Lenzing Ag · VIE:LNZ
Lenzing — FY2013 Earnings Presentation
61 slides from Lenzing's earnings presentation, Mar 21, 2014
Slide 1: Leading Fiber Innovation
Leading Fiber Innovation LENZING INVESTOR PRESENTATION – FULL YEAR RESULTS 2013 March 21, 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: Executive summary
Executive summary FY 2013 – not a question of volumes but of prices1 Revised guidance delivered New record sales volume of +10% to 890 k tons (2012: 810 k tons) despite production losses Successful sale of 85% of Lenzing Plastics GmbH Cash received: EUR 62 mn EBITDA (EUR 225.4 mn) and EBIT
Slide 4: Highlights Q4/2013
Highlights Q4/2013 Good volumes but average fiber price further decreased New record sales volume of 231 k tons Average fiber price at EUR 1.61 per kg Sales EUR 461.9 mn EBITDA as expected 4
Slide 5: Fiber market environment 2013
Fiber market environment 2013 MMCF1 with new production record, total fiber market increased by only 1.6%2 2) sources: ICAC, CIRFS, Fiber Economics Bureau, National Statistics, The Fiber Year, Lenzing estimates. Percentage increases based on exact figures 3) thereof VSF (incl. Tencel) 4.4 mn tons (+
Slide 6: There is enough cotton on the market
There is enough cotton on the market Further increase of cotton stock Cellulose fiber market remains rather difficult Cotton market1 Average cotton A price stayed flat at mmt2 90.4 USct/Ibs in 2013 ICAC forecast sees global cotton production 2013/2014 by ~1 mmt2 above global demand for the fou
Slide 7: Cotton market
Cotton market External statements to current market situation Besides others, the cotton scenario is determined by two There is a divergence about contrary influences: On the one hand cotton farmers are production estimates as forecasters faced with increasing labor costs, high costs for fertilizers
Slide 8: Competitive viscose environment
Competitive viscose environment Cellulose fiber market under price pressure Global viscose market in a limbo Stable cotton prices while VSF spot prices on lower levels (12.280 RMB at end of 2013 vs. 14.000 RMB at beginning of 2013) and with negative premiums to cotton Capacities of 5.8 mmt1 (m
Slide 9: Lenzing with new sales volume record in 2013
Lenzing with new sales volume record in 2013 Continued downward price trend affected sales, Q4 with new record in sales volume -8.2% 0.9% -5.6% 0.5% -4.4% -6.2% -3.3% -1.1% -4.6% -3.6% External sales (EUR mn)1 Sales volume (kt) Average fiber price (EUR/kg)2/ growth2 1) core fiber segment sales, excl
Slide 10: 2013: Sales affected by price pressure
2013: Sales affected by price pressure Continuous success in Nonwoven Sales by segment fibers (EUR mn) -6.9% ∑ 1,896.0 ∑ 1,765.9 Pulp, energy, others -18.5%1 Nonwoven fibers +6.5% Textile fibers -8.8% 1) due to switch from external to internal sales in Biocel Paskov (effect: ~EUR 60 mn) 10
Slide 11: FY 2013 financials
FY 2013 financials Optimized interest bearing financial debt Net financial debt increase of EUR 159 mn thereof2: Net effect Plastics sale: EUR -61.7 mn Cash taxes: EUR 59.1 mn Net interest: EUR 18.9 mn Cash Capex: EUR 252.2 mn Dividend payment: EUR 53.3 mn Change in working capital: EU
Slide 12: Looking ahead into 2014
Looking ahead into 2014 Specialties and cost in the focus Difficult market environment here to stay Q1: VSF prices again on low levels after a short pick-up in February Further additional volumes of ~300 k tons in 2014 and ~250 k tons in 2015 but so far no new projects announced Lenzing will
Slide 13: excelLENZ cost savings program
excelLENZ cost savings program Clear target: Structural savings of up to EUR 120 mn p.a. in 2015 EUR mn ~120 mn 120 mn Structural mn cost savings annualized 60 mn + Quick wins Operational excellence, ~20 excelLENZ 1.0 procurement ~40 mn ~20 Personnel ~20 SG&A, other costs 13
Slide 14: Outlook: Full Year 2014
Outlook: Full Year 2014 A year of transition Tough pricing environment to be continued (VSF overcapacities, high cotton stock) Capacity ~1 mn tons Ramp-up of TENCEL® jumbo line Cash out ~ ~ Cash in CAPEX: ~ EUR 125 mn excelLENZ savings ~EUR 60 mn + Net debt frozen at ~EUR 500 mn + Mi
Slide 15: Q4/2013 – Financial information
Q4/2013 – Financial information
Slide 16: Q4/2013: As expected
Q4/2013: As expected (EUR mn) Q4/2013 Q4/20121 Total external sales 461.9 522.9 Inventory change/work in progress 8.0 (6.6) Work performed by the group and capitalized 9.1 27.5 Cost of material and purchased services (342.8) (337.3) Personnel (95.8) (77.6) Other operating expenses/income (40.8) (60.
