Very warm welcome to this investor presentation. Before we start with the real investor presentation, let me give a chance to our new board member, Nico Reiner, who's the first time in this call, to introduce himself. Nico.
Stephan, thank you very much. Having the chance to get an introduction from my side. My name is Nico Reiner. I'm 54 years old. I am having roughly 15-20 years experience as a CFO in different companies as it is family-owned businesses, stock-listed companies, private equity-owned companies. I'm really looking forward having joined the Lenzing team by beginning of this year. I am very convinced of having a very successful future. Thank you very much for that. Thank you.
Thank you, Nico Reiner. With me today are as well my other board colleagues, Christian Skilich and Robert van de Kerkhof, as well as our Vice President, Investor Relations, Sebastien Knus. The year 2022 can be clearly cut into halves. Whilst the first half was actually a pretty solid result, driven by first signs of cost increases, but thanks to the good demand on the other half side, we could pass on these cost increases pretty well in the first half. Whilst in the second half, we saw an extremely challenging market environment for the overall industry, but also for Lenzing. We saw on one hand side a strong drop in demand, especially on our textile fiber side, combined with an increase, a strong increase of cost on both raw materials and energy. That was really different to the COVID time.
You remember the COVID year, we saw a drop in demand, but then in these years, we also saw a drop of the raw material cost. Altogether, we certainly see the second half of 2022 as an unprecedented year or half of a year, and we call it internally a perfect storm. At the same time, we are also very positive to see an improvement in the overall market environment in the coming months, and first indications are visible already in January and February. Of course, when we saw this perfect storm arising, we immediately reacted and started programs to generate, on one hand side, cost savings, but also on the other hand side, to manage our costs. Cash, sorry. The cost savings initiated were two programs, one called Advanced Lenzing, another one called goMore, more dedicated to our personnel costs.
Those programs are very well on track. They will deliver in total an annualized impact of round about EUR 70 million. On one hand side, we saw a business environment with strong headwinds, especially in the second half. On the other side of the year 2022, we also saw some strategic highlights. First and foremost to mention our two milestone projects. Both our projects in Thailand as well as in Brazil, were completed in time and in budget, despite quite some challenges driven from the pandemic conditions, really chapeau to the entire team. Both plants operating and running and will deliver significant earnings in the year 2023. When we look at our sustainability actions and results, we see that we remain the champion of sustainability. That is also seen by the external world.
We again received the AAA from CDP. We again received the AA from MSCI, we have received the platinum status from EcoVadis again. For sure, also a highlight is that we successfully completed the search for our new CFO, we have today Nico, the first time in this investor call. He started on the 1st of January. Now, looking at the numbers of the year 2022. Whilst our revenue grew to above EUR 2.5 billion, our EBIT came only in at EUR 242 million, a net loss after minorities of EUR -73 million was recorded. Despite the high but planned CapEx and the weak operating results and the inventory build in the Q4 of last year, we still maintain a solid liquidity cushion of more than EUR 680 million.
Due to the loss, we decided that we will have no dividend for the year 2022. Now, how will be the year 2023? We call it the year of the comeback, and the outlook is certainly more positive and assuming a further market recovery as we guided in our ad hoc yesterday. We expect the EBITDA in a range of EUR 320 million-EUR 420 million. On the next slide, I would give you a little bit the guidance of this presentation to what we wanna explain in this presentation. We want to spend some more time to explain what really happened in the second half of 2022, what we call the perfect storm. Here, you see that we had several unforeseeable developments creating the so-called perfect storm for our company.
To be honest, only a few people thought that Russia would really start a war in Europe, leading to an unprecedented rally of energy prices. At the same token, the demand of the textile industry really dropped in the second half of the year sharply. Let me also be very clear. We, at Lenzing, took immediate action and the right steps to control the situation. That is what we can clearly report today. We are in control, have a sustainable cost-saving program, which is not only serving for the year 2022 or the year 2023, but is enhancing our competitiveness going forward. We take care, we take seriously care of our free cash flow. The year 2023 will be our comeback year.
Not only because we have done the right adjustments in place. We can also expect positive contribution from our signature investments in Thailand and Brazil. Both plants are fully invested and fully operational. They will contribute significantly to the earnings in 2023. Assuming a further market recovery, therefore, we guided to be in the range of EUR 320-420 for 2023. How will be the midterm future for Lenzing? We are saying we have still excellent prospects for the years to come. We remain absolutely convinced that Lenzing has an excellent position in the market because we have strong products, strong brands, and a pretty nicely filled innovation pipeline. All of that is serving the two mega trends of the industry and the markets we are operating in, sustainability and circularity. Both mega trends are actually in the DNA of Lenzing.
In addition, there is a market for specialty bio, which is constantly growing way above the market average, and Lenzing has the right product to serve this highly growing market. As I mentioned before, with our cost reduction program, we increase our competitiveness going forward. Let's go into the details, and we would start with the year 2022 and what happened, what we call the perfect storm on the raw material and energy side. I would like to hand over to Christian to take us through the development in energy and raw materials. Thank you, Christian.
Thank you, Stephan. Good morning, good afternoon from my side as well. Yeah, development on the cost side. For costs here at Lenzing, both energy and chemicals increased throughout 2022 sharply. The most striking increase was, of course, in European natural gas prices, which increased more than twentyfold in quarter three of last year compared to early 2020, and have only started now to normalize. Natural gas in the U.S. as well increased, but much less than in Europe, but still more than quadrupled. Coal prices in Asia as well have roughly doubled. On the chemical side, as you know, caustic soda is the key input for the viscose process. Prices in Asia more than doubled, but most strikingly, the European market prices reached all-time highs based on a supply-demand imbalance in the chlorine industry and as well, driven by the very high energy costs.
To visualize the impact of those two trends just outlined, Lenzing's production costs have increased by 35% in total versus the full year 2021. Furthermore, our cost split for production has shifted with energy representing now 17% and chemicals, 20% of our total production costs. By that, moving over from the cost side to Robert with an input on the demand side.
Thank you very much, Christian, and also a very warm welcome from my side. This perfect storm year, as Stephan already elucidated, was supposed to be a great year. When the year started off, most of the industry leaders in the fashion industry expected 2022 to be a very, very strong year. The executives, as you can see here, more than half the executive expected that the year would be better or at least the same, even 91% than 2021. Now that optimism resulted in quite some unfavorable decisions. The brand and retailers ordered a lot of merchandise. They expected that the consumers would come back to the stores and buy these goods.
This is also a correction then of the supply chain hiccups that occurred during the COVID crisis, as well as the various logistics problems that we had with the Suez Canal and of course, in the Shanghai Port that was blocked for a long time. This then resulted in significant higher inventories throughout the value chain. As you can see on the next slide, the clothing inventories, and here we have an example now from the United States, [uncertain], who is quite transparent with this data. The clothing industry in values had reached an absolute record high somewhere around September, October of 2022. The lighter green area at the bottom shows you the average range between 2012 and 2019. You can say it was fairly stable.
It was always around, let's say, the low end of around 65 to the higher end of 90. Never has it been such a steep increase as we've seen at retail level than in 2022. This was then driven by the optimism of the brands, and most of them were caught off guard by this very sluggish consumer demand. Their reaction was also very rapid. They reduced ordering, and even orders that had been confirmed were canceled. This, of course, trickled down all the way through the value chain, which led to a declining demand for the fabrics, the yarns, and of course, ultimately also for suppliers like us on the fiber side.
The optimism that was mentioned before, if you look here on the left, has resulted in a significant decrease both in US and Europe in the second half of this year. This is something that hurt us, as I said, as an overall industry. On the next slide, you can see that is reflected in the ITMF mood of the industry index. The optimism in the beginning of 2022, and these are people throughout the value chain. These are people that are like us, fiber producers, spinners, machine makers. Everybody in the textile value chain is providing its input. Anything that is above zero means it's very, very positive. Things will be better. You can see that, until May, the mood was extremely positive, and certainly in July, it tipped around with an absolute low.
Things will get worse even in November of 2022. This also reflected on the operating rates of the viscose industry. You can see in the middle slide that the operating rates of the viscose producers in China. Steady operating rates around 80%, quite business as usual in China, and then suddenly a drop in September to a barely 50% operating rate, with a slow recovery then by November, and again, a drop, of course, in preparation of the Chinese New Year, in the beginning of 2023. The prices followed the same trend. Robust demand increased the prices to EUR 15,500.
Please mind the comments that Christian Skilich made about the increases in chemical costs also, of course, resulted in the need for the Chinese producers to increase the viscose prices to an absolute record of EUR 15,500, but since then have come down to a level of EUR 13,000 of this year. What does it mean for Lenzing? Overall, we saw a fiber demand drop of 10% in 2022. It was approximately 100,000 tons of less fibers that we managed to sell, and this specifically has been of course, in the textile industry.
Our nonwoven industry remained very solid. This confirms clearly our strategy to serve both the textile and the nonwoven industry. This is not typical for the viscose industry. The same trend you've seen throughout all the different fiber producers. Cotton, for instance, also had a similar drop than what we have seen here on the viscose side. With that market overview, I would like to hand over to Nico.
Thank you, Robert, for that great explanation about the content of our top line. Let's have a look now on the numbers themselves. Revenues of EUR 2.6 billion versus EUR 2.2 billion in 2021, mostly driven by an increase in fiber prices and DWP volumes. The share of pulp in our revenues increased to 18 percentage point compared to 13 percentage point in 2021. The quarterly development clearly shows that revenues were negatively impacted starting in Q3 2022 due to the softening of demand, while our performance in H1 was relatively strong. The Q4 in 2022 includes the building of provisions for cost reduction measures of approximately EUR 15 million, as well as FX effectors. In connection, we saw an increase in energy and raw material prices that we could only partly pass on.
All in all, this then caused a significant drop in EBITDA from Q3 onwards and thereby leading to our revision of EBITDA guidance in December 2022. Overall, EBITDA in 2022 was above the levels of 2020 when COVID hit. Looking on EBIT. For EBIT, we see the same development as for our EBITDA, with a peak in Q2 and a decline afterward. For sure, net results are in line with the overall development. We reported a net loss of EUR 73 million attributable to shareholders at Lenzing. Getting from profitability now moving into the free cash flow for the period. It is evident that the negative cash flow generation is mainly driven by the investment in the new plant that has now been completed successfully and will not require additional CapEx for the full ramp-up.
The -EUR 43 million of operating cash flow was instead driven by the significant increase in working capital due to the increase in inventories. With regards to working capital, in the last years, it has always been around the level of ±EUR 400 million. In 2022, we see a peak in the level of trade working capital, mostly driven by lower level of sales in Q4 and consequent increase of inventory. Inventory increased from EUR 477 million by the end of 2021 to EUR 709 million in 2022. Getting from the cash now into the balance sheet on the next slide. We show here the historical net financial debt evolution.
For year 2022, lenders have increased mainly due to reduction in liquidity caution, driven by EUR 700 million CapEx program in relation to Thailand and Brazil plants , as well as increase in trade working capital due to rising inventories. As such, reported net financial debt increased to approximately EUR 1.9 billion from EUR 1 billion in full year 2021. Whereas economic net financial debt increased to approximately EUR 1.4 billion from EUR 600 million in full year 2021.
