EANS-Adhoc: Lenzing AG / Lenzing Group: Good Half-Year Results in a Difficult Market Environment

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quarterly report

22.08.2012

-New record fiber shipment volume in Q2
-Earnings at the level of the 2010 financial year
-Guidance adjusted to current market expectations

The Lenzing Group performed very well in the first half of 2012
against the backdrop of a difficult market environment. The ambitious
business targets were fully achieved. However, as expected, the
record levels generated in the first half of 2011 were not reached
again. Due to the changed market expectation the guidance for the
full year 2012 has been adapted.

Consolidated sales at EUR 1,061.8 mn in the first half of 2012
remained stable for the most part (H1 2011: EUR 1,076.2 mn, a drop of
1.3%). In spite of lower average fiber selling prices, Lenzing
succeeded in maintaining a constant level of sales due to the
increased fiber shipment volumes made possible by the recent capacity
expansion measures.

Consolidated EBITDA (earnings before interest, tax, depreciation and
amortization) in the first half of 2012 totaled EUR 193.6 mn, down
from the all-time high of EUR 247.8 mn in the first six months of
2011. Accordingly, the EBITDA margin continued to be at an attractive
level of 18.2% (H1 2011: 23.0%). EBIT (earnings before interest and
tax) in the first half-year 2012 also amounted to EUR 141.1 mn, a
drop of 29.2% from the EBIT of EUR 199.2 mn generated in the first
six months of 2011. This corresponded to an EBIT margin of 13.3% (H1
2011: 18.5%). The slightly more pronounced decrease in EBIT in
percentage terms in comparison to EBITDA is due to the increased
amortization of intangible assets and depreciation of property, plant
and equipment within the context of the enhanced investment activity.
Thus the EBITDA and EBIT margins in the first half of 2012 were at
about the same level as in the 2010 financial year, a year featuring
a top performance in a comparison of the last ten years.

"We managed to successfully counteract the weak market conditions
throughout the entire first half of 2012. Demand for Lenzing fibers
continued unabatedly and all our fiber and pulp production plants
were operating at full capacity. We even managed to achieve a new
record in the first half-year with a fiber shipment volume of 390,000
tons", says Peter Untersperger, Chief Executive Officer of Lenzing.

In any case, Lenzing remains firmly committed to its long-term
objectives, and will invest approximately EUR 1.6 bn by 2015 in order
to expand fiber production capacity to about 1.2 mn tons per year.
"We think in the long-term and anticyclically," Lenzing CEO Peter
Untersperger states. Amongst other projects, construction work began
in June 2012 on the first TENCEL® production facility at the Lenzing
site within the framework of this expansion program. The new plant
also represents the world's largest TENCEL® production line to date.

Investments in intangible assets and property, plant and equipment
totaled EUR 130.0 mn in the first half of 2012, compared to EUR 82.1
mn in the prior-year period. The investment focus was on construction
of the fifth fiber production line at the Indonesian subsidiary PT.
South Pacific Viscose (SPV), the expansion of TENCEL® production
capacities in the USA, the remodeling and expansion of the Paskov
pulp plant and as well as infrastructure investments at the Lenzing
site.

Adjusted equity1) climbed by 4.6% to EUR 1,096.6 mn (December 31,
2011: EUR 1,048.1 mn). Net financial debt amounted to EUR 268.0 mn in
the middle of 2012 (December 31, 2011: EUR 159.1 mn). In particular,
the distribution of the dividend to shareholders of Lenzing AG (EUR
66.4 mn) and a tax prepayment (EUR 42.5 mn) in Austria were
responsible for the higher net financial debt.

"We were able to finance the investments in the first half-year on
our own. With a net gearing below 25% and flexibility on the basis of
the available liquidity of EUR 600 mn, we are in a position of
carrying out our investments as planned, even under difficult market
conditions", says Lenzing's Chief Financial Officer Thomas G. Winkler
in commenting on the current half-year results.

Positive development of all segments In the core fiber segment, the
Business Unit Textile Fibers registered an ongoing strong demand in
all markets in the light of the expected lower selling prices for
fibers. Textile demand for TENCEL® fibers developed particularly
gratifyingly, for example for soft denim applications, sportswear and
home textiles.

In the first half of 2012, the Business Unit Nonwoven Fibers also
succeeded in further increasing sales volumes from the prior-year
level, although Lenzing nonwovens were not immune to the downward
price trend for viscose fibers. Whereas newly-installed production
capacities in Europe for wipes ended up leading to overcapacity, the
market in the USA showed itself to be stable. The Asian nonwovens
sector, particularly in China, continues to clearly be on a growth
path.

The average fiber selling price of the Lenzing Group bottomed out at
EUR 2.03 per kilogram in the first half of 2012, which represents a
decline of about 12% from the very strong first half of 2011 with
all-time high prices in the entire fiber industry. However, compared
to the fourth quarter of 2011, the average fiber selling price in the
second quarter only dropped by 5%, and remained unchanged compared to
the first quarter of 2012.

