Note 41. Financial guarantee contracts, contingent assets and liabilities, other financial obligations and legal risks

The Lenzing Group has entered into contingent liabilities of EUR 10,282 thousand (December 31, 2021: EUR 4,905 thousand), above all to secure claims related to the sale of certain equity investments and claims by suppliers, for possible default on sold receivables (also see note 36 “Factoring”) and for claims by third parties outside the Group. Less important contingent liabilities involve granted retentions. The reported amounts represent the maximum payment obligation from the viewpoint of the Lenzing Group, and there is only a limited potential for recoveries.

The Lenzing Group provides committed credit lines of EUR 3,091 thousand (December 31, 2021: EUR 5,379 thousand) to third parties. These credit lines were not used as at December 31, 2022 and December 31, 2021 (also see note 22).

For the equity contributions of Lenzing AG to LD Celulose S.A. in the years 2021 to 2022, bank guarantees amounting to EUR 51,703 thousand existed as at December 31, 2021. These bank guarantees were not drawn as at December 31, 2021. No such guarantees exist as of December 31, 2022.

The Lenzing Group carries obligations for severance payments and anniversary benefits for former employees of certain sold equity investments up to the amount of the notional claims at the sale date. Provisions were recognized for these obligations as at the reporting date at an amount equal to their present value calculated in accordance with actuarial principles. Lenzing AG, in particular, has also assumed liabilities to secure third-party claims against consolidated companies; these claims are considered unlikely to be realized. The Managing Board is not aware of any other financial obligations with a significant impact on the financial position and financial performance of the Group.

The obligations arising from outstanding orders for intangible assets and property, plant and equipment amounted to EUR 185,721 thousand as at December 31, 2022 (December 31, 2021: EUR 248,062 thousand). The Lenzing Group has long-term purchase obligations related to raw material supplies, in particular for wood, pulp, chemicals and energy.

In the 2021 financial year, a lawsuit was filed in a US court against Lenzing AG for unspecified claims for damages in connection with a former investment. Lenzing AG has rejected these claims. Payment of damages was not considered probable by management as at December 31, 2022 as well as at December 31, 2021. Details about the provision for legal defense costs are provided in note 31.

As an international corporation, the Lenzing Group is exposed to a variety of legal and other risks. These risks are related, above all, to product defects, competition and antitrust law, patent law, tax law, employees and environmental protection (in particular, for environmental damage at production locations and climate risks). It is impossible to predict the outcome of pending or future legal proceedings, and rulings by the courts or government agencies or settlement agreements can lead to expenses that are not fully covered by insurance which could have a material impact on the group’s future financial position and financial performance. Additional information is provided in the risk report of the Lenzing Group’s management report as at December 31, 2022.

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