Drawing attention to the balance sheet metrics on the right side of the slide. Also, they evidently reflect the impact of overall weaker full year 2022. We are still in a strong position at year-end 2022, with approximately EUR 700 million of liquidity caution available, as well as substantial adjusted equity position with more than 37%. By having said that, I would like to hand over back again to Stephan.
Thank you, Nico. In a nutshell, Lenzing had a solid start in the year. Demand was strong in all product groups, be it fibers, be it dissolving wood pulp, and we had prices on high levels in both categories. As a consequence, revenues increased accordingly by 25% versus the first half year 2021. Even though costs were increasing, Lenzing achieved a solid EBITA in the first half year of round about EUR 190 million. However, as previously mentioned, the second half of last year really represents a perfect storm for us. With highly unfavorable market conditions meeting an already challenged free cash flow. In particular, the industry saw an unprecedented further increase in energy prices, 20 times the gas price in Austria, for example.
Raw material costs five times than caustic versus the price levels in the year 2020, coupled with a destocking and softening in demand in textile, as Robert explained. Additionally, we had the planned, but still very high CapEx for two new plants and the inventory build in the second half of the year that both affected significantly our free cash flow for the period. We hopefully could explain to you that the magnitude of the events was very difficult to predict at the beginning of last year. We revised our guidance in September and in December. You know, transparency is extremely important for us, and therefore, we also wanted to take the necessary time today to explain the various factors in detail that lead to our results and how we see those developing going forward.
Going forward means also we took action, of course, immediately, proactively in 2022 to reduce our cost on one hand side, but also to secure our liquidity. During the second half of 2022, we adjusted our production volumes in order to reduce our overall cost and limit any further increase in trade working capital. Furthermore, we initiated a reorganization and cost reduction program. Which is expected to deliver annual savings of more than EUR 70 million with a full impact to be expected at the end of the year 2023. I can report the programs are running very well. We believe that our proactiveness and swiftness in identifying and addressing the challenges our industry is facing today, has helped to build a position for us for a strong rebound. Having said so, let's focus on the year 2023, the comeback year for Lenzing.
All in all, we believe that 2022 has been an unprecedented year that we don't foresee to repeat any time soon. While we leave these developments behind us, we really focus on 2023 and have several measures in mind for Lenzing to come back strong again with an overall recovered market environment. Let me remind you, we have in our cost reduction program, realized cash effective savings of an annualized impact bigger than EUR 90 million, addressing personnel costs, procurement costs, as well as operational or cost of goods sold. We also have initiated working capital improvement measures, reducing both our fiber and pulp inventory levels. I can report that already at the beginning of this year, our fiber inventory is back to normal levels, and that will help to overall improve our liquidity.
For sure, we had a strong cash out in our CapEx for our two major projects, but they are now up and running and will significantly contribute in the cash flow for this year. We also reassessing our FX risk management as well as our energy hedging policy to mitigate adverse effects we have on those sides. In a nutshell, 2023 will be the year of the comeback. Why do we believe that 23 is gonna be a year of a comeback? On the macroeconomic side, rather being revised downwards constantly, growth outlook starts to rise again. Analysts agree a recession can be likely avoided in both U.S. and Europe, and what we hear from China's reopening is promising.
We see that on early indicators, important indicators for textile turnover, like the metro ridership, the traveling in general, and the activities elsewhere in the private and hobbies in China. If we are looking more particular into the textile industry, the current situation is still rated as very poor in January, but the outlook is much better than it was couple of months ago. The sentiment is rather becoming optimistic with a huge jump on this optimism in the last weeks and months. Robert explained what happened and why the textile value chain built these inventories. That was a big part of the problem in 2022, Now the inventories have come down along the textile value chain. Viscose inventories are at 22 days now, which is right at the 5-year average and at the same level as mid-2022.
On a similar level, inventories of viscose yarn and viscose fabrics has come down. In a finished product, clothing inventories, for example, in the U.S., have also reduced. Overall, we see that the demand of fibers as a consequences of what Robert explained is depressed in the second half of 2022, but is now picking up again. We see that in our order book already in January and February, still on a low level, but constantly increasing. Consumer confidence has declined strongly when the war started in Ukraine, but it's picking up again in many European countries. Lastly, we had very high input costs in 2022, as Christian explained, and we see costs coming down, both on the energy side.
Take for example, the day ahead natural gas price in Europe is back under EUR 50 from its peak of above EUR 300 in August. Also caustic soda, our key chemical for the viscose and modal process is coming down. Let me be honest, on the flip side, we also know that there are still many risks around us, including geopolitics. However, as a whole, we see much more positive signs than we saw a couple of quarters ago. Therefore, after the perfect storm in the second half of 2022, 2023 will be the year of the comeback. We expect overall improvement of the market condition than versus 2022. We have seen that the European gas prices are coming down from its summer highs. And the mild winter has resulted in record natural gas storage levels in Western Europe.
That should help the prices as well. As we said, caustic soda is coming to more normalized levels, and on the demand side, we saw that we have first positive signs and first increasing order levels versus the month before. With this improved demand, we will also see an increase of prices again. Finally, we shouldn't forget that all has a positive impact to our free cash flow. On one hand side, the wave of heavy investment, EUR 2 billion in the last three years, is behind us. Both sides will now, on the contrary, contribute positively to our cash, as well as our cost saving measures, as well as our working capital measures, the inventory reduction. With that, I hand over to Nico again to talk a little bit more about our liquidity position.
