Lenzing Aktiengesellschaft (LNZ) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Sugi, your Chorus Call operator. Welcome and thank you for joining Lenzing Group's analyst call. [Operator Instructions] Your hosts today are Stefan Doboczky and Thomas Obendrauf. I would now like to turn the conference over to Stefan Doboczky, CEO of Lenzing.

Ladies and gentlemen, a warm welcome from my side. Thanks for joining the Q1 Lenzing investor call. Thanks for your interest. Quarter 1 2021, a very successful start in the year and, in some way, maybe even an inch better than what we could have anticipated still some weeks back. And if we compare the situation -- market situation that we face at this moment in time and compare this to just 10 months back, it feels like a different world. So Q1, very strong market environment in general. Revenue came in with EUR 489 million, up a bit less than 5% versus the same period last year. And if you remember, last year, we were slightly, but only slightly impacted by COVID due to our activities in Nanjing. But in Europe and in the rest of the world, we didn't have yet any impact. Specialty share, and Thomas will speak later about the adapted definition, we're now at 73% versus the 72% that we had same period last year. EBITDA, also very strong, reflection of the positive price and demand development, but still also, I think, reflecting the positive work that we continue to do last year on the cost side, EUR 95 million, compared to EUR 69 million of last year, more than 1/3 better than the same period last year. Net result of the minorities at EUR 28 million and earnings per share at EUR 1.06. We will speak later on about the outlook, and we will speak later on about the reconfirmation of the strategic mid-term targets 2024. We will also focus in-depth on the two big projects, both on time and in budget. And as you could read from the press release yesterday, we decided to make the next substantial step to transform our portfolio in direction of specialties by investing, as was part of our strategic plans, EUR 200 million in Asia, both at our Indonesian at our Nanjing site, which will drive our specialty growth, but will also have a very substantial impact on our sustainability targets. Still some words on Hygiene Austria. This was a topic that I think captures, particularly for those who are closer in Austria, busy in the first couple of weeks in March and April. By now, the project, I would say, we have done what could be done. We ensured that the quality of the masks was checked and assured. We ensured the recertification. We ensured that top management would be replaced. And then I think also recognizing what we can do, we then decided to actually transfer our shareholding to partners and as such then also ensured the continuation of the business. Thomas will also go a bit more in-depth that we have written off all on the investments that we still had in our books as well as a loan in the first quarter. So for us, subject, closed, and we move on. Staying on the theme of sustainability and our sustainability strategy. Lenzing has been one of the first companies now who has presented in detail our sustainability strategy at the Annual General Meeting. We went with our shareholders in quite some depth into the approach of sustainability, the way sustainability is for Lenzing a core value that we are sort of balancing the interest of shareholders, the impact on the people we interact with as well as the impact on the planet, but it is also the main business and innovation driver. And per se, really is sort of a bit guiding towards. The translation of our sustainability strategy was done over the last 2 years into 18 discrete targets that we have set ourselves supporting a good too handful of the United Nations Sustainable Development Goals. And for most of the targets we have by now not only clear responsibility, but also detailed road maps how we want to accomplish them. Here, you see illustrative our decarbonization road map. And those road maps are then translated for each site. We have targets per site. And what we would like to symbolize here is we know by now in great detail how we will accomplish a minus 60% on CO2 per metric ton of product sold. So we know how we're going to accomplish our 2024 target, that we are very well on track. We know how we're going to accomplish our 2030 target, that's all part of our plans. And we also know a bit more than that how to go to minus 60%. In all transparency, to reach carbon neutrality by 2050, there is quite something that I think still needs to happen in the Lenzing community, but also with our suppliers, but also, I think when it comes to new technology and changes in the total energy mix and landscape. One of the elements of such a road map was the investment that we announced yesterday. The total of the EUR 200 million will bring the total Indonesian side into an ECOVERO Eco Viscose side. In essence, we will triple our capacity for ECOVERO, a product which is in very high demand. We will bring to Nanjing model. We will increase our capacity there by a good third versus what we have today installed. We will be the first wood-based lyocell manufacturer who has a site now in China that is completely independent from coal. We will have a gas-based cogeneration unit that will help us to support the site with steam as well as electricity. And in total, on both sides, we will reduce the carbon footprint by 320,000, and we will accomplish by focusing in Purwakarta on recovery of sulfur emissions, recovery of sulfur product, to reduce our sulfur emissions by 50%. That is the single biggest step to accomplish our desulfurization targets of our Sustainable Development Goals. So that's what you see on the next slide. In essence, this investment is a big step for our sCore TEN target. It is strongly accretive to EBITDA as well as to ROCE. I think it's some of the very good business cases, but it's also very conducive to our sustainability targets as I elucidated. So sustainability presented to the shareholder meetings, I think we have