- Q2 20A revenue -35% y/y (-26% q/q) and EBITDA -70% y/y (-61% q/q): Margins collapse to 7.9% as textile fibre revenue declines by 58% y/y
(-50% q/q), which shadowed the increase in non-woven fibres revenue of +8% y/y (+12% q/q). - Central European wood market is still marked by strong climatic influences: Large quantities of damaged and calamity wood had a negative effect on the volume and price structure on the market again in H1 20A. COVID-19 intensified this trend further. Significant oversupply consequently coincided with weaker industry demand, especially for spruce wood. This also led to considerable oversupply and declining prices for hardwood.
- Customers and partners along the textile value chain remain under pressure: In the US and major European markets, revenues in brick-and-mortar stores dropped by more than 80%. Since June 2020, a textile retail sales recovery is under way, but with regional differences for price and demand momentum.
- Pulp & Wood division created in June 2020: New leadership in place to focus on increasing their own supply of DWP. The segment supplies 67% of the Groups’ DWP needs currently. In H1 20A, their mills produced 300kt of DWP.
- Strategically still fully on track (key projects remain on time and within budget): DWP 500ktpa in Brazil (CapEx of USD 1.38bn and cash cost of USD 300/t, with start-up in H1 22e) with financing in Brazil now secured; and the worlds’ largest (100kt) lyocell plant in Thailand (EUR 400m with ramp-up expected by the end of FY 21e).
- Current DWP prices are unsustainable in their view: Assessing the cost structure of Chinese DWP producers, cost inflation from HW chips imports should help drive price inflation.
- VSF conversion margins improved: DWP contributed some of this; however, it was also supported by closure of poor performing assets in China leaving more efficient producers left. Additionally, lower energy and caustic prices helped margins eased.
- VSF inventory overhang persists: 36 days at a fibre level vs. the 5-yr average of 16 days. Efforts to generate cash saw VSF stocks off loaded below VC. This behaviour is likely to stop but has added pressure to prices, which they deem as unsustainable.
- VSF capacity outlook: Lenzing expects further Lyocell announcements in China. For commodity viscose, new capacity is limited and do not expect new additions for years.
- Lenzing does not expect a fast recovery: Q3 and Q4 revenue will be better than Q2 as they are confident that the worst is behind them. However, VSF commodity prices to remain low for months to come.
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