Many thanks, Stephan, and great for these explanations about the year 2023, the comeback year. This comeback year is based on a strong liquidity position. Turning into this slide here, we have now an overview of Lenzing's debt maturity profile. There's approximately EUR 250 million of debt maturing by end of 2023, which is well-covered by existing liquidity and undrawn credit facilities. We are also proactively looking into refinancing alternatives for debt coming up due in 2024 and 2025. We continue focusing on implementing measures to further protect liquidity and improve cash flow generation, which will provide us with additional comfort and headroom with regard to upcoming maturities. As a result, we also have suspended dividends 2022, and we announced yesterday our position to the dividend policy for 2023.
In parallel, we are also working on optimizing Lenzing's capital structure for the long term, so we are well-positioned to execute our own future growth strategy. Overall, Lenzing's liquidity position remains strong. Having said that, back to you, Stephan.
Thank you. Summarizing again what we have walked you through in the previous slides. As mentioned, the market environment is challenging for the whole industry. We see demand in Q1 increasing but still on a low level, but week by week it gets better and so does our capacity utilization, whilst it is not yet on a pre-crisis level. Still, visibility is low at this point in time, and volatility on the cost side is high. With our new hedging strategy, we can, at least on the energy side, create a buffer. We firmly believe that during the course of 2023, market conditions will improve, stimulating demand and leading to a reduction in inventory levels further, and that will create the demand drive as well as our pricing power.
This will be coupled with positive cash flow contribution from our recently completed project in Thailand and Brazil. If I add on top our successfully implemented measures on the cost reduction program, we are very positively looking onto the results for the year 2023. As we guided yesterday, we expect the EBITDA, depending on the market recovery, between EUR 320 million and EUR 420 million. After looking into 2023, I would ask Robert to give us a look into the years 2024 and afterward. Robert?
Yeah. Thank you, Stephan. If you look at this slide, and it starts in 1960, the fiber industry has almost continuously grown. I say almost because in about nine instances, this growth pattern has been disrupted by external typical macroeconomic recessions. You can see definitely on the right side, the COVID hit very deep. What remains very clear from this slide, however, is the trend continues to be upwards and also what is really clear takeaway, there is a very rapid recovery of the fiber industry after such a crisis. This is something that we should be prepared for now as well. We can have a quick recovery also in the current circumstances of the fiber industry. What drives this fiber growth?
On the next slide, you can see it is still the fundamentals that we've been sharing with you in the last few years. Population continues to grow, GDP continues to grow, so people have more money to spend. This is resulting in an overall fiber market growth of 2%-3%. The wood-based cellulosic fiber industry is growing at about double that rate. Historically, it has been growing at this rate, and we also expect this to continue. The fundamental driver, of course, is that sustainability gap that we've been talking about before. There's increasing pressure on the fossil-based fibers, and there's all the synthetics, the polyesters and the nylons. As a consequence, the wood-based cellulosic fibers are really in much stronger demand. The cherry on the cake, of course, is still lyocell.
It's a very small fiber in the overall fiber industry, but there you can still see driven both in textiles and in woven, we continue to anticipate growth rates of over the 20%. What are we doing on the market from a Lenzing perspective? We really have a lot of innovation, as Stephan said, already at the beginning. We have a pipeline of good innovations. Despite COVID, we could continue to develop some of these great innovations and bring them successfully to the market. On the left side, you see just a few of these highlights.
On the right side, you see an amazing picture that was taken in a water fountain when we celebrated the 30 anniversary of our TENCEL brand, something that we're really proud of and really gives us a very strong heritage of the brand itself. Awards like the ISPO award, which is the biggest organization in the textile industry for athletic wear was something that we were very pleased about because the active wear industry is an industry where synthetic is, of course, very dominant. Having this ISPO award 2022, but also the ITMF award for sustainability and innovation, really is something that we can be very proud of. Also, what is amazing, 300,000 tons of total Lenzing ECOVERO brand fibers have been sold since we launched it in 2017.
As you all might recall, the viscose industry got under tremendous pressure from some of the NGOs, but our ECOVERO brand shows that Lenzing is really the leader in the industry in cleaning up the impact of the fiber industry when it comes down to the chemicals. Let me give you a very quick update, a little bit on where do we stand with the various brands. VEOCEL is a very young brand. VEOCEL was created to really address the nonwoven market. It's an industry where synthetics are the key driver because cost is the key factor there. It's very often a disposable product.
With trends like in Europe, the Single-Use Plastics Directive, we believe that there is a opportunity to educate the consumers to really help to differentiate those brands and retailers that want to do something right with their products, and they are now adapting very rapidly the VEOCEL brand name. As you can see here on the left, the co-branding programs. These are programs where the brands that you can see in the middle actually use our VEOCEL brand on their packaging, has continuously increased. The brand awareness for VEOCEL also continued to increase in the last few years. It's a very young brand, but to have that kind of awareness is something that we can be very proud of. Of course, our flagship brand, TENCEL. Despite the crisis, despite the COVID crisis, consumer changed completely. Very few people could go shopping.
Most of them went online. With a change in our branding strategy, much more going to co-branding programs, much more going to digital marketing, we managed to increase the TENCEL brand awareness again. Now, this is not normal. In the history of a brand, you will always see brands a little bit going up and down. The steady increase of the TENCEL brand awareness, as you can see on the right, something we can be very proud of.
Also then the brands, as you can see in the middles, with whom we have active co-branding agreements, is something that we can be proud of because these are the people that actually reinforce the overall strength of the TENCEL brand, but also the whole promise of innovation and sustainability that we bring with our brands to the consumer. With that, I would like to hand back to Stephan of some of the internal things we have been doing extremely well.
Thank you, Robert. Being proud of something, I think that's the perfect transition to this slide. Even in a challenging environment, our two new plants were delivered on time and at budget. They will now allow Lenzing to fully participate on the market recovery in 2023. The teams did really an incredible job to complete these highly strategic expansion projects. Shout out to the teams. The lyocell plant in Thailand will help us to serve the growing demand for sustainable produced fibers, and the plant itself will be operated carbon neutral and is therefore extremely important milestone towards the carbon-free future. Just to remind, we had this strong demand in the first half of 2022. We were sold out and couldn't fully participate on the demand.
