: Financials 2017 – Revenue
Financials 2017 – Revenue EUR mn EUR mn Share of specialty fibers1 (4.1)% +5.9% in 2017 586.2 577.5 2,259.4 13.6% 562.9 2,134.1 555.7 1,976.8 1,908.9 1,864.2 41.9% 532.8 44.5% Specialty fibers 1 Q4/2016 Q1/2017 Q2/2017 Q3/2017 Q4/2017 2013 2014 2015 2016 2017 Standard fibers Group revenue Group reve
Slide 13: Financials 2017 – Earnings
Financials 2017 – Earnings EBITDA margin EBIT margin EPS1,2 (EUR) 11.8% 12.9% 14.7% 20.1% 22.2% 4.5% 1.2% 7.6% 13.9% 16.4% 1.89 (0.92) 4.78 8.48 10.47 EUR mn EUR mn EUR mn +17.3% +25.2% +23.0% 371 282 502 428 296 229 290 240 128 225 151 86 50 22 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013
Slide 14: Financials 2017 – Key figures (1/2)
Financials 2017 – Key figures (1/2) EUR mn EUR mn 900 (801) 800 (730) 1,650 49.7% (683) 700 1,605 (577) 1,596 600 570 1,600 1,579 39.7% 505 1,572 500 450 1,550 1,541 29.7% (383) 400 355 316 296 300 280 1,500 19.7% 328 200 8.1% 18.6% 1,450 3.7% 15.1% 9.7% 100 67 (0.1%) 7 0 1,400 -0.3% 2013 2014 2015
Slide 15: Financials 2017 – Key figures (2/2)
Financials 2017 – Key figures (2/2) 1,800 130.0% 120.0% 1,600 EUR mn 1,528 EUR 110.0% 1,390 5.50 1.50 1,400 100.0% 5.001 1,219 1.30 90.0% 4.20 1,200 1,110 4.50 1,055 80.0% 1.10 1,000 61.2% 70.0% 3.50 1.20 2.00 53.0% 0.90 50.6% 60.0% 800 3.00 3.00 50.0% 2.50 2.00 0.70 600 1.75 40.0% 3.7% 45.5% 44.7%
Slide 16: Cash flow development and trading working capital
Cash flow development and trading working capital +8.5% (Gross CF) (42.7)% (Operating CF) +9.2% (91.1)% (Free CF adj.) EUR mn 600 40.0% EUR mn 500 82 35.0% 473 419 78 0 0 83 386 400 447 30.0% 366 414 394 396 380 25.6% 284 271 300 25.0% 231 23.4% 20.8% 219 216 200 19.4% 20.0% 145 21.3% 19.5% 21.6% 95
Slide 17: Outlook
2018 Outlook www.lenzing.com 14.03.2018 - 17
Slide 18: Market environment more challenging
Market environment more challenging 2018e: 600 – 900 kt viscose net capacity additions Harriman index increased over the last two quarters expected to come on stream 1 (Caustic soda, IHS Europe low, EUR/t) 800 600 6.3 – 6.6 400 5.7 200 5.4 0 Q1-16 Q3-16 Q1-17 Q3-17 Q1-18 Euro strenghtened substantia
Slide 19: Lenzing stays the course
Lenzing stays the course www.lenzing.com 14.03.2018 - 19
Slide 20: Outlook 2018: Execution priorities
Outlook 2018: Execution priorities ● Strengthen the core ● Continue debottlenecking of 35 kt pulp until 2019 ● Finalize decision on backward integration ● Specialization ● Start-up with 25 kt lyocell from debottlenecking in Heiligenkreuz, Austria, in Q2/2018 ● Finalize 90 kt lyocell brownfield proje
Slide 21: Outlook 2018 – Fiber market and Lenzing Group
Outlook 2018 – Fiber market and Lenzing Group The International Monetary Fund expects a further acceleration in global economic growth to 3.7 percent in 2018. However, growing protectionist tendencies in the political arena represent a source of uncertainty. Export-oriented companies in the Eurozone
Slide 22: FY 2017 Financial information
FY 2017 Financial information www.lenzing.com 14.03.2018 - 22
Slide 23: FY 2017: Consolidated Group P&L
FY 2017: Consolidated Group P&L (EUR mn) 2017 2016 Change y-o-y (%) Revenue 2,259.4 2,134.1 5.9 Change in inventories of finished goods and work in progress 16.8 6.4 160.5 Own work capitalized 46.1 21.8 111.1 Other operating income 49.9 45.5 9.6 Cost of material and purchased services (1,258.0) (1,2
Slide 24: FY 2017: Consolidated Group P&L - Quarters
FY 2017: Consolidated Group P&L - Quarters Change Change (EUR mn) Q1/2017 Q2/2017 Q3/2017 Q4/2017 Q4/Q3 (%) Q4/2016 Q4/Q4 (%) Revenue 586.2 562.9 577.5 532.8 (7.8) 555.7 (4.1) Change in inventories of finished goods and work in progress (21.4) 20.4 (2.5) 20.3 - 18.2 11.2 Own work capitalized 9.3 10.
