Lenzing Aktiengesellschaft (LNZ) Earnings Call Transcript & Summary

Thanks a lot, operator. Yes, also from my side, a very warm welcome to this investor presentation. With me today are Nico Reiner, our CFO; and Christian Skilich, our CPO/CTO. Let's start with an overview of the key developments and strategic highlights of the first quarter '23. We see first signs of recovery in the textile fiber market, and we see a solid business development in nonwoven as well as a good demand on the pulp side. We also see a positive development on the raw material and energy cost. Our global cost reduction program with an annualized impact of more than EUR 70 million is well on track. I'm happy and proud to announce that we started the production of TENCEL modal fibers in our production site in China. And on the energy side, we just announced the acquisition of a biomass plant for the energy supply of our lyocell specialty production site in Heiligenkreuz, Austria in order to speed up the energy transition as well as securing further saving potential. As you could read recently, Robert van de Kerkhof decided not to further extend his contract. Robert has excellently fulfilled his role as a Chief Commercial Officer since 2014 and contributed significantly to the successful development of the Lenzing Group. I and my Board colleagues would like to thank him for his dedicated and trustful cooperation and wish him all the best for his future path. I have essentially taken over the Commercial and the Fiber division, and Robert will continue to drive the sustainability area, including the CO2 road map as the Chief Sustainability Officer until end of '23. The Managing Board of Lenzing Group will thus be reduced from 4 to 3 members end of January 1, 2024. Now let's move to the key financials. On the revenue side, we saw the first recovery in volumes in line with the market environment, while prices remain under pressure. There was a positive impact of cost decreases and valuation accruals were benefiting EBITDA. Revenue slightly increased to EUR 623 million in the first quarter of '23 versus EUR 615 in the pre-crisis quarter 1 2022. EBITDA reached EUR 30 million versus EUR 88 million in quarter 1 2022. And the net result after minorities and hybrid bond was negative at minus EUR 80 million versus positive EUR 23 million in quarter 1 2022. Our liquidity cushion remained stable at EUR 640 million. Looking at our guidance, we can confirm that assuming a continued market recovery in the current financial year, the Lenzing Group expects the EBITDA in 2023 to be in a range of EUR 320 million to EUR 420 million. Let's start with an update on our new lyocell plant in Thailand and our new DWP mill in Brazil. As you know, both plants were commissioned successfully in the last year. The 180 kt plant in Thailand will help us to serve the growing demand for the sustainably produced lyocell fiber, in this case, even carbon-neutral lyocell fiber. The 500 kt single-line DWP plant in Brazil is expected to help us in 3 aspects: security of supply as well as cost advantage and incremental revenue through external sales. As you know, both sites are fully invested, and they are now up and running. We are very happy with the progress and are further increasing the production outlook. The quality of both plants are already on very high level. Both new plants are well on track to contribute positively to the 2023 results. Another positive news. Now let's move to China. I'm excited to announce that we completed the conversion of a production line from generic viscose to TENCEL branded modal fibers for textiles successfully at the end of March 2023. We can now offer our Chinese customers the long-time expected locally produced TENCEL fibers for the first time. We continue to expect attractive structural growth in demand for modal fibers and are now in the position to meet this demand much faster than in the past. The nameplate capacity for the line is 35,000 tonnes per year, and this is in addition to the existing modal capacities in our production site here in the Lenzing headquarters. With this conversion, the fiber portfolio out of the Chinese production site now solely consists of eco-friendly specialty fibers under the brand TENCEL, VEOCEL and Lenzing ECOVERO. We celebrated the launch of this new production line together with 200 customers in China. And with that, I will hand over to Christian to give us the first update on the energy site.

Thank you, Stephan. Good morning, good afternoon from my side as well. As you know, our lyocell production site in Heiligenkreuz suffered most from the increases of energy costs due to its exposure to gas, mainly Russian gas. In order to significantly decrease our dependency on fossil energy, we acquired right now a biomass plant for the energy supply of the Heiligenkreuz production site. About 50% of the gas currently used is planned to be replaced by renewable energy. The backward integration into energy is planned to lead to cost savings, for instance, from less use of gas and electricity and CO2 certificates. The use of renewable energy will improve our sustainability footprint and strengthen our eco-responsible specialty fiber portfolio. The closing of the transaction is expected to take place in the current quarter. So let's look now at some of the key developments in the markets for energy and chemicals. On the cost side for Lenzing, both energy and chemicals came down in quarter 1 2023. However, the prices remained highly elevated, especially in Europe, for natural gas, where prices remained more than fivefold compared to the pre-pandemic level. However, our energy hedging strategy is in place now and the majority of energy costs for 2023 is locked in now. On the chemical side, as you know, caustic soda is a key input for the viscose process. Prices in Europe have decreased for the first time since the beginning of 2021, but are still more than triple the pre-pandemic level, while Asia and the U.S. are suffering much less. Those are developments of market prices and do not fully reflect the impact for Lenzing as we are sourcing at better conditions in Europe, and we partially source from Asia if the price delta is beneficial and benefit thereby from our storage facility in Italy. I hand over now back to you, Stephan, for the development on the demand side.

Thanks, Christian. We posted here the textile industry sentiment graph, right? And everything above the black line means good, everything below the black line means poor. As you can see, the sentiment of the current business situation and effects on industry which is in dark green reached a new low in March. However, the ITMF regularly asks players in the global textile industry also about the expectation for the textile industry sentiment in the coming 6 months. In the second half of 2022, this forward-looking sentiment was poor, as you can see in the graph. Whilst current trading is still weak in many textile areas, the outlook has changed to the positive since January and further increased in March. The 6-month expectations in the textile industry are now in line again with the January 2022 sentiment. Some of the possible reasons for the expected improvement, for instance, the improved energy situation as well as the growth in pulp from the China reopening and the early results in China. Staying with China, we are looking also, and you know that, that was a very important driver for the results in '22, on the inventory side. Let us now look at the latest development in viscose, in particular, the operating rates and the industry. As you can see, the operating rates developed very positively in the second half of this quarter after Chinese New Year. We are now above the critical 75% mark. Inventories, as I said before, was a big part of our problem in 2022. They are still higher versus long-term average in some Western markets like U.S. But in China, the viscose chain inventories are all trending downwards. And VSF inventory is already below the 5-year average. Therefore, also the higher operating rates. In a nutshell, we see stronger demand. However, prices remain low compared to the input cost. With that, I hand over now to Nico to take us through the financials.

Thank you, Stephan, and a warm welcome from me as well. Let's start with revenues. They increased to EUR 623 million versus EUR 615 million in Q1 2022. This development was mainly driven by a significant increase in the share of DWP revenues. For now, textile fiber prices remain under pressure. But we expect prices to improve in the course of the rest of 2023, in line with a further market recovery. Fixed costs remained stable and are expected to benefit from ongoing cost improvement measures going forward. EBITDA reached EUR 30 million compared to EUR 88 million in the pre-crisis Q1 2022. Looking at EBIT, it reached minus EUR 41 million, with depreciation and amortization being at EUR 71 million. And for group net profit after minorities and hybrid bond, we reported a net loss of EUR 80 million attributable to Lenzing shareholders in Q1 2023. Financial result was at minus EUR 33 million, and income taxes were positive at EUR 9 million. Looking now at cash flows. Free cash flow was at minus EUR 132 million. In the free cash flow, we can see, first, positive impact from our CapEx reduction due to the completion of our 2 projects in Thailand and Brazil in 2022. Going forward, in '23, we will not have such significant projects and are, therefore, confident that CapEx levels are under further normalization and investments will mostly include the upgrades at existing sites, such as in China or Indonesia as well as maintenance CapEx for sure. Trade working capital increase in Q1 2023 was mostly driven by an increase in receivables, reflecting the positive development on the demand side, partly offset by an inventory reduction of roughly 10 percentage points versus Q4 2022 caused by a reduction in volumes. Due to ongoing working capital improvement measures, we are confident in our ability to further optimize our working capital, which will benefit our free cash flows going forward. On the next slide, we show historical net financial debt quarterly evolution. Reported net financial debt increased slightly to approximately EUR 2 billion from EUR 1.9 billion quarter-on-quarter. The economic net financial debt as of Q1 '23 increased to approximately EUR 1.5 billion from EUR 1.4 billion in Q4 '22. Drawing attention to the balance sheet metrics on the right-hand side of the slide. Also, they evidently reflect the impact of overall weaker full year 2022. We remain in a stable position at Q1 '23, with approximately EUR 640 million of liquidity cushion available as well as a substantial adjusted equity position. We continue focusing on implementing measures to protect liquidity and improve cash flow generation and are also working on optimizing Lenzing's capital structure for the long term with the aim of being well positioned to execute our future growth strategy. Let me hand it back now to Stephan.

Thank you, Nico. Let's talk about the various measures we have taken and we'll continue to do. Overall, we are well on track both on the cost saving measures as well as on the liquidity measures. When we look in detail, the reorganization and cost reduction program initiated in 2022 with an annualized and recurring impact of more than EUR 70 million is on track, with the impact targeted to be growing throughout the year, month by month. With regards to the working capital, improvement measures are on track as well, and inventory levels have been reduced in quarter 1, in particular in fiber. Looking at CapEx, as Nico stated, in 2023, we will focus our CapEx, mainly on maintenance as well as on the carryover of the 2 upgrade and conversion projects in the sites in China and in Indonesia. The reduction of CapEx is well underway with the CapEx in Q1 2023 down by about 50% compared to Q4 2022. And on the risk management side, as Christian mentioned, we have put our energy hedging strategy in place, and the majority of the energy cost for 2023 in Europe and in the U.S. is already locked in. We are convinced that our proactiveness and swiftness in identifying and addressing the opportunities we have in savings and liquidity measures help us to be in a very good position for the rebound of the business. Let's come to the outlook. 2022 was an unprecedented year that we don't foresee being repeated anytime soon. In our presentation, which you may have listened for the full year results, we called the second half of 2022 the perfect storm. Cost in chemicals and energy were at unprecedented levels, demand for fiber in the textile industry declined steeply, which led to a decline of fiber sales and sales prices for Lenzing. Free cash flow was significantly affected by the planned but high CapEx for our 2 new plants and inventory buildup as well, especially in the pulp area, resulting overall in a negative operating cash flow. In the first quarter of 2023, costs started to decline. But as Christian said, they were still elevated versus previous levels. Nonwoven sales remained strong, while textile sales started to increase compared to Q4 2022. And while fiber prices remain under pressure, DWP prices were stable. Due to the completion of our new sites in Brazil and Thailand in 2022, CapEx in quarter 1 of '23 decreased by roughly 50% compared to the quarter 4 of last year. In the remaining 3 quarters of '23, we expect a continued improvement of the market conditions in textile. Costs are expected to further decrease on several fronts, raw materials, energy and other costs as a result of our global savings program. The hedging strategy is expected to provide a good safety net, in particular for Q4. The uptick in demand is expected to have a positive effect on utilization rates and, consequently, on sales prices. As a result, operating cash flow is expected to increase; CapEx will be focused on maintenance and carryovers; and trading working capital is expected to decrease. Now we are not alone with our view on the textile market. Let's see how other players in the textile industry see the outlook for the rest of the year, and let me here quote 2 examples. H&M stated recently, and I'm quoting here, "We definitely see a good tendency when it comes to how the spring collections are received. February and March are quite volatile depending on the weather. This quarter gives even more reassurance that we will see a recovery during this year towards the end of the year." Levi as well expect the second half of 2023 to be considerably stronger than the first half. Both messages are in line with our assumptions, which we have in terms of further market recovery for the next quarter. So what does this all mean for the outlook of Lenzing? As mentioned before, we saw the first signs of demand recovery accompanied by the raw material and energy cost decreases in quarter 1 2023. Whilst visibility remains restricted, we expect significant upside in quarter 2 to quarter 4 of this year compared to the first quarter. And what are the main drivers of this outlook? First, the recently completed expansion projects are expected to significantly contribute. Secondly, the global cost reduction program with more than EUR 70 million annualized savings will have an increasing positive impact month by month. Third, we expect further decreases of energy and chemical costs. Fourth, we