The dissolving wood pulp in Brazil will help us in the cost reduction program as it represents a perfect backward integration in our most important raw material, pulp. It increases on top our security of supply. In addition, for this year, we have the two ongoing upgrades which we have reported in prior calls, one in China, converting a line to modal, and the other one in Indonesia in converting one of our last factories, the last factory actually into a specialty plant. Both factories will be technically completed in the first half of 2023. With all of these investments, Lenzing will be significantly strengthening its backward integration in pulp as well as offering more of the highly demanded sustainable premium fibers. Lenzing stands for sustainability.
The press is calling us the sustainability champion, maybe these three awards are telling why they call us that way. On one hand side, we won again the triple A award of CDP, a triple A rating is only given to 12 companies globally. MSCI, again, double A, but with a significantly improved score from 7.6 to 8.4. EcoVadis, yet again, platinum status, a status which only 1% of the companies achieve. Let me summarize what we have taken you through. After having navigated through the perfect storm in half year 2 of 2022, our outlook for 2023 is positive. We see ourselves well-positioned in a recovering market environment and intend to further strengthen our positioning through the ongoing company cost reduction program and other initiatives, for example, on working capital.
Of course, there remains a high level of uncertainty when it comes to FX, raw material costs, energy costs, logistics costs, and there are several factors that neither we nor anyone else in the industry can influence. However, taking all the above into account and due to the margin contribution of the two new plants and our activities we have initiated and we have fully in our control, i.e., the cost saving program, we are confident to have an EBITDA range for the year 2023 in the order of magnitude between EUR 320 million-EUR 420 million. As Robert explained, with regards to 2024 and beyond, we will have a better picture later this year. As you know, historically, the textile market and also Lenzing always came back after a crisis and always came back stronger than before. We expect this pattern to continue.
The key reason behind these expectations are we are in a leading position to tackle the mega trends of sustainability and circularity. Specialty fibers have the highest growth rate in the industry, as you have seen, and those are the products we have in our portfolio. As Robert elucidated, we have a strong innovation platform on top with unique technologies that secure our long-term prospects. As we have seen in the recent past years with innovation such as LENZING ECOVERO turning into strong margin contributors. We can build that on strong ingredient brands like TENCEL as well as VEOCEL to further support our both margin and growth. Last but not least, our new and upgraded assets.
The new assets in Thailand and Brazil, the upgraded assets in China and Indonesia, will have a boosting impact after the full recovery of the market. These are the reason why we are optimistic about 2023, and we are optimistic about Lenzing in total. Thank you for your attention, and we now open up the floor for your questions.
Ladies and gentlemen, at this time, we will begin with the question and answer session. Please note that the questions are only possible via telephone. Anyone who wishes to ask a question may press star and one on their telephone keypad. If you wish to withdraw your question, you may press star then two. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. First question is from the line of Ingo Schachel with BNP Paribas Exane. Please go ahead.
Yeah, thanks for taking my question. My first one would be on the energy and chemical cost inflation, which you've illustrated well on slide 7. I think you've explained well that spot prices have started to decrease. But regarding the, let's say, realized energy and chemical costs in your P&L, can you explain a bit what, let's say at the lower end of your guidance, whether you've already backed in energy and chemical cost relief or whether the lower end of the guidance should also be achievable if energy and chemical costs remain at 17% and 20% of your production cost?
I will hand over this question to Christian Skilich. Thanks.
Yeah. Thanks for the question. We have penciled in all our energy and chemical assumptions so far into the guidance. For the energy side, we had been able to have fully hedged for our European and US-based sites, a bigger portion of the 2023 energy demand, both for steam, gas Electricity, so that we are really confident that we will keep energy costs and chemical costs within the guidance.
Okay. Maybe a question also to Nico Reiner as the new CFO and welcome to the team. I think maybe a conceptual question on the financial position and balance sheet of Lenzing. I mean, you've outlined that the liquidity position is strong, as you said. Of course, some metrics like net debt to EBITDA are quite impacted by the low EBITDA levels. Do you already have a view, let's say with a three-year view, where you think the... Well, what other metric you think would be important, net debt to EBITDA or maximum net debt level, whether, yeah, you already have certain target metrics in mind, that the balance sheet should be at in, let's say, 3 years' time, when it comes to key credit metrics?
Thank you very much for that question. I think it's important to note that for sure we are looking on our leverage and we are looking on the improvement of our leverage at this point of time. Overall, we are permanently also watching our balance sheet structure and as is usual practice on that one, it's also clear that, based on these developments, we are also doing a clear focus on our thoughts going into the years 2024 and 2025 when it comes probably to refinancing topics, which is a common practice in every company.
Clear to say, we have our overall guidance, if you look there to 2027 of 2.5x here. It's absolutely clear that we are doing everything as it is told with the cost-cutting program, as it is also said with the working capital measures, and also by having said that for 2023, a very solid liquidity cushion is there. We are taking our thoughts and are looking therefore, with a strategic approach how further our balance sheet can be improved. We are quite confident on achieving that.
Okay, very clear. Thank you.
Next question is from the line of Christian Faitz with Kepler Cheuvreux. Please go ahead.
Yes, thank you. Good afternoon, everybody. I have two questions as a start, please. First of all, I remember that in late 2022, you were suggesting that per the Q2 of this year, you are seeing enhanced capacity utilization. Can you remind us where we are in terms of capacity utilization at present at your major plants? A question on EBITDA and free cash flow. What is your view on the mid-cycle EBITDA and free cash flow of your activities? Do you have a view already at this point in time? Thank you.