Slide 25: FY 2017: Topline breakdown
FY 2017: Topline breakdown Change Change Q4/Q3 Q4/Q4 Change (EUR mn) Q1/2017 Q2/2017 Q3/2017 Q4/2017 (%) Q4/2016 (%) 2017 2016 y-o-y (%) Breakdown of Fibers segment revenue Textile fibers (%) 71.5 69.2 70.2 69.0 (1.6) 71.0 (2.8) 70.0 70.9 (1.3) Nonwoven fibers (%) 28.5 30.8 29.8 31.0 3.9 29.0 6.8 30
Slide 26: Financials 2017 – Earnings per quarter
Financials 2017 – Earnings per quarter EBITDA margin EBIT margin EPS1 (EUR) 19.4% 23.0% 24.1% 21.9% 19.8% 13.4% 17.5% 18.1% 16.3% 13.6% 2.50 2.75 2.80 2.57 2.35 EUR mn EUR mn EUR mn (2.2)% (2.7)% (6.9)% 135.1 135.6 126.4 102.3 101.8 75.0 75.3 94.2 107.7 105.3 69.0 67.0 74.6 72.6 62.4 Q4/2016 Q1/2017
Slide 27: FY 2017: OPEX as of total sales
FY 2017: OPEX as of total sales Change Change Q4/Q3 Q4/Q4 Change (EUR mn) Q1/2017 Q2/2017 Q3/2017 Q4/2017 (%) Q4/2016 (%) 2017 2016 y-o-y (%) Total sales 586.2 562.9 577.5 532.8 (7.8) 555.7 (4.1) 2,259.4 2,134.1 5.9 Total OPEX1 (451.7) (472.2) (473.1) (472.7) (0.1) (481.6) (1.9) (1,869.7) (1,779.6)
Slide 28: FY 2017: Solid balance sheet, strong ROCE
FY 2017: Solid balance sheet, strong ROCE as at Dec. 31, 2017 3,000.0 ∑ EUR 2,497.3 mn ∑ EUR 2,497.3 mn Change According to IFRS (EUR mn) 31 Dec. 2017 31 Dec. 2016 in % 2,500.0 Total assets 2,497.3 2,625.3 (4.9) Liquid assets1 315.8 570.4 (44.6) 2,000.0 thereof liquid funds 306.5 559.6 (45.2) Total
Slide 29: FY 2017 Total opex structure
FY 2017 Total opex structure 2016 (Total Opex EUR 1,779.6 mn) 2017 (Total Opex EUR 1,869.7 mn) 236.6 262.4 13.3% 14.0% 319.2 349.4 17.9% 18.7% 1,258.0 1,223.8 67.3% 68.8% Cost of material and purchased services Cost of material and purchased services Personnel expenses Personnel expenses Other opera
Slide 30: FY 2017: Net debt bridge
FY 2017: Net debt bridge EUR mn Change in total working capital EUR (148.5) mn3 245.3 2 76.7 7.2 71.8 66.8 80.6 111.7 3.1 1.8 26.1 12.5 511.8 1 Net financial Tax Net interest Gross CF Cash capex Change in Change in Dividend Inflow from Currency Others Net financial debt FY 2016 (incl. fin. ass.) oth
Slide 31: 10-12/2017: Net debt bridge
10-12/2017: Net debt bridge 114.8 115.7 EUR mn Change in total working capital EUR (84.4) mn3 16.9 16.4 4.9 41.0 66.8 43.4 22.7 0.1 0.0 0.4 Net liquidity Tax Net interest Gross CF Cash capex Change in Change in Dividend Transaction Currency Others Net financial Q3/2017 (incl. fin. ass.) other WC tra
Slide 32: FY 2017: Cash flow by quarters
FY 2017: Cash flow by quarters Change Change Change Q4/Q3 Q4/Q4 y-o-y (EUR mn) Q1/2017 Q2/2017 Q3/2017 Q4/2017 (%) Q4/2016 (%) 2017 2016 (%) Gross cash flow (before taxes and interest) 132.5 134.1 130.4 114.8 (12.1) 124.8 (8.1) 511.8 445.4 14.9 Taxes and interest (10.7) (28.9) (32.1) (21.4) (33.7) (
Slide 33: Cash flow development and trading working capital
Cash flow development and trading working capital (9.5)% (Gross CF) EUR mn +9.2% (Trading Working Capital) (91.5)% (Operating CF) EUR mn (Free CF adj.) 500 30.0% 450 83 0 400 50 46 18 25.0% 121.8 350 380 384 414 103.1 98.5 106.1 105.2 300 384 95.1 98.2 20.8% 353 93.4 250 18.5% 20.0% 79.3 19.4% 19.4%
Slide 34: Appendix Equity story
Appendix Equity story www.lenzing.com 14.03.2018 - 34
Slide 35: Lenzing – Our mission