Slide 17: Q4/2013: Topline breakdown
Q4/2013: Topline breakdown Successful Nonwoven business Change (EUR mn) Q4/2013 Q3/2013 Q4/Q3 (%) Q2/2013 Q1/2013 Breakdown of fibers segment sales Textile fibers 252.9 253.9 (0.4) 270.6 271.3 Nonwoven fibers 117.8 116.7 0.9 117.9 111.3 Others1 13.8 13.5 2.2 13.8 12.9 Total fibers only sales 384.5 3
Slide 18: Q4/2013: Cost of material
Q4/2013: Cost of material Affected by record sales volumes Change (EUR mn) Q4/2013 Q3/2013 Q4/Q3 (%) Q2/2013 Q1/2013 Dissolving wood pulp1 (150.5) (147.5) 2.0 (137.7) (134.7) as % of total cost of material and purchased services 43.9 48.6 - 46.3 43.5 Key chemicals (46.3) (46.7) (0.9) (46.1) (45.5) a
Slide 19: Q4/2013: Total Remaining Opex
Q4/2013: Total Remaining Opex Representing stable 33% of total Opex Change (EUR mn) Q4/2013 Q3/20131 Q4/Q3 (%) Q2/20131 Q1/20131 Total personnel expenses (95.8) (77.4) 23.8 (81.4) (82.5) as % of external sales 20.8 16.9 - 16.5 16.6 Total other operating expenses (55.2) (53.4) 3.4 (57.6) (58.7) as %
Slide 20: Q4/2013: Cash flow by quarter
Q4/2013: Cash flow by quarter Change (EUR mn) Q4/2013 Q3/20131 Q4/Q3 (%) Q2/20131 Q1/20131 Gross CF (before taxes and interest) (29.9) 66.5 n.m. 69.9 66.1 Taxes and interest (4.8) (17.2) (72.1) (16.1) (40.0) Gross CF (after taxes and interest) (34.7) 49.3 n.m. 53.8 26.1 Change in total working capit
Slide 21: FY 2013 – Financial information
FY 2013 – Financial information
Slide 22: Consolidated Group P&L
Consolidated Group P&L (EUR mn) 2013 20121 Total external sales 1,908.9 2,090.4 Inventory change/work in progress 11.5 8.2 Work performed by the group and capitalized 52.2 57.7 Cost of material and purchased services (1,253.4) (1,303.7) Personnel (337.0) (309.9) Other operating expenses/income (156.
