The Analysts View of Tencel - Part 2: SBC Warburg (1996)

This report dated June 96, which first appeared in the "engine room" in January 1997, gives information on the planned expansions, their capital cost, the costs of some raw materials and other costs, and the assumed Tencel selling prices.  The high marketing cost of developing the fashion end uses in the early years is notable.  Three pages are reproduced below:

The Analysts View of Tencel - Part 1: BZW (1997)

After the rather gloomy prognosis of our Hotel Byblos Worldwide Fibres Conference, here's a more optimistic note, a few months later, from a key opinion former, Barclays de Zoete Wedd.

Points to note:

• Growth in Tencel sales was the major factor driving improvement.
• By 2000, they expect Tencel to be generating sales of £220m and profits of £50m

Courtaulds Strategy and the Role of Fibres: Part 3 (1997)

From 1997 WORLDWIDE FIBRES CONFERENCE - Hotel Byblos, Malaga, 30/1/1997

Points to note:

• Courtaulds made a mistake in staying out of Asia.
• Tencel can't grow fast enough to make a difference.
• The old fibres have to recover and perform reasonably - or else!

So we have commercial challenges and we have technical challenges. The capital cost of Tencel is too high. We have a geographic challenge coming upon us. We have to go to Asia. We can't leave the next generation of managers in Courtaulds in the same position that our predecessors left us, which was to avoid Asia back in the  1960s. Even then it was evident that textiles were going to be made (there). We can't do that to the next generation. So we have to be in Asia and handle all the cultural challenges that go with it.

Fibres: Tencel has to go from zero turnover in 1992 to €400 million in 2000, almost doubling every two years. At the same time it has to make 25 per cent return on sales. lf it doesn't make that we won't pay back the €600 million capital we will have invested. We can't depend on Tencel to provide the growth that will drive Courtaulds over the next five years. No matter how fast we develop it, it won't make enough impact on the top line, never mind the bottom line, to drive Courtaulds forward in terms of shareholder value.

Speciality Fibres: There are two small businesses. One superb, growing

Courtaulds Strategy and the Role of Fibres: Part 2 (1997)

From 1997 WORLDWIDE FIBRES CONFERENCE - Hotel Byblos, Malaga, 30/1/1997

Points to note:

• £300m spent on Tencel and another £300m planned.
• Tencel is 1/10th size of the rest of fibres businesses so the other fibres have to generate the cash.
• Tencel challenges are at least as great as those of viscose but "be patient: the returns are there".

The easiest way to make the company grow, both in sales and margins, is to
improve the quality of our performance, the quality of products and the service we offer our customers. So we have initiated a programme of work using Gemini Consultants to try to improve the quality of our businesses. I also set a target that in five years' time we can write on the front of our Accounts "Courtaulds is a quality business". lt is about the quality of the product we offer and the service we provide, and how we employ people and treat them. If we get that right we will get the right financial results.

Viscose, acrylic and acetate are our oldest businesses. They have been around from 90-odd years, to 70 to 40 years. We have to be realistic about what can be done in these three businesses. They are old technologies and they are in the wrong geographic area, primarily, to supply the textile industry.

We need for Fibres to create a different approach to selling. We need to step out of the box and develop a new way of doing things. If we get that the title of "mature businesses' won't apply.

Akzo sells Tencel with Acordis to CVC (1999)

Akzo Nobel has welcomed a bid from UK venture capitalists CVC Capital Partners for its beleaguered fibres business Acordis.  CVC, backed by Acordis' management, has offered E825m ($889m) to acquire a majority stake in the fibres company. Akzo has the option to buy 20%.  Acordis chief executive officer Folkert Blaisse said: 'We back CVC's offer 100%. We trust that the transaction will be completed fast, effectively and efficiently.'

Akzo Nobel chairman Cees van Lede said: 'CVC's proposal fits our stated strategy of establishing Acordis as an independent company with a solid foundation.'

Akzo had previously sought to float or demerge Acordis, although Akzo was working on restructuring the business further before this went ahead (ECN 17 May).

Industry watchers said the price for the business was fair. Akzo can now concentrate on its other, more profitable businesses, while CVC could eventually resell Acordis or float it on the Dutch stock markets.  Mark Sullivan of Chase Manhattan bank, which advised CVC on the deal, said seeing the fibres market cycle through could be tough, but that 'CVC has taken on the challenge'. For Akzo, he said the deal was a 'clean strategic solution'.

Under CVC, Acordis will continue its strategy to build its portfolio of speciality fibres for niche markets to balance slim profits from the cyclical businesses that are undergoing restructuring.

Acordis and Austria's Lenzing have confirmed that the CVC bid does not affect their possible US viscose rayon joint venture, and that discussions continue.

Acordis incorporates the fibres businesses acquired by Akzo from Courtaulds, which have been a drain on Akzo's resources ever since.

16 August 1999 00:00 [Source: ICB]