Lenzing Ag Ord

Yeah, perfect. So good afternoon, everyone, and thank you for handing over to me. And thanks to everyone for joining our call today. Today, we're going to walk together through Lansing's result for the first quarter of 2026. Just a brief look into the agenda. I will start with the key highlights, followed by an update on the market environment, as always. And then I will take you through the financials in more detail, including the EBITDA, the cash flow, the working capital, and our balance sheet position. And finally, we will end with our current view on the outlook before we move to the Q&A session. Let me start with the key highlights of the first quarter of 2026. As we also discussed in March this year, the year began in a very challenging geopolitical and macroeconomic environment, in particular the escalation in the Middle East, which has increased the uncertainty across energy, chemicals, logistics, and finally also consumer markets. Against this backdrop, we delivered a revenue of €616 million, which is an 11% decline year-on-year and slightly below the fourth quarter of 2025, reflecting the still challenging market environment and lower pulp volumes. Please keep in mind that especially the first quarter of 2025 was particularly strong with a worsening economic situation over the following quarters 2025 following the tariff announcements in April. Our EBITDA increased significantly compared to the fourth quarter 2025 to €116 million, corresponding to a solid EBITDA margin of 19%. This underlines the continued impact of our pricing and cost excellence initiatives and the measures that we have taken, supported by some one-off effects that we will also discuss in today's meeting. The cash generation was particularly strong. The unlevered free cash flow reached 66 million euros, supported by, again, disciplined CapEx control and continued working capital management. Overall, Q1 confirms that we are making progress on what we can control, cost discipline, cash generation, and commercial steering. With that, we were able to deliver a net profit of €24 million after three consecutive quarters in a loss position. Now, let's step a bit closer to the current market environment. The global apparel market in the textile industry showed stable growth in the first quarter, but the consumer sentiment remained cautious. We saw first signals of an easing situation after the tariff announcement last year, than the backdrop with the conflict in the Middle East. However, demand was supported by a stronger trend in the US and China. Lower income consumers continued to reduce discretionary spending. The non-woven markets, in contrary, remained more resilient, particularly in Europe and North America. We continue to see some structural support from the conversion towards more sustainable and plastic reduced materials. In our dissolving wood pulp division, the demand remained closely linked to the production of regenerated cellulosic fibers. We experienced high downstream operating rates together with some supply disruptions with some of our competitors supported an improvement in our price level. Overall, the market prices for both fiber and dissolving wood pulp improved during the quarter Just as a reference, the CCF China index for viscose increased by 1.4%. The CCF for lyocell increased by 3.4% over the quarter. So there is also a bit of a market recovery that we could see over the first quarter. But overall, the broader market environment remains volatile, and visibility, especially over the entire year, is still limited. Let me now address the impact of the war in Iran on our business and the mitigation measures that we have defined. As we discussed also last time, we do not have direct business with Iran. Our sales exposure to the Middle East is limited. However, we are seeing some indirect effects across our value chains. These include some higher logistic costs, increasing chemical prices, wood and energy costs, from the second quarter onwards, and risks around the chemical supply security. We're closely monitoring the price and the cost development, and we have defined clear mitigation actions. These include a pass-through of higher costs where possible, a much more tense pricing policy that we're currently doing, and also pricing process, where even on a daily and weekly basis, we adopt and adjust minimum prices. We further focus on value-equative allocation of volumes across customers and regions, and we strive to establish alternate supply routes for key chemicals. In addition, we continue to prepare further cost-saving initiatives. Our focus is to limit negative effects as much as possible. Turning now to the fiber business first, the fiber sales volumes. remains broadly stable compared with the fourth quarter of 2025 at 220,000 tons. So it's a plus 1% compared to the last quarter. This still reflects our measures that we have taken during 2025 to adjust our capacities, especially in our Indonesian asset. The demand stabilized and we see a strong push through the supply chain at the moment with a strong order book development. The average fiber sales prices improved in the first quarter. In Euro terms, the prices increased by 3% to 2 or 1 euros per kilogram, while in US dollar terms, they increased by 2.7% to 2.35 US dollars per kilogram. The increase was supported by a favorable FX development and an improvement in our price premium versus the generic market prices. We just talked about the CCF viscous index that increased by 1.4%. So you can see that in the mix, we were still able to outperform the overall market. The development is consistent with our strategy, the focus on disciplined pricing and value generating volume allocation, rather than volume growth at any price. So the premiumization strategy is paying off. Let me now turn the page to the parts business. The dissolving wood part production volumes decreased by 5% compared with the fourth quarter to 292,000 tons. The third-party sales volumes were down by 18% to 166,000 