Lenzing – Our mission “Lenzing is a performance materials company that turns CO2 and sunlight into highly functional, emotional and aesthetic products across the globe” Textile Nonwoven www.lenzing.com 14.03.2018 - 35
Slide 36: Global fiber market at a glance
Global fiber market at a glance 2017e consumption numbers Wool 1.1% Cotton 24.1% 105 mn tons Synthetic fibers Other natural fibers 64.2% 4.4% Wood-based fibers 6.2% ● Lyocell ● Modal ● Viscose 1) Incl. bast, flax, hemp, jute, silk and allied fibers 2) Wood-based and cotton linter-based cellulose fib
Slide 37: Lenzing - Market leader in all three fiber generations
Lenzing - Market leader in all three fiber generations Competitive Fiber Types Market Position Intensity Lyocell #1 Low Modal #1 Medium Viscose #2 High Source: Lenzing data 2017, CCFG, CCFEI www.lenzing.com 14.03.2018 - 37
Slide 38: Lenzing is the only player with European roots in viscose staple fibers
Lenzing is the only player with European roots in the viscose staple fibers market1 (2017e) … Lenzing with 17% share of production Lenzing with 16% share of capacities2 Others Lenzing Others Lenzing 17% 17% 20% 16% Xiangsheng 5% Xiangsheng Aoyang 5.3 mn tons 5% 6.2 mn tons Birla 16% 5% Birla Aoyang
Slide 39: … and is a global leader in wood-based cellulose fibers
… and is a global leader in wood-based cellulose fibers Balanced exposure to matured and Global network of production sites and emerging markets sales offices Fiber revenue by region 2017 footprint AMEA (Asia, Middle North Asia East and Africa) 37% 36% Europe & Americas 27% Source: Lenzing data as a
Slide 40: Capacity 2018: A global footprint
Capacity 20181: A global footprint Europe2 China Total pulp capacity 457 493 570 575 181 209 178 178 270 275 111 119 165 165 2017 2018e 300 300 2017 2018e 2017 2018e Lenzing (A) Paskov (CZ) USA Total capacity Indonesia dissolving dissolving pulp capacity pulp capacity 1,009 1,048 232 263 51 54 111 1
Slide 41: Textile and Nonwovens are the two main applications
Textile and Nonwovens are the two main applications Textile Nonwovens Size ~90 mt ~10 mt Regional Over 90% of spinning and fabric making Mainly a regional market (due to high logistic costs) focus located in China, India and Asia-Pacific High Low: Top 5 to 10 players hold between 60-80% share Fragme
Slide 42: Long-term interfiber price development
Long-term interfiber price development1 Staple fiber prices - Development in China USD/kg (incl. VAT) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 01/2010 08/2010 03/2011 10/2011 05/2012 12/2012 07/2013 02/2014 09/2014 04/2015 11/2015 06/2016 01/2017 08/2017 03/2018 Viscose Cotton Polyester Sources: Chin
Slide 43: Sales and marketing - Customer concentration
Sales and marketing - Customer concentration Textiles Percent of sales by customers Nonwovens Percent of sales by customers (20171) (20171) 61.2% 47.5% 44.5% 30 % 35% 21 % Top 5 Top 10 Top 20 Top 5 Top 10 Top 20 Source: Lenzing data 2017 www.lenzing.com 14.03.2018 - 43
Slide 44: Lenzing underpins its innovation leadership
Lenzing underpins its innovation leadership Industry leading R&D spend (EUR 55.41 mn in 2017) ● R&D is an essential part of the sCoreTEN strategy and contributes to R&D expenses (2014-2017)1 all five fields EUR mn ● Substantial progress with respect to strategic innovations and thus looking at a hea