road maps that are very actionable. This is not a vision. This is detailed road maps per site and the step that we just announced yesterday was a next market-lead step in this direction. Looking a little bit at the market. Now if we look at the downstream market on retail level, we see, again, 2 pictures. We see, on the one hand, that Europe and the U.S., we see retail traffic still being impacted, Europe the most. We see that in the U.S., clothing sales do a bit better than retail traffic, suggesting on the one hand that the purchase person, when they go to shop, is slightly better than the past. And that online is covering for some share. So there, we are down some 5%, 10% versus the same period of sort of -- versus pre-COVID level. If you look at China, there we are at pre-COVID level. And in Europe, we are still quite a bit behind. What does this mean for the demand and price picture in our industry? In essence, we saw all fiber classes in terms of price, in terms of demand, in a very positive territory. However, we also saw for all relevant fiber classes somewhat a peak in beginning March, mid-March, and since then a slight erosion of prices, however still on a high level. So in March, we had CNY 15,600 on viscose; for textile in nonwoven application, up 16,000; very healthy operating rates again at sort of the 5-year average and inventory levels even below the level that we typically see with 12 days. Dissolved wood pulp prices at a very high level of $1,100. In essence, I think what you need to take away, we had in the whole industry, I think, a pretty healthy appetite and belief that autumn/winter collection will be close to back as normal. At the same time, we had a pretty empty inventory along the industry chain and to some extent on the commodities also some trading effects. So I think some of that we will see in Q2 and Q3 easing. So we will still have, in our opinion, healthy demand, but I think some of the inventory buildup will again get reduced. If you look at the conversion margin and on theoretical profit, viscose is in healthy territory, but given the very high dissolved wood pulp prices that we have now on a conversion margin, we're just back at -- I would say at a typical level of a good year, not as bad as what we had in most of '19 and '20, but also not anymore the highs that we had in January, February or in most part of '17 and '18. If you look at the specialty price fiber development, please don't forget, you have here a mixed picture, including the Lenzing viscose specialties but also TENCEL modal as well as TENCEL lyocell. And you always have a 6-month rolling average. So Lenzing specialty sales much more stable. You see here less of an aggressive price uptick. I think that's also because there was much less of a price reduction. However, we do see that both in modal as lyocell prices are also picking up, the increasing prices because the demand is very healthy. One of the things that we are particularly pleased is the developing on the branding. If you also look at our website, you see that next to TENCEL we're be putting more effort now also on the repositioning of ECOVERO as well as very climate conscious products in nonwoven. And that we are stressing the word to buy TENCEL quite actively. Very recently, we were pleased with the coverage that we achieved with Red Carpet Green Dress cooperation for the Oscars. One of the main presenters, Marlee Matlin, wore a dress from TENCEL Luxe. We received enormous social media coverage because the Vivienne Westwood as well as the organizers and then many also of the tabloids spoke about TENCEL Luxe, I think, that brought us enormous publicity. And if you look at the next page, you're at the other side of the spectrum. Here, we don't speak about haute couture, but we are very pleased with the branding partnerships that we're getting. We are here at the Times Square. You see an H&M advertisement that was going there for more than a week, where they're using TENCEL lyocell as a key differentiator. We don't pay for this advertisement. I think you can imagine that 1 week coverage in Times Square doesn't come cheap for H&M. But for us, it was free advertising. So market friendly, branding good progress, some word on the big expansion projects. I will first do Brazil, and then I will hand over to Thomas to speak about Thailand. Our joint venture in Brazil in Minas Gerais at the construction of the 500,000 ton dissolved wood pulp line is progressing very nicely. We are on time. We are in budget. And we continue to be positive that in the first half of next year we will be starting up that line. You see on the next pages a couple of impressions on how the site develops and sort of a helicopter view. For those of you who know the Lenzing site, that site is bigger than the total Lenzing site to speak. More than 2 square kilometers the total site is large. On the next slide, you see one of the core elements of a pulp plant, the boiler section, the huge biomass boiler, recovery boiler. You see the stack, 75-meter high. And to recovery boiler and biomass boiler steam drums were lifted on the week precise, as we have planned it 2 years ago when we made the project plan. And that's all despite the COVID circumstances that we have in Brazil. Next page, you see the wastewater treatment, our effluent treatment plant. Also a very important part of the plant. Also from an ESG perspective, I think, essential. We use a tertiary treatment, effluent strategy there that I think gives us enormous peace of mind that we will not only live up to the local regulations, but also to the very high Lenzing standards. On the next page, you see the water intake at the Araguari River progressing well as well as then on the next page the water intake plateau areas with all the substations because this plant will be a huge producer of green energy. And that is more or less the interface where our substation will then be faced with the [ CEMEX ] or the public grid substation. We will then deliver the green energy into the grid. Thomas, may I hand over to you for Thailand.

Thank you, Stefan. Let me continue with the lyocell expansion project in Thailand. In a nutshell, the project is on time and in budget. The key facts are, of course, unchanged to our last presentation. So it will be 100 kilotons lyocell fiber plant. It will be the largest of its kind. And of course, it will boost our specialty ratio accordingly. CapEx unchanged with EUR 400 million. The project is fully on track, as we mentioned before, and ramp-up is expected by the end of 2021, and the plant will be fully ramped up in the second half of 2022. Moving on to the next slide there, you can see an overview of the site. Let me start on the right side there with the wastewater treatment plant, of course, state of the art. Next to it, you have the pipe warehouse, then comes the production building, followed by the fiber warehouse. And in front of the fiber warehouse, you have the utilities plant. And in front of the production building, you see the technical warehouse, laboratory and workshops. And for those who saw previous pictures of the project, actually, you will realize, yes, a couple of buildings are already finished, and we made tremendous progress, actually, over the last couple of weeks. Moving on to the next page. Actually, what you see there is our production building. As we already highlighted, quite a lot of progress over the last couple of weeks, so fully on time. Moving on to wastewater treatment plant. As I mentioned already, it's a state of the art wastewater treatment plant, which is, of course, crucial with regards to sustainability. And last but not least, one more picture, actually, where you can see our fiber warehouse and the utilities plant. Overall, we are very confident that we will start-up this plant in Q4 of this year. So let me move on now to our Q1 financials, and let me start with revenues. As already mentioned by Stefan, revenues came in with EUR 489 million compared to EUR 466 million the year before. It's an increase of about 5%, of course, driven by strong prices, but also by higher volume. Actually, revenues that were contributed from the pipe side were a little bit lower. But nevertheless, we ended up with a 5% revenue increase. With regards to the group revenue by application, you see now that we are back on the pre-crisis level with 68% accounting for -- or textile fibers accounting for 68%, and the nonwoven fiber is accounting for 32%. So this is basically as you saw it in Q1 2020. With regards to our specialties, also this was already highlighted by Stefan. Actually, we changed the way of how we calculate the ratio. You see it here, 73% of our total fiber revenue. I think this makes it a more meaningful number. Before we move on to earnings, I mean, maybe one more thing I would like to highlight is for those of you who looked at the P&L statement in detail, you will have realized that actually we changed the presentation of our profit and loss statement from the total cost method to cost of sales method. And I think that will quite be helpful with regards to transparency and comparability. Moving on now to earnings. Let me start with EBITDA there. EBITDA came in with EUR 94.5 million compared to EUR 69 million the year before. It's a massive increase of almost 37%. EBITDA margin now above 19% compared to less than 15% the year before, of course, driven by the strong price development in Q1. With regards to EBIT, of course, we see the same development there. I mean EBIT increased from EUR 30 million to EUR 55 million, so basically, the same increase in absolute numbers. Of course, in percentage terms, it increased significantly more. It's an increase of 85%, bringing EBIT margin to more than 11% compared to 6.4% the year before. And with regards to group net profit, actually, the quarter came in with slightly above EUR 28 million compared to EUR 22 million the year before. Earnings per share at EUR 1.06 compared to EUR 0.84 in the year before. What you have to keep in mind, when you take a look at the group, net profit is, of course, the impairment of the Hygiene Austria investment and the loan. And of course, you have to deduct the interest for the hybrid bond. Moving on to cash flow and trading working capital. Yes, as you see here, I think very strong gross cash flow and operating cash flow. Operating cash flow came in with more than EUR 110 million. CapEx was also very high in Q2, actually with EUR 211 million. However, with the very strong operating cash flow, we could pay more than half of it out of the operating cash flow, bringing the free cash flow to a negative EUR 99 million. But I think the graph tells all, very strong improvement over the last couple of quarters. With regards to trading working capital, also, I'm quite happy with the development there. In absolute numbers, we had EUR 381 million, slightly lower than by the end of 2020. And trading working capital in percent of annualized group revenue, of course, came down as well. Moving on to some balance sheet metrics, and let me start with net financial debt. Actually, net financial debt according to IFRS came in with EUR 572 million compared to EUR 471 million the year before. The increase, of course, out of the negative free cash flow. What you have to keep in mind when you look at net financial debt is, of course, that we fully consolidate our Brazilian joint venture. So if you adjust for the portion that is being guaranteed by our joint venture partner, Duratex, then actually what we call the economic net financial debt came in with EUR 411 million compared to EUR 380 million the year before. With regards to total assets, of course, an increase -- quite some increase of more than 9%. That is, of course, driven by the huge CapEx we did in Thailand and in Brazil. Our adjusted equity now slightly below EUR 2 billion. This is, of course, driven by the result, but also by the FX development. And net financial debt actually already mentioned. And to close it off actually with regards to our liquidity cushion actually at more than EUR 2 billion, consisting of EUR 1.2 billion in liquid assets and another EUR 840 million in unused credit facilities. So I think, overall, indeed, an excellent start into 2021. And with that, I hand back to Stefan for the outlook.

Thanks, Thomas, for the elucidation of the financials. If you look a bit into '21, what do we see? Number one, I think, in general, a strong market sentiment, but there remains COVID-19. And we see it very intensely at the moment in India, which is a big textile market, hits us less than other players in the industry. But the situation there is just a reminder how volatile and how difficult the situation still is. And we need to be careful in the way we just project whatever we face at the moment for the medium run. Long term, I think that is, again, a bit of a different picture. Now we have seen -- we saw prices in March peaking. We expect prices to remain on a relatively high level. However, not as high as March with RMB 15,600. At the moment, prices are hovering slightly below the RMB 1,500 per ton level. Dissolved wood pulp prices we expect to remain strong. Will they stay on the $1,100 level? We need to see. Maybe still for this quarter overall some softening would not surprise us. But structurally, I think dissolved wood pulp is seeing, I think, very healthy demand. And I think with paper and paper pulp also being relatively strong, we expect prices in comparison to remain high. And that gives us a certain floor to viscose prices, which, in general, I think, is for Lenzing very helpful. We spoke about Thailand and Brazil that will continue to get our focus as well as the new invest in Indonesia and Nanjing. And we're making continuous improvement and operational excellence. Ongoing -- this is a focal priority for us. And we continue, as a consequence, also to help to get more efficiency out of the plants that we operate. We shared with you with the full year result with the key work plan -- the key strategic milestones. 3 of the decisions by now we have taken in the first 4 months of this year, the modal expansion as well as the expansion of ECOVERO and the steps to decarbonize our portfolio. Nanjing, Prachinburi already announced. We also are in the process of starting up on one big facility here on the raw material side in Lenzing that will contribute to carbon reduction that we will communicate more about in the next couple of days. And of course, a major milestone is the project finalization then at the fourth quarter of this year. Last slide, very familiar to you, our 2024 target. We would like to reemphasize our commitment and our firm belief that we will achieve this target, EUR 800 million in 2024, ROCE above 10%. With the strong cash flow that we observed now, I think the deleveraging is actually even less of a challenge than probably what we still would have expected beginning of last year when we announced the target. Specialty share, maybe just with the redefinition that we have used, you might interpret this as -- this is not a very aggressive target. You're right, not a very aggressive target. I think we would be very surprised if we would not be very close to the 100% level at this moment in time with -- post the redefinition as well, the decision that we've taken. Dissolved wood pulp integration on track and the carbon emission, I also spoke about, also very well on track. All in all, first quarter, strong start into the year 2021, helps after 3 very difficult quarters in 2020. Strategically fully on track, execution wise fully on track, and we look with quite some optimism into the year 2021. With that, we will open the floor for questions. Operator, please.

[Operator Instructions] First question is from the line of Christian Faitz, Kepler Cheuvreux.

