Note 34. Capital risk management

General information

The overriding objective of equity and debt management in the Lenzing Group is to optimize the income, expenditures and assets of the individual operations/business units and of the Group as a whole in order to achieve and maintain sustainably strong economic performance and a sound balance sheet structure. An important role in this process is played by financial leverage capacity, the protection of sufficient liquidity at all times and a clear focus on key cash-related and performance indicators in line with the Group’s strategic course and long-term goals. This protects the ability of the group companies to operate on a going concern basis. In addition, the authorized capital and contingent capital give Lenzing AG greater flexibility in raising additional equity in order to take advantage of future market opportunities.

The equity management strategy followed by the Lenzing Group is designed to ensure that Lenzing AG and the other group companies have an adequate equity base to meet local requirements. For further details to the financial covenants see note 35 and 37 (“Liquidity risk” section).

Management uses an adjusted equity ratio for internal control purposes. Adjusted equity is calculated in accordance with IFRS and comprises equity as well as investment grants less the related deferred taxes. The adjusted equity ratio (= adjusted equity in relation to total assets) equaled 34.7 percent as at December 31, 2023 (December 31, 2022: 37.8 percent).

Adjusted equity is calculated as follows:

The dividend policy of Lenzing AG, as the parent company of the Lenzing Group, is based on the principles of continuity and a long-term focus in order to support the future development of the company, to distribute dividends to shareholders in line with the company’s opportunity and risk situation, and to appropriately reflect the interests of all other stakeholders who are decisive for the company’s success.

Net financial debt

The Supervisory Board and Managing Board of Lenzing AG regularly review the development of net financial debt because this indicator is an extremely important benchmark not only for the Group’s management, but also for the financing banks. The ratio of net financial debt to EBITDA is particularly relevant. The continued optimal development of the Lenzing Group is only possible with convincing internal financing strength as the basis for increased debt capacity. Since the second quarter of the 2023 financial year, net financial debt has been presented excluding lease liabilities (see note 35, table “Carrying amounts, category, fair values and fair value hierarchy of financial instruments”). In previous financial years, lease liabilities were included in net financial debt. The change in the calculation was implemented as key Lenzing Group stakeholders also monitor net financial debt excluding lease liabilities.

Interest-bearing financial liabilities are classified as follows:

Liquid assets consist of the following:

Net financial debt in absolute terms and in relation to EBITDA (see note 4) is as follows: