THE LENZING GROUP: GOOD FIRST QUARTER 2001 AFTER THE EXCELLENT YEAR 2000

All production lines of the Lenzing Group worked to full capacity during the first quarter 2001. In the course of the first three months of the year, the consolidated sales went up by 12%, as compared to the first quarter 2000, i.e. from EUR 144.4 million to EUR 162.2 million. Earnings before taxes and minority interest (EBT) rose from EUR 7.4 million to EUR 11.5 million, which is a growth of 55%. The operating results amounted to EUR 12.3 million, as compared to EUR 9.0 million before. EBITDA grew by 22% and amounted to EUR 22.6 million. As at 31 March 2001, the staff level amounted to 3,211.

Jochen Werz, Spokesman of the Managing Board of Lenzing AG, comments: “During the first quarter 2001, the Lenzing Group was able to continue its successful development. In spite of clearly higher raw-material costs, the structural improvements - achieved in recent years - have led to better results.”

THE FIBERS SECTOR

Market Environment: Major Increases in Raw-Material Prices

Throughout the world, some of the raw material prices for chemicals have gone up considerably: caustic soda experienced a major price leap, with the price during the first quarter 2001 being twice as high as for the same period last year. Moreover, energy costs were on a high level. At the beginning of the year 2001, the prices for competing fibers declined, especially for cotton. The result was price pressure on viscose fibers. Buyers' restraints in the USA had a negative impact on demand.

Lenzing AG: Good Results

In comparison to the first quarter 2000, sales increased by 16%. In spite of the higher prices for caustic soda, which had not been expected to be of such magnitude, the operating results went up by more than one third. At the beginning of the year, it became possible to increase prices for fibers.

From today's perspective, Lenzing should be able to compensate any downswing in textile activities by increases in the nonwovens segment, which is a market that continues to develop well. The capacity at Lenzing will be expanded after the completion of a new production line in the middle of 2001, in order to meet the growing demand for Lenzing fibers.

Lenzing Lyocell: Good Demand for ProViscose and Nonwovens Fibers

After increasing the production capacity last year, production at Heiligenkreuz is being expanded on an ongoing basis. The demand for ProViscose and nonwovens fibers developed satisfactorily. The Lyocell LF fiber, which facilitates new fiber applications, is currently being launched on the market. On the other hand, there is a worldwide cyclical slow-down of business activities, which results in a generally difficult market environment for Lyocell.
It was possible to improve the results for the first quarter 2001, as compared to the same period during the previous year. However, they continue to be negative.

Lenzing Fibers Corporation: Difficult Overall Conditions

During the first quarter 2001, Lenzing Fibers Corporation (LFC) continued to fight on several fronts against a shrinking textile market in North America. Most US customers in this segment were strongly affected by the low-price imports and the downswing of business activities in the USA. Growing volumes of imported semi-finished nonwovens products slowed down the good development of the nonwovens market in recent years. Since pulp prices continue to be high, and since the costs for caustic soda and energy also went up considerably in the USA, the results obtained by LFC continue to be negative, in spite of all the measures taken.

South Pacific Viscose: Production Running at Full Speed

The fiber production of South Pacific Viscose (SPV), the Indonesian affiliate, continues to run at full speed. A record production level was obtained in February 2001. After pulp prices had gone up considerably during the past year, a decrease was observed in the course of the first three months of this year. However, this was more than offset by the strong price hikes for caustic soda. SPV is therefore trying to pass on the higher raw-material costs.

THE SECTORS ENGINEERING & SYSTEMS-CONSTRUCTION, FILMS, PAPER

Lenzing Technik: Positive Development

Lenzing Technik, the engineering and systems-construction company, experienced an excellent development during the first quarter 2001. Sales were clearly above those for the comparable period of the previous year, with the good order volumes of the site at Lenzing contributing essentially to this development. On account of the positive development of the contribution margins and the tight lid on low-level fixed costs, the results were above schedule.

Lenzing Plastics: Satisfactory Order Volumes

The first quarter brought a favorable development for Lenzing Plastics, both in terms of sales and results. Cable tapes and technical laminates were areas that experienced considerable growth. The demand from the building-materials trade was below expectations. All product groups provided positive profit contributions – the PEX products for hot-gas filtration showed a particularly gratifying development.

Lenzing Paper: Results Above Target

Deliveries declined on account of inventory-level adjustments undertaken by our wholesale customers. The lower level of market activities throughout the industry was especially noticed with regard to recycling and envelope papers. On account of lower pulp and waste-paper prices, which had shown a dramatic increase in 2000, it became possible to clearly improve the results.

OUTLOOK

Positive Development Continues

The Lenzing Group expects a good year 2001. It can be expected that raw-material prices will continue to be on a high level during the second quarter. It is anticipated for the second semester of the year that the demand for Lenzing fibers will continue to grow, since several competitors in Japan, the USA and Europe are withdrawing from the market. As in the years before, Lenzing is focussing on the growing segment of specialty fibers.

On account of the unfavorable general conditions, the dynamism of the growth at Lenzing Lyocell has slackened. Lenzing Fibers Corporation is expecting a difficult year. The development of the results to be achieved by South Pacific Viscose will depend on the extent to which price increases can be passed on.

Lenzing Technik and Lenzing Plastics are optimistic for the year 2001, on account of the good demand and the already completed cost-reduction programs. With less pressure from raw materials, Lenzing Paper should be in a position to achieve a good development of its business results.

LENZING GROUP – FINAL RESULTS 2000: BEST YEAR IN THE HISTORY OF THE COMPANY

The Lenzing Group experienced a favorable development in the course of the year under review. Earnings before taxes and minority interest (EBT) went up from EUR 3.9 mill. for 1999 to EUR 64.9 mill., which is the best result achieved in the history of the company. With an increase of 75% to EUR 107.4 mill., EBITDA showed an above-average growth. These results became possible on account of an optimized product mix and the strict cost-reduction program of recent years.

The consolidated Group revenues went up from EUR 550.2 mill. to EUR 664.1 mill., which is an increase of 21%. The fibers sector contributed 63% of sales, while paper and films each generated 9%, and the engineering & systems-construction sector 3%.

All production facilities worked to full capacity. The total production of the Lenzing locations went up by 14% to 335,000 tonnes of fibers, as compared to the year before. The Lenzing Group succeeded in increasing its world market share from 9% to 20% over the past ten years.

The equity ratio rose from 32% to 37%. The ROCE increased from 2% to more than 14%. The net gearing developed from 50% to 44%.
EUR 45.3 mill. were spent on investments in fiscal 2000 (1999: EUR 39.0 mill.)