From left to right: Thomas Obendrauf - CFO, Stefan Doboczky - CEO, Robert van de Kerkhof - CCO
Stefan Doboczky, Chairman of the Management board of the Lenzing Group, Chief Commercial officer Robert van de Kerkhof and Chief financial officer thomas obendrauf discuss the growth in specialty fibers, the megatrend sustainability and the Lenzing Group’s investment plans.
“We are the world market leader for botanic fibers and want to expand this position. However, this expansion will only succeed if we make our processes more efficient and continuously introduce innovative, new products to the market – like RefibraTM fibers, a new generation that combines wood and cotton scraps as raw materials and paves the way for a closed loop in the fashion sector.”
Q: In 2016 you announced three major investments at your sites in Austria, the Czech Republic and the USA. What is the back-ground for this investment campaign?
Stefan Doboczky: As part of our sCore TEN strategy, we set a goal to increase the share of specialty fibers in Group revenue to 50 percent by 2020. We therefore have been investing in the expansion of capacity at our locations in Lenzing, Heiligenkreuz and Mobile. Over the coming years we also plan to increase our own pulp supplies for the production of our botanic cellulose fibers from the current level of roughly 56 percent up to a maximum of 75 percent. These investments will be made in Lenzing and Paskov.
Thomas Obendrauf: The decisive factors for our investment in the USA were location advantages and the foreign exchange situation. In particular, low energy costs combined with close proximity to the harbor in Mobile which, in turn, leads to favorable logistics costs. We also have a USD surplus because our fibers are invoiced in that currency. These factors, in combination, explain our decision in favor of the US investment.
Q: Isn’t demand much stronger in Asia? The production sites for most of the textile industry are located in that region.
Stefan Doboczky: It is generally correct that the spinning mills produce primarily in Asia, and this situation will not change in the near future. However, our plants deliver to customers through-out the world and we try to make the best use of the respective location advantages. In the future, we plan to increase our focus on the expansion of our fiber capacity in Asia.
Q: When you want to better utilize location advantages, which customers do you work with most closely?
Robert van de Kerkhof: Our fibers pass through a fairly complex value chain which frequently covers several continents. For textiles, our fibers are first delivered to spinning mills–mostly in Asia–then they are woven or knitted, frequently dyed, further treated and finally cut, sewn and sold. The customers for our nonwoven production are located mainly in the USA and Europe. Consequently, we speak with a large number of companies along these processes.
Q: Sustainability is one of the core values in Lenzing’s new strategy. How important is sustainability for consumers?
Robert van de Kerkhof: A recent survey carried out by Lenzing shows that our Lenzing Modal® branded fibers and our TENCEL® fibers are strongly associated with sustainability. The market for botanic fibers–like the ones produced by Lenzing–is growing about twice as fast as the fiber market in total. That reflects the increasing focus of the textile and fashion sectors on this subject. It is, not least, consumers and NGOs who are demanding social and ecological action.
Q: How can you combine sustainability with profit?
Stefan Doboczky: Our sustainability strategy is based on three pillars “People–Planet–Profit”. “People” stands for the way we treat our employees and deal with the interests of our stakeholders. “Planet” involves the responsible use of resources. Lenzing has always produced botanic fibers made of cellulose. In other words, that is deeply anchored in our DNA. But we must also generate profits–that is a decisive factor for the long-term survival of every company.
Thomas Obendrauf: The viscose price is subject to substantial fluctuations. Expanding the share of specialty fibers will allow us to better cushion these fluctuations. This, in turn, will help to stabilize earnings and improve profitability.
Q: In recent years Lenzing sold a number of business areas that are not part of the core strategy. Has this process been concluded?
Thomas Obendrauf: Yes, we are basically finished with this process. We sold our plastics division three years ago and other areas from the Technik Segment in 2016 in order to better concentrate on the core fiber business.
Q: Let’s continue with the core business: Your strategy also calls for the deepening of cooperation with customers along the value chain and the development of new business fields. What does that mean in detail?
Stefan Doboczky: We see opportunities to increase our relevance for all participants in the value chain over the medium-term. And we want to utilize these opportunities by improving and expanding our service offering and through high-tech innovations.
Q: What role does digitalization play for Lenzing?
Stefan Doboczky: Digitalization is changing many areas of business–not only in production, but also in administration and sales. It is therefore very important for us to continuously educate our employees so they will be optimally equipped to meet these new challenges. We don’t want to be driven by digitalization, we want to actively design it. In short, we also see good perspectives here for further expanding our role as the market leader.
Robert van de Kerkhof: The textile sector is seeing an increase in the number of online shops and a decline in the number of physical retailers. And at the same time, customers’ demands for information are rising. The traceability of fibers up to the finished garment, which is possible with our new RefibraTM branded fibers, represents a unique selling proposition.
Q: Continuing with perspectives: What are Lenzing’s goals for2017?
Stefan Doboczky: Through our own organic growth, we want to provide our customers with continued support for their development. The sCore TEN strategy therefore includes goals that are focused specifically on profitable growth. Synthetic polyester fibers make up two-thirds of the global fiber market, cotton fibers represent one-fourth and botanic fibers have a share of only five to six percent. We are the world market for botanic fibers and want to expand this position. However, this expansion will only succeed if we make our processes more efficient and continuously introduce innovative, new products to the market – like RefibraTM fibers, a new generation that combines wood and cotton scraps as raw materials and paves the way for a closed loop in the fashion sector.
Robert van de Kerkhof: In addition, we see that we can generate higher value added for our customers with new products because of strong consumer demand. A new brand strategy and the new regional matrix organization will support us in these activities.
Thomas Obendrauf: The framework conditions on the fiber and foreign exchange markets have been favorable to date in 2017, and we also see a good balance between supply and demand. Naturally, that makes us optimistic for the current financial year.