Lenzing Ag Ord

Welcome to the Analyst Conference Call and Live Webcast. I am Yousef, the Chorus Call Operator. I would like to remind you that all participants will be in listen-only mode and that the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rohit Agrawal, CEO. Please go ahead.

Good afternoon, and a warm welcome to the presentation of Lenzen's results for the financial year 2024. Ladies and gentlemen, with me today is Nico Reiner, our CFO. We'll start with an overview of key developments. I can clearly say that the revenue, profitability, and free cash flow significantly improved in 2024, despite a continuously challenging market environment. Our revenue increased by 6% to 2.6 billion euros compared to 2023, mainly reflecting a higher level of revenues generated from fibers. EBITDA significantly rose by 30% to 395 million euros in 2024. And the margin, EBITDA margin increased from 12% to 15%. This development was driven by the positive effects of the performance program on the top line as well as on the cost reductions. Precash flow also showed a clear positive trend with an increase to 167 million euros compared to minus 123 million euros in 2023. Overall, our performance continues to show positive developments despite the lack of market returns. Moving on to the next slide, our focus remains very much on driving price and cost excellence. As I said, markets remain challenging in 2024. Let's start with a brief overview on demand, prices, as well as input cost, and we'll go into a bit of detail in the subsequent slides. On the demand side, global apparel markets developed mostly flat, while nonwoven markets continue to remain more robust. With regards to market prices, we saw a slight increase of selected generic prices on fibers compared to the end of 2023. However, the average of 2024 was lower compared to average price in 2023. On the cost side, energy and caustic soda market prices remained elevated versus pre-crisis levels. Let's go into a bit more detail and look at, first, the market demand. And we have two key markets, textiles and nonwovens, that we serve. Let's start with the textiles markets. When adjusted for inflation, global demand for apparel remained largely flat in 2024 compared to the previous year. The U.S. sales showed resilience, while Europe saw declines and China experienced stagnation. Inflation still impacted apparel retail sales in 2024. Lower consumer confidence and reduced spending appetite posed ongoing challenges in 2024 and are expected to carry into 2025. Factors such as economic volatility and geopolitical instability were also significant factors and will likely remain at the forefront this year. Maintaining balanced inventories levels has also become an ongoing priority for apparel companies since 2022. when levels were just too high. Overall, it has been and continues to be a challenging retail landscape for apparel. From 2019 to 2024, global apparel retail sales are estimated to now have grown by less than 1% per year on average, which is less than population growth and has likely led to sudden pent-up demand. Now, let's turn our attention to nonwovens. Non-wovens are developing more stable in consumer markets like absorbent hygiene wipes as their daily need items. Regulatory framework like the upcoming UK single-use plastic ban in wipes are setting the stage for a shift towards cellulosic fibers. And this paired with growing brand interest in sustainability credentials like carbon footprint. In dynamic times, local supply and supply security becomes a key value-creating aspect for lensing. Let's move and look at how the price evolution took place for generic fibers in 2024. These fiber prices are for the Chinese market. Please keep in mind that prices shown on this slide are generic market prices. Lensing prices are mainly traded at a premium. and the current share of specialties in 2024 increased further to 93%. However, the genetic market price is shown here, given indication of the price development in a major fiber market. The China's viscose market performed relatively stable in 2024. Chinese plants were producing at high operating rates, and inventories remained low in historical comparison. And the prices stood higher at the end of the year at around 13,750 RMB a ton. Looking at cotton, cotton prices were volatile throughout 2024. After a peak in February, demand concerns started to weigh on prices later in the year. The international cotton prices closed the year about 12 cents lower than 2023. Looking at dissolving pulp prices, they went up over the year as mainly stable operations of viscous plants supported demand and price development of dissolving pulp. Moving on to the next slide, we talk a little bit about the input costs, and here are two of the main ones, energy and caustic soda. They were slightly significantly higher compared to historical levels, and there was an increase in the first quarter, 2024, compared to third quarter. Geopolitical developments increased uncertainty over gas supply in Europe, while cold and windless conditions drove gas consumption for largely power generation. This resulted in a further increase of gas in the European market. Costing sort of prices were on the rise in the fourth quarter as planned and unplanned outages reduced supply. The cost side remains a challenge for fiber markets. As we just saw, the relevant markets for us still show no or little signs of sustainable recovery, especially generic fiber patches continue to remain under pressure, and input costs are still on elevated levels compared to 2020. It is therefore even more important that we took swift action last year and are implementing the holistic performance program. The program initiatives are primarily aimed at generating free cash flow and improving EBITDA, through trends in sales and margin growth, as well as sustainable cost excellence. Just as a reminder, it consists of three pillars. Profitable top line growth with full focus on margin improvement. Number two, cost excellence in all what we do. And number three, free cash flow generation. The overall impact of the program should result in significant positive free cash flow. Looking at first point of a program, the commercial activities. We have undertaken extensive actions to strengthen sales activities, such as acquisition of new customers for the most important fiber types and expansion in new markets, which are having all a positive impact. We've also updated our commercial processes, strengthened performance culture and commercial teams, upgraded compensation schemes, and introduced new sales management tools. This is all part of what we would describe as commercial excellence. A key element to increase the margin is to shift our product mix further towards premium fibers. In 2024, the share of specialty fibers increased by 14 percentage points to 93%. As another very important outcome, our fiber sales volume increased by 16% compared to 2023 to over 960,000 metric tons. With regards to the second point of our program, which is around cost excellence, we anticipate significant cost savings of which over Euro 130 million were already realized in 2024. We expect cost savings to further increase to an annual cost savings of more than 180 million euros for this year. And to make it very clear, we're talking about a recurring target with an ongoing impact beyond this year as well. Very good progress has been made in the area of product costs and quality through intelligent efficiency improvement measures. Successes have also been achieved in purchasing through operational and strategic measures. Looking ahead, the holistic performance program is expected to continue to improve manufacturing costs, and to leverage for the cost potential, particularly in the areas of overhead functions. At the same time, the structural and process improvement addressed will lead to positive effects on sales and margin generation. Here, I mentioned the performance program is currently well above plan. We can certainly be satisfied with our success so far, but there are still improvement areas ahead of us, in order to maximize our full potential. From an organization perspective, we continue to focus on strengthening our global sales. At the same time, we've adapted our corporate organization to the change market conditions, and thereby strengthening the positioning of the Lensing Group as a leading integrated fiber group. And with this, I hand over the time now to Viko Naina for an update on financials.

