Lenzing Ag · VIE:LNZ
Lenzing — Q1 2015 Earnings Presentation
57 slides from Lenzing's earnings presentation, May 18, 2015
Slide 1: Leading Fiber Innovation – Q1/2015 Results
Leading Fiber Innovation LENZING INVESTOR PRESENTATION – Q1/2015 RESULTS May 18, 2015
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: Q1/2015: Executive summary
Q1/2015: Executive summary Strong earnings improvement Group revenue with 5.1% significantly higher y-o-y (EUR 474.6 mn vs. EUR 451.7 mn) Better product mix and slightly higher sales volume of 238.4 k tons y-o-y (Q1/2014: 235 k tons) driving up fiber revenue by 9.3% Average fiber price per kg
Slide 4: Q1/2015: Fiber price development
Q1/2015: Fiber price development 3-year average until April 30, 2015 US-Cent/lb Cotton A Index 200 days average 120.00 110.00 100.00 90.00 73.95 80.00 70.00 60.00 USD/K PSF CN 200 days average 1.80 1.70 1.60 1.50 1.40 1.30 1.20 1.11 1.10 1.00 0.90 0.80 4
Slide 5: High cotton stocks likely to keep international cotton prices down
Q1/2015: High cotton stocks likely to keep international cotton prices down1 Price pressure to remain on total fiber market Cotton prices on a low level after sharp drop in July 2014 Cotton market1 (in mmt2) 30,00 Average Cotton A Index currently around 70 USct/lbs 26.30 26.34 China ended its
Slide 6: Q1/2015: Competitive viscose environment
Q1/2015: Competitive viscose environment Will increase in viscose prices be sustainable? No change in Q1/2015 vs. Q4/2014 Good volume demand considering Chinese New Year in February Fiber price increases after end of reporting period but questionable if sustainable, currently no price increase
Slide 7: Q1/2015: Lenzing's action plan
Q1/2015: Lenzing‘s action plan Pushing TENCEL® and Lenzing Modal® with several marketing campaigns TENCEL® lyocell fiber promotion at all customer events Start in September 2014, end in January 2015 at Heimtextil Push in TENCEL® Denim More than 50% of exhibitors use TENCEL® fibers in denim f
Slide 8: Q1/2015: Lenzing's action plan
Q1/2015: Lenzing‘s action plan Pushing TENCEL® and Lenzing Modal® with several marketing campaigns TENCEL® in knits Start of promotion for fashion knits, pushing the fibers TENCEL® A100 and TENCEL® LF TENCEL® MICRO A100 presented to the trade Fiber innovation was introduced TENCEL® Filtrat
Slide 9: Q1/2015: Financials
Q1/2015: Financials Revenue increase in a tough pricing environment – better product mix Better product mix % of fiber sales Q1/2015 Q1/2014 TENCEL® 25% 19% Lenzing Modal® 16% 16% Lenzing Viscose 59% 65% Group Revenue Fibers only Revenue 9
Slide 10: Q1/2015: Financials
Q1/2015: Financials Strong earnings improvement – EPS at EUR 0.66 (Q1/2014: EUR 0.28) EUR mn +28.7% +61.3% +120.7% +115.3% Growth rate 59.6 46.3 27 24.8 16.7 16.6 11.2 7.7 10.2% 12.6% 3.7% 5.7% 2.5% 5.2% 1.7% 3.5% Margin EBITDA EBIT EBT Net profit Q1/2014 Q1/2015 10
Slide 11: Q1/2015: Opex breakdown
Q1/2015: Opex breakdown Positive effects from excelLENZ Change Change (EUR mn) Q1/2015 Q4/2014 Q1/2014 Q1/Q4 (%) y-o-y (%) Total revenue 474.6 506.5 451.7 (6.3) 5.1 Total Opex (437.0) (431.0) (430.6) 1.4 1.5 Total costs of material and purchased services (307.2) (302.5) (301.7) 1.6 1.8 as % of total
Slide 12: Q1/2015: Financials
Q1/2015: Financials1 Net debt frozen as announced 900 875 Stable net financial debt at EUR 450 mn 801 800 730 730 700 613 653 Total liquidity cushion of EUR 489 mn 600 500 529 505 EUR 280 mn liquid assets2 500 450 450 306 EUR 209 mn of open credit facilities 400 346 307 296 280 280 300 200 1
Slide 13: Q1/2015: Financials – Net debt cascade
Q1/2015: Financials Net debt cascade EUR mn 3 450 57.8 1 57.4 26.4 12.9 0.7 450 8.5 3.1 8.6 0.1 2 11,9 Change in total w orking capital: EUR (31.0) m n 3 Net Financial Tax Net Interest Gross CF Cash Capex (incl. Change in Change in other Dividend Reclassification Currency Others Net Financial Debts