First question with regards to the utilization, I would hand over to Stephan.
Yeah. Thank you very much. As you rightfully said, we took the measure of reducing our output at the back end of 2022 when hit by the perfect storm. We are now increasing the output again. Currently, status of this week is we are running with 26 out of 30 lines. That gives you an indication. We are still not back to the old operating levels, but week by week going up. Regarding the cash flow question, I hand over to you, Nico. Could you repeat, maybe?
Yeah. The mid-cycle where you see the EBITDA and cash flow level. Yeah, you are quite aware on our public guidance in going into 2027. Overall, we are here looking into a guidance of 2.5 times. This is the real topic which you should have in mind coming from that perspective. My guidance would be going into this direction. Also having said that, clearly to state that also EBITDA needs to increase to achieve these targets here clearly.
But we are not giving any detailed guidance on the years in between. Overall, what you see now here for 2023 is a clear improvement on EBITDA level coming from 2022 when the perfect storm hit Lenzing in the second half of the year. For sure, there is a very positive trend also on the EBITDA level. We gave to the market yesterday a guidance for 2023, and this is a very positive outcome, and so looking for on achieving that.
Thank you very much. Very helpful.
Next question is from the line of Isha Sharma with Stifel Europe. Please go ahead.
Hi, good afternoon. I have a number of questions. I'll ask first three, please, and then I'll queue back. If I look at your pulp and fiber split for 2022, is it also something that we should expect to be similar in 2023 with a number of capacity additions in pulp? If you could also comment a little bit on the market development for both your products and how we should think of the earnings split in 2023, please. The second question is on CapEx. We saw another step up in Q4. Overall for the full year, it was around EUR 700 million. You had guided a little over EUR 600 million earlier. What changed there? Were there new projects that you had to take care of?
If you could give us some color on your CapEx also going into 2023, what should we take into consideration? The third one is on networking capital. Typically, we have seen across the industry, working capital release in Q4 in a weak demand environment, but we didn't see this at Lenzing. If you could please explain why that was the case and when should we see working capital release. Thank you.
First question, I will hand over to Stephan, and then the second and the third, Nico will be happy to answer.
Thank you, Isha, for your questions. I take the first two. As you can imagine, with the ramping up and now full production of our factory in Brazil, actually the pulp share will increase as planned on versus even 2022. That was your first question. Second question regarding CapEx. As you know, we had EUR 2 billion or more than EUR 2 billion over the last three years. This year, we were really focused mainly on the maintenance CapEx, as well as the completion of the mentioned strategic project in Indonesia and in China. The range you can expect will be in the order of magnitude between EUR 250 million-EUR 280 million.
Thank you for your question regarding the working capital situation. I mean, when you look at the development of the top line and the demand, where Robert was also explaining, we could see that in Q3, and especially in Q4, 2022, there was a sharp decline in demand. As you think about our facilities and our production capabilities, which are on continuous production, basically, it was really difficult to get in balance with the shorten of demand and our capacity production. As a consequence, it was absolutely clear that the products went into inventory and we had to bring this inventory then also in our balance sheet, which we have seen here, but also obviously clear. First of all, we have reduced also our production capacities then in Q4 as an immediate reaction to the market development.
Secondly, we have taken clear actions to reduce inventory already by the end of Q4, and also at this point of time, we are on a good track getting inventory in a balanced way back again. This gives you a little bit of a picture, what we have been doing here on this topic, and hopefully this gives you also the color in regards to the working capital.
Right. Maybe just on the pulp side, if you could please give us a little bit of a color on how you expect the market to develop and in turn the pricing, because we know a number of capacities are coming in. Yours is obviously captive, I understand that, but with the low demand environment in fibers, you were also selling externally at good margins. Just was wondering how this develops through 2023.
for this, questions, we'll hand over to Christian Skilich.
Thank you for the question. As you have well pointed out, the pulp markets have come down within quarter four, have come down as well on the pricing side to a level of approximately $900 per ton. We went on that price tag as well into the beginning of that year and have seen now over the last couple of weeks price movements northwards in the range of $30-$50 per ton. That recovery on the pulp side is clearly following the recovery on the viscose market.
Thank you so much. I'll reach you back.
As a reminder, that's star followed by 1 to ask a question. Next question is from the line of Dr. Karl Arco with Gesellschaft für Investitionsplanung . Please go ahead.
Thank you. Thank you, gentlemen. Even though the outlook might be great, we have to deal with the financials that we see at the moment, which are not too great out of my view, with a gearing of 89%, which jumps to 120% and an equity ratio which drops to 27% if you deduct the hybrid capital. I'm wondering whether ever any covenants of the banks have been broken already? What was it demanded by the banks that you pay no dividends? Will you Do you plan to pay interest on the hybrid capital? Continuing with the hybrid capital, end of 2025, there either you repay the hybrid or there is a step-up which could triple your cost of interest to.
How do you want to deal with that? Also in your annual report, you say you entered obviously into different contracts to use to secure your supply. This obviously obliges you to buy material. At the given demand that you have at the moment, do we have to fear for a loss? Can you quantify an impending loss out of these contracts, out of these obligations? Now my last question, sorry. You have bought 40,000 hectares and rented another 30,000, I read. You activated this timber on a discounted cash flow basis with EUR 127 million. Discounted cash flow and forest, I know out of own experience, is difficult. Anyway, I was wondering what are the acquisition costs of these hectares were. Thank you. Sorry for so many questions.
Let's start with the first questions, which regards the balance sheet and financing to Nico.
