Risk Report

Current risk environment

The global risk environment in 2026 is characterized by a combination of structural, geopolitical and economic uncertainties.

Increasing strategic competition between the major powers and the dismantling of multilateral cooperation mechanisms are weakening international stability.

In economic terms, ongoing trade conflicts, protectionist measures and a fragmented global economy are weighing on supply chains, investments and growth prospects.

Despite the numerous geopolitical tensions, there are also signs of improvement in the European economy and a more confident economic outlook than at the start of the previous year, partly thanks to new trade agreements.

Technological upheavals, particularly in the areas of artificial intelligence and cyber risks, are increasing the vulnerability of organizations and companies alike.

Furthermore, climate-related extreme weather events and the pressure to transform existing business models are exacerbating the complexity of the risk environment.

Overall, 2026 is characterized by greater market volatility, reduced predictability of political and economic decisions and growing conflict potential.

A detailed analysis of the global fiber market development in the reporting year and the associated risks for the Lenzing Group are presented in the “General Market Environment” chapter.

Lenzing risk outlook for 2026

The global risk environment, particularly with regard to current geopolitical developments, affects Lenzing’s business activities to varying degrees.

For 2026, the IMF forecasts global economic growth of 3.3 percent. Global headline inflation is expected to decrease to 3.8 percent in 2026, and to 3.4 percent in 2027.¹

Earnings risks for Lenzing arise in particular from the persistently weak demand for regenerated cellulose fibers. This is attributable to a shift in market equilibrium due to increased Asian competition and resultant low fiber prices, as well as to the volatile price trend for key raw materials and energy.

Lenzing addresses these risks proactively through the consistent implementation of its revised strategy and the associated focus on sustainable growth with low-emission premium products.

In view of geopolitical tensions, global trade conflicts lead to an increased risk of additional trade restrictions with potential negative effects on supply chains and sales markets relevant to Lenzing.

The supply of the fiber production sites with high-quality dissolving wood pulp is considered secure in the long term thanks to the company’s own pulp production and sufficient market capacities.

The liquidity risk for 2026 is classified as moderate due to the cash position, undrawn credit lines with banks as well as the expected free cash flow development. Lenzing strengthened it’s liquidity position through a syndicated financing of EUR 545 mn, consisting of a bullet loan of EUR 355 mn with a term of three years and a revolving line of credit of EUR 190 mn with a term of three years and extension options of two years in total as well as an again significantly positive free cash flow. A significantly rising interest rate level or an unexpectedly negative development of the operating business and the resulting free cash flow would pose a risk to the available liquidity. A breach of the financial covenants contained in the financing agreements would trigger an obligation to repay the financial liabilities and thus pose a risk to available liquidity.² A short‑term, unexpected loss of the existing working capital financing programs (factoring and supplier financing arrangements) would pose a risk to the available liquidity. The availability of credit and capital markets for refinancing activities is important for Lenzing in 2026 and represent risk-mitigating factors for liquidity management.

On the currency side, a depreciation of both the US dollar and the Chinese yuan would have a negative impact on Lenzing’s open currency volumes.

In the context of the ongoing reorganization measures currently being implemented by Lenzing, and the associated workforce reduction plans, there is a medium‑term risk of a potential loss of know‑how.

Among non-operational risks, cyber security, data protection and other compliance-related risks are of key relevance to Lenzing due to their potential impact in terms of business disruption or damage to reputation. Lenzing manages such risks by way of preventive measures, including a modern technological infrastructure, guidelines implemented throughout the Group, structured training and continuing education programs as well as a global organizational structure.

1Source: IMF, World Economic Outlook, January 2026

2For a detailed description, please refer to note 37 in the consolidated financial statements

Risk management objectives

The main purpose of risk management in the Lenzing Group is to safeguard and strengthen the company through an adequate, objective and transparent assessment of financial, operational and strategic risks, including those related to ESG issues.

Lenzing utilizes a comprehensive, company-wide risk management system to ensure centralized risk management and monitoring for the Group. Together with the operating units, significant risks are identified and assessed and then communicated and transparently presented to the Managing Board and other stakeholders. Proactive analysis of potential risks is just as much the aim of risk management as the task of actively controlling risks and evaluating appropriate measures with the business units concerned. In connection with climate change, climate-related risks and opportunities as well as their short-, medium- and long-term effects on the Lenzing Group, are identified and evaluated as part of risk management and appropriate risk mitigation measures are derived. This takes into consideration the requirements of the ESRS (European Sustainability Reporting Directive) on climate-related opportunities and risks.

