EANS-Adhoc: Lenzing AG / Sales and Earnings Decline in 2013 - Countermeasures Well Underway

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annual result/annual report
21.03.2014

-Ongoing good volume demand, new record sales volumes -Unsatisfactory
earnings situation due to very weak fiber selling prices -Initial
effects of cost optimization measures already have a positive impact
in H1 2014

The business development of the Lenzing Group in 2013 was
characterized by the continuation of good volume demand, new record
shipment volumes and full capacity utilization against the backdrop
of extremely weak fiber selling prices. Lenzing has moved to
counteract this situation on the basis of a comprehensive cost
optimization program, a marketing offensive for specialty fibers,
adjustments made to the business strategy in order to minimize risk
and an optimized organizational structure in the Group.

Consolidated sales[1]in the 2013 financial year fell by 8.7% from EUR
2.09 bn to EUR 1.91 bn, which can be attributed to the drop in fiber
selling prices, which declined by 13% year-on-year to EUR 1.70 per
kilogram, as well as the divestment of the Business Unit Plastics.
Moreover, there was a loss of external sales totaling EUR 61.8 mn as
a consequence of the complete conversion of the Paskov pulp plant in
2013 from paper to dissolving pulp which is used within the Lenzing
Group.

Consolidated earnings before interest, taxes, depreciation on
property, plant and equipment and amortization (EBITDA)[2]totaled EUR
225.4 mn, down from the adjusted figure of EUR 352.4 mn in 2012[3])
but in line with the most recently published guidance for the year.
The EBITDA margin amounted to 11.8%, compared to the adjusted level
of 16.9% in the previous year. Consolidated earnings before interest
and taxes (EBIT)[4]amounted to EUR 86.4 mn in the 2013 financial
year, compared to the prior-year level of EUR 231.5 mn (adjusted).
The EBIT margin was 4.5%, down from the adjusted figure of 11.1% in
2012.

Comprehensive countermeasures "We assume that the difficult market
environment will continue in 2014 and perhaps far into the year 2015.
For this reason, we have implemented timely and comprehensive
countermeasures", explains Peter Untersperger, Chief Executive
Officer of Lenzing. "We are massively reducing costs at the same time
adding impetus to the marketplace by promoting our specialty fibers
TENCEL® and Lenzing Modal®. Our market and quality offensive is being
supported since the beginning of the year by the newly created
functional Group organization. At the same time, our growth strategy
is oriented to the current market situation on the basis of a
consistent adjustment of risk", CEO Untersperger adds. "The
uninterrupted strong volume demand for Lenzing fibers shows that
against the backdrop of a difficult business environment we are
offering the right products in a sustainably attractive growth
market. We are working intensively and resolutely to optimize our
competitive strengths".

Resolute implementation of cost optimization program The first cost
optimization program entitled excelLENZ 1.0 was already launched in
the beginning of 2013, generating savings of approximately EUR 40 mn.
This was followed by excelLENZ 2.0, which was initiated in November
2013 and is now being resolutely implemented. Cost savings from all
cost modules and all sites operated by the Group of EUR 120 mn
starting in the 2015/16 financial years have been identified. Cost
savings generated by this program of about EUR 60 mn have been
budgeted for the 2014 financial year. Two-thirds of the cost savings
will be derived from cutting material costs, overhead, massively
reducing operating expenses and increasing operating efficiency.
About one-third of the cost reductions will be related to lower
personnel expenditures. In order to cushion these measures, a
comprehensive redundancy program was developed at the end of 2013,
for which provisions of EUR 19.7 mn were allocated in the
consolidated financial statements for 2013.

In the light of current market conditions, the revised Lenzing
strategy focuses on risk optimization and further promoting highly
profitable specialty fibers. Construction of the new TENCEL®
production plant at the Lenzing site is the only capacity expansion
project being implemented by the Lenzing Group at present. No further
viscose fiber growth investments will be carried out for the time
being. The construction of a viscose fiber facility in India was
postponed.