Slide 45: sCore TEN investment program
sCore TEN investment program ● Debottlenecking of pulp and specialty fibers ● Around EUR 100 mn in pulp (in 2019) ● Around EUR 100 mn in specialty fibers (in 2018) ● Lyocell brownfield project of 90 kt in Mobile/USA (in 2019) ● Investment of USD 293 mn at existing site in Mobile/USA ● Construction s
Slide 46: Looking forward: Megatrends support fiber demand growth
Looking forward: Megatrends support fiber demand growth Population growth and higher purchasing power in the emerging markets drive overall fiber growth World CAGR 2010-2020 6.9 7.8 Population 6.1 +1.1% bn 12.2 GDP per capita 9.7 (current prices) 5.7 +2.4% ths. USD/capita 14.8 Fiber consumption 11.9
Slide 47: Wood-based fibers outgrow market
Wood-based fibers1 outgrow market Expected growth of global fiber demand until 2020 Million metric tons 120 CAGR 110 Wood-based fibers (2015e – 2020p2) 100 Synthetic Cotton 90 Other Wood-based 5-6% p.a. 80 fibers1 70 60 Synthetic fibers 4-5% p.a. 50 40 30 Cotton 0-1% p.a. 20 10 Total fiber market 3-
Slide 48: Asia Pacific remains the growth engine in global textiles
Asia Pacific remains the growth engine in global textiles Global apparel demand by value1 (2005-2020) CAGR (2015-2020e) USD bn 1,517 1,306 38% Asia Pacific 4% 988 36% 23% 22% North America 2% 22% 26% 26% Europe 27% 2% 39% 14% 14% ROW 12% 3% 2005 2015 2020e 1 Based on current prices and historic year
Slide 49: Sustainability is gaining importance
Sustainability is gaining importance Less than 1% of global water Arable land is decreasing due to Oil is a finite resource causing resources is available as fresh erosion and urbanization negative externalities water for people ● With a growing global population, ● Sooner or later “peak oil” will b
Slide 50: Lenzing's sustainability strategy
Lenzing’s sustainability strategy “Lenzing balances the needs of society, the environment and shareholders and is a sustainability leader in its industry. Creating substantially more positive impacts or benefits is the guiding torch for our innovation and business practices.” ● Four focus areas ● Wo
Slide 51: Certificates and recognitions
Certificates and recognitions ● VÖNIX (Austrian Sustainability Index) ● 100% USDA Biobased certification for all Lenzing fibers (LENZINGTM FR at 99%) ● The European Eco-Label (European Flower) ● OK compost HOME (TÜV AUSTRIA BELGIUM) ● Responsible Care® ● OK biodegradable SOIL (TÜV AUSTRIA BELGIUM) ●
Slide 52: LENZING ECOVERO - The new standard in eco-responsible viscose
LENZING™ ECOVERO™ - The new standard in eco- responsible viscose! ● LENZING™ ECOVERO™ fibers are the innovative and unique answer to the increasing demand for sustainable products along the textile value chain ● Worldwide highest environmental standards in the viscose production relying on three maj
Slide 53: REFIBRA: The game changing recycling technology
REFIBRATM: The game changing recycling technology ● REFIBRATM recycling technology for the circular economy (Closed loop system) ● Combination of lyocell technology with pioneering use of recycled cotton off-cuts ● Upscaling of cotton and significant reduction of cotton scraps in the garment product
