14 November 2013 11:18 [Source: ICIS news]
LONDON (ICIS)--Austria-based cellulosic fibres producer Lenzing said late on Wednesday that its net profit for the first nine months of 2013 fell by 44.2% year on year to €86.6m ($117m) on the back of difficult market conditions and “increasingly fierce price competition”.
Sales were down 7.7% year on year during the period at €1.45bn, while consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 20.5% over the same period to €223.8m, despite €24.8m in one-off proceeds from the sale of its plastics business unit buoying earnings, Lenzing said.
Prevailing economic headwinds have led the company to launch a cost-cutting initiative, with a target of annual cost savings of €120m until 2015.
Sales and marketing operations are to be ramped up, and focus increased on the Asian and Turkish markets, Lenzing said. The company is also planning to increase efficiency and reduce headcount, with measures potentially affecting all global sites, and leading to a total of 600 job cuts.
Worst-hit will be the company’s largest production site in Lenzing, Austria, which could see its 2,600-employee headcount cut by up to 15%. Some of the cuts will be handled through employee retirement or not filling vacant positions, Lenzing added.
The measures are to be carried out in the coming months, and will partially impact earnings in 2014. The company predicts one-off expenses related to the cost-saving programme to be in the mid double-digit euro range.
The difficult environment has led the company to downgrade its full-year EBITDA estimates to €220-230m, down from earlier guidance of €280m.
Lenzing CEO Peter Untersperger predicted that conditions were unlikely to improve next year, and could remain difficult well into 2015.
“The difficult market situation will continue in 2014 and possibly well into 2015. We will resolutely counteract this unfavourable situation and adjust our cost structures to the new circumstances as quickly as possible,” Untersperger said.
Despite weak macroeconomic conditions, all fibre production facilities will continue to operate at full capacity, the company added.
Fibre shipment volumes increased 12% year on year during the period to 660,000 tonnes, but selling prices averaged €1.73/kg, a 14% year-on-year fall. Lenzing attributed the fall to price and margin pressure in China as a result of surplus production capacity.
“This development intensified further in the third quarter and influenced all other key sales markets,” the company said, adding that it expects price pressure to remain strong in the closing quarter of 2014.
($1 = €0.74)
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