Lenzing AG: Satisfactory First Quarter 2003 after 2002 – the Best Business Year in the Company's History

"Larger quantities of produced fibers, as well as a product mix, which was improved once more in favor of specialty fibers, were the reasons for this increase in results. Moreover, we succeeded in achieving this further improvement, compared to the already very good previous year, against the background of an unfavorable development of the business cycle and the currency situation," comments Thomas Fahnemann, Chairman of the Board of Management, the result for the first quarter.

Fiber production lines work at top speed

During the first quarter 2003, it was possible to decouple the fibers sector of Lenzing AG to a very large extent from the unfavorable overall environment. In the first quarter, too, fiber production lines at Lenzing AG worked to full capacity. The expansion of the Lenzing site to a fiber production of 200,000 tons per year, as well as to a pulp production of 210,000 tons per year, which was decided last year, is proceeding according to schedule. It is expected that the project will be completed by year end 2003 or in early 2004.

Demand for Lenzing Lyocell fibers continues to be positive, the production line at the Heiligenkreuz site is working to full capacity. In spite of the pressure, caused by currency factors, it was possible to improve the result for the first quarter, compared to the first quarter of the previous year, on account of larger quantities. Again, the expansion of the Heiligenkreuz location by another production line, to 40,000 tons per year, is proceeding according to plan.

South Pacific Viscose (SPV), our Indonesian associate, recorded a very good result for the first quarter 2003. The quantities sold, as well as the prices obtained were better than had been expected. Exports, in particular, developed very positively. The sales obtained by Lenzing Fibers Corporation, our US minority share holding, for the first quarter were satisfactory, especially in the nonwovens sector. However, there is some pressure on margins, due to massive increases in raw-material prices.

Positive contributions to the result by the sectors engineering and systems construction, as well as plastics and paper

Lenzing Technik succeeded in continuing the good development of the last year. During the first quarter 2003, the level of incoming orders was altogether positive. Due to cyclical reasons, the market situation of Lenzing Plastics was unsatisfactory. The income situation developed according to plan and was once more clearly positive for the first quarter 2003. The result obtained by Lenzing Paper was satisfactory.

2002 – The best result in the company's history

As already mentioned in the preliminary report of 3 March 2003, the Lenzing Group succeeded in obtaining the best result in the company's history for fiscal 2002, in spite of the overall difficult cyclical situation. With sales amounting to EUR 625.6 mill. (after EUR 622.7 mill. for fiscal 2001), it was possible to clearly improve all income-related key figures. Income before taxes, depreciation and amortisation (EBITDA) rose by 19% and amounted to EUR 121.3 mill., income from operations (EBIT) went up by 21% and amounted to EUR 78.4 mill.

Outlook: Overall conditions continue to be difficult

No thorough change in the slack cyclical environment, prevailing worldwide, can be expected for the coming quarters. To date, the end of the war in Iraq has not led to any sustainable improvement of the general mood on markets. The SARS epidemic in Asia is another uncertainty factor. Fiscal 2003 will therefore be a difficult year for the fiber industry.

The Lenzing Group will continue, with consistency, on its course of decoupling itself, as much as possible, from the cyclical business trend. The noticeable decline in the demand for fibers in Europe, as well as the dollar exchange rate, which is likely to continue to be poor, will be aggravating factors in this connection. On account of the excellent positioning, the consistently improving product mix and the control over costs which the Lenzing Group exercises, the Board of Management expects to again obtain satisfactory results for the coming months.