The Lenzing Group’s cost-cutting measures helped the fiber producer achieve a slight earnings improvement. in the third quarter of 2014 compared to a year earlier, the first quarterly comparative gain in about two years.
Lenzing said third-quarter earnings before taxes improved 18 percent to 33.3 million euros, or $41.6 million, from 28.2 million euros in the prior-year quarter. In spite of higher sales volumes, consolidated sales in the third quarter ended Sept. 30 stagnated at 457.7 million euro, or $571.3 compared to the prior-year level of 457.1 million euro, or $570.6, due to lower average fiber selling prices.
“The measures are succeeding,” said Lenzing chief executive officer Peter Untersperger. “The earnings improvement is mainly attributable to the excelLENZ cost-cutting drive, but also from the first fiber sales volumes produced by the new Tencel fiber plant in Lenzing.”
Sales and earnings in the first nine months of 2014 declined compared to the prior-year performance, but cost savings are having a positive impact, Lenzing said, and further reductions are planned, since no significant impetus is expected from the market.
The decline in the average fiber selling prices and the high volatility in the fiber market continue to negatively impact the company’s business operations. Consolidated sales decreased 6.2 percent to 1.36 billion euro, or $1.7 billion, in the first three quarters of 2014, down from 1.45 billion euro, or $1.81 billion, in the previous year. Lenzing said more than half of the sales drop came from non-recurring effects related to the disposal of the Business Unit Plastics in 2013. Consolidated sales were down 2.8 percent in a like-for-like comparison.
Average fiber selling prices of Austria-based Lenzing Group fell to 1.55 euro per kilogram compared to 1.73 euro per kilogram in the first three quarters of 2013. Fiber sales volumes rose 7 percent year-on-year to 706,900 tons in the first nine months of 2014. In addition to Tencel, Lenzing wood pulp-derived fibers include modal and viscose.
The company said as a consequence of the excelLENZ program, the number of employees working for the group fell to 6,352 as of Sept. 30 compared to 6,675 on Dec. 31.
“We expect cost savings exceeding 90 million euro [$112.34 million] for the entire year 2014, of which about one quarter involves personnel expenses,” Untersperger said. “The remaining cost decreases equally relate to reduction in material costs and savings derived from efficiency projects to cut general and administrative expenses. Planning work has begun to enable a further improvement of the Lenzing Group’s cost structure to be achieved in 2015. Starting in 2016, we will achieve sustainable cost reductions of over 160 million euro [$200 million] per annum. These measures are designed to safeguard the long-term competitive strength of the company and its self-financing capacity for future investments.”