Slide 14: FX effects in Q1/2015
FX effects in Q1/2015 On P+L and equity FX and FX and (EUR mn) Q1/2015 hedging (EUR mn) Q1/2015 hedging effects effects Revenue 474.6 (24.0) Change foreign currency translation 43.7 43.7 reserve Inventory change/work in progress (4.2) Available-for-sale financial assets 0.3 0.0 Work performed by the
Slide 15: excelLENZ cost saving program
excelLENZ cost saving program On track in 2015 160 160 One-off 2014 40% 46% 137 Structural 140 ++ Incremental savings 14% Total Runrate 120 30 12 100 2015 35% 32% 80 33% 60 107 40 2016 32% 43% 25% 20 0 Operational excellence 2014 2015 e As of 2016 Personnel cost Material cost 15
Slide 16: Outlook: Full Year 2015
Outlook: Full Year 2015 Further improvement of KPI in a tough pricing environment No mid-term improvement of global fiber market Volume demand to be continued but fiber price increase still questionable to be sustainable, Lenzing going for increased premiums Long-term MMC market will stay attr
Slide 17: Q1/2015 – Financial information
Q1/2015 – Financial information
Slide 18: Q1/2015: Consolidated Group P&L
Q1/2015: Consolidated Group P&L (EUR mn) Q1/2015 Q4/2014 Q1/2014 Revenue 474.6 506.5 451.7 Change in inventories of finished goods and work in progress (4.2) (16.8) (0.1) Work performed by the Group and capitalized 5.9 5.1 12.6 Other operating income 20.5 16.7 12.5 Cost of material and purchased ser
Slide 19: Q1/2015: Topline breakdown
Q1/2015: Topline breakdown Textile fibers going up y-o-y, still strong Nonwoven business Change Change (EUR mn) Q1/2015 Q4/2014 Q4/Q1 (%) Q1/2014 y-o-y (%) Breakdown of fibers segment revenue Textile fibers 269.4 286.0 (5.8) 247.5 8.8 Nonwoven fibers 132.2 123.1 7.4 119.9 10.3 Fibers only 401.6 409.
Slide 20: Q1/2015 Total Opex structure
Q1/2015 Total Opex structure Q1/2015 Q1/2014 (Total Opex EUR 437.0 mn) (Total Opex EUR 430.6 mn) 12.2% 53.5 12.6% 54.3 17.5% 76.3 17.3% 74.6 70.3% 307.2 70.1% 301.7 Other2 Other2 26% Pulp1 23% Pulp1 47% 49% Energy Energy 12% 12% Key Key chemicals chemicals 16% 15% Material cost Personal cost Other c
Slide 21: Q1/2015: Cash flow by quarter
Q1/2015: Cash flow by quarter Improved free cash flow Change Change (EUR mn) Q1/2015 Q4/2014 Q1/2014 Q1/Q4 (%) y-o-y (%) Gross CF (before taxes and interest) 57.8 95.8 42.2 (39.7) 37.1 Taxes and interest 5.4 (4.6) (9.2) - - Gross CF (after taxes and interest) 63.2 91.2 33.0 (30.7) 91.8 Change in tot
Slide 22: FY 2014 – Financial information
FY 2014 – Financial information
Slide 23: FY 2014: Consolidated Group P&L
FY 2014: Consolidated Group P&L (EUR mn) 2014 excl. imp. 2014 incl. imp. 20131 2013 Total sales 1,864.2 1,864.2 1,859.0 1,908.9 Inventory change/work in progress (2.6) (2.6) 12.3 11.5 Work performed by the group and capitalized 34.6 34.6 52.0 52.2 Other operating income 48.5 48.5 36.6 68.1 Cost of m
Slide 24: FY 2014: Topline breakdown
FY 2014: Topline breakdown Affected by Nonwoven business (+), low pricing (-), discontinued operations (-) Change Change (EUR mn) 2014 2013 y-o-y (%) 20134 y-o-y (%) Breakdown of fibers segment sales Textile fibers 1,028.3 1,048.7 (1.9) 1,048.7 (1.9) Nonwoven fibers 475.9 463.6 2.6 463.6 2.6 Others1
Slide 25: FY 2014: Total Opex
FY 2014: Total Opex 2014 (Total Opex EUR 1,704.5 mn) 2013 (Total Opex EUR 1,815.3 mn) 20131 (Total Opex EUR 1,766.1 mn) 12.5% 12.4% 12.3% 17.1% 18.6% 18.5% 69.0% 69.2% 70.4% Cost of material and purchased services Cost of material and purchased services Cost of material and purchased services Person
Slide 26: FY 2014: Opex as of total sales
FY 2014: Opex as of total sales Change Change (EUR mn) 2014 2013 y-o-y (%) 20132 y-o-y (%) Total sales 1,864.2 1,908.9 (2.3) 1,859.0 0.3 Total Opex1 (1,704.5) (1,815.3) (6.1) (1,766.1) (3.5) Total cost of material and purchased services (1,199.2) (1,253.4) (4.3) (1,223.4) (2.0) as % of total sales 6
