19. Biological assets

Biological assets comprise standing trees of a plantation in Minas Gerais, Brazil, which are used as a raw material for pulp production. In accordance with IAS 41 (Agriculture), biological assets are presented at fair value in the consolidated statement of financial position. The plantation is recognized at level 3 of the fair value less estimated costs to sell at the harvest. It is assumed that fair values can be measured. Measurement of biological assets is monitored and reviewed by the Lenzing Group. The necessary market data are validated on the basis of the dual control principle.

The measurement is based on a discounted cash flow model on the basis of sustainable forest management plans, industry benchmarks for wood prices and delivery costs and taking into account the growth cycle. A wood price based on a multi-quarter average of industry benchmarks is used for the valuation. The annual harvest from the projected tree growth is multiplied by wood prices, and the forestry and harvesting costs are deducted. The fair value of the plantation is measured as the present value of the harvest from one growth cycle on the basis of the productive forest area, taking into account environmental restrictions and other reservations. In particular, the calculated fair value would increase (decrease) if both the timber price and the timber volume were to increase (decrease). The calculated fair value would decrease (increase) if the discount rate were to increase (decrease).

Young standing timber less than one year old is considered an immature asset and is recognized at cost. When harvested, biological assets are transferred to the item inventories of the consolidated statement of financial position. Changes in the fair value of hedging instruments in relation to the foreign exchange risk are recognized in the income statement under the cost of sales.

As at December 31, 2024, the plantation comprised approximately 40,817 hectares of eucalypt wood (December 31, 2023: 41,204 hectares) and 497 hectares of pine wood (December 31, 2023: 714 hectares). The wood is up to 15 years (December 31, 2023: 15 years) old. Wood amounting to EUR 15,736 thousand (December 31, 2023: EUR 9,893 thousand) is less than one year old and therefore considered an immature asset.

Biological assets developed as follows:

The capitalized production costs include capitalized borrowing costs of EUR 14,669 thousand (2023: EUR 15,566 thousand), the financing cost rate of which is 14.1 percent (2023: 14.1 percent). The depletion-based depreciation relates to reductions in biological assets as a result of the harvest. The gains and losses from the change in the fair value of biological assets in the amount of EUR 32,199 thousand (2023: EUR 80,102 thousand) are included in the cost of sales. They consist of the regular remeasurement of EUR 5,195 thousand (2023: EUR 85,997 thousand) and foreign currency gains/losses of EUR 27,004 thousand (2023: EUR minus 5,895 thousand) from the remeasurement of the lease liability for the land use right which is directly related to the plantation.

The following assumptions were made:

A change in key input factors which cannot be observed on the market would have the following effects on the measurement of biological assets: