Annual Financial Report 2016 Lenzing Group Lenzing.Com Contents
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Naturally positive Annual Financial Report 2016 Lenzing Group lenzing.com Contents Management Report 2016 4 General Market Environment 4 The Development of Business in the Lenzing Group 6 The Development of Business in the Segments 8 Investments 12 Research and Development 12 Non-financial Performance Indicators 13 Risk Report 15 Report on the Key Elements of the Internal Control System (Section 243a Para. 2 of the Austrian Commercial Code) 18 Shareholder Structure & Information on Capital 19 Outlook 20 Appendix: Notes on the Financial Performance Indicators of the Lenzing Group 22 Corporate Governance Report 2016 26 Report of the Supervisory Board 32 Consolidated Financial Statements 2016 34 Consolidated Income Statement 35 Consolidated Statement of Comprehensive Income 36 Consolidated Statement of Financial Position 37 Consolidated Statement of Changes in Equity 38 Consolidated Statement of Cash Flows 40 Notes to the Consolidated Financial Statements 41 General Information 41 Notes to the Consolidated Income Statement 54 Notes on the Consolidated Statement of Financial Position, the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Changes in Equity 58 Notes to the Consolidated Statement of Cash Flows 88 Notes on Risk Management 89 Disclosures on Leases 107 Disclosures on Related Parties and Executive Bodies 109 Other disclosures 112 Auditor’s Report 116 Lenzing Group Five-Year Overview 120 Financial calendar 2017 121 Einzelabschluss 122 Lagebericht 2016 123 Jahresabschluss 2016 143 Bestätigungsvermerk 174 Declaration of the Management Board 177 Market Environment General Global economy Fibers on the world market The global economy1 was characterized by subdued development Fibers in 2016, with only few exceptions. Estimates by the International Monetary Fund (IMF) place worldwide growth at 3.1 percent, com- From synthetic polymers pared with 3.2 percent in the previous year, which represents the Polyester, Polyamide, Polypropylene, Polyurethane smallest increase since the economic downturn in 2009. Growth (Elastan), Acrylic, Polytetrafluorethylene remained stable at 4.1 percent in the emerging and developing countries, but fell to 1.6 percent (2015: 2.1 percent) in the indust- From natural polymers rialized countries. Protein-based Wool, Silk, Angora, Cashmere, Casein Economic growth in China declined from 6.9 percent to 6.7 percent, Collagen, Ardein, Zein etc. and Brazil remained in recession with minus 3.5 percent (2015: Cellulose-based minus 3.8 percent). In contrast, the negative trend in the Russian Cotton & bast fibers economy improved considerably from minus 3.7 percent to minus Cotton, Flax, Hemp, Jute etc. 0.6 percent. India was confronted with a notable slowdown from Woodbased 7.6 percent to 6.6 percent. The gross domestic product in the USA Viscose, Modal, Lyocell, Cupro etc. rose by 1.6 percent in 2016, whereby this increase was clearly weaker than the previous year (2015: 2.6 percent). The eurozone From anorganic substances generated growth of 1.7 percent in 2016, which also represents a Carbon, Ceramics, Glass, Metall decline compared with the 2 percent recorded in 2015. Wood-based cellulose fibers again served as another major growth Global fiber market driver. The worldwide production of 6.5 mn tons in 2016 represents an increase of 4.3 percent over the previous year. The growth in Substantial increase in worldwide fiber production, wood-based cellulose fibers not only outpaced the entire market, slowdown in consumption2 but was nearly double as fast as the synthetic chemical fiber mar- Initial estimates show a 3.6 percent rise in worldwide fiber ket. The production of this largest fiber segment based on market production to 97.8 mn tons in the 2016 calendar year after the share rose by only 2.2 percent to 62.1 mn tons in 2016. In contrast, decline in 2015. This positive development was contrasted, the production of other natural fibers (protein-based) stagnated at how ever, by less robust growth in consumption. Preliminary 5.2 mn tons. calculations show an increase of 1.5 percent in demand to 99 mn tons during the reporting year (2015: plus 3.7 percent). Global fiber consumption in 2016 by type of fiber in percent (basis = 99 mn tons)* The comparatively slower growth in demand resulted primarily Cellulo from weaker private consumption in the industrialized countries, se- & pro which was not offset by the steady and sound growth in Asia. The tei n- production volume fell below consumption for the second year in ba s 1.1% Wool e succession, in spite of the overall increase. High cotton stocks, d fi especially in China, and surplus capacity for synthetic fibers conti- b 24.3% Cotton e r nued to influence the market. s The total increase in production during the reporting year was 62.7% Synthetic supported primarily by cotton – which followed a historical drop of fibers 5.3% Other natural fibers nearly 20 percent in production in 2015 with a technical reaction and an increase of more than 8 percent to 22.8 mn tons in 2016. 