Sales increases for specialty fibers The focus is now on expanding
the share of specialty fibers in relation to total sales volumes. "In
2013 ourspecialty fibers Lenzing Modal® and TENCEL® achieved an
unchanged and attractive price premium of 50%vis-à-visstandard
viscose fibers against the backdrop of good volume demand",
saysFriedrich Weninger, Member of the Management Board with
responsibility for fiber production. "Moreover, we have opened up new
sales markets and regions for TENCEL® in preparation for the start-up
of production at the new TENCEL® plant in Lenzing, and have further
expanded our innovation pipeline", Mr. Weninger adds. However,
Lenzing was only able to partially counteract the weak price
development for standard viscose fibers by increasing total sales
volumes. On balance, fiber sales volumes reached a new record level
of about 890,000 tons in 2013, a rise of 10% from the comparable
level of 810,000 tons in 2012.

Ongoing high equity ratio, reduced level of investments The balance
sheet total of the Lenzing Group fell considerably in the past
financial year, from EUR 2.63 bn to EUR 2.44 bn as at the end of
2013. This can be mainly attributed to the planned reduction in cash
and cash equivalents in connection with the completion of current
investment projects. The adjusted equity ratio rose from 43.8% to
45.5% of the balance sheet total. Net financial debt of the Lenzing
Group climbed to EUR 504.7 mn at the end of 2013 (2012: EUR 346.3
mn).

Investments in property, plant and equipment, intangible assets and
non- controlling interests (cash-CAPEX)[5]were significantly cut back
in the 2013 financial year to EUR 252.2 mn from the prior-year figure
of EUR 346.2 mn. The focal point of the investment activity carried
out by the Lenzing Group was construction of the new TENCEL®
production plant, urgently needed infrastructure investments at the
Lenzing site and completion of the conversion project at the Paskov
pulp plant.

Outlook 2014 Hardly any change was perceptible in the difficult
business environment impacting the business operations of the Lenzing
Group in the first weeks of 2014 compared to the fourth quarter of
2013. No major improvement is in sight with respect to the price
situation on the global fiber market. The reasons are the
historically high cotton inventories, high cotton production and
surplus capacities in China for manufacturing man-made cellulose
fibers.

Volume demand for fibers remained strong at the turn of the year
2013/14.

In 2014 the Lenzing Group is counteracting the unfavorable market
situation by speedily implementing the cost reduction and efficiency
enhancement program excelLENZ 2.0. All required provisions for the
non-recurring costs relating to excelLENZ 2.0 were made in the
consolidated financial statements for the 2013 financial year. This
program is expected to already positively affect earnings in 2014 to
the amount of more than EUR 60 mn.

This program together with the new Group organizational structure
which took effect at the beginning of 2014 are major contributions
towards restoring the global competitiveness of the Lenzing Group.

Key Group indicators

(IFRS) in EUR mn 1-12/2013
1-12/2012(1)
Consolidated sales 1,908.9 2,090.4
EBITDA 225.4 352.4
EBITDA margin in % 11.8 16.9
EBIT 86.4 231.5
EBIT margin in % 4.5 11.1
Profit for the period 50.0 180.9
CAPEX (incl. BU Plastics) 252.2 346.2

Dec. 31, 2013 Dec. 31, 2012
Adjusted equity ratio(2)in % 45.5
43.8
Number of employees at 6,675 7,033
period-end

1) The previous year's figures were adjusted due to reporting changes
(refer to Note 2 of the consolidated financial statements as per
December 31, 2013) 2) Equity incl. government grants less prop.
deferred taxes

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----------- [1] All figures including discontinued operations except
when explicitly stated otherwise. [2] Consolidated EBITDA before
restructuring amounted to EUR 219.4 mn (2012: EUR 358.7 mn). [3] The
previous year's figures were subsequently partly adjusted (refer to
Note 2 of the consolidated financial statements as at December 31,
2013). [4] Consolidated EBIT before restructuring amounted to EUR
106.5 mn (2012: EUR 255.0 mn). [5]Incl. the Business Unit Plastics

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