The rayon factory in the town of Lenzing, situated in Upper Austria between Salzburg and Linz, was built in 1938 as part of the Nazi authorities’ self-sufficiency programme; a number of plants were built in Southern Germany and Austria in order to replace cotton imports. The rayon factory was adjacent to an existing pulp mill, which became the main source of woodpulp; the mill was bought by Lenzing in 1969. The integration of pulp and rayon production gave Lenzing a cost advantage over rayon producers such as Courtaulds which obtained their wood pulp from distant suppliers.
After the war the company was controlled by two partially state-owned banks, Landerbank and Creditanstalt. Subsequent mergers in the Austrian banking industry led to the creation of Bank Austria, which became the principal shareholder. Lenzing was listed on the Vienna Stock Exchange in 1985 but only about 10 per cent of the shares were offered to outside investors. Lenzing was expected to make profits and to pay dividends but it was not a shareholder-driven company. As the principal employer in its region, it had a social responsibility which influenced its strategic decisions, not least its determination to make the best possible use of the site. A drawback of the site was the lack of water and Lenzing had to invest in costly techniques to
reduce its water consumption while also meeting the environmental rules laid down by the regional government. The result was a cleaner manufacturing process, giving the company the confidence to continue improving the viscose process at a time when other producers were cutting back.
Lenzing also developed speciality cellulosic fibres, of which the most important was modal; launched in 1964, this was a “high wet modulus” fibre, stronger than rayon and suitable for hightenacity applications. Lenzing took a cautious approach to synthetic fibres. It made a brief foray into acrylics and later into polyester in partnership with Hoechst, but was never a major producer. Because of its limited involvement in synthetics, Lenzing was less affected than most other European fibre producers by the over-capacity crisis of the mid-1970s. At the end of that decade it made what turned out to be an important decision to participate in an Indonesian viscose plant with the Indian Ashok Birla group. The Indians had asked for technical assistance and in exchange Lenzing secured a minority interest in the new company. This plant, which started production in 1982, gave the Austrian company a foothold in a region where demand for man-made fibres was growing fast, and paved the way for subsequent investments in Asia; Lenzing later acquired majority control of the Indonesian company.
Like Courtaulds, Lenzing was aware of possible alternatives to the viscose process and it initiated research into solvent spinning during the 1980s. A pilot plant was built in 1990 and five years later Lenzing decided to manufacture its own lyocell fibre, a direct competitor to Tencel; production began in 1997. In 2004 Lenzing bought the ex-Courtaulds Tencel business from CVC.This added the two Tencel plants which Courtaulds had built, in the UK and the US, to Lenzing’s existing plant in Austria. All three factories were subsequently expanded, and in 2010 Lenzing announced plans to build a new Tencel plant in Austria. The Tencel takeover was one of a series of moves which gave the Austrian company a more international dimension. The Indonesian plant was enlarged and in 2005 the decision was taken to build a viscose plant at Nanjing, China; another Asian viscose plant, in India, is expected to come on stream in 2013. Lenzing is now one of the two leading producers of cellulosic fibres, the other being the Aditya Birla group in India. Nearly 60 per cent of its sales come from Asia, but the heart of the company remains the original site in Lenzing; some 3,000 out of the company’s total labour force of 6,600 are employed there.
Although Lenzing has diversified on a small scale outside fibres, principally in plastics, its strategy since the war has been based on the belief that, with continuous investment in new technology and new product development, cellulosic fibres will remain a good business to be in. This consistency has been reinforced by the company’s ownership structure. In 2000 Bank Austria sold its shares to an Austrian foundation, the B & C Private Foundation, whose mission was to act as a long-term core investor in Lenzing, with a commitment to maintain the company’s role in the Austrian economy. In 2011, as part of a capital reconstruction which involved the issue of new shares, B & C reduced its share of the voting shares to 68 per cent and the free float was increased to about 33 per cent. Part of the motivation was to make Lenzing shares more accessible to international investors.
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