Commodities

Fibres producer Lenzing swings to H1 loss but sees ray of hope

Fibres producer Lenzing swung to a loss in the January-June period as low prices and weak demand hit its business but it said textile fibre markets have started to recover since June.

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VIENNA, Aug 5 (Reuters) - Fibres producer Lenzing LENV.VI swung to a loss in the January-June period as low prices and weak demand hit its business but it said textile fibre markets have started to recover since June.

The Austrian group, which produces cellulose fibres derived from sustainable wood and pulp for customers including H&M HMb.ST, Victoria's Secret LB.N, and Levi's, booked a loss of 14.4 million euros ($17.0 million) in the first half of 2020 after making a profit of 76.8 million euros last year.

Lenzing is facing a pricing decline in its core commodity, viscose, and crumbling demand in its main end-market textiles but is investing in new production capacities, which is pushing up its debt.

The group said it expects its revenue and operating performance in the third and fourth quarters to exceed those it reported in the second quarter.

However, the recovery in its textile fibre markets since June still saw varying regional prices and demand momentum, Lenzing said.

Its nonwoven fibres unit, which produces cleansing tissues, sterile wraps and plasters, accounted for more than half of revenues in the second quarter as it benefitted from increased hygiene awareness due to the pandemic.

Lenzing said it was fully committed to its expansion projects in Brazil, where it is building a $1 billion pulp mill in a joint venture with Duratex S.A DTEX3.SA, and Thailand, where it is building a 400 billion euro production site.

It said both would make a significant contribution to earnings from 2022.

Net debt increased to 809.3 million euros by the end of June, up from 511.4 million euros at end-December.

($1 = 0.8467 euros)

(Reporting by Kirsti Knolle Editing by Michelle Martin)

((kirsti.knolle@thomsonreuters.com; +43 1 2530 1650 13;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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