Letter from the
Chief Executive Officer
We look back on an exceptional year in this report. 2022 was a year full of contrasts: on the one hand, it was characterized by unspeakable humanitarian suffering and economic turmoil owing to the Russian invasion of Ukraine. The consequences have since been felt in all parts of the world, with Lenzing and manufacturing industry as a whole hit by the adverse impact. Conversely, it was a year of outstanding successes that are undoubtedly a source of pride to me as Lenzing’s Chief Executive Officer.
Let me start by looking at our business performance: the rise in energy and commodity costs from the first quarter of the year onwards and the collapse in demand during the third quarter had a significantly negative impact on Lenzing’s earnings in the 2022 financial year. Revenues climbed by 16.9 percent year-on-year to EUR 2.57 billion, which was solely due to the rise in fiber prices, while EBITDA was down by 33.4 percent to EUR 241.9 million.
The Lenzing team in Prachinburi (Thailand) celebrating the shipment of the first carbon-zero TENCEL™ fibers from our new site, the world’s largest lyocell fiber plant.
Having responded quickly and decisively to all external crises, we can be very proud of our significant milestones such as the implementation of our investment projects in Thailand and Brazil.”
Chief Executive Officer
Lenzing’s Managing Board reacted swiftly to this trend in earnings, launching a reorganization and cost-cutting program that had already made initial contributions to profits by the end of 2022. Once the program has been implemented in full, it will reduce the cost base by EUR 70 million on an annualized basis.
However, we will be doing more than just making structural changes to our cost base. Our aim is to keep developing in the spirit of continuous improvement and to emerge stronger from this crisis. This means we are taking a critical look at our processes in all parts of the organization with a view to identifying where we can improve. We want to be ready to benefit from the future market recovery as quickly as possible. This crisis is likely to be with us for longer than that which materialized at the start of the COVID-19 pandemic. Nevertheless, we can look forward with great confidence, as the need for sustainable innovations in the world is undiminished, while the demand for environmentally friendly fibers for the textile and nonwoven industries will continue to grow.
The new pulp mill in Brazil, the largest of its kind in the world, was successfully ramped up despite the many challenges, particularly in relation to the pandemic.
It is our mission to change the world for the better. This is what really sets us apart from other companies and gives a sense of purpose to what we do. “Advance our world with better choices” – this is the bold purpose statement we developed in collaboration with our employees in 2022.
We have also continued to develop our strategy and will keep focusing on leveraging our specialties to drive profitable growth once we have successfully implemented our capital spending projects in Thailand and Brazil. We will keep pressing ahead with the issue of recycling, thus making a valuable contribution to transforming the textile and clothing industry from a linear to a circular economy model. We remain a sustainability champion – recent top marks from CDP, EcoVadis, MSCI and other respected environmental organizations and rating agencies are evidence of this – and we have every intention of becoming a circular economy champion too.
Alongside the operating targets, we have also set ourselves ambitious financial goals: we aim to increase our EBITDA – with an ROCE of over 12 percent and assuming a normal economic environment – to EUR 1 billion by 2027. We will leave no stone unturned in working towards this lofty target over the coming years.
A crucial part of our Lenzing Purpose and our Better Growth corporate strategy is that we will not be satisfied with reducing negative impacts. Instead, we aim to create even more positive benefits by, for example, working to further enhance diversity and gender equality within the company, as well as biodiversity. We have also made further progress on our climate targets by migrating two more plants to a renewable electricity supply. Introducing sustainability clauses to contracts with suppliers marks another logical step in underpinning our role as a pioneer.
At this point, I would like to highlight the successful investment projects that we have implemented or significantly moved forward this year, starting with the launch of the world's largest lyocell plant in Thailand. Thanks to this new and ultra-modern plant, we are better placed to meet the growing demand for environmentally-friendly TENCEL™ and VEOCEL™ branded lyocell fibers. In future, we will be able to provide the pulp required for the production of these fibers from our facility in Brazil, which we also successfully commissioned this year. Despite numerous challenges, both projects were realized on schedule and within budget, and we are also well on target in terms of the quantities sold. These are achievements we at Lenzing can be rightly proud of.
We are also continuing to invest in our existing production plants so that we can tailor our product mix to our customers’ needs and constantly improve our environmental footprint. In China, following the imminent conversion of a production line, we are now able to offer locally produced TENCEL™ Modal fibers to our customers for the first time. In Indonesia, we have made substantial progress in refitting existing production capacities, which will allow us to offer significantly better LENZING™ ECOVERO™ branded viscose fibers in future.
All investment projects are also helping us to meet our climate targets. We plan to halve our carbon emissions by 2030 and achieve carbon-neutral production by 2050. Both targets were recognized by the Science Based Targets Initiative in 2019. As a result, we remain the only provider of wood-based cellulose fibers on the market. We are already in a position to operate both plants in Thailand and Brazil on a carbon-neutral basis. In Brazil, we can even feed a considerable portion of surplus energy into the public grid.
The topic of energy has seldom been as pressing as it has been this year and, like many industrial companies, we have been forced to accelerate the process of reducing our dependence on external energy supplies, especially at our European plants. Against this backdrop, we are particularly pleased to have commissioned the largest photovoltaic system in Upper Austria at our headquarters in Lenzing in 2022.
I would also like to take this opportunity to offer our heartfelt thanks to you – our investors, customers and partners – on behalf of the Lenzing Managing Board. I am conscious of the fact that turbulent times such as these invariably present new and unexpected challenges. This makes your trust in our strategy and our sustainable, innovative products all the more valuable.
We have continued to improve our multiple award-winning reporting to suit our readers and have optimized the digital solutions on offer. This report offers a detailed insight into the company’s current situation, as well as its activities and achievements in the field of sustainable development. In all of these aspects, we have shone a spotlight on the people who, thanks to their commitment, made a positive contribution to Lenzing’s success in 2022 and are driving the necessary transition from a linear to a circular economy model in the textile and nonwoven industries.
Let me stress once again that we have adopted the right strategy in these turbulent times. I firmly believe that, thanks to Lenzing, we are ideally positioned to meet the growing global demand for sustainable solutions that are fit for the future. We will certainly continue to develop as a champion of circularity and play a pioneering role in this field.
In summary, I hope you enjoy reading our financial and non-financial reports and that they provide you with a lot of new food for thought.