"The first half of 2012 demonstrated that Lenzing fiber prices
develop much less cyclically than cotton prices and spot market
prices for viscose fibers produced by our competitors", explains
Friedrich Weninger, Member of the Management Board and Chief
Operating Officer responsible for the fiber business. "This is the
result of our consistent quality orientation, the high share of
specialty fibers and the above-average level of service provided by
Lenzing", he adds.

The Segments Plastics Products and Engineering developed solidly. The
Segment Plastics Products profited from strong demand on the part of
the construction industry, for example high-tech multi-layer
laminates for the cladding of insulated pipelines and ventilation
ducts as well as laminated films for insulating materials. In the
Segment Engineering the order intake was at a high level throughout
the entire first half of the year.

Outlook New guidance for EBITDA and EBIT A continuation of the
consolidation phase in the global fiber industry is expected in the
second half of 2012. The textile pipeline is well filled due to the
limited dynamics provided by private consumption in the
industrialized countries. As a consequence, the quick reduction of
cotton inventories which are currently at a disproportionately high
level will likely take longer than expected.

Hopes of a market upturn as of the middle of the year have not been
fulfilled. We expect global fiber prices to decline slightly in the
third quarter of 2012. Accordingly, the average selling prices for
Lenzing fibers should be lower in the third quarter than in the
second quarter, and end up ranging between EUR 1.95 and EUR 2.00 per
kilogram.

The Lenzing Group has correspondingly adapted its outlook for the
entire year 2012 in the light of the fact that business is no longer
expected to develop in a mirror-inverted manner compared to 2012.
From today's perspective consolidated sales will likely be at
approximately the prior-year level and amount to EUR 2.1 to 2.15 bn.
Fiber shipment volumes are expected to reach about 810,000 tons,
corresponding to a considerable rise of 14%. On the basis of the
early completion of the new fifth production line at its Indonesian
subsidiary SPV, Lenzing is confident of already achieving initial
sales revenue from this new production facility in the fourth quarter
of 2012. Additional fiber volumes will also be derived from the plant
optimization program and expansion of the TENCEL® site in
Mobile/Alabama (USA).

As a consequence of this ongoing dynamic development, Lenzing now
forecasts a new EBITDA range of between EUR 350 mn and EUR 400 mn
(previous guidance: EUR 400 - 480 mn). In addition, Lenzing expects
EBIT in 2012 to be within a range of EUR 240 - 290 mn (previous
guidance: EUR 285 - 365 mn). Capital expenditure in 2012 will likely
total approximately EUR 325 mn.

The overall global economic development could have both positive and
negative effects on the company's business in the second half of the
year. Furthermore, expectations relating to the upcoming cotton
harvest in the upcoming 2012/13 cotton crop year comprise an
important but still unclear factor impacting further market
development. The long-term trend towards man-made cellulose fibers
remains intact. This has been underlined by the nascent rally in
agricultural raw material prices since June 2012 as well as the
recent stable cotton price level which is significantly higher than
in past years despite the temporary surplus in the cotton supply. The
Lenzing Group is very well prepared to meet these challenges. For
this reason, Lenzing will remain committed to its growth path for the
coming years.

Key Group indicators (IFRS)
in EUR mn 1-6/2012 1-6/2011
Consolidated sales 1.061.8 1.076.2
EBITDA 193.6 247.8
Earnings before interest and tax (EBIT) 141.1 199.2
Earnings before tax and minority interest (EBT) 138.2 187.7
Profit for the period 100.1 145.3
EBITDA margin in % 18.2 23.0
EBIT margin in % 13.3 18.5
Gross cash flow 114.2 218.7
Investments in intangible assets and property,
plant and equipment 130.0 82.1

30.06.2012 31.12.2011
Adjusted equity ratio* in % 46.7 44.8
Employees at the end of the period 6,724 6,593

*Equity incl. government grants less prop. deferred taxes

Segment reporting in EUR mn 1-6/2012 1-6/2011
Segment Fibers
Sales 955.9 967.9
EBITDA 182.9 235.8
Earnings before interest and tax (EBIT) 132.6 189.9
Segment Plastics Products
Sales 86.9 92.2
EBITDA 7.8 8.7
Earnings before interest and tax (EBIT) 4.9 5.3
Segment Engineering
Sales 58.3 53.7
EBITDA 4.1 4.9
Earnings before interest and tax (EBIT) 3.3 4.2

1) Incl. investment grants, less prop. deferred taxes

Further inquiry note:
Lenzing AG
Mag. Angelika Guldt
Tel.: +43 (0) 7672-701-2713
Fax: +43 (0) 7672-918-2713
mailto:a.guldt@lenzing.com

end of announcement euro adhoc
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issuer: Lenzing AG

A-A-4860 Lenzing
phone: +43 7672-701-0
FAX: +43 7672-96301
mail: a.guldt@lenzing.com
WWW: http://www.lenzing.com
sector: Chemicals
ISIN: AT0000644505
indexes: WBI, ATX, Prime Market
stockmarkets: free trade: Berlin, official market: Wien
language: English