envisage an increase in fiber revenues due to expected positive volume, mix and price development. And last but not least, the operating rates for both fiber and pulp are expected to further increase based on the positive development of operational efficiency. As a result, assuming a continued market recovery in the current financial year, the Lenzing Group confirms the expectation of EBITDA in 2023 to be in the range of EUR 320 million to EUR 420 million. If we look beyond 2023. Looking at our long-term business case, the overall driver for Lenzing and our products remain unchanged and continue to show positive development. The structural driver of about 1% annual population growth remains largely unaffected by short-term development. In combination with the higher per capita fiber consumption, this will lead to a forecasted increase of the fiber market of 2% to 3% per year. Wood-based cellulosic fibers are forecasted to grow by 4% to 6% due to the cellulosic gap. The shift to sustainable fibers such as lyocell is driven by growing consumer demand, criticism by some leading NGOs and anticipated regulations, such as, for example, the EU Textile Strategy. As a result, the expected growth rate for lyocell is more than 20% per year. Based on our strong position, we are ready to tackle the megatrend of sustainability and to accelerate the transformation of the textile business from a linear to a circular model. Ladies and gentlemen, crisis are part of history. And as you can see in this chart, we plotted the fiber demand from the '60s up until today. Fiber demand rebounded quickly and exceeded the pre-crisis level either in the following year or the year after the crisis. What remains very clear was there are setbacks from time to time. There is a clear underlying trend of growing fiber demand driven by the combination of population growth and higher per capita consumption. Let me summarize that the positive prospects for Lenzing remain unchanged and '23 is targeted as a comeback year for Lenzing. We see first signs of a demand recovery and expect this to continue in the course of 2023, especially for the textile fiber market as our nonwoven business was already quite solid in the first quarter of this year. On the cost side, energy and chemical costs show signs of normalization in '23, and the positive impact of our global cost reduction program is planned to further increase in the course of the year. Of course, there still remains low levels of visibility on demand and cost. And some of the factors neither we nor anyone else in the industry have an influence. However, in a nutshell, we expect the continuation of the market recovery and EBITDA, as explained before, in the range of EUR 320 million to EUR 420 million for 2023. With regards to 2024 and beyond, we expect to have benefit later this year. But as you know, historically, the textile market and also Lenzing has tended to come back after crisis year, and we have expected general pattern to continue. And the key reasons behind this expectation are: We are in a strong position to tackle the megatrends of sustainability and circularity. And even though we had not much spoken about circularity today, rest assured that this is one of the key topics and key priorities for us in the years to come. Specialty fibers are forecasted to grow above the average and those are exactly the products we have in our portfolio. We have a strong innovation platform with unique technology that supports the long-term prospects. As we have seen in the recent past, for example, with the innovations such as Lenzing ECOVERO turning into a strong margin contributor. Additionally, we can build on our strong ingredient brands such as TENCEL and VEOCEL to further support both our margins as well as our revenue growth. Last but not least, our new and our upgraded assets, I expect it to have a boosting impact assuming full recovery of the market. We remain committed to changing the world from a linear to a circular economy, and we choose to embrace the circular economy as an early opportunity. Through our greater transparency and improved infrastructure and greener energy sources, we will drive this agenda. So in summary, we, as a Board, remain positive looking at the prospects of Lenzing. With that, I would like to close the presentation. Thank you very much for your attention, and we will now open the floor for the Q&A.

