Tencel Sales Update (2013)

Another Extract from the 2013 Lenzing Annual Report...

Sales of TENCEL® fibers for textile applications were at a high level in 2013 against the backdrop of an attractive price premium compared to viscose fibers. Lenzing succeeded in opening up new markets and new customer segments, which was also important in the light of the planned coming on stream of the new TENCEL® production facility in Lenzing in the middle of

2014. Despite the production interruption at the TENCEL® factory in Heiligenkreuz, shipment volumes still surpassed the comparable prior-year figures. The products TENCEL® LF and the new, extremely high-quality TENCEL® fibers Micro-LF and TENCEL® Micro were well received by Asian customers. Similarly, the use of TENCEL® fibers in the bed linen segment was further expanded.  From a regional perspective, Asia remained the strongest sales market for the textile applications of both Lenzing Modal® and TENCEL®.

The priority for TENCEL® was on expanding the areas of application of this versatile fiber. In 2013, TENCEL® fibers were used for the first time as upholstery fabrics for sofas. In addition to the aesthetically pleasing advantages of intense colors and a velvety sheen, sofas with a fabric cover of TENCEL® boast a lower electrostatic charging compared to the conventional

polyester covers. Moreover, the removable fabric covers can be laundered at home, and thus are easier to keep hygienically clean. Furthermore, Lenzing intensively worked on opening up new fields of application for TENCEL® in the construction business. In addition to initial market success with TENCEL® powder in pasty plasters, one focal point in 2013 was on developing TENCEL® additives as a stabilizing factor for building materials, particularly concrete.

Initial application tests for the first hydrophobic cellulose fiber TENCEL® Biosoft were carried out together with customers in the 2013 financial year.

In 2013 Lenzing presented “EUROCEL ”, a new fiber blend consisting of 50% high-quality Lenzing viscose fibers manufactured in Europe in an environmentally compatible manner along with 50% TENCEL®. EUROCEL is a new type of high-end nonwovens quality to be selectively used for hygienic applications (e.g. baby care) as well as in the household and industrial

sectors. The underlying concept of supplying fibers verifiably manufactured in Europe for European products appeals to customers aiming to differentiate themselves from competitors on the basis of regional origin and sustainability.

Tencel Expansion Update (2013)

An extract from the Lenzing 2013 Annual Report...

The global challenges facing the business world and the environment are formidable, and solutions are urgently needed. In the world of man-made cellulose fibers, TENCEL® is the predominant product of the 21st century in every respect, the true New Age fiber. Its natural raw material, the modern and environmentally compatible production technology and the enormous performance potential of the fiber itself make it unequalled in modern times. Only Lenzing successfully manages the industrial-scale production of TENCEL®, in which more than 99% of the solvent used is recycled in the closed-loop process. This means the ecological footprint of the fiber is unparalleled.Construction of the first TENCEL® jumbo production facility at the Lenzing site continued on schedule in 2013. The company was able to make up for weather-related delays in the first quarter. Almost all the technical equipment had been installed by the end of 2013. All piping and cabling work were well on track, so that the first tests of individual parts of the plant were already initiated. Lenzing plans to keep to its timetable, with the first TENCEL® fibers likely to leave the production lines of the new plant sometime around the middle of 2014. After the initial start-up phase, the new plant will boast a nominal annual capacity of 67,000 tons of TENCEL ® fibers. Investment costs are expected to total EUR 150 mn due to adjustments made to the original plans in connection with improved plant safety and an increased production volume.

The new TENCEL® facility reflects next generation TENCEL® technologies.

Tencel News: 600 jobs to go at Lenzing Austria (2013)

In the light of the ongoing difficult market situation, Lenzing has decided to proactively implement a massive, far-reaching cost optimization program. The initiative will enable cost savings of EUR 120 mn p.a. until 2015 as a means of safeguarding Lenzing’s cost leadership on the global market for man-made cellulose fibers. In this way Lenzing is responding to the current difficult market environment, which has led to increasingly fierce price competition.

“The difficult market situation will continue in 2014 and possibly well into 2015. We will resolutely counteract this unfavorable situation and adjust our cost structures to the new circumstances as quickly as possible”, says Peter Untersperger, Chief Executive Officer of Lenzing AG. “Our aim must not only be to expand our quality leadership and innovative strength on a sustainable basis, but also to regain the cost leadership in our industry. We continue to see attractive growth potential for our products, but we are already preparing ourselves today as optimally as possible for the increasingly tough competition. Cost discipline and cash generation will be our targets over the coming years.”

In particular, the sales and marketing organization will be strengthened as part of the current reorganization project. The entire organization will sharpen its focus to more strongly orient its activities to the important fiber markets of Asia and Turkey. Sales efforts in China especially will be expanded on the basis of additional technical experts and market development capabilities.

Lenzing will continue to invest, particularly in developing TENCEL® for high quality textile applications and sustainable nonwoven applications. Demand for Lenzing Modal® remains strong.

The expanded cost optimization program “excelLENZ 2.0” is a further, comprehensive step to sustainably safeguard earnings and future investment projects. It complements the initial “excelLENZ” cost-saving program which has been underway since the beginning of the year as well as the organizational restructuring of the Group. Improvement potential for all cost modules encompassing all operating units has been defined over the past weeks. The measures to be implemented on this basis will not only result in savings in material costs but also massive reductions in operating expenses and overhead, extensive increases in operating efficiency as well as a reduction in the total number of employees. All global sites will be affected. The staff at the Group’s largest production site in Lenzing, Upper Austria will likely be downsized by up to 15% from the current level of about 2,600 employees (including retiring employees and unfilled vacancies). On balance, a total of up to 600 jobs will be cut or vacant positions not filled.

The individual measures will be quickly carried out in the coming months, and thus already partially impact earnings in 2014. Lenzing expects one-off expenses related to the implementation of the “excelLENZ 2.0” drive in the mid double-digit euro range.

Source: Lenzing PR