Slide 23: FY 2013: Topline breakdown
FY 2013: Topline breakdown Nonwoven fibers a stabilizing factor and effects from Plastics sale Change (EUR mn) 2013 2012 y-o-y (%) Breakdown of fibers segment sales Textile fibers 1,048.7 1,149.6 (8.8) Nonwoven fibers 463.6 435.2 6.5 Others1 54.0 49.4 9.3 Total fibers only sales 1,566.3 1,634.2 (4.2
Slide 24: FY 2013: Cost of material down approx. 4%
FY 2013: Cost of material down approx. 4% Cost switch Paskov (other/DWP) and effects from excelLenz Change (EUR mn) 2013 2012 y-o-y (%) Dissolving wood pulp1 (570.3) (529.7) 7.7 as % of total cost of material and purchased services 45.5 40.6 - Key chemicals (184.5) (181.1) 1.9 as % of total cost of
Slide 25: FY 2013: Total Remaining Opex
FY 2013: Total Remaining Opex Representing stable 31% of total Opex and fairly stable Change (EUR mn) 2013 20121 y-o-y (%) Total personnel expenses (337.0) (309.9) 8.7 as % of external sales 17.7 14.8 - Total other operating expenses (224.8) (234.0) (3.9) as % of external sales 11.8 11.2 - Total rem
Slide 26: Balance sheet as at December 31, 2013
Balance sheet as at December 31, 2013 3000 ∑ 2,439.9 EUR mn ∑ 2,632.7 EUR mn ∑ 2,439.9 EUR mn ∑ 2,632.7 EUR mn 2500 2000 1,130.7 1,089.5 (42.9%) (48.4%) (44.7%) (54.3%) 1500 (11.4%) 1000 875.1 (12.8%) (10.1%) 800.7 (33.2%) (32.8%) (10.6%) 500 176.6 (7.2%) 200.3 (7.6%) (11.8%) (18.3%) 233.2 (9.6%) 22
Slide 27: FY 2013: Cash flow
FY 2013: Cash flow Change (EUR mn) 2013 20121 y-o-y (%) Gross CF (before taxes and interest) 172.6 343.3 (49.7) Taxes and interest (78.1) (95.3) (18.1) Gross CF (after taxes and interest) 94.6 248.0 (61.9) Change in total working capital2 (13.6) (44.3) (69.3) CF from discontinued operations 1.3 5.7
Slide 28: Appendix – Equity story
Appendix — Equity story LENZING
Slide 29: Global fiber market at a glance
Global fiber market at a glance 2013 preliminary 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, Lenzi
Slide 30: Innovation drives specialties
Lenzing: 75 years of innovation Only producer of three fiber generations Market Position % of and Market Share Unique Selling Proposition Key End Markets Fiber Sales in 20131 20132 #1 ...the new age fiber Jeans, bed linen, Environmentally friendly process underwear Breathable, next to skin char
Slide 31: Lenzing: Global market leader in VSF
Lenzing: Global market leader in VSF1 (2013e) 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% Sate
Slide 32: Lenzing: Only global player
Lenzing: Only global player Sales volume by region1 – strong footprint in Asia RoW Americas 2% 7% Europe incl. Turkey 29% Asia 62% Source: Company information 1) fiber sales by volume in metric tons, FY 2013 32
Slide 33: 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 34: 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 35: Fiber strategy recalibrated
Fiber strategy recalibrated Focus on TENCEL® Strategic measures Strategic direction Priority focus area of Lenzing’s growth strategy Gain market share in applications/regions by Tencel Scale scaling up Textile and Nonwoven applications Exploit first mover advantage Expansion of selected high
Slide 36: Sales and marketing
Sales and marketing Customer concentration Textiles % of sales by customers Nonwoven % of sales by customers (2013) (2013) Source: LAG 36
Slide 37: Sales and marketing: Blue chip companies drive demand in specialties
Sales and marketing Blue chip companies 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 38: 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 39: Lenzing: Unique innovation model
Lenzing: Unique innovation model Strong R&D organization Organization structure Unique innovation model Close collaboration with sales & marketing to develop Breakthrough innovation applications for customers Focus: Leap technologies (e.g. Lenzing Modal®, TENCEL®) 15% of total 2013 projects De
Slide 40: Lenzing has cost advantages
Lenzing has cost advantages Through pulp integration and long-term pulp supply contract Pulp is the main input factor with 44% 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 41: Capacity expansion to 2014
Capacity expansion to 20141 ~ 1 mn tons What is there (or under construction) today 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 40 100