[Operator Instructions] The first question is coming from Markus Mayer from Baader-Helvea.

I have several questions, if I may. I'll start with this joint venture of dissolving wood pulp. Can you help us understand how the cash flow generation from this joint venture is affecting you? From the 51-49 joint venture, does it mean that you get yearly a dividend? And if so, when? Or do you get quarterly cash flow payments? That would be my first question. Second question, also on this joint venture, it looks like, at least out of the compare -- the numbers this last year and particularly the second half last year, this joint venture currently has a capacity utilization of around 6%. Can you help us understand why this was the case? Was this pure demand-driven, or also maintenance or ramp-up-related-driven? And also what has been the ramp-up or start-up costs you had to book in the first quarter? Then my third question is on the cash flow. You said you want to work on net working capital. And also CapEx is coming down from a very high level. Can you help us to understand how much net working capital do you expect to help the cash flow this year and also how the CapEx saving over the year might be? And also this remark you made on optimizing the capital structure, what this exactly means that would be of high help. And then the last question would be if you could give us an indication on the financial costs you expect for the full year and maybe also, saving over the quarters.

So thank you, Markus. Now let's start the first question with regards to the joint venture in Brazil. So how the cash flows are affecting us, I will hand over this to Nico.

Thank you. So Markus, just to respond on this question, I mean, we are in a position that we own 51% points of this joint venture. And as you are aware, at this point, joint venture just recently started and got into operation of the pulp production. So basically, we are still in a ramp-up phase. And as in joint ventures regularly is the case, for sure, we need to align with our joint venture partner, who has got 49% points of the whole joint venture. And if there is any cash coming up, then we need to also decide on, as you said already and stated in your comments, on a dividend policy, which is then guiding into our Lenzing AG structure. So this is basically the case and the description for your questions. So I would go further down the road and go to the next question, which is then...

I might have still an add-on question. When you say you decide on dividend policy, so we should expect then potentially a yearly dividend payment, I guess. Right?

If this is the case, this could be the case, yes. So we will see how things are developing, but we are very positive on the overall development, and we are very confident about our investment. So we will see in the future how this will go on. And so therefore, the structure, I explained to you, this is the case, yes.

The next question is coming from Isha Sharma.

No, no, operator, we still have a couple of questions from Markus left. The next one would be around the capacity of the mill in Brazil. This one, I will hand over to Christian Skilich.

Yes, Markus. The ramp-up is following completely the plan. We have almost achieved full nominal capacity within the month of December 2022. In quarter 1 of this year, we have to report the annual shutdown, which is to be performed for safety reasons and maintenance reasons for every single pulp mill, and that was performed within the month of January of that year.

Good. Thank you. Then the next question was with regards to cash flow. So net working capital as well as CapEx outlook for the rest of this year. Nico Reiner?

Yes. So let me focus on the CapEx question you had. So as mentioned already in the presentation, the key focus on CapEx is on maintenance spend as well as some carryovers from the upgrade and conversion of the sites in China and Indonesia. So this is the key focus on that one.

And then we have the last question with regards to the financial costs for this year. Nico Reiner?

Thank you. If you look into the financial costs for this year, Q1 2023 has been a little bit uplifted. But if you take that one as a guidance, then you could see the financial results and make your own calculations on that issue. So this is basically the comment on this question, yes.

Okay. And the one comment you made on optimizing the capital structure, can you clarify what you have meant with this?

I mean, as you are aware, we are permanently looking into our capital structure and managing our balance sheet. So this is basically the key topic what we are doing here also.

The next question is coming from Isha Sharma from Stifel Europe.

I have three questions, please. First, could you quantify the positive impact from valuation accruals that you have mentioned on EBITDA in Q1? The second one would be on lower energy costs that you have mentioned. So you have said that you are fully hedged now for -- or almost fully hedged for 2023. Then how are you expecting to benefit from lower energy costs? And just a follow-up on the question that Markus has asked on optimizing capital structure. At what point would you take a decision on this? And what can be -- what are your different options if we, let's say, assume that the second half does not see the kind of recovery that you're expecting, then you're kind of in a cash burn position. Then what exactly are your options from there? And what would you do to optimize your capital structure?

So first question with regards the valuation of the accruals, I would hand over to Nico Reiner.

Yes, thank you for that question. But honestly, we do not share any details on this topic. It's a standard process every company is used to. So I would not share any details on this topic, yes.

Then the next question with regards to energy costs and hedging. I would hand over to Christian Skilich.

Yes, take it with pleasure. Yes, we're performing an energy hedging that is based on both financial hedges with banks but as well physical hedges directly with energy suppliers, both for natural gas and electricity. And the aim is to ensure a coverage of approximately 2/3 for the next 12 months. So why that? We are aiming to benefit both from minimizing the risks but as well while still being active on spot purchases to benefit out of potentially lower prices in the future.

Good. And then we have another question with regards to capital. We'll hand over to Nico Reiner, please.

Yes. Thank you. Basically, if you think about capital, there's always -- as in each balance sheet, there's equity, there is debt side. And as I mentioned already before, we are permanently actively managing our balance sheet. So if you think about capital structure, you always have to think holistically. And if you think holistically, then you have to think on the equity, on the debt side. So we are fully flexible and looking forward to optimize our capital structure. That will be my comment on that one.

