Lenzing Ag Ord

Thank you, Carmen. Ladies and gentlemen, welcome to the presentation of Lenzing's results of the first quarter 2025. With me today, as usual, is Nico Reiner, our CFO. Let's start with an overview of the key developments. Revenue and EBITDA continue to improve, also in the first quarter of this year, in a market environment that remains still challenging. Our revenue reached 690 million euros, an increase of 5% compared to the first quarter last year. EBITDA more than doubled compared to the first quarter 2024 and reached 156 million euros with an EBITDA margin increasing from 11 to 23%. Free cash flow was back to positive in the first quarter. However, not on the very high level we have seen in quarter one of 2024. Overall, our performance continues to show very positive developments despite the lack of market recovery. As I said, the markets remain challenging also in the beginning of 2025. Since the inauguration of Donald Trump and his first tariff announcements, market uncertainty has clearly increased However, the direct impact on the first quarter 2025 was still relatively limited, as the measures intensified in the beginning of the second quarter. Let's start with a brief overview on demand, prices, as well as input costs. On the demand side, global apparel markets developed mostly flat, while non-urban markets continue to remain more robust. With regards to market prices, we saw a slight decrease of selected generic fiber prices compared to Q4 2024, especially towards the end of the quarter. On the cost side, energy and caustic soda market prices remained elevated versus pre-crisis levels. Let's look at the relevant markets for lensing, textiles and nonwovens. When adjusted for inflation, global demand for apparel remained almost unchanged, with modest growth in the first quarter versus last year. However, there were slight differences in the regional comparison. While demand in China developed slightly positively, consumer confidence in the U.S. fell sharply over the quarter due to political uncertainty. This development was also reflected in falling US apparel retail sales in February. Demand recovered in March after the US consumers stocked up on apparel given the expected price increases due to the announced tariffs. Overall, US apparel retail sales grew marginally year-over-year in the first quarter. However, in Europe, demand for apparel fell due to increasing consumer uncertainty. Low consumer confidence and reduced spending appetite remains ongoing challenges in 2025. In addition, economic and geopolitical instability, considering the U.S.-China trade war, keeps the uncertainty high. Now, let's turn our attention to nonwovens. Also in nonwovens, tariffs play a major role, but particularly Chinese sellers are looking for alternative outlets for volumes so far going into the U.S. End markets show high resiliency with a relatively stable consumer demand. The trend towards less plastic is ongoing, and the carbon footprint and other sustainability credentials are increasing, becoming a differentiator for nonwoven manufacturers and brands, and driving interest for more sustainable fibers. Moving to looking at the prices. Now, these are fiber prices of 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 specialities is at over 90%. However, the generic market prices shown here give an indication of the price development in the fiber market. Now, most of the first quarter, the Chinese viscous market performed stable. Chinese plants were running at high operating rates, and inventories remained relatively low. However, the spring peak season that traditionally emerges in March was overshadowed by macroeconomic developments. Demand and prices did not increase as expected. Instead, they started to gradually decline towards the end of the quarter. The price for medium-grade viscose fiber stood then at RMB ton 13,300 which is about 3% below beginning of the year. Now let's look at cotton prices. Cotton prices were already suffering from weak demand before the US-China trade intensified again. The United States is the second largest source of Chinese cotton imports. It is expected that China will source more cotton from other countries, probably Brazil and Australia in the future. The main concern is that a downturn in the global economy could have additional negative impact on demand. The pressure on dissolving pulp prices increased during the first quarter as downstream markets became weaker and paper pulp prices were on a very low level. Suppliers made some price concessions and the dissolving pulp prices came down a bit from the highs of 2024. Moving to input costs, energy and chemical costs are still significantly higher compared to historical levels and cost pressure partially increased compared to the previous quarter. Colder than expected weather and geopolitical developments drove European gas prices even higher while reduced demand weighed on Southeast Asian coal prices. Caustic soda prices slightly reduced in Europe due to weaker demand. but they increased in Asia as companies built up inventories ahead of Lunar New Year holidays. Hence, cost side remains a challenge for fiber markets. As we saw, the relevant markets for us still show no or little signs of a sustainable recovery with especially generic fiber prices continuing 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 with the holistic performance program. The program initiatives are primarily aimed at generating free cash flow and improving EBITDA through strengthened sales and margin growth, as well as sustainable cost excellence. As a reminder, it consists of three pillars. Profitable top-line growth with full focus on margin improvements, cost excellence in all we do, and free cash flow generation. The overall impact of the program should result in a significant positive free cash flow. Now let's look at a second point of a program, which is cost excellence. In 2024, we already realized our Euro 130 millions in cost savings. Now we do expect cost savings to further increase to an annual cost savings of more than Euro 180 million for this year, and we are clearly well on track to meet this target as well. To make it clear, we are talking about a recurring target with an ongoing impact beyond this year as well. Progress continues to be good in the area of product cost 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 further cost potential, particularly in the area of overhead functions. At the same time, the structural and process improvements addressed will lead to positive effects on sales and margins generation. 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. And with this, I hand over now to Nico Reiner for an update on financials.