Slide 27: FY 2014: Solid balance sheet
FY 2014: Solid balance sheet As of December 31, 2014 ∑ 2,375.1 EUR mn ∑ 2,375.1 EUR mn Equity (55.7%) Property, plant (44.0%) and equipment (14.5%) Inventories Financial liabilities (9.8%) Trade receivables (30.7%) (7.6%) Trade payables (11.4%) Cash and cash equivalents (8.9%) Provisions (8.6%) Othe
Slide 28: FY 2014: Cash flow
FY 2014: Cash flow Considerably improved cash flows Change (EUR mn) 2014 2013 y-o-y (%) Gross CF (before taxes and interest) 253.3 172.6 46.7 Taxes and interest (22.5) (78.1) (71.2) Gross CF (after taxes and interest) 230.8 94.6 144.1 Change in total working capital1 (12.0) (13.6) (11.9) CF from dis
Slide 29: Appendix – Equity story
Appendix — Equity story Seen ZinG
Slide 30: Global fiber market at a glance
Global fiber market at a glance 2014e production numbers Wool Natural Fibers 1.3% & Natural Polymers Cotton 29.4% 89.4 mn tons man-made cellulose fibers Synthetic fibers Viscose/Rayon 62.6% MMC fibers Modal 6.7% TENCEL®/Lyocell Source: CIRFS, The Fiber Year, The Fiber Organon, Lenzing estimate
Slide 31: Innovation drives specialties
USP: Only producer of three fiber generations Strong market position of TENCEL® and Lenzing Modal ® Market Position % of and Market Share Unique Selling Proposition Key End Markets Fiber Sales in Q1/20151 Q1/20152 #1 ...the new age fiber – outstanding sustainability Jeans, bed linen, Environmenta
Slide 32: Lenzing: Global market leader in VSF
Lenzing: Global market leader in VSF1 (2014e) Lenzing with 21% share of production2 Lenzing with 18% share of capacities3 Lenzing Lenzing 21% 18% Others 31% Others 33% Grasim4 9% 4.60 mn tons Grasim4 5.49 mn tons 9% Thai Rayon4 Tangshan 2% Thai Rayon4 Helon Tangshan 3% 9% 3% Indo 9% Helon Bharat4 3%
Slide 33: Lenzing: Only global player
Lenzing: Only global player Sales volume by region1 – higher footprint in Asia (Q1/2014: 61%) RoW Americas 2% 8% Europe incl. Turkey 27% Asia 63% Source: Company information 1) fiber sales by volume in metric tons, Q1/2015 33
Slide 34: Capacity 2015 – a global footprint
Capacity 20151 – a global footprint TENCEL® plant with full 67 k tons capacity Europe2 China CAGR 5.8% CAGR 6.2% 444 444 355 357 373 172 172 178 103 1053 105 178 1788 103 103 107 110 110 140 160 149 149 161 162 162 2011 2012 2013 2014 2015e 2011 2012 2013 2014 2015e USA CAGR 5.7% 50 50 50 50 40 100
Slide 35: Capacities by site and year
Capacities by site and year Investment in TENCEL® jumbo line – full production in 2015 Planned Capacity – Capacity – Capacity – capacity – YE 2012 YE 20131 YE 2014 YE 2015 Plant location (metric tons) (metric tons) (metric tons) (metric tons) Lenzing / Austria 252,000 268,000 339,000 339,000 Lenzing
Slide 36: Capacity by site 2015
Capacity by site 2015 Capacity per Capacity per Capacity per Capacity per (metric tons) March 31, 2015 June 30, 2015 September 30, 2015 December 31, 2015 Lenzing 339,000 339,000 339,000 339,000 Indonesia 320,000 320,000 320,000 323,000 Nanjing 178,000 178,000 178,000 178,000 Heiligenkreuz 65,000 65,
Slide 37: Lenzing has cost advantages
Lenzing has cost advantages Through pulp integration and long-term pulp supply contract Pulp is the main input factor with 49% 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 38: 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 39: 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 40: Sales and marketing: Customer concentration
Sales and marketing Customer concentration Textiles % of sales by customers Nonwoven % of sales by customers (Q1/20151) (Q1/20151) 64.3% 50.7% 44.8% 31.7% 33.4% 20.8% Top 5 Top 10 Top 20 Top 5 Top 10 Top 20 Source: LAG 1) Due to a new clustering in 2015, the figures cannot be compared to previou
Slide 41: Lenzing is the innovation leader