Risk management strategy & process

Lenzing’s risk management strategy follows a multi-step approach: Lenzing’s risk appetite defines a general attitude towards taking risks and realizing opportunities and is determined at various levels. Risks that are unacceptable or not aligned with Lenzing’s strategy are avoided, mitigated or transferred. Lenzing’s risk appetite therefore also defines the Group’s risk transfer strategy, which in turn determines the retention level of the individual production sites. Corporate Risk Management conducts semiannual risk interviews with all operational units and global corporate functions. The focus is on a short and medium-term risk assessment, while the analysis of climate-related risks and opportunities also includes a long-term view (see also the chapter “E1 Climate change” in the non-financial statement of the Annual and Sustainability Report). The main risks, as well as an increasing number of opportunities, are recorded and quantitatively assessed in Lenzing’s Enterprise Risk Management (ERM) system. The risks are simulated against planned EBITDA and the range of potential deviations from the respective budget is determined. To this end, Lenzing uses a modern simulation software solution, which is also used to calculate risk KPIs such as Value at Risk (VaR), risk-adjusted EBITDA and ROCE as well as the net debt to EBITDA ratio. Risks that cannot be measured in monetary terms are recorded qualitatively.

Depending on the impact on the company, efforts are made to avoid, minimize or transfer risks through appropriate measures or, in certain cases, and if necessary and reasonable from a corporate perspective, to intentionally assume them.

Lenzing’s ERM organization specifies rules, rights and responsibilities within the Lenzing Group that have to be fulfilled by all relevant stakeholders. Each production site has a nominated risk manager to coordinate and communicate all site-specific risks and opportunities and report these as part of the half-yearly risk interviews. Risks are allocated in accordance with the respective corporate organization, with each risk being assigned a “risk owner”.

The effectiveness of the risk management system used by the Lenzing Group was evaluated and confirmed by KPMG Austria GmbH pursuant to Rule 83 of the Austrian Corporate Governance Code (ACGC) as part of a special audit with limited assurance in the reporting year.

The main risks and opportunities are presented to the Managing Board and to the Supervisory Board’s Audit Committee on a half-yearly basis.

Market environment risks

Market risk

As an internationally active corporation, the Lenzing Group is exposed to a variety of risks. Price and volume trends for textile fibers and, to a lesser extent, nonwoven fibers are cyclical, as they depend on global and regional economic conditions. Lenzing fibers compete with cotton, regenerated cellulose and synthetic fibers in many submarkets. The price trends of these products, driven primarily by overall demand and market saturation, consequently also exert an influence on the revenue and sales volumes trends of Lenzing fibers. The Lenzing Group counteracts this risk through the continuous premiumisation of its global product portfolio and a consistent sustainability and innovation strategy.

Sales risk

The Lenzing Group generates around 50 percent of its fiber revenues with a mid-double-digit number of customers. Customer concentration in the pulp sector is comparatively higher than in the fiber sector. A decrease in sales to these major customers, or the loss of one or more major customers without an immediate replacement, poses a certain risk. The company counteracts such risk with its global presence and the continuous broadening of its client base and sales segments. Potential default on trade receivables is covered by clear receivables management and global credit insurance.

Competitive and innovation risks

The Lenzing Group is exposed to the risk of losing its position on the fiber market due to greater competition or new technologies developed by competitors. Lenzing counteracts this risk with research and development activities that exceed the average for the sector and by a high level of product innovation and steady cost optimization. The Lenzing Group – similar to other producers – is exposed to the risk that alternative fiber products may become available and be marketed at more favorable prices than regenerated cellulose fibers. Furthermore, Lenzing’s competitiveness may also be negatively impacted by additional trade barriers.

Laws and regulations

The Lenzing Group is confronted with different legal systems and regulations in its global markets. A change in laws or other regulations, such as import duties, product classifications, environmental requirements etc., as well as a more stringent interpretation of existing regulations and laws, could lead to significant additional costs and to competitive disadvantages. The Lenzing Group maintains certified management systems for quality management according to ISO 9001, for environmental management according to ISO 14001 and for safety management according to ISO 45001. Legal compliance in connection with these management systems is regularly audited both internally and externally.

Due to the progressive effects of climate change on society and ecosystems, more stringent legislation and regulations on the part of governments and other stakeholders are to be expected. The implementation of regionally differing measures could have a negative impact on the Lenzing Group’s performance and success. In order to be able to respond proactively to climate-related physical and transitory risks, Lenzing conducted a climate risk analysis for the first time in 2024.