Slide 54: Dissolving wood pulp is the basis for our sustainable products
Dissolving wood pulp is the basis for our sustainable products Our business is part of a natural closed cycle We only use wood from sustainable forestry 1) Controlled = Internally audited according to the standards of the wood certifiers and externally verified www.lenzing.com 14.03.2018 - 54
Slide 55: Highly efficient use of the raw materials
Highly efficient use of the raw materials The Lenzing site is fully integrated. Dissolving wood pulp production at the Lenzing and Paskov sites achieve a wood utilization rate of about 100% (incl. energy use). www.lenzing.com 14.03.2018 - 55
Slide 56: Fiber production fully secured by a robust pulp supply
Fiber production fully secured by a robust pulp supply Level of backward integration: Own pulp supply in percentage of annual fiber capacity ● >50% secured by own pulp production ● Remaining pulp is secured Total annual through long-term contracts fiber capacity (100%) 58% 56% 56% 56% 56% 2013 2014
Slide 57: The strategy – driving value growth
The strategy – driving value growth www.lenzing.com 14.03.2018 - 57
Slide 58: Strengthen the Core
Strengthen the Core ● Further strengthen pulp position via backward integration and/or strategic co- operations 1 ● Maintain quality leadership ● Deliver EUR 50 mn EBITDA by 2017 with commercial and operational excellence program ● Strengthen our co-products business ● Grow viscose position via stra
Slide 59: Customer Intimacy, Specialization, Forward Solutions and New Business Areas
Customer Intimacy, Specialization, Forward Solutions and New Business Areas Increase management presence and decision power in the regions Move selectively forward 4 in the value chain via new Establish two additional game-changing 2 regional application and technologies customer innovation centers
Slide 60: Backup
Backup www.lenzing.com 14.03.2018 - 60
Slide 61: Where you can find our fibers
Where you can find our fibers Apparel/Home & Interiors - close to skin www.lenzing.com 14.03.2018 - 61
Slide 62: Where you can find our fibers
Where you can find our fibers Nonwovens • Facial masks • Wipes • Hygiene articles www.lenzing.com 14.03.2018 - 62
Slide 63: Where you can find our fibers
Where you can find our fibers New Business Development & Technical textiles • In automotive • Packing solutions with • Botanic Shoe with TENCEL® fiber (car seats, tires, injection Lenzing Modal® COLOR fiber TENCEL® fiber shoe complete (shoe molding, …) (vegetable and fruit nets – soles, lining, uppe
Slide 64: Lenzing share information
Lenzing share information Oberbank AG 3.97% ISIN LNZ / AT0000644505 Bloomberg LNZ:AV Reuters LNZNF.PK ATX Prime, ATX Global Players, Indices VÖNIX Sustainability Index B&C Privatstiftung Number of shares 26,550,000 50.00% Share price Dec. 29, 2017 EUR 105.85 Free float 46.03% Market capitalization E
Slide 65: Contacts and financial calendar
Contacts and financial calendar Investor Relations contact Financial calendar ● Stephanie Kniep Full year results 2017 March 14, 2018 Head of Investor Relations 74th Annual General Meeting April 12, 2018 Corporate Communications & Investor Relations Results 01-03/2018 May 8, 2018 ● Phone: +43 7672 7