Inflation crashes business plan of Altri’s biggest competitor in lyocell production » Galicia

An unfavorable scenario exceeds the plans of the Portuguese altri Establishing a textile fiber factory at Palas de Rei (Lugo), the flagship project promoted by Xunta European funds New Generation. The innovative plant for the production of viscose from wood to supply the fashion industry would have few comparable plants in the world, despite the increasing use of such materials in textiles. European criterion lenzing, an Austrian company that issues more than 2,000 million invoices per yearhowever, it triggered alarms due to inflation and “hard” market deterioration. It does so just months after commissioning the world’s largest lyocell plant in Thailand, one of the materials Altri plans to manufacture in Lugo, and after increasing revenue by 25% in the first half of the year.

Until then, everything seemed to be going well for Lenzing, even confirming that it will close the year with an EBITDA “significantly higher” than in 2021, when it reached 362.9 million. This happened on August 3, despite the decline in margins and lower profits, which the accounts for the first six months of the year already showed. Everything changed in September. The company launched a snow alertIt suspended its forecasts for this year and warned that its business plan is at risk in terms of financial targets through 2024 as its long-term strategic approach has not changed. The result was a 38% drop in the stock market in just over a month..

If the Portuguese pulp mill launches the Galician mill, Lenzing will become one of Altri’s competitors in the business of providing sustainable fiber to the textile industry. However, the scarcity of players in this sector indicates that there will be a large market for both and it may even be necessary for the Portuguese group to cooperate with the Austrian, which appears to be a possible technological partner for the Palas de Rei factory. .

Lenzing does not see this clearly

“We are experiencing unprecedented disruptions in the energy and commodities markets that affect the consumer climate and significantly limit our visibility into short- and medium-term business development.” Lenzing’s CEO explains: stephan silafThe decision to suspend forecasts for the current year, promising significant growth in revenue, EBITDA and profit. The company explains that the evolution in 2022 can only be predicted to a limited extent. “extremely low” visibility into demand for their products and the high volatility of energy and raw material costs.

He points out that the war in Ukraine, China’s zero-Covid policy and rising inflation have had a strong impact on the global economy, to the point where the International Monetary Fund lowered its growth expectations from 3.2% to 6.1% compared to last year. «This drastically deteriorated market environment is increasingly challenging the consumer climate, as well as sensitivity in Lenzing-related industries. As a result, expectations for job prospects have again dropped significantly,” the company says.

Relying on its new factories in Thailand and Brazil, the group believes its long-term strategy is correct. The roadmap is to promote “specific biodegradable” fibers, ie those with higher added value; to invest in renewable energies in all its locations; Supplying the soluble pasta plant in Brazil; and its four reference brands Tencel, Lenzing, Ecovero and Veocel, accounting for 75% of revenue. But the Austrian company admits this. Business plan and dividends planned for 2024 also “at risk” with the current scenario

Plan to achieve 1,000 million ebitda

Lenzing’s strategic plan foresees EBITDA of 800 million by the end of 2024, compared to 363 million in 2021. Debt of 1,502 million should be 2.5 times below EBITDA, and ROCE, which is an indicator of profitability related to profits, should be 2.5 times below EBITDA. The pre-tax and interest on capital used to acquire them would exceed 10%, two percentage points more than 8.1% in 2021. Curiously, the ultimate financial goal of the corporate strategy that the company presented in June of this year, to be Getting more than 1,000 million ebitdas by 2027, with a ROCE of over 12%. Now, it looks like the plan is about to explode.

The Austrian group’s difficulties have caught Altri as it prepares to land at the Palas de Rei, but it has yet to be confirmed whether it will make the necessary investment to build the facility. The Portuguese pulp mill stated that it will decide over 700 million that the mill needs. in June 2023. By then, it will be clearer whether it will receive European funds to build it and whether it has the right partners for the development of the project.

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