Thank you, Rohit. and a warm welcome from my side as well. Despite continuously challenging markets, we were able to increase both our revenues and our margins thanks to the measures that we have taken actively. Revenue increased by 50 million euros in Q4 year-on-year. Looking at the full year in total, revenues increased by 6% to 2.66 billion euros. EBITDA increased by 48 million euros or 56% in Q4 compared to Q4 2023. Looking at the full year EBITDA, it increased by even 92 million euros or 30% compared to 2023. Looking at adjusted figures, the EBITDA improvement would have been even higher. Deprivation was at €307 million, leading to an EBIT of €88.5 million, a significant increase to 2023, which was impacted by impairments. Income taxes amounted to €96.3 million compared to €7.3 million in 2023. This reflected the retroactive withdrawal from the Austrian tax group as a consequence of the interest of BNC falling below 50%. In addition, the income tax expense was influenced by the value adjustment of tax assets of individual group companies and by currency effects due to the transition of tax items from the local currency into the functional currency in a volume of 47.5 million euros. As a result, net loss attributable to Lansing shareholders amounted to 156.6 million euros. This is of course not satisfactory, and we must clearly continue to improve. Let's move to the next slide. Looking now at cash flow. Trading working capital increased by 5% in line with revenue growth and reached 578 million euros at the end of 2024. We were able to significantly decrease trading working capital since the peak levels early 2023. With regards to CAPEX, Lensing continues to put a clear focus on maintenance and license to operate projects as part of its performance program and capex significantly decreased to 156 million euros in 2024. This compares to 283 million euros in 2023. As a result, free cash flow increased by 290 million euros to 167 million euros in 2024. This development shows clearly a positive impact from the measures taken in our performance program. The fourth quarter had a negative free cash flow of 25 million euros. However, it needs to be considered that seasonal effects such as the 14th monthly salary as well as interest in tax had their impact. Let's move to the balance sheet. On the left side of the slide, we show the development of net financial debt. Net financial debt decreased by 30 million euros compared to 2023 and was at 1.5 billion euros at the end of 2024. Our leverage in terms of net financial debt to EBITDA significantly decreased by 1.3 terms and was below 4 at the end of 2024. The direction here is the right one. However, as you know, we clearly aim for further reducing our leverage. On the right side, you see the development of our liquidity cushion. It decreased by 284 million euros compared to the end of 2023 and reached 650 million euros at the end of 2024. This decrease reflects the repayment of debt mainly in the fourth quarter. In September, we announced the successful issuance of a 650 million US dollar green bond by the Brazilian joint venture, LDC. Part of LDC's new financing structure with a total volume of $1 billion is also a $350 million syndicated loan. With this, LDC converted the existing project financing, which enabled the erection of one of the world's largest dissolving wood pipe plants, into a standalone corporate finance structure. As you know, Lansing has a 51% share of the JV and is fully consolidating LDC. Based on the maturity of the bond as well as the terms of the loan, the refinancing led to a positive shift of debt maturities. Please note, that the 500 million Euro hybrid bond is not included in the numbers on this slide, as it is treated as equity in our balance sheet. Financing considerations for 2025 and beyond are ongoing in a structured and professional way, and we will communicate any potential next steps in due course. With this, I hand back to you, Rohit, Thank you.