The Lenzing Group Confirms 2003 Figures

Says Thomas Fahnemann, Lenzing's Chairman of the Management Board: "In spite of a difficult environment we were able to work to full capacity at all fiber production sites and to clearly expand the produced quantities. Furthermore, we succeeded last year in largely dissociating ourselves from the very volatile market environment by obtaining a share of nearly two thirds with our special products."

A Slack Market in Europe - A Boom in China

In the core business, cellulose-based fibers, fiscal 2003 showed diverging trends. On the one hand, the persistent sluggish cyclical activity in Europe and the drastic decline of the dollar rate had a negative impact on the textile fibers and nonwovens industry. Whereas Lenzing - which is the biggest European manufacturer by far - recorded increases in quantities, viscose fiber production in Europe fell by about 2%. The development in Asia and especially in China, on the other hand, took a completely different course. There, demand clearly picked up at the middle of the year. In addition, there was a major price increase for cotton and polyester fibers during the second semester. In China alone, this last factor accounted for a production increase for viscose fibers of about 20%.

First estimates indicate that the world's fiber production grew by 4.2%, amounting to 56.5 million tons, in 2003, with viscose staple fibers recording an above-average growth by 7.8% to about 1.8 million tons.

"Altogether 2003 served to prove that - globally speaking - we are working on a growing market. More prosperity in the developing countries, population growth and new areas of application in the nonwovens sector - all this makes us confident that the Lenzing Group, which is one of the biggest players on the world's viscose market will successfully continue its dynamic growth course in the future," says Thomas Fahnemann, Chairman of the Management Board, who is responsible for the global fiber business of the Lenzing Group.

Setting the Course for the Future

In the course of implementing this growth strategy, two important large-scale projects were successfully completed in 2003 which expanded the capacities of the sites at Lenzing and Heiligenkreuz. EUR 90 mill. were invested at Lenzing in order to increase the fiber capacity to about 200,000 tons per year (previously 180,000 tons). The pulp capacity was enlarged to about 210,000 tons per year, in order to preserve full integration of production. At the Heiligenkreuz site, a second Lyocell production line was finished, which cost EUR 36 mill. and doubled the capacity to nearly 40,000 tons per year.

At the Indonesian associate, South Pacific Viscose, it was also possible to set a new production record of about 135,000 tons, thanks to a great many technical optimizing measures.

In 2004, an additional sum of about EUR 15 mill. was invested in order to expand the capacities for Modal fibers at Lenzing. As a result, the product mix at the Lenzing site was further improved in favor of high-quality special fibers.

Good Results for the Non-Fiber Business Sectors

Although 70% of the sales of the Lenzing Group in 2003 were achieved in the fiber and pulp sectors, the non-fiber-specific business sectors also provided major contributions to the business result.

Lenzing Technik, which achieved total sales of EUR 86.0 mill. (after EUR 59.4 mill.) looks back on a record-setting year and a very good result. The underlying reasons were the billing for intra-group orders in the framework of the capacity expansion program, as well as the implementation of several international orders in the field of the viscose and pulp industries. High-end electronic manufacturing for electronic devices was off to a very good start.

Lenzing Plastics proved once again that, in spite of the sluggish cyclical activity in Europe, it is one of the most successful Austrian plastic processing companies. With stable sales, which amounted to about EUR 72 mill., it succeeded in further expanding its market position in various niche areas such as building materials, insulating materials, as well as high-quality polypropylene products for packaging applications. The result of Lenzing Plastics was very satisfactory.

Lenzing Paper, which manufactures high-quality recycling paper and special products (poster paper varieties, envelope paper varieties), succeeded in setting a new production record of about 75,000 tons in 2003 - contrary to the trend in the paper industry. Sales remained unchanged at about EUR 56 mill., which accounted for a clearly positive result. Due to cyclical conditions on the core markets, i.e. Germany and Switzerland, the market environment was very slack.

Publication on "Sustainability in the Lenzing Group"

One further focus of the work in fiscal 2003 was to document the model role that Lenzing has been playing in the area of sustainable management for years. In a special publication, the principles of sustainable management in the Lenzing Group were documented in great detail.

As regulations on electricity from ecological sources, for example, or the trade in CO2 emissions are currently under discussion, the burden for Austria as an economic location will be considerable. This will also have an impact on Lenzing AG which has made a major previous input in the field of environmental protection.

Financial Statement Permits an Increase in Dividend to EUR 6 per Share

The Management Board will propose to the General Shareholders' Meeting an increase of the dividend from EUR 4 to EUR 6 per share. Says Peter Untersperger, responsible for finances on the Management Board: "This proves the economic efficiency of Lenzing AG. It was possible to a large part to finance the record investments of more than EUR 131 mill. during the year under review from our cash flow, which amounted to EUR 104.2 mill. (after EUR 101.9 mill.). Our equity ratio (49.6%) continues to be at a high level so that we are very well equipped for further growth, even after this round of investments."

The slight decline in Group sales by 0.6%, to EUR 621,9 mill., is due to fewer trading revenues as well as the decline of the dollar rate. The decrease in the operating result (EBIT down by 5.6% to EUR 74.0 million) is a reflection of the difficult overall conditions during the first semester 2003, as well as of the impact of the dollar rate.

"With an EBITDA margin of 18.4% and an EBIT margin of 11.9%, Lenzing is definitely among the Austrian companies that have scored the greatest economic success," says Peter Untersperger.

It was possible to achieve an increase of 7.5% to EUR 77.5 mill. in 2003 regarding the result before taxes. The primary reasons were a financial result that was improved to plus EUR 3.5 mill. (after minus EUR 6.2 mill.), due to a higher income from affiliates, as well as positive one-off effects from the sale of the LFC, the US affiliate. In addition, it was possible to decrease expenses for interest. The profit per share from continuing operation went up by 23.1% and amounted to EUR 16.46.

Outlook for 2004

Fiscal 2004 is off to a good start. "The growth engine Asia, especially China, is running," says Thomas Fahnemann. This is why Lenzing opened a new trading company in Shanghai recently. An expansion of activities in China is currently being examined; definite decisions should be taken before year-end 2004. Altogether, the Lenzing Group is looking forward to another good year. However, there are several factors that account for uncertainties: the international political situation, the dollar rate, the discussion of Austria and Europe as locations and, finally, the further development of cotton prices. These factors make it difficult to give a precise forecast for 2004.

Important Key Figures acc. to US-GAAP, on a Companys basis (in EUR mill.)	2003	2002	Change in %
Umsatz	621.9	625.6	-0.6
EBITDA	115.8	121.3	-4.6
Operatives Ergebnis (EBIT)	74.0	78.4	-5.6
Jahresüberschuss	60.5	49.2	+23.2
EBITDA-Marge in %	18.6	19.4	-4.1
EBIT-Marge in %	11.9	12.5	-5.0
Brutto Cash-flow	104.2	101.9	+23.2
Eigenkapitalsquote in %	49.6	51.1	-2.9
Sachanlagevermögen	456.6	381.1	-19.8
F&E-Kosten in % vom Umsatz	ca. 2.5	ca. 2.0
Gewinn EUR/Aktie (fortgeführte Geschäftstätigkeit)	16.46	13.37	+23.1
Dividende (2003 Vorschlag)	6.0	4.0	+50
Mitarbeiter	3,058	3,365 (inkl. LUSAC)