Yeah. Let me allude, first of all, on the covenant topic you are addressing. At this point of time, Lenzing has got only one affirmative covenant out of its financing structure, which is EUR 250 million cash, which we need to keep on balance sheet due to the financing of our project in Brazil. Next to that, there are none other affirmative covenants. Let me allude on the topic, have you any breach of any covenant at this point of time? As simple as it is, clearly, no. Finally, let me also answer your question on the dividend. Have we been, let's say, influenced by any banks regarding our dividend policy? Also a very simple answer, no. Let me get to your question on the hybrid.
We know the hybrid is due in December 2025. Coming from today, there's a pretty long time going into this timeframe and to have, let's say, any type of solution, either refinancing or either not refinancing. I think that's a long way to go. We are looking forward with all the strategies which we could have to get here to a solution at a point of time, pretty far ahead of any maturity of this hybrid. You have been asking if we are willing to pay our obliged interest on the hybrid. Very simple answer, yes. We are fully compliant with all our contracts. Now, by having said that, I would love to hand over to my colleague, to Christian Skilich, that he could elaborate a little bit on our wood, which is there over in Brazil, and we are using for our pulp production.
Thank you, Nico. Yeah, thanks for your question on that topic. The plantation that you're referring to in the amount of approximately 40,000 hectares was brought in as an in-kind from our joint venture partner on a lease base into the joint venture. LDC didn't acquire any land there, and all the standings in the forests there are accounted in our books according IFRS standards.
Yes. Okay. It is, so you didn't buy it. They brought it into your joint venture. Do I understand this right?
Yes.
Yes. Still you have to address some kind of value when you know, when you, [uncertain] , whatever this is in English.
Yeah.
You still need a value for it, no?
E-exactly.
Yeah.
That was brought into the joint venture at a certain value.
Okay, which you're not going to tell me. Okay.
Not to disclose.
Okay. I had this one question with this contract to ensure your supply. Yes, you obviously entered into a couple of obligations of material which you have to buy or you can buy and you have to buy. If you take the current demand that you have, do we have to fear of any write-offs out of these obligations?
There will be no negative impact out of the sourcing of chemicals or energy into our books.
Okay. Whatever. Yeah. Any other material, yeah?
No.
I don't know what the hell. Okay. Let me see. Sorry. Thank you for the moment. Well, perhaps 1 more thing. I guess, obviously, you plan to restructure your or you rethink your capital structure, obviously. I guess, 1 of the options will be a capital increase as well, I guess.
It will be a question for Nico, I assume.
Yes. Thank you. I mean, generally speaking, when we are checking our capital structure, which by the way we are doing permanently, we always have all possibilities and all actions in hand. It's either way, a debt situation or an equity situation. At this point of time and also going forward, we are always checking all our possibilities to manage our balance sheet in a very optimized way. That would be my answer to your question.
Okay. Now, a very small last question. The upcoming investments for the next year, 23, and costs that you have, you can... Is your cash flow big enough to pay to come up for all of this?
Very clear answer, yes.
Okay.
I can only repeat, we have a very solid liquidity cushion, and on based on that one and also on our operational cash flow, we do see there are no issues.
Thank you.
Next question is from the line of Markus Mayer with Baader Helvea. Please go ahead.
Yeah, good afternoon, gentlemen. I also have several questions. I come back to Isha's question on net working capital and inventories. Here you had EUR 200 million, roughly EUR 200 million higher net working capital in 2022 versus 2021. Should we expect this higher net working capital to be basically reduced in 2023, and as such, that this will boost your cash flow, or is this a too aggressive assumption? Also on inventories, have you seen any inventory devaluations as you have shown that prices for raw materials but also fiber products went down? On your more on the guidance and housekeeping side, what is the assumption of or for tax rate you have for 2023?
Also, what are the assumptions for the upper end, the lower end of the guidance range? Lastly, if you could give us an update on your dividend policy, was there any change? Is now the dividend policy linked to net results to a positive one or to a positive cash flow or to leverage situation? That would be helpful. Thank you.
For the first question with regards to, networking, net working capital, Nico, please.
Yeah. As, as we have seen also in the presentation, historical volumes on working capital have been around the EUR 400 million. As you have seen also in the presentation that we are clearly above this level. We are expecting to get back to these normal levels. The answer is, yes, we will reduce also inventory and therefore have their positive impact coming from this action. In regards to the question on the valuation of the inventory, clear to say we are an IFRS company, we evaluate on current market values our inventory and not only our inventory, also the full balance sheet. Therefore, the answer is, we are very convinced about the value of our inventory. On the dividend policy, lastly, what you said here, I can only reflect what has been communicated yesterday.
There is a clear dividend policy in place which has been communicated, by middle of last year, and we stick to that dividend policy, and we have given to the market further guidance yesterday with our comments on the dividend policy for 2023. Therefore, I think from my end, nothing else to comment on.
Maybe in addition, what we are saying is we are not suspending the dividend policy as per se or as such, but only for the financial year 2023.
Okay.
Okay.
On the guidance functions, if you could help us there, upper and lower end and also tax rate, please.
Yeah. Very much so, depending on the speed of the market recovery, right? That is the main driver as we elucidated on the energy cost. We have a very good hedging side or hedging initiative done. The speed of the market recovery will determine whether we are gonna end up more on the lower end or on the higher end.
Maybe if I can throw in another question, on Christian Faitz's question regarding a mid-cycle EBITDA. You previously had a target of EUR 800 million by 2024 EBITDA. Since then, a lot has changed. Would it be fair to assume if the assumptions of the past would have been the same, the energy situation, demand situation, et cetera, that this EUR 800 million is still in place, and there will be a kind of a 2024 mid-cycle EBITDA margin indication. Is this fair?
I would hand over, to Stephan for this question.