I have one question for now. Can you explain a bit more in detail your investments in Asia are significantly improving the CO2 footprint in your 2 existing plants plus the conversion to more specialty grades? Whether these EUR 200 million CapEx pretty much self finance themselves via improved profitability or cash flow? Or how much have you earmarked for the next 2 years for CapEx out of your normal CapEx plan?

Thanks, Mr. Faitz. I will speak a bit about the details what we are doing, and then I will ask Thomas to speak a bit about the CapEx side. In essence, we are doing -- in Nanjing, we are converting a viscose line into a modal line. We are changing the energy footprint at the site. So those are the major steps that we are undertaking there. In Indonesia, we have, in essence, 3 major activities. The first 1 is actually reduce the sulfur emission. There is a so-called cap plant that we need to build there that helps the CS2 consumption, will make the site much more efficient. Secondly, we will reduce the overall air emission level by running more things in cycle as well as water emission by extending and professionalizing the wastewater treatment plant. At the same time, we are making the small modification that are then needed on top to produce on all lines ECOVERO. So the full sites then in Nanjing, in Indonesia, as well as, of course, Austria, so all our 3 viscose site will be EU Ecolabel compliance. Today, it is only Nanjing and only Lenzing. And by doing that, we will -- indeed, we will have a very attractive business case for both of the sites. But as Thomas will say, it's not that -- in essence before we have converted the site that the CapEx is paid, but, Thomas, maybe a couple of words on the CapEx side.

On the CapEx, I mean, actually, in total, we will spend around EUR 200 million at the sites in Nanjing in China and in Indonesia. Actually, the CapEx will be spread out, of course, in '21, '22. With regards to China, actually, we will spend the majority of the CapEx already this year and only a smaller portion next year. And in Indonesia, it is the other way around. The reason for that is actually in China we already started preparing actually for this CapEx project already some weeks or months ago. So actually, yes, in total, EUR 200 million. And of course, it will then later on boost profitability accordingly.

The next question is from the line of Markus Mayer, Baader Bank.

Two questions from my side as well. Firstly, again, on Hygiene Austria. You said you fully wrote down your investment. Maybe you can help us understand what the total magnitude of this write-down was in Q1. I have not seen -- maybe it's something that maybe I overlooked it. And secondly, coming back to Christian's question on the EUR 200 million investment. Still that means -- it's better to understand what is the return from the CO2 rights, your sale to take and current price versus the price then, which is heading towards EUR 65 per ton that to Europe, but I guess this will be also the case globally? And also what is the return from this positive product mix effect and also increased capacity? Any flavor here would totally help.

Okay. Maybe, Thomas, first on Hygiene Austria, and I will do then the investment.

On the Hygiene Austria, actually, you will find in the financial result, actually, the impact out of the impairment of the investment. Investment amounted to EUR 4.5 million and the loan that was granted to Hygiene Austria of another EUR 2 million. So actually, in the financial results, you'll find EUR 6.5 million negative for Hygiene Austria in Q1. And with that, actually, 100% in payout. So everything fully written off.

Moving to your next question in terms of the investment, please understand we don't give the level of detail that you're looking for as a breakdown. What we would like to guide, however, on is that the business case of the conversion of the lines is in not only EBITDA but also ROCE accretive business case and is contributing to the targets that we have set ourselves. So independent of the ESG impact, it's just by the pricing deltas that we can accomplish, the cost reduction that we can accomplish as well as the improvement in product mix, is in total a very interesting business case.

May still add-on question on this one. On the phasing of these returns, let's say, we assume, let's say, number x and split that up over years. Is it then fair to assume that the majority of the returns -- the run rate of that still will be taking off in 2023 and 2024? Or is this the saving more back-end loaded after 2024?

Please assume that by 2023 you will have the full savings.

The next question is from the line of Isha Sharma, Stifel Europe.

The first one is on branding. Do you receive any co-branding requests also initiated now from mainstream brands since your ramped up co-branding efforts? And your recent effort like eShop. Do you expect it to also support your popularity among the retail brands? That will be the first one. The second is that your Scope 1 and 2 CO2 emissions are by far the highest in Indonesia. And as per your press release yesterday, the conversion of the Purwakarta site means a reduction of 120,000 tons. Just wondering what further steps can you take at the site to reduce emissions further? And maybe the last one. Could you tell us what has exactly changed in your definition of specialties? And when you say it is probably not too bullish to assume that you move towards 100%, can we expect that already by end of 2022?

Okay. If we start with the first one. Yes, we do receive requests for co-branding from also very well-known brands. We are making -- I think I showed it also at the annual result presentation, some of the detailed brand statistics. We have launched on our eShop or on the TENCEL web page, the where to buy, where you can now click-through immediately to the eShops of our customers that was launched very recently. And in the first couple of weeks, we already have now more than 10,000 click-throughs onto those sites. So I think that's a very promising developing -- development that not only serves our -- let's say, our customers or downstream customers because we revert business to them, but it is also, I think, giving us, over time, a good information about the people who are interested in TENCEL and gives them from an end consumer perspective the ability to find TENCEL products without a lot of hassle. Second question, Indonesia, what we're doing now is we're actually taking biogenic material and will change the mix in the fuel boiler. The majority at that stage is still going to be coal. Our vision is that over time we will be able to run also Indonesia with a very high share of biogenic material, but that is something that needs to grow over time, but also then one or the other adjustment needs to be made on the boilers. With respect to specialty definitions, I would like to ask Robert (sic) [ Thomas ] maybe to do that. What I said before is in terms of the sheer number. If you now take whole Indonesia and ECOVERO is for us a specialty product. Nanjing runs on ECOVERO and modal. There is hardly anything in our commodity definitions left. That's why I mean -- I think the 75%, as we formulated with the decisions that we have now taken, feels conservative, is conservative, will be over accomplished. But Thomas, maybe on the definition.

Actually, what we changed is only the way how we calculate it. So actually, now you see the specialty revenues in percent of total fiber sales, whilst in the past, actually, the calculation was based on total group revenue. And anyway, in the presentation, you have all the information actually to redo the calculation as we did in the past. So if you do the math, then you would end up with around 64% according to the old calculation method. So the definition hasn't changed at all.

The next question is from the line of Sebastian Bray, Berenberg.

Today I would focus on the modal investment. Could you remind me of what Lenzing's current modal capacity is? And how much viscose capacity will be removed as a result of the 35 kiloton investment? I also have a few questions on personnel cost over the next 2 or 3 years, but I'll stop with that one.

Modal, we are adding 35,000 tons. We have about 110,000 capacity at this moment in time. I think as a rule of thumb, you can assume that a bit less than twice of that is being taken out of operation on the commodity viscose side.

That is very helpful. If I may follow-up on the personnel cost development over the next 2 or 3 years. Do you have any idea or just percentage guidance of how many extra people are going to be working in these plants? Or is that really going to be visible in the P&L for 2021?

So did you say -- the cost, let's say, the personnel cost in Nanjing and in Indonesia will not change as a consequence of those investments. So that you can assume stable. The additional personnel that will be added is particularly in Thailand as well as in Brazil. So there, we will have, of course, the start-up costs as well as then as soon as the plant goes operational also the personnel costs that will come in there. We don't guide now on that detail exactly, on the number of people that we would add there. One of the things that, however, I would like when you speak about personnel costs to -- because I think that's an important part of guidance. Last year, we didn't pay any employee bonus. That is not a typical part of the personnel, let's say, cost development. So whoever models personnel cost should assume a reasonable bonus structure, and that is something that 2021 very -- is at least part of -- that we include in our guidance.

Last one, just on quick, any update on TENCEL supply-demand? It looks quite decent for the next year or 2. Is that a fair assessment? And has anything changed on your view on the supply additions?

No. Nothing has changed. I think we feel very positive that we can commercialize our -- we call them internally T3 in our TENCEL lyocell plant in Thailand. That -- I think that the commercialization makes great progress. We feel very healthy demand, and we remain very positive on this.

[Operator Instructions] The next question is from the line of Teresa Schinwald from Raiffeisen Bank International.

I would like to ask my questions one by one. And the first one is actually a follow-up on the lyocell demand and supply balance and market overall. So could you please update us on the expected capacity addition on the market overall? And also with respect to Sateri's recently announced plans to add 500,000 ton of capacity by 2025.

