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Green threads: Thomas Obendrauf, CFO of Lenzing

Thomas Obendrauf, CFO of Lenzing, speaks with Acuris Capital Intelligence about how the Austrian textile manufacturer has been moving its global expansion plans forward during the pandemic and why sustainability plays an outsized role for the firm.

Interview by Patrick Costello

Q. What are Lenzing’s main growth aims for the coming months?

We’re currently setting up two new production sites in Thailand and Brazil. In Thailand, we’re building a state-of-the-art lyocell plant so that speciality fibres account for more than 75% of our revenue by 2024. In Brazil, we’re constructing a dissolving wood pulp plant in a joint venture with the Brazilian textiles company Dexco (formerly Duratex Group). It is the biggest project Lenzing has ever done and will increase our production capacity in dissolving wood pulp to more than one million tonnes. We will also end up nearly 100% backward integrated at completion. 

Q. How does Lenzing monitor liquidity to support these aims? 

We traditionally have had a very conservative balance sheet. When the pandemic hit us, we were just beginning the project in Brazil, while the project in Thailand had been ongoing for nine months or so. Usually whenever we start such projects, we make sure the loans we need to see us to the finish are basically secured when we kick off. Still, to be on the very safe side, we also issued a hybrid bond last December amounting to €500 million, even though all our credit lines were secured on time and meeting expectations.

Q. And how does the company’s financial performance look now?

The second quarter of 2021 was a very strong quarter—we were very pleased with that performance. And when you look at our H1 2021 numbers, you can see that Lenzing has plenty of liquidity. As of 30 June 2021, our liquid funds exceeded €1 billion. With those funds in place plus the unused credit lines, there is no doubt we can finish all the projects we have launched. Lenzing is a conservative company in that regard. We would rather have too much liquidity than end up in a situation which is maybe not so nice.

Q. What operational risks are you keeping an eye on?

Looking at the macro-economic environment, what we are seeing—what every company is facing really—is that prices are going up. Prices are up massively for certain raw materials, energy prices are up significantly and freight costs are extremely high. 

At some point, I expect the global supply chain will be back to “normal” again. The question still is when that will be the case.

Q. Has Lenzing’s attitude towards capital markets changed over the past 18 months?

As mentioned, the major bit of financing we did the past two to three years was the hybrid bond in late 2020. In late 2019, we also issued a private placement (“Schuldschein”), which was likewise €500 million. Otherwise, financing for the projects in Brazil and Thailand are done via our banks, and we use the Austrian Export Credit Agency (OeKB), which offers highly competitive financing. We are not planning another private placement at this point, but rest assured, we are monitoring those markets as well. Overall, I’d say they still look quite attractive.

Q. Where does M&A fall in Lenzing’s strategy? 

Our capital allocation priority is investing in capex for growth, followed by dividends. M&A would only rank third after these aims, for various reasons including a lack of targets in markets like lyocell. We look into things and are shown one or the other pulp mill up for sale, but historically we’ve always decided to go for capex for growth and build it up ourselves. That is much easier than converting a mill in many cases—although cashflows are more immediate with M&A than a DIY project of course. As we entered the pandemic having basically completely end-financed our plans, and then issued the hybrid bond, we have not had many in-depth discussions with advisors on these topics recently.

Q. Sustainability is an increasingly important topic, especially in the textiles space. How does Lenzing approach ESG issues?

Sustainability is a major innovation driver for us and a key part of our business model, not just a core value, and this differentiates Lenzing from our competition and even more so from competing fibre. In 2020 and 2021, for example, Lenzing launched the first carbon-neutral cellulosic fibres on the global textile and nonwoven markets, marking another milestone on the path Lenzing and its partners are taking towards carbon neutrality. Fibres such as polyester are going to see an uphill battle in the years to come for several reasons including the EU single-use plastics directive. Solutions already exist in the textiles industry for these issues, they just need to be applied and our fibres are a perfect solution. 


A bit of background: Thomas Obendrauf has been CFO of Lenzing since 2016. Headquartered in Upper Austria, the €2.69 billion market cap company generated €1.6 billion revenue in 2020 and has more than 7,000 employees. It focuses on the ecologically responsible production of specialty fibres made from wood and is the only global producer capable of manufacturing all three wood-based cellulose fibres of viscose, modal and lyocell at industrial scale. Its branded fibres, such as TENCEL, have applications for textiles including women’s clothing and denim to high-performance sportswear. 

This interview has been edited for clarity and length.