Yeah. As we said in our last call, we gave guidance for the year 2027. I think you realize that the year 2022 was for sure different than we expected it. We will now see how the year 2023 will come in, and then we are in a much better position to see where we are on those levels, which we want to be for 2027. I think it is, at the moment, a little bit too early to say it's EUR 1 billion, as well as the 2 times net debt to EBITDA in the year 2027.
The number, will it be confirmed? Will it be earlier? Will it be later? There, you have to give us a little bit more time, depending also on the speed of recovery in 2023. As we said, at the moment, it is very much in our focus, and I think Nico elucidated on that one, that we are driving the net debt over EBITDA path in the right direction.
Okay. Thank you. Next question is from the line of Teresa Schinwald with Raiffeisen Bank International. Please go ahead.
Hello. thanks for taking my question.
At least we cannot hear the question.
I think she just dropped out. Operator, maybe we can move on to the question of Isha.
Schinwald has connected on a second line. Please go ahead.
Thank you. Sorry, I had two lines on and there was an echo. First, thanks also for developing more numbers. I hope this is a practice that is here to stay. I have some questions still remaining. First on coming back to the risk management and especially on the energy and FX hedging. Can you tell us a bit more about the maturities that you're now hedging on the energy side for electricity and gas? Also if the FX risk management, if there is a change to the usual open position of about $400 million on the US dollar front? My other question is on what we can expect from depreciation next year? Also that now there is also a depletion portion in the depreciation, and if you feel comfortable, for example, with a consensus of EUR 250 million on the depreciation.
First, question with regards to energy hedging, hand over to Christian Skilich, please.
Yeah, thank you for the question. To elucidate a bit on that, we have, for gas, steam, and, power, mostly, physical hedges in place for a material portion of our demand for the next, 12 months, as well rolling forward, for a minor portion already for the 12 months then, to follow. In regards of risk management, we see here, a rather conservative, approach on really managing our risks for especially the period of the full year 2023. For FX hedging, I would hand over to Nico then.
Yeah, pretty simple answer to your question. No big changes here. We are risk averse and, so that's the answer to your question on the FX side. On the depreciation side, I mean, basically, we are usually not giving any guidance on depreciation volumes, as we have a guidance of, or if there are. Basically, what you are talking about is guiding into the right direction, I would say. Also to comment on your thoughts and question in regards to the depreciation, it's in relation to our biological assets, which we do have over there in Brazil. This is giving the answer then to that portion of the depreciation.
Thank you.
Follow-up question from Isha Sharma with Stifel Europe. Please go ahead.
Thank you. Can I ask you about your guidance again, please? If we think of Q4 EBITDA, and we also adjust for the provisions that you made, underlying it was kind of no EBITDA, how should we think about going into 2023? Is it fair to say then that your guidance is based on more of a second half recovery since you also still have to work on your inventory levels and bring them down? Is that fair?
Yeah, that is fair. It is, as we said, we expect the market recovery during the course of the year. That is reflected in our guidance. We expect a stronger Q3 and Q4 than in Q1 and in Q2.
Understood. Just on D&A, again, EUR 75 million is what you have reported in Q4. Is that a good run rate going forward? The other one is also on financial costs, which were also elevated in Q4 at EUR 40 million. Of course, you had in the first 9 months some special effects, and Thomas told this to us in the last call. If you could help us with your best guess at what run rate we should think of, since you still have to refinance for 2024 maturities. That would be great. Thank you.
Nico, please.
Let me discuss a little bit with you. What was your precise question now? You have been crossing around the whole garden of KPIs and, please, can you please precisely ask your question?
Your Depreciation and Amortization in Q4 was EUR 75 million. This was much more elevated than in the past. I'm asking if this is the run rate going forward. If we assume EUR 75 million each quarter for 2023, is that the right number for Depreciation and Amortization? That is the first one. The second was, one is on the financial costs. They were EUR 40 million negative in Q4, while in the first nine months they were positive. There were some one-off effects, as you have told us before. My question is: What would be the financial cost going into 2023? If you could give us your best guess, please. Is that clear enough, or should I ask?
No, thank you much. No, understood. Because I got it a little bit. So on your first question on the depreciation, I mean, what you see here for sure, you have to take in mind, first of all, that we ramped up our new big investments in Brazil and also in Thailand. Simple to that effect, there is a clear increase also in depreciation. Your calculation, which you are doing here on base Q4, is going in the right direction, I would assume here. Also, when I talk about your second part of your question, this, the situation on the financial results, also pretty clear here. It's also directionally going into the right direction as we have ramped up all our facilities, our investments here.
With this ramp up, we also have to take into consideration, a higher, let's say, impact on our financing costs, which is pretty clear going forward, based on our contracts, which we do have in our financing contracts here. Directionally, what you are saying here is also in the right way.
No, I'm sorry, but I still don't understand. Financial costs in 1 quarter was EUR 40 million. Should I think of EUR 40 million in each quarter? That would be a very high number for the full year.
If you think about the EUR 40 million there are also FX effects within this number. I would love to emphasize here. Also additionally, as you are right, EUR 40 million calculation would be relatively high also. If you take some of the FX effects out of it and look in rationale what is really on our balance sheet, I think then you come pretty close to a number here. Overall, we do not give any guidance on a detailed number on financial results. We are guiding only EBITDA. I think that has been pretty precisely communicated.
Thank you.
There are no further questions at this time. I will hand back to Stephan Sielaff for closing.
Yeah. Thanks a lot for dialing in, listening in. I think, we could elucidate the perfect storm in the second half of 2022, our comeback year in 2023, and our excellent prospects for the 2024 onwards. Thanks a lot for your time. Thanks a lot for your questions. All the best for you. We are looking positively into 2023. All the best. Thank you.