Slide 42: Fiber market environment: Stock-to-use-ratio
Fiber market environment Highest-stock-to-use-ratio ever at approx. 84% (2013/2014) World cotton production of 25.8 mn tons, consumption of 23.6 mn tons and ending stocks of 19.9 mn tons Massive increase of Chinese national cotton reserve of estimated 11.6 mmt1 tons (>58% of world inventories) U
Slide 43: Viscose spot prices China below cotton prices since March 2013
Viscose spot prices China below cotton prices since March 2013 VSF spot China and cotton price development (in cents/Ibs) Q1/2012 Q2/2012 Q3/2012 Q4/2012 Q1/2013 Q2/2013 Q3/2013 Q4/2013 1 1) Cotton Future calculated on the basis of the most liquid next future compared with the actual Cotton A Index
Slide 44: Cellulose Gap: A growth opportunity
Cellulose Gap: A growth opportunity 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 45: 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 Structural limitations in cotton production: within historical narrow band (1960-2013) effects from yield expansion leveling out Million hectares Mil
Slide 46: Cellulose Gap: A long-term growth opportunity
Cellulose Gap: A long-term growth opportunity 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
Slide 47: 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 48: Lenzing share information
Lenzing share information Oberbank AG ISIN LNZ / AT0000644505 5.0% Bloomberg LNZ:AV Reuters LNZNF.PK ATX Prime, ATX Global Players, Indices VÖNIX Sustainability Index Free float Number of shares 26,550,000 mn 27.4% B&C Share price December 30, 2013 EUR 41,63 Privatstiftung Market capitalization 1,10
Slide 49: Back-up
Back-up
Slide 50: Where our fibers end up
Where our fibers end up Ladies wear – close to skin Cowl neck tee Lightly padded bra top maxi dress Sequined knit cardigan USD 39.50 USD 79.50 USD 88.00 TENCEL® / Spandex Ecosil® Lenzing Modal® / Spandex 58% Viscose / 42% TENCEL® 50
Slide 51: 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 Denim shirt Nixon USD 98.00 USD 240.00 EUR 39.95 100% TENCEL® Lenzing Modal® / TENCEL® / 100% TENCEL® Cotton / Elastane 51
Slide 52: 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® 52
Slide 53: Nonwoven applications
Nonwoven applications Wipes Sustainable convenience Medical Naturally pure Hygiene Safety in sensitive areas Technical Leading fiber innovation 53
Slide 54: 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) 54
Slide 55: 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 20141 Plant location (metric tons) (metric tons) (metric tons) (metric tons) Lenzing / Austria 252,000 252,000 268,000 339,000 Lenzing Vis
Slide 56: Capacity by site 2011 - 2013
Capacity by site 2011 - 2013 Capacity Capacity Capacity Capacity Capacity Capacity per March 31, per June 30, per September per December (metric tons) YE 2011 YE 2012 2013 2013 30, 2013 31, 2013 Lenzing 252,000 252,000 264,000 264,000 264,000 268,000 Indonesia 240,000 320,000 320,000 320,000 320,000
Slide 57: 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 320,000 320,000 320,000 325,000 Nanjing 178,000 178,000 178,000 178,000 India - - - - Heiligenkr
Slide 58: Lenzing Viscose textile prices compared to cotton price development
Lenzing Viscose® textile prices compared to cotton price development VSF-price lower than cotton price after end of reporting period EUR/kg 19.1% 8.3% 3.5% 5.4% -33.0% 17.0% 17.6% 28.7% -20.6% 16.4% 5.3% -24.6% -2.17% 21.5% 16.8% 15.2% 15.1% -4.5% -3.3% -7.0% 1) historically, standard viscose fibers
Slide 59: Viscose fiber industry cost curve
Viscose fiber industry cost curve Lenzing placed in an excellent position* Index 100 = Lenzing** Other Chinese competitors 140 135 130 125 120 Other Asian competitors 115 Chinese competitor No. 2 110 105 Lenzing** 100 Chinese competitor No. 1 95 90 * Based on publicly available information (Sales mi
Slide 60: DWP industry – cash cost curve
DWP industry – cash cost curve* A lot of new capacity added on the right side of the curve Cost Competitiveness1 USD/ton 1200 1000 Canada III 800 China Scandinavia Canada II 600 Paskov Canada I South Africa Lenzing Brazil 400 Sumatra 200 0 * Cash cost (excl. freight, interest, taxes) 1) Incl. projec
Slide 61: 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