tons. The lower external sales volumes were driven by an increased internal supply demand, as well as the seasonal impact of the Chinese New Year. At the same time, the dissolving wood prices stabilized in the first quarter. The average sales prices remained flat at around 69 euro cent per kilogram. We all remember the downward rally that the dissolving wood part price had to face in 2025, where we hit rock bottom in quarter four. At the moment, we do see a positive ASB development. We cannot see the in-quarter development here, but let me report on that. The ASB moved from approximately $799 per ton in January to more than $820 per ton in March. And we currently see further positive signals into quarter two. Let me briefly comment on input costs. Energy market prices increased again in the first quarter of 2026. This is also a clear outcome of the Middle East conflict. Electricity prices in Austria, natural gas prices in Europe, both remain significantly above the historical levels. If we look on caustic soda as a reference material for our chemicals, we saw some easing in the first quarter, but the price levels still remain elevated compared with the historical base year 2020. And here, please keep in mind that this development in the chemical cost sector does not contain any impact from the Iran conflict yet. So we anticipate the NAOH prices to increase by more than 10, even 20 percent in the second quarter compared to the price level prior to the conflict. This means that input costs continue to be a material burden for the industry and also for Lansing. the situation might further increase the volatility, particularly for energy and chemical markets, which we very diligently currently look at. So we continue to be disciplined in cost to increase operational efficiency and also to be very stringent in our pricing measures with regard to our top line. A main pillar remains our performance program And a main pillar of our strategy is also excellence. In line with this, we've already shown a strong performance over the years 2023 to 2025 with the 200 million of cost savings delivered. Building on this, we have defined additional measures out of the 45 million euro in personal expenses that we announced already September last year in 2025. The first 25 million euro are delivered. so we can tick box that and will be followed by additional cost saving measures which are currently under preparation at the moment. So our clear and continuous commitment to deliver on our cost structure. Now let's shift gears and turn into the financial section. First the overview and you can see always the comparison to first quarter in the prior year and the last quarter in 2025, so that we can better reflect on the U-turn that we're currently in. Quarter one, 2026, was characterized by lower revenues year-on-year, but a strong sequential improvement in EBITDA and continued progress on cash flow and the balance sheet. The revenues at €660 million, as reported, down 11% year-on-year and 2% compared with the fourth quarter, 2025. EBITDA at €116 million down year-on-year, but up 60% compared with Q4. This corresponds to an EBITDA margin of 19%. Very important, unlevered free cash flow amounted to €66 million, which is an up of 66% year-on-year, a slight decrease, 24%, compared to a strong Q4 that we also steered towards the year-end. The trade working capital, we continued to reduce by 29% year-on-year, down to a level of 425 million euros now by end of the first quarter. On the balance sheet, the net financial debt declined by 9% year-on-year to 1.36 billion euros, while the liquidity cushion increased to a bit more than 900 million euros. On the next page, Let's move through the developments in revenue and EBITDA in more detail. And please note that this page now is compared against quarter one of the prior year, whereby in some passages of this presentation we correspond or we compare to quarter four in order to give you a better understanding on the current development and the situation. In quarter one, the group revenue declined down to 616 million. We talked already about that. Main driver, lower fiber production and sales volumes compared to the very strong first quarter and exceptionally strong quarter one in 2025. And also dissolving wood pulp price developments. The EBITDA decreased year-on-year to 116 million euros. The EBITDA and the EBITDA margin were supported by continued cost excellence and pricing measures that we have taken. Some one-off effects, especially, and to walk through them, the sale of surplus CO2 certificates in the amount of 14 million euros. This is not compared to prior year. This is the absolute amount. The positive valuation effect from biological assets in Brazil. in the amount of 13 million euros and the first time consolidation of 3-2 Textile. You remember that in February we took over the majority stake in 3-2 Textile and thus had to account for the first consolidation in the first quarter. So there is a bad will that we could account and that was a bit diacritic to us of 12 million euros while at the same time We now fully consolidate also the cost of this trend venture, which amounts to approximately €1 million a month, so €2 million is the cost impact, €12 million is the positive EBITDA impact. The key message here is that we were able to defend solid profitability level despite the challenging volatility in the market. Let us now walk through the EBITDA bridge and now again against the previous quarter, so quarter four 2025, to better discuss the evolution of the market and of the company. Again, EBITDA increased by 60% from 73% on a week, quarterly EBITDA in quarter four 2025 up to 160% now in quarter one. We can see that the improvement is mainly stemming from positive margin effects in the fiber division with a 6 million quarter-on-quarter effect, as well as additional cost savings of 16 million euro, higher sale of CO2 certificates with 5 million quarter-on-quarter effect, some positive effects impact, 6 million euro