Tencel in Lenzing Annual Reports 2010 - Part 1

This report has more on Tencel and Lenzing's enthusiasm for the Courtaulds concept of the Cellulose Gap than any previous report and will be split over 2 posts...

... market experts expect that cotton will not be able to sufficiently fulfill demand for high quality fibers boasting high wearing comfort despite the extensive use of genetically modified cotton plants. This shortage will lead to a so called “cellulose gap” which cannot be fi lled on the basis of the anticipated growth of production volumes for man-made cellulose fi bers at the present time. Additional factors in Lenzing’s favor are the outstanding technical properties of Lenzing fibers as well as the fact that the company is the only global supplier which can offer all three generations of man-made cellulose fibers, i.e. Lenzing Viscose., Lenzing Modal. and TENCEL.

Lenzing “Full Win”

On the basis of these fundamental considerations, Lenzing redefined its strategic objectives leading up to the year 2014 as follows: 

More than one million tons of Lenzing fibers are to be produced and marketed annually, of which more than one-third are specialty fibers  (Lenzing Modal., TENCEL.), enabling an average double-digit percentage sales growth and a simultaneous margin improvement, with about 700,000 tons of the required pulp supply derived from its own production capabilities.

Lenzing aims to achieve these targets by implementing the biggest expansion program in its corporate history, with expansion investments planned at almost all of its production facilities across the globe.

The positive market development in the second half of 2009 continued in 2010 as well. Demand for Lenzing fibers on the part of the textile and nonwovens industry could only be partially satisfied despite the expansion of production capacities in 2010.

The reason for this development was the long-term market trend towards the increased use of Lenzing Viscose., Lenzing Modal and TENCEL. fibers as described in the previous section of this report. In addition, the overall economic recovery combined with a broad-based upturn in private consumption also contributed to growth. In fact, the markets in Asia tended to overheat as a result already in the first half of 2010. Ultimately cotton prices exploded as of the third quarter 2010 due to the perceived danger of a physical shortage as a consequence of flood catastrophes in Pakistan and India. This

prematurely ended the expected normalization of the price situation in the second half of the year.

The TENCEL production facility in Heiligenkreuz, Austria also raised total capacity by 10,000 tons to about 60,000tons as of the 2011 business year thanks to a corresponding investment program. The TENCEL factory in Grimsby (Great Britain) carried out refurbishment investments, allowing for a considerable increase in production capacities for the TENCEL specialty fiber A-100 although total capacity remained the same.