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By
Reuters
Published
May 15, 2014
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Lenzing says cost cuts ahead of plan, shares rise

By
Reuters
Published
May 15, 2014

VIENNA, Austria - Austrian viscose-fibres maker Lenzing's profits fell by less than expected in the first quarter as it accelerated a cost-cutting plan, lifting its shares more than 5 percent.


Lenzing said on Thursday core profit fell by 30 percent as a rise in output was outweighed by weak prices for viscose that it saw lasting for months ahead - although there had been a slight increase since a year-to-date low in April.

Prices for viscose fibres, which are closely linked to cotton prices, are falling as Chinese producers who account for most of the world's production add capacity to meet demand for China's large textile production sector.

Lenzing said its 2014 savings would "significantly exceed" the 60 million euros ($82 million) it had set as a floor, as it implements a tough savings programme that includes cutting 15 percent of jobs at its largest site.

Shares in Lenzing pared gains to trade 5 percent higher at 46.04 euros by 0933 GMT, off a high of 46.08 euros and outperforming a flat European chemicals index.

Kepler Cheuvreux analyst Stephan Trubrich said sales and earnings were above the bank's and consensus forecasts. "The company's launched cost-optimisation programme contributed strongly to the Q1 earnings beat," he wrote in a note.

Lenzing said its total fibre sales volumes rose 9 percent to a record 235,000 tonnes in the quarter but could not compensate for a 12 percent fall in prices, leading to a sales decline of 9 percent to 452 million euros ($620 million).

Earnings before interest, tax, depreciation and amortisation (EBITDA) were 46 million euros.

"Further weakening of global viscose fibre selling prices is anticipated. It is likely to take several quarters until the existing surplus production capacities for viscose fibers are reduced," Lenzing said.

Lenzing, the global leader in cellulose fibres, is focusing more on its specialty fibres Tencel and Modal to boost margins. It said Modal generated good sales volumes in the first quarter and it achieved a stable price premium for Tencel.

$1 = 0.7294 Euros

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