quarter-on-quarter, and the already discussed positive one-timers with regard to tree-to-textile, so 10 million euro impact. in that regard. These positive drivers more than offset the ongoing burden from inflation and weaker market-related effects in the pulp division. So the pulp division, quarter on quarter, is down by €6 million, driven by the lower sales. This bridge again clearly shows that the internal measures are keeping traction and are helping to stabilize the earnings situation even without sustainable market recovery until now. Looking at the quarterly trends, I think this reconfirms the picture that I just have drawn. Revenues have slightly decreased over the last years. This reflects the strategic shift from the volume-driven growth towards value generation, including the targeted cut of unprofitable volumes that started in the course of 2025. also with the idling of some of our assets in that year. At the same time, in our quarter-on-quarter EBITDA increased by 44 million euros compared to the fourth quarter of 2025. And the continuous focus is not on maximizing volume, but on improving the quality of our earnings, on improving the margin resilience, and improving further the cash generation. I think the first quarter therefore represents an optimistic step back into the right direction. Turning to cash flow and working capital, trade working capital decreased significantly year on year, mainly driven by lower inventory levels. Just reported on the 425 million euros as per end of quarter one. Cap expense remains very disciplined at 28 million euros, so this is a let's say, a slow start into the year, given the overall CapEx amount that we planned for the year. As a result, unlevered free cash flow increased by 26 million euros to 66 million euros for the first quarter. And this clearly remains one of the core management priorities for 2026. Taking a step closer to the components of working capital, This is just a detail for your reference. So main driver is on the inventories, where we continue to adjust all levels of wood, of chemicals, of finished good fiber, and also of pulp in our sites. So in terms of cash generation, this clearly pays back. Trade receivables also with a... Good development year on year. A slight increase over the last quarter. Same for the trade papers. I think here we see an OK development. Let's move to the balance sheet. The net financial debt, as we have seen on the overview page, improved to 1.36 billion euros. Good reduction year on year. the improvement mainly driven by free cash flow generation. At the same time, liquidity caution remains at a very solid level above 900 million euros. This is also a level that we discussed in our earnings call two months down the road. This gives a solid financial buffer in a period of high market uncertainty and further supports the ability to continue in executing our strategy. The financing profile or maturity profile and maturity structure remains well balanced. There is no changes with that regard and thus I propose that we jump over this page and leave it as it is. And we move to the outlook. Let's again start with the broader implication of the escalation in the Middle East. The war, as we just discussed, has multiple effects on the textile, nonwoven, and pulp industries. So disruptions in oil and gas supply through the Strait of Hormuz lead to higher energy costs. This is one important factor. Further secondary effects, availability of chemicals and also on market prices of chemicals. which increased the production cost for pulp and cellulosic fibers from quarter two onwards. Wood prices also remain elevated. So there is a disruption in the construction area, especially in the Middle East, which leads to a slowdown of the sawmills in our region here in middle Europe. And thus, currently, wood prices are heavily elevated. and our pulp costs are impacted with that regard, and container shipping also remains being impacted from the current situation. As an upside, the higher crude oil prices increased the cost of synthetic fibers, so when we talk about substitution, and our, let's say, competition in terms of fiber types. So we have seen a rally in terms of the ASP average selling price for synthetic fibers with more than 20% over the last weeks. Cotton, on the same token, is affected by higher cost for fertilizers, also driven by the Iran war. And just as a remark, and you might look it up, as of yesterday, cotton price was beyond $2 per kilogram after an increase by 4% to $1.70. from December to March, so there is also certainly some tailwind with regard to substitutional products that support us in our pricing efforts and in passing through our costs to our customers. But we stay exposed to the indirect effects of costs on logistics, on chemicals, on wood, on energy, and on potential weaker consumer sentiment, which we try to mitigate as discussed in one of our earlier slides. If we summarize the outlook, Q1 2026 was constructive despite a challenging geopolitical and macroeconomic environment, including the uncertainty given still with the tariffs, the escalation in the Middle East. We saw improved price trends in both pulp and fiber compared with the fourth quarter with further positive indications for 2026. However, energy and raw material costs are expected to remain elevated depending on duration. And if the conflict intensifies, this will continue to weigh on the earnings situation starting 4 to 2 onwards. Again, we are closely monitoring the developments and will continue to mitigate negative effects through pricing, cost discipline, alternative supply, routes, and value equity for value-oriented volume allocation. Still, due to low visibility and the high level of uncertainty, we decided to further not provide any guidance for 2026. However, the key priorities remain unchanged. Pricing, cost excellence, working capital management, and thus the focus on cash. With that I will end my presentation and will hand back over to the operator for the Q&A. Thank you.