Thank you, Rohit, and also 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 actively taken. Revenue increased by 32 million euros in the first quarter compared to quarter one in 2024 and reached 690 million euros. EBITDA more than doubled and increased by 85 million euros to 156 million euros. As the number of CO2 certificates helped continue to increase in 2024, we decided to sell some of them in the amount of 25.5 million euros, which positively impacted the EBITDA. Deprivation was at 82 million euros, leading to an EBIT of 74.3 million euros, which compares to 1.5 million euros in Q1 2024. Income taxes amounted to 3.3 million euros compared to 9.2 million euros in Q1 2024 and the financial result was 39.2 million euros compared to 19.2 million euros in Q1 2024. As a result, there was a profit of 4.7 million euros for Lensing shareholders. This is a clear improvement compared to the loss of 32 million euros in Q1 2024 And our target is clearly to continue to improve. Let's move to the next slide. Looking now at cash flow. Trading working capital increased by 16% to Q1 2024. Our objective is to have the right balance. I would say that levels at the end of March were a bit on the high side, and we aim to reduce it. 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 remained on low levels of 33 million euros in Q1, comparable to the first quarter last year. As a result, free cash flow was positive again at 15 million euros. that was not as high as in the first quarter 2024, partially impacted by one-offs. We clearly continue to have a very clear focus on free cash flow. Let's move to the balance sheet. On the left side of the slide, we show the development of net financial debt. It remained relatively stable at around 1.5 billion euros. On the right side, you see the development of our liquidity cushion. It decreased slightly by 14 million euros and reached 636 million euros at the end of the first quarter. With this, I hand back to you, Rohit.

Thank you, Niko. Let us now move to a topic which is probably keeping every company busy at the moment, which is the U.S. tariffs. While in Q1, the key focus was mainly on the dispute between the U.S. and its neighbors with Mexico, Canada, as well as the 10% and later 20% on all imports from China, we saw limited impact in our Q1 result. However, the actual escalation from reciprocal tariffs followed in early April. With the now ongoing 90-day pause, we have 10% additional import tariffs into the U.S. and 145% additional on Chinese imports imports into the U.S., while China levies 125% of import tariffs on U.S. goods. Now, this has led to both supply and demand shocks, a collapse of China-U.S. trade, and two, an impact of global value chains and supply chains. Now, as a globally active company, those tariffs do have an impact on Lenzen, as they make our imports of raw materials for our U.S. manufacturing site in Mobile Alabama more expensive. And they come with a lot of uncertainty from secondary effects, which today are hard to estimate. Let me just give you one example. U.S. tariffs will make goods more expensive for consumers, which might lead to hesitancy to spend and eventually lower demand volumetrically. All in all, everybody in the industry is scrambling to deal with the situation and plan in scenarios given the high uncertainty. Still, we believe lensing is better positioned than other fiber manufacturers given our global footprint. And needless to say, we are working on a set of mitigation measures which include switching supply routes for input materials such as dissolving pulp and chemicals, and shifting fiber volumes between a production size to optimize for existing and possible tariffs, and really supporting our customers. In general, We maintain very close contact to our customers in regional value chains to handle the situation in the best possible way with our partners. Let's move a little bit and talk about the outlook. I can clearly say that thanks to our performance program, the operational performance in the first quarter of 2025 was solid. We assume stable demand in bulk and have a cautious outlook on the generic fiber market development in 2025-2025. and we expect energy and raw material prices cost to remain on elevated levels. However, market visibility is low, and that is further intensified due to the current changes in global tariffs, the potential impact of which is continuously being evaluated. We have set up a task force to analyze the situation, and mitigation measures are being added or adjusted depending on the developments. While the market has not helped us so far, We are not waiting on tailwinds from the market. We continue to take the future in our own hands. And we expect operational results to continue to be positively impacted by the performance program. Therefore, we expect EBITDA for the 2035 financial year to be higher than in the previous year. With this, I will hand over back to the operator for the Q&A.