Sector News

Lenzing to cut more jobs as viscose fiber prices plunge

November 28, 2014
Chemical Value Chain
Lenzing Group, the Austrian man-made cellulosic fibers producer, today announced a further round of job cutbacks in response to plunging prices in the viscose fibers market. The latest measures are in addition to the cost-cutting plan launched by Lenzing a year ago. The restructuring will impact up to 250 jobs, including one-third temporary staff, mainly at the Lenzing site. The distribution of the cuts among the various company sites will be decided by the beginning of 2015.
 
The cutbacks will be concentrated in Lenzing’s engineering and maintenance services, and in the engineering subsidiary, Lenzing Technik. Lenzing says that the results achieved by the cost-reductions announced last year are “encouraging” but are completely insufficient to offset the decline in global fiber selling prices. 
 
Lenzing says it hopes to avoid compulsory layoffs and will try to reach a mutually acceptable solution with the affected employees, as in the 2014  cost-reduction program. The company has agreed, during initial talks with the Lenzing Works Council, to extend the current redundancy program and to offer employees affected by the downsizing the possibility of transferring to the Lenzing Labor Foundation.
 
Owing to the difficult market conditions, Lenzing says it will not implement any major new fiber expansion projects at the Lenzing site or abroad in the foreseeable future and that it will significantlyreduce its investments in coming years. As a result, it is working on a strategic reorientation of its engineering subsidiary, Lenzing Technik, to focus the company more strongly on the external market. Lenzing Technik, which has about 600 employees and a temporary staff of 120 people, generated 40% of its sales of approximately €120 million ($149.5 million) from external contracts in 2013. 
 
Lenzing says it continues to expect good volume demand for all cellulosic fibers globally, but does not foresee a recovery in selling prices in coming quarters. It blames the market woes largely onthe substantial decline in polyester fiber prices, which will be exacerbated by the recent massive drop in oil prices, together with “the expected longer-lasting period of low or at least volatile cotton prices as a consequence of the surplus supply of Chinese cotton.”
 
The latest measures were foreshadowed earlier this month with the publication of Lenzing’s third-quarter results. CEO Peter Untersperger said at the time: “We expect cost savings exceeding €90 million for the entire year 2014, of which about one quarter involves personnel expenses,” adding:“Planning has begun to enable a further improvement of Lenzing’s cost structure to be achieved in 2015. Starting in 2016, we will achieve sustainable [annual] cost reductions of over €160 million.”
 
By Natasha Alperowicz
 

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