The Lenzing Group is embarking on a new business strategy called “SCore Ten,” a multifaceted plan that aims to increase the share of specialty fibers to 50 percent of revenue by 2020, expand its quality and technological position for man-made cellulose fibers and open new business areas.
The plan, being orchestrated by chief executive officer Stefan Doboczky, who took the helm of the Austria-based fiber giant in June, also has among its main priorities a strengthening of the company’s core business and intensifying cooperation with customers along the value chain.
“Our objective is to safeguard and expand Lenzing’s leadership role on the dynamic growth market for man-made cellulose fibers,” Doboczky said Monday. “To achieve this, we will focus more intensively on the most attractive segments in the specialty fiber business. Lenzing will put value before volume in the future,” while still aiming to achieve volume growth.
Lenzing said it expects demand for man-made cellulose fibers to increase 5 to 6 percent annually through 2020, which is nearly twice as fast as the global fiber market. The primary factors driving demand are the continuing growth of the world’s population and rising prosperity in emerging markets.
The company said forecasts call for a rise in per capita textile consumption in emerging markets of 50 percent from 2010 to 2020. In industrialized countries, the nonwovens industry — an important sales market for Lenzing — will profit from increased demand for hygiene products. The nonwovens segment is expected to expand twice as fast as the textile market.
Lenzing said the SCore Ten strategy was designed to take account of the major megatrends. On the one hand, the name stands for a performance orientation, “scoring,” and for a strengthening of Lenzing’s core business operations, “core,” and on the other, the new plan reflects the objective of generating sustainable growth with specialty fibers such as Lenzing modal and Tencel, Ten.
These measures comprise the cornerstones of SCore Ten. A key target is to increase Lenzing’s pulp position through backward integration by increasing its own pulp production volumes and expanding strategic cooperation. The company produced 992,000 tons of fiber in 2014, representing a 21 percent global market share for man-made cellulosic fibers.
Lenzing will also strive to expand its quality and technology leadership. A program aimed at strengthening commercial processes is designed to deliver an earnings before interest, taxes, debt and amortization, or EBITDA, contribution of 50 million euros, or $53.6 million at current exchange, by 2017.
In the first three-quarters of 2015, Lenzing saw consolidated revenue rise 7.4 percent to 1.46 billion euros, or $1.56 billion. EBITDA improved 31.7 percent to 210.6 million euro, or $226.7 million.
To achieve “customer intimacy,” Lenzing plans to establish regional competence centers for product innovations and will move greater decision-making powers to the regions.
By focusing on “specialization” Lenzing aims to generate 50 percent of total revenue from the business with eco-friendly specialty fibers such as Tencel, modal and viscose fiber specialties by 2020. Lenzing will further increase production capacities for Tencel depending on market requirements.
In 2014, Tencel and modal combined for 38 percent of fiber sales, while the commodity-based viscose made up 62 percent.
Last year, Lenzing began production at the world’s largest Tencel fiber production plant located at the Lenzing headquarters in Upper Austria that has a nominal capacity of 67,000 tons annually.
The company will also look to selectively enhance its research and development activities along the value chain through “new game-changing technologies.”
In addition, based on its core competencies, Lenzing will open up new business areas.
In the light of the increasing demand for textile fibers, Lenzing said one of the major future challenges for the fiber industry is sustainability, an area where it feels it holds a major competitive advantage. Its cellulose fibers originate in sustainably managed forests, are produced in an environmentally friendly manner and are biodegradable.
The company has received various citations for its sustainability methods, including the European Award for the Environment and the Oeko-Tex Sustainability Award.
Regarding the financial performance targets of SCore Ten, Doboczky said, “Compared to the previous year, we want to continually increase EBITDA by 10 percent annually and aim to increase the return on capital employed to more than 10 percent by 2020. At the same time, our objective is to keep net financial debt at a level which is less than 2.5 times EBITDA.”
Lenzing plans to finance all necessary investments required to implement this strategy from its own capital resources and simultaneously strive for a dividend payout of up to 50 percent of net profit.