Thank you very much, Mr. Breuer. Ladies and gentlemen, we'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to save the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may present one at this time. And the first question comes from Christian Feitz from Kepler Chevreul. Please go ahead.

Yes, good afternoon, everyone. And congrats on the results in these very challenging times. A couple of questions on demand, please. First of all, do you have a feel how much customary stocking is happening because some of your clients might fear significant supply disruptions going forward or have feared already starting in March, actually? And in that context, indeed, how has demand improved in March versus January and February levels? And the second pocket of questions would be, Do you fear any supply issues for your own plants, particularly in Asia? And you mentioning the pulp prices, higher pulp prices in Europe, when do you see wood prices to go down? Thanks very much.

Christian, thanks for the questions. So first question was on the restocking effect with regard to the demand. So I agree that when the Iran conflict broke out, the first impulse of our customers that we could see was kind of a bit panic buying and trying to fill up the supply chain. And we are very careful that we outbalance that and understand the demand metrics going forward in order not to run into a situation where demand is dropping and we see a bullwhip effect into our sites and thus also in the working capital. So this was clearly also on our agenda as the management board. The first reaction and impulse reaction of the customers that we have seen and perceived in March compared to January, February, which was a bit, okay, let's now place orders. We need to fill up the supply chain, is now moving into a more consistent pattern. I just talked about also the rally on synthetic fibers and cotton fiber prices. So this gives us currently some tailwind that we expect also. We are carefully optimistic that in the second half year of 2026, we continue on a healthy demand and that does not fully um let's say wipe us back so uh here i would say we are carefully optimistic that we can keep that level however the visibility still is is not very strong you understand the nature of our business especially in the textile business it's a very short-term business that can move very quickly on the second question with regard to the supply issues for our own plants um the we had uh already some issues uh on our indonesian assets so With regards to caustic soda, we are supplied with two local suppliers, one of them declared force majeure due to the Iran conflict. We managed to open up alternative supply routes with that regard and are fully supplied also in SPV. At the moment, we don't foresee any further supply. Just to conclude on that, the supply disruption was lasting not even a week, so we managed it very well. For the other sites, especially in Europe, but also in Thailand or China, at the moment we don't foresee any supply disruptions. We don't have concrete indications that there is something in line of sight. The big question is, again, a matter of visibility into the second half here. And the question was on wood. So the wood price really started in February already. And when you talk about wood procurement and wood supply, you always have to follow a defined radius. It doesn't make sense to cover long distances with regard to wood supply because it simply elevates cost. we don't have a concrete answer on when we expect the cost to go down because the soil needs to ramp up again. Construction needs to ramp up again. So the utilization of the sawmills is here key because when looking at, let's say, typology of a forest, typically the very... Let's say that the nice linear wood goes into the sawmill and the lower priced wood goes into the pulp industry. So it's highly dependent, but we hope that we find some improvement here in the second half year.

Thanks very much. Very helpful.