ESG-related risks and opportunities

As part of a double materiality assessment, Lenzing regularly identifies the material topics relating to its sustainability-oriented business model using a multi-stage and holistic approach. Material risks and opportunities are assigned to the individual ESG topics and are being progressively integrated into the Enterprise Risk Management system and taken into account in Lenzing’s long-term strategic business planning.

In the environmental responsibility area (Environment), the main focus topics comprise climate-related issues in connection with global warming (carbon dioxide reduction) as well as sustainable raw material procurement (wood, chemicals) and growing water shortages in certain regions. Increasing regulation, particularly in relation to the taxation of greenhouse gases and the pricing of carbon, represents a significant risk for Lenzing. Regulations concerning greenhouse gas emissions have already been introduced in countries where Lenzing operates carbon-intensive processes. Lenzing is consistently working on the implementation of energy efficiency measures and the reduction of carbon emissions in order to take account of environmental protection and reduce exposure through eco taxes.

For Lenzing, wood is the most important natural resource for the production of its biodegradable cellulose fibers. Despite sustainable sourcing policies and backward-integrated production, a risk exists that wood prices will rise further due to climate change, increasing global demand for biomass, and alternative land use.

The global textile industry, especially the fashion industry in which Lenzing’s products are frequently deployed, is regarded in a critical light due to its sometimes resource-intensive consumption of raw materials and its production processes. Lenzing regards this development as an opportunity, based on its business model of responsibly produced fibers and its access to new and emerging markets.

The production of pulp and fibers is associated with high levels of water consumption as well as air and water emissions. Lenzing operates a careful, global water management system that ensures compliance with both local laws and global standards. Lenzing is counteracting the increasing scarcity of water by continuously improving resource utilization.

In the area of social responsibility, the main risks in relation to the physical and mental long-term health and safety of employees at our own sites and along the value chain as well as in society should be highlighted, which Lenzing is increasingly countering with targeted surveys and focus programs.

In the area of corporate governance (Governance), risks such as cyber security incidents (see “IT risks”) as well as poor compliance with corporate governance and resulting risks are material.

Operational risks

Procurement risk (including pulp supplies)

The Lenzing Group purchases large volumes of raw materials (wood and chemicals) and energy for the manufacture of its cellulose fibers. Fiber production and related margins are exposed to risks arising from the availability and prices of these raw materials, which can fluctuate to the Lenzing Group’s disadvantage and may increase as a consequence of climate change. Such risks are countered through the careful selection of suppliers based on price, reliability and quality criteria, EcoVadis-based sustainability assessments, the Together for Sustainability (TfS) audit program, Lenzing-specific audits as well as the establishment of long-standing, stable supplier-customer partnerships, in some cases with multi-year or long-term supply agreements. In addition, all suppliers must comply with Lenzing’s Global Code of Conduct for Suppliers. Nevertheless, a risk exists of violations of this code, which may have a negative impact on the Lenzing Group and its stakeholders along the value chain. Supply chain risks may also result from disruptions caused by natural disasters.

Lenzing has also entered into long-term contractual relationships with selected raw material suppliers and service partners. These agreements require Lenzing to purchase specified quantities of raw materials on standardized terms and conditions, which may also include price adjustment clauses. Lenzing may consequently not be able to adjust prices, purchase volumes or other contract conditions over the short term in order to respond to market changes.

Operating and environmental risks

The production of regenerated cellulose fibers involves complex chemical and physical processes that entail certain environmental risks. These risks are very well controlled thanks to proactive and sustainable environmental management, closed production cycles, ongoing emissions monitoring, state-of-the-art production techniques and the monitoring of production processes by highly qualified personnel. Lenzing continuously works on increasing safety and environmental standards through voluntary references such as the EU Ecolabel. As the Lenzing Group has operated production facilities at several locations for decades, risks arising from environmental damage in earlier periods cannot be ruled out entirely.

Although the Lenzing Group has set very high technological and safety standards for the construction, operation and maintenance of its production sites, the risk of breakdowns, disruptions and accidents cannot be completely excluded. Such disruptions may also result from external factors beyond the company’s control. Direct protection against certain natural hazards, such as cyclones, earthquakes and floods, beyond existing natural hazard insurance is not feasible. Moreover, a risk exists that not only personal injury but also material and environmental damage, both within and outside the production facilities, could result in substantial claims for damages and even criminal liability.