We expect this year that our capacity will come on stream. And next to that, in terms of nameplate, we expect something north of 100 kt being added by various competitors. I already commented in our full year results and the announcement of Sateri. Sateri will come into the market. They're already there with a 30 kt line. I think in itself, whatever Sateri plans, you would need to ask Sateri. But what we have seen at least historically, that not all of the announcement and all of the time lines should be taken with the exact precision as being announced. And I think if you go back to also the viscose announcements historically, some of the pulp announcements. I think that's to be taken into consideration, but it's a very reputable serious company that, for sure, will be there in lyocell. But I think on that question, I remain very optimistic about our ability to keep ground, retain margins by the work that we do in branding, in proliferating our SKUs, in driving down the cost curve ourselves. And we are committed to continue the investment path in lyocell ourselves.

Got it. The next rather on the dissolved wood pulp side, Stora Enso also announced its exit from the business. Is this already taken into account in your comments about the expected price stability in the dissolved wood pulp? Does this change the picture, improve the picture for your own investment?

Stora Enso is a relatively small player. We speak here somewhat 300 kt plus/minus depending on how they swing into paper or not. It will slightly help the so-called softwood pulp, the more the long fiber pulp that we are today commercializing from our site in Paskov. In the grand scheme of things, the exit of Stora Enso, I think, has no implication on the market. It's too small in comparison to what it is coming. But I think, overall, next year, quite a lot of pulp is coming into the market from us but also from Bracell who has a huge investment also in Brazil. Structurally, we believe that the dissolved wood pulp market, long term, USD 900 plus/minus is a reasonable market guidance.

And my last one refers to your change in the reporting format. And you mentioned a better comparability with peers. Did you rather look to the upsides of the industry? Which peers, in general, did you have in mind?

No. Actually, I mean, no specific peers actually in mind. However, I think when you take a look at the profit and loss statement, you will hardly find or you will not find a lot of companies using the total cost approach compared to cost of sales. So actually, especially in the specialty chemicals industry, basically all of them are doing it according to cost of sales. And with the cost of sales method, actually, you have significantly more insight because you have a gross profit, a gross profit margin, which you won't have using the other format.

The next question is from the line of [ Nikolas Knaib, Binaprivac Bank ].

First one on EBITDA margin, or, let's say, margins in general. You had a quite significant improvement in Q1. Do you expect this level that is -- this level is sustainable throughout the year? Or do you think that as conversions -- conversion margin is coming down a little, also that EBITDA margin will come back a little throughout the year? And then secondly, on CapEx again, maybe as you expected earlier before the new projects in Indonesia and China, CapEx for the full year of around EUR 800 million. Can we expect now something around EUR 900 million maybe?

Okay. We don't guide on EBITDA margin. And I think in our industry, it's not particularly helpful, given that you have very few materials that can have quite some movement in the one or the other direction. So we don't guide on EBITDA margin, but we guide a bit on EBITDA. And I think -- but we leave it with that. Q1, in general, was a very good quarter. Let me put it that way. It was a very good quarter. CapEx, Thomas.

On the CapEx, actually, when we released the full year numbers for our 2020, actually, we guided CapEx on EUR 800 million. As for today, I would say, I expect CapEx in the range of EUR 800 million to EUR 850 million. The projects that we announced yesterday in China and in Indonesia, actually, they were already basically reflected in our guidance we gave by year-end. But as you could see from the Q1 numbers, projects are making very good progress, therefore, EUR 800 million to EUR 850 million.

The next question is from the line of Isha Sharma, Stifel Europe.

Just a follow-up on the guidance. Since you mentioned that you expect the price of viscose as well as dissolving wood pulp to stay at a relatively high level and the fact that earlier you had mentioned that there is always a bit of a lag effect when it comes to price increases. So what we see in Q1, probably fully reflect in Q2. Are you comfortable with where consensus is at with the EUR 400 million for the full year EBITDA?

Again, please understand, we have issued a guidance very explicitly that we will reach at least the level of 2019. So the pre-COVID level, which was a bit on south of EUR 330 million. We don't give additional, let's say, guidance on top of that.

There are no further questions at this time. I would like to hand back to Stefan Doboczky for closing remarks.

Thank you very much, everybody, for your interest in the group. I think COVID remains something that gives us a headache. We need to be very vigilant and careful as we have now more than 10,000 people at our construction site next to the 7,000 people that we need to take care of. We are very happy that our people in India are safe, and we're also supporting their activity and local community. That also means for yourself, stay safe, be careful. Let's all get healthy through this last -- hopefully, last intense period of COVID, and thanks for your interest in our group.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Good bye.