The next question comes from Sebastian Bray from Birenberg. Please go ahead.

Hello, good morning, or good afternoon, I should say, and thank you for taking my question. I'd have two, please. The first one is just on what the underlying EBITDA was in the first quarter of the year. So the nominal is 116. Am I right in saying that taking off the CO2 credit sales, which are 13.7 million, the revaluation adjustment to 13.3, and then the goodwill reversal of value upwards of goodwill, is of about 12. Is that 78, let's call it 80 million or so underlying run rate? And that's my first question. And my second one is on CapEx. This has been another quarter where Lansing has been able to keep this at quite a low level. Is 30 million a quarter just a reasonable assumption for the remainder of the year? Thank you.

Hi, Sebastian. Thanks for the questions. I start with the second question because it's faster to answer. So the 30 million is clearly not the level that we can contain. This would be even below 2025, which was a rock bottom cutback. So we still consider a level above 2025 as reasonable for this year. You remember in our last call, we indicated a level of 160 to 180 million for 2020. 2026, which still holds true. On your second question with regard to the underlying run rate, in principle, your math is correct. Just keep in mind that also in the prior quarters that we compare against, we also had impacts of asset valuation and CO2 certificates. And also for the coming months, there is an excess share of CO2 certificates that we can sell to the market. Yeah, but in principle, your method is correct.

And just to check, are the sales of CO2 certificates largely done after the current year? Because my understanding is that the EU will then start to adjust the free allocation of production allowances downwards at a certain quota is not it for the minimum production level.

It highly depends on, let's say, political structure and the regime with regard to the CO2 certificates going forward. In principle, we receive more than we consume. So this gives us an excess share that we can sell. And in our current planning assumption, even for 2027, we consider a potential for further sales.

That's helpful. Thank you for taking my questions.

The next question comes from Patrick Steiner from OdoBHF. Please go ahead.

Good afternoon. Thank you for taking the questions. Two remaining from my side. First of all, could you give us more details on the refinancing needs in 2026 and the impact on interest costs? And secondly, do you already have a feeling of how these set of effects on prices and input costs will affect your margins over the next two to three quarters? Thank you.

Yeah, I again start with the second question. So if I understood it correctly, so the increased input cost in quarter two and going forward, how those might affect the margins. So as I said, our key goal is to pass through any cost increases with a very stringent price approach. This is key. And if we are consistent with that approach and if we are successful with that approach, We hope that we can mitigate any increases in the fiber section. In the pulp section, we also talk about cost increases where we try to pass forward chemical cost and wood price cost for PASCOV. It might have an impact if we are not entirely successful with our approach, but the goal is, again, to fully compensate for that. That's the clear management priority. With regards to refinancing need for end of the year, you're right, there's some maturities, especially in the German Schultern Darlehen in quarter four, that in our planning we foresee to cover. First of all, we come from a good and solid cash position and liquidity cushion. Second, we foresee smaller refinancing instruments with regard to UKP financing in our planning for that year. Discussions are already starting.

Okay, thank you very much. So no negative effect on interest costs going forward from this refinancing?

This is not a high interest financing, so no negative effect.

Okay, thank you very much. Very helpful. Thanks.

the next question comes from gregor koppensteiner from rbi please go ahead uh yeah also good afternoon from my side just a quick question here um how do you cope with this higher energy costs do you have any hedges in place and if yes what is secured in terms of exposure and how long is your time horizon and are there also some hedges for chemicals in place thanks so

Hi, thank you. So we do have a hedging policy for energy costs. First of all, please keep in mind that especially in our Austrian side, in Lenzing, we are 90% backward integrated with our own energy production. So there is a minor impact with that regard. But we follow a hedging policy of hedging approximately 60% of the open positions. And this holds true for the current year as well as for the following year. So in principle, this approach is aligned within the management board and is fully implemented at the moment. The second question was on hedging for chemicals. No. So we don't do. We are in spot markets with that regard.

Thank you.

As a reminder, if you wish to register for a question, please press star and one on your telephone. There are no more questions at this time. I would now like to turn the conference back over to Matthias Breuer for any closing remarks.

Yeah, let's keep it short. Thanks for attending. And latest in August, we follow up with a second half year. I'm looking forward to that and wish you a good time until then. See you soon. Bye-bye.