The Lenzing Group’s production activities are concentrated at a small number of locations. Any disruption at one of these facilities has a negative impact on the Group’s business operations and its goals.

Plant risk

Lenzing is an asset-capital-intensive company that is exposed to the risk of aging plants or aging plant components. Ongoing investments are required to keep these plants or plant components at the leading edge of technology. Lenzing continuously takes measures to counter this risk by asset maintenance initiatives and productivity enhancements.

Product liability risk

The Lenzing Group markets and sells its products and services to customers worldwide. These business activities can lead to damage to customers, or along the value chain, through the delivery of a defective product by Lenzing or one of its subsidiaries. Moreover, product safety can be jeopardized by pollution, which may cause problems in the value chain, such as potential health implications for employees and customers. Lenzing is also subject to local laws in the countries where its products are delivered. Especially in the USA, the potential implications are considered to be severe. Lenzing counteracts such risk through appropriate preventive measures in the production process, regular quality controls and professional damage management. Third party damages caused by Lenzing are covered by a global liability insurance program.

Financial risks

For a detailed description of financial risks refer to notes 34 to 37 to the consolidated financial statements.

Tax risk

The Lenzing Group’s production sites are subject to local tax laws in the respective countries and are required to pay income taxes as well as other taxes. Changes in tax legislation or different interpretations of applicable provisions may lead to subsequent tax charges.

Compliance

The ongoing tightening of international codes of conduct and legislation increases the requirements for Lenzing with regard to compliance with and monitoring of these provisions. Inadequate controls in business processes or a lack of documentation can lead to the violation of applicable laws or regulations and significantly jeopardize reputation and commercial success. Lenzing’s compliance organization proactively manages these risks by means of the corporate code of conduct that is valid throughout the Group, as well as directives addressing the areas of bribery and corruption, money laundering and antitrust practices. Risks in connection with data protection are addressed by a data protection officer and by means of extensive training programs for employees. Further information on compliance is provided in the Corporate Governance Report.

Intellectual property risks

Lenzing is exposed to the risk that its intellectual property may be infringed or incompletely protected. The Lenzing Group counters such risks by means of a dedicated intellectual property protection department.

IT and OT risks

In its day-to-day operations, Lenzing depends on advanced information technology (IT) systems, both at its own production sites and throughout the entire value chain. IT systems are vulnerable to a range of problems, including software and hardware malfunctions, malicious hacking and cyberattacks, physical damage to key IT centers and computer virus infections. Consequently, any major damage, disruption and/or circumvention of its existing IT systems may hamper business operations. These risks are addressed through comprehensive technical and organizational measures as well as additional cyber insurance.

In addition to IT risks, Lenzing also records and evaluates risks in connection with OT (Operational Technology) equipment and processes in order to proactively and strategically counteract potential business interruptions.

Personnel risks

Personnel risks may arise through the turnover of key staff as well as the recruiting of new staff at all global sites. These risks may be further amplified by the reorganization measures undertaken by Lenzing, including the associated workforce reduction initiatives. The Lenzing Group has established a Human Resources Department which operates internationally and coordinates personnel planning with the respective sites, and centrally manages and controls all personnel issues.

At the production facilities, both employees of the Lenzing Group and workers and employees of external companies are potentially exposed to a risk of injury. Lenzing’s Safety and Health program takes such risk into consideration and includes a strategic approach to risk reduction, precautionary measures, and extensive training. For more information, see the non-financial statement of the Lenzing Group’s Annual and Sustainability Report.

Risks relating to major projects

Major projects entail the inherent risk of cost and time overruns, which Lenzing counters with a standardized planning process, consistent project management, ongoing cost controls as well as insurance solutions and risk transfer.

Risks from an external perspective and for other stakeholders

As a globally operating company, the Lenzing Group is aware of its social responsibility. The risks described in the risk report refer primarily to the effect on the Lenzing Group’s assets and earnings. As one of the sustainability leaders in its sector, the Lenzing Group seeks a balance between the needs of society, the environment and the economy. The company assumes such responsibility, particularly also with respect to potential effects of its operations on neighbors of the production sites as well as in relation to society as a whole. Active stakeholder work to mitigate risks (partnerships for systemic change) and to create additional benefits for people and the environment is a clear goal of the Lenzing Group’s innovation and operating activities. In cooperation with its partners, the Lenzing Group is working on understanding the risks for stakeholders and on finding solutions to mitigate such risks. This work is based on open communication and transparency as well as continuous improvement of technologies and sustainable practices.