6.6% Wood-based That represents the first year-on-year increase in cotton produc- cellulose fibers tion since 2011. 1) Source: IMF, World Economic Outlook, January 16, 2017 2) The production-related data in this section was updated from the initial estimates publis- hed in the 2015 Annual Report. Sources: International Cotton Advisory Committee (ICAC), IMF, Cotton Outlook, CCF Group (China Chemical Fibers and Textiles Consulting), Food and Agriculture Organization (FAO). *Sources: ICAC, CIRFS, TFY, FEB, Lenzing estimates 4 Annual Financial Report 2016 LENZING GROUP Demand for cotton exceeds production, stocks remain high despite decline3 Excess demand will again play a role in the 2016/17 cotton production season. Cotton consumption is expected to remain nearly constant at 24.1 mn tons, while production is projected to rise by 8 percent to 22.8 mn tons. These factors will lead to a further reduction in inventories, which are expected to fall to nearly 18 mn tons and the lowest level in the past 5 years. However, they will still cover roughly 75 percent of the annual demand for cotton. Production is currently expanding in 4 of the 5 leading grower nations – India, China, USA, Pakistan and Brazil. The only excep- tion is China, where the long-term decline is continuing and the harvest volume will fall to the lowest level in roughly 15 years. In spite of this trend, the market share attributable to these countries will rise to over 75 percent of global production. According to the Cotlook A Index, the average price for cotton rose by 5.5 percent year-on-year to USD 74.3 cents per pound in 2016. The potential for further increases in the cotton price remains limi- ted, however, due to the disproportionately high inventory levels. Further increase in viscose fiber prices during 2016 Viscose prices rose by an average of 7 percent in 2016 and reflected the improvement recorded in 2015. The annualized price of cotton rose by roughly 5 percent, the first increase after a two- year decline. In contrast, average annualized polyester prices fell for the fifth year in succession with a decline of nearly 9 percent in 2016. There is currently no significant upward potential for synthe- tic fiber prices due to the development of oil prices. The long-term premium price trend for viscose versus cotton was again confir- med in 2016. Staple fiber prices – Development in China* USD/kg (incl. VAT) 3.5 3.0 Viscose 2.5 2.0 Cotton 1.5 1.0 Polyester 0.5 01/2014 01/2015 01/2016 12/2016 3) Source: ICAC January 2017 * Source: CCFG, Cotton Outlook MANAGEMENT REPORT 2016 5 in the The Development of Business Lenzing Group The Lenzing Group generated outstanding perfor- mance in 2016, with a successful year-on-year improvement of all key business and financial indicators. This sound development was based on slightly higher sales volumes and, above all, on a subs- tantial increase in selling prices for all LenzingTM fibers. Group revenue rose by EUR 157.3 mn, or 8 percent, from EUR 1.98 bn in 2015 to EUR 2.13 bn in 2016. This growth was supported, above all, by higher fiber selling prices as well as a slight increase in sales volumes. The positive effect of this price develop- ment is also reflected in earnings indicators: Group EBITDA (earnings before interest, tax, depreciation and amortization)* rose by 47.6 per- cent to EUR 428.3 mn and the EBITDA margin increased from 14.7 percent in 2015 to 20.1 percent of revenue for the reporting year. Group EBIT (earnings before interest and tax)* nearly doubled from EUR 151.1 mn to EUR 296.3 mn, which supported an improvement in the EBIT margin* to 13.9 percent (2015: 7.6 percent). Net profit for the year totaled EUR 229.1 mn, which represents an increase of 78.9 percent over the prior year level of EUR 128.1 mn. A condensed version of the Lenzing Group’s consolidated income statement for the 2016 financial year is presented below: Condensed consolidated income statement1 EUR mn Change 2016 20152 Absolute Relative Revenue 2,134.1 1,976.8 157.3 8.0% Change in inventories, own work capita- 73.8 67.7 6.1 9.1% lized and other operating income Cost of material and other purchased (1,223.8) (1,218.3) (5.5) 0.5% services Personnel expenses (319.2) (300.2) (19.0) 6.3% Other operating expenses (236.6) (235.9) (0.7) 0,3% EBITDA 428.3 290.1 138.2 47.6% Amortization and depreciation (135.1) (142.2) 7.2 (5.0%) Income from the release of investment 3.1 3.2 (0.1) (3.6% grants EBIT 296.3 151.1 145.2 96.1% Financial result 3.1 (3.5) 6.6 (188.0%) Allocation of profit or loss to puttable (4.8) (0.2) (4.6) 2,332.3% non-controlling interests EBT 294.6 147.4 147.2 99.9% Income tax expense (65.5) (19.3) (46.2) 239.5% Net profit for the year 229.1 128.1 101.0 78.9% 1) The full consolidated income statement is presented as part of the consolidated financial statements.