Description of the company and its business activities
Lenzing Aktiengesellschaft (Lenzing AG), which maintains its registered headquarters in 4860 Lenzing, Werkstrasse 2, Austria, is the parent company of the Lenzing Group (the “Group”). The shares of Lenzing AG are listed in the Prime Market Segment (since April 18, 2011) and in the ATX benchmark index (since September 19, 2011) of the Vienna Stock Exchange in Vienna, Austria.
The core shareholder of Lenzing AG as at December 31, 2021 is the B&C Group, which directly and indirectly holds an investment of 50 percent plus two shares (December 31, 2020: 50 percent plus two shares) in the share capital of Lenzing AG. The direct majority shareholder of Lenzing AG is B&C KB Holding GmbH, Vienna. The indirect majority shareholder of Lenzing AG, which prepares and publishes consolidated financial statements that include the Lenzing Group, is B&C Holding Österreich GmbH, Vienna. The ultimate parent company of the B&C Group, and therefore also of Lenzing AG, is B&C Privatstiftung, Vienna.
The core business of the Lenzing Group is the production and marketing of wood-based cellulosic fibers. The pulp required for production is manufactured for the most part in the Group’s own plants and is supplemented by external purchases.
Basis of Reporting
The consolidated financial statements for the period from January 1 to December 31, 2021 were prepared in accordance with the International Financial Reporting Standards (IFRSs) and interpretations which were endorsed in the EU and required mandatory application as of the reporting date. The additional requirements of Section 245a Para. 1 of the Austrian Commercial Code (“Unternehmensgesetzbuch”) were also met.
The reporting currency is the euro (EUR), which is also the functional currency of Lenzing AG. The functional currency of the majority of the subsidiaries is the euro (EUR) or US-Dollar (USD). The figures shown in these consolidated financial statements and notes were rounded to the next thousand, unless indicated otherwise (“EUR ‘000”). The use of automatic data processing tools can lead to rounding differences in the addition of rounded amounts and percentage rates.
Effects of the COVID-19 crisis on the annual results
Business trends in the 2021 financial year improved significantly compared to the same period of the previous year due to the positive market environment. In preparing the consolidated financial statements, the Managing Board has taken into consideration the effects of the COVID-19 crisis, in particular with regard to estimation uncertainties and judgments (such as in the context of the corporate planning used to determine recoverable amounts). Additional information on the effects of the COVID-19 crisis and the measures taken by the Lenzing Group can be found in the group management report.
As part of the preparation of the consolidated financial statements, the management is responsible for assessing the company’s ability to continue as a going concern. If material uncertainty exists with regard to events or conditions that may raise significant doubt concerning the company’s ability to continue as a going concern, such uncertainty must be explained. Based on the estimates of the Lenzing Group’s management and considering all available information regarding the future, which covers a minimum of twelve months after the balance sheet date, such uncertainties do not exist. On the basis of the secured liquidity situation, the continued strong position in the markets relevant to Lenzing and the expectation that the negative effects of the COVID-19 crisis will gradually abate over the course of 2022, the management estimates that the group has sufficient resources as of the approval date to enable it to continue operations in the foreseeable future. Therefore, the consolidated financial statements were prepared based on the assumption of the group’s ability to continue as a going concern.
Measurement
Assets and liabilities are principally measured at amortized or depreciated cost. In contrast, other measurement methods are used for the following material positions:
- Biological assets are measured at their fair value.
- Provisions are measured at the present value of the expected settlement amount.
- Deferred tax assets and deferred tax liabilities are recognized at their nominal value. They are measured on the basis of the temporary differences existing as at the reporting date and the effective tax rate expected when the differences are realized.
- Derivative financial instruments and financial assets measured at fair value through profit or loss and at fair value through other comprehensive income are measured at their fair value.
- Puttable non-controlling interests are measured at fair value through other comprehensive income.
Estimation uncertainty and judgments
The Managing Board of Lenzing AG uses estimates, assumptions and judgments in preparing the IFRS consolidated financial statements. These estimates, assumptions and judgments are based on the circumstances assumed as at the reporting date and can have a significant effect on the presentation of the Group’s financial position and financial performance. They involve the recognition and measurement of assets and liabilities, contingent receivables and liabilities, the reporting of cash flows and income and expenses (including other comprehensive income) as well as the presentation of disclosures in the notes.
The Lenzing Group is committed to the ecologically responsible production of fibers from the renewable raw material wood and is very concerned about climate protection. In preparing the consolidated financial statements, the Managing Board has taken into consideration the effects of climate change, in particular with regard to estimation uncertainties and judgments (such as in the context of the corporate planning used to determine recoverable amounts). Overall, no significant discernible effects arise at present.
Assumptions and estimates
The following future-oriented assumptions and other major sources of estimation uncertainty at the reporting date could have significant effects on these consolidated financial statements of the Lenzing Group:
- Intangible assets and property, plant and equipment (see note 11): determination of the recoverable amount in connection with impairment testing as defined in IAS 36 (impairment).
- Biological assets (see note 20): determination of fair value less costs to sell.
- Cash and cash equivalents (see note 37): Assessing the classification of money market funds as cash equivalents.
- Financial instruments (see note 37 and 39): determination of fair values and expected credit losses.
- Provisions (see note 32): determination of the expected settlement amount and the net liability of the defined benefit pension and severance payment plans.
- Puttable non-controlling interests (see note 37): determination of fair value less costs to sell.
- Deferred taxes and receivables from current taxes (see note 31): assessment of the extent to which deferred tax assets (in particular, from loss carryforwards) can be utilized and assessment of the recoverability of receivables from current taxes.
- Research and development expenses (see note 18): assessment of capitalization and impairment of development expenses.
Assumptions and estimates are based on experience and other factors that are considered relevant by the Managing Board. However, the amounts actually realized can deviate from these assumptions and estimates if general conditions develop in a different way than the expectations as at the reporting date.
Judgments when applying accounting policies
The application of accounting policies by the Lenzing Group included the following major judgments, which had a material influence on the amounts reported in the consolidated financial statements:
- Liabilities within the scope of reverse factoring agreements (see note 33): assessment of the requirements for derecognition as defined in IFRS 9 (financial instruments).
- Full consolidation and equity method (see note 3, note 37, and note 43): assessment of the existence of control over subsidiaries and assessment of the existence of joint control or significant influence. Application of the present access method to puttable non-controlling interests.
- Receivables from the sale of and measurement of investments accounted for using the equity method (see note 22): evaluation and measurement of the partial sale of the investment in EQUI-Fibres Beteiligungsgesellschaft mbH (EFB), Kelheim, Germany.
- Evidence of impairment (see note 11): evaluation of indications of impairment resp. for impaired cash-generating units evaluation of the occurrence of material changes in comparison with the previous year.