Lenzing is the innovation leader Industry leading R&D spend (EUR 20.61 mn in 2014) R&D expenses (2000-2014) Intellectual property As of December 2014, Lenzing owned 35 3,5 approx. 1,500 patent applications and 30 3 patents in 63 countries belonging to 250 patent families 25 2,5 All significant p
Slide 42: Innovation process adapted to new functional organization
Innovation process adapted to new functional organization Idea Feasibility Review New innovation Development Launch process „PRO” CCO Central R&D Business Product Process New R&D Development Development Development organization Lenzing Lenzing Apparel Home/ Non- New TENCEL® Pulp Co-Products Viscose®
Slide 43: Growth drivers for the MMC market
Growth drivers for the MMC market 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: Cellulosic Wood Gap 2.4% Shift
Slide 44: 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 (1960-2015e) effects from yield expansion leveling out Million hectares Million metric tones 45
Slide 45: 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 46: 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 March 31, 2015 62.62 EUR Free float 27.4% Market capitalization 1,662.6 mn March 31, 2015
Slide 47: Back-up
Seen ZinG
Slide 48: Q1/2015: Low pricing level remains
Q1/2015: Low pricing level remains1 But VSF prices have increased by 9% to ~12.500 RMB2 since January (Index: Base = January 2, 2014) Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 115.00 105.00 95.00 85.00 75.00 65.00 Dec. 2014 Jan. 2014 Aug. 2014 Mar. 2014 Apr. 2014 Okt. 2014 Jan. 2015 Jun. 2014 Jul. 201
Slide 49: Lenzing Viscose textile prices compared to cotton price development
Lenzing Viscose® textile prices compared to cotton price development VSF prices increasing premium over cotton1 EUR/kg 3.5 3 2.5 19.1% 8.3% 3.5%17.0% 17.6% 2 28.7% 5.4% -33.0% -20.6% 16.4% 5.3% 20.7% 7.8% 15.7% 15.1% -2.17% 1.5 21.5%16.8% 15.2% -24.6% -4.5% -3.3% -8.0%-10.1% 1 -7.0% 0.5 0 1. Q. 13 1
Slide 50: Fiber market environment: stock-to-use ratio
Fiber market environment Highest stock-to-use-ratio ever at approx. 90.7% (2014/2015*) World cotton production of 26.34 mn tons, consumption of 24.05 mn tons and ending stocks of 21.81 mn tons Huge Chinese national cotton reserve of estimated 12.45 mmt1 tons (>57% of world inventories) Usc/Ib St
Slide 51: 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) 51
Slide 52: Where our fibers end up
Where our fibers end up NORDSTROM ae SRD Ae TB zobha’ [[E) -eeoasast- NEIL Barren Zappos: Splendih Pra hambe 5; QU REVOLVE alo (Asemcom TRUE RELIGION’ patagonia —a LAUREN SHOPBOP 6 © ATHLETA bdlamingcale's SUNDRY Naa ella moss) SOLOW ROYAL a ROBBINS eee Y/OSEMITE | Hurley){ | - ROOKS travis) hatha =
Slide 53: Where our fibers end up
Where our fibers end up Apparel - Ladies’ wear – close to skin 100% Jacket: 35% TENCEL® / Asymmetric Hem Dress 100% TENCEL® 65% TENCEL® / TENCEL® 18% Ramie / 47% 100% TENCEL® 35% Cotton Organic cotton, Jumpsuit: 100% TENCEL® 53
Slide 54: Where our fibers end up
Where our fibers end up Home and Interiors 100% TENCEL® Lenzing Modal® bedlinen towels duvets bathrobes mattresses …. 54
Slide 55: Where our fibers end up
Where our fibers end up Nonwovens TENCEL® TENCEL® TENCEL® wash cloth face masks hygiene articles 55
Slide 56: Where our fibers end up
Where our fibers end up New Business Development & Technical TENCEL® Lenzing Modal® COLOR TENCEL® car seats vegetable and fruit nets laces tires eg. at REWE Austria soles injection moldings outer/inner layer … 56
Slide 57: Contacts and financial calendar
Contacts and financial calendar Investor Relations contact Financial calendar Financial calendar 2015 Stephanie Kniep Full year results March 24, 2015 Head of Investor Relations 70th Annual General Meeting April 22, 2015 Phone: +43 7672 701 4032 Results 1st quarter May 18, 2015 Half year resul