The next question is coming from Christian Faitz from Kepler Cheuvreux.

Yes. Two questions, if I may. First one would be you -- thanks for sharing the operating rates of the industry. Is it safe to assume that the operating rates of your plants are close to those industry rates at this point in time? And second, the Lenzing side is currently being restructured. Can you please tell us a bit more where we are on this and when the process will be concluded?

So the first question is with regards to the operating rates in the industry and how that reflects to our operating rate, I will hand over to Stephan Sielaff.

Yes. Thank you for the question. So the operating rate, I would say we are -- we have seen an increase month by month throughout the quarter. And we are now on an operating rate on the fiber side, which is above the levels you have seen on the [ viscose ] customer side. And I'm not sure that I got your second question about the Lenzing side is going to be restructured? No. We have a project here where we are also looking at the personnel cost side, but that is not only impacting Lenzing -- the Lenzing side, but all sites globally. And this is a global initiative, not something only dedicated at the Lenzing side.

Sure. I'm aware of it, but I always thought that the Lenzing side would be a prominent portion of that. So I was going to ask where we are on that.

Yes. We are -- as we said, we are well on track with that, both in Lenzing but also in the other sides.

The next question is coming from Sebastian Bray from Berenberg.

I'll ask them one by one. Depreciation and amortization, EUR 78 million in quarter 1. Is this a decent run rate for the full year, as in on an underlying basis, you just multiply the number by 4?

Now I will hand over this one to Nico Reiner.

Yes. Thank you for that question. I mean, basically, your assumption and your calculation is going into the right direction. Probably, you need also to think on the topic that we are ramping up our facilities in China and also our facilities in Indonesia. So that might have also a little impact, but your calculation is going into the right direction.

That's helpful. The next one is on lyocell. The slides have made reference to the demand outlook of over 20% per annum. Could that talk about the 1- or 2-year supply outlook. Sateri, I think, publicly confirmed they had bought online 100 kilo tonnes last year. Is that, to your knowledge, running well, the capacity that's been brought online? Have the difficulties been resolved? And what is the magnitude of lyocell capacity additions that Lenzing is expecting over the next year or 2?

Okay. Yes, you're right. That is also my level of information. Yes, we have a competitor who started up their factory. Whether -- how that works in detail, I don't know. Actually, we are not negatively surprised in any form or shape by this because the market, as we see it, is growing by 20% per year. And actually, it helps to establish lyocell as standard fiber. More players are offering it. And we have different market segments we are tackling. We are selling, as you know, under the TENCEL brand, under the VEOCEL brand, and we are targeting a different segment than the competition. Overall, I'm not surprised, and we actually welcome others to produce lyocell as it helps to the conversion towards lyocell.

There are no further questions at this time. I would like -- oh, we got another question at this moment. We have another question from Bartek Pastwa from Schroders.

Can I go back on previous questions. I think you gave very vague answers, to be fair. On the -- first, on the CapEx view and cash flow, can you give us a CapEx guidance or maintenance CapEx you plan to spend this year and the carryover for Indonesia and China that you plan to spend because these are known numbers. You will know exactly how much you need to spend.

Yes. This is for Nico Reiner.

Thank you. Just to reflect on that, there has been already a question to that, and there has been a calculation from an analyst already on that question, which I commented already in the direction what he said. So basically, that would be my comment on that question. And on the split of what you have been referring to on maintenance CapEx and the different areas, this is something we do not comment at this point of time.

So returning to the previous answer, so EUR 70 million D&A this quarter x4, EUR 280 million. Is that what I'm looking at this year?

That is your calculation, and I commented previously already.

All right. Okay. With your guidance -- EBITDA guidance for the year, would you expect to be cash positive, negative for the year?

I mean, as you know, and you are aware on that topic, we only guide on EBITDA level. So therefore, we do not guide anything which is beyond that area.

Okay. And on the Brazil site, your 51% stake there. What is the current pulp prices? What is the current annual EBITDA level of that business?

First of all, let me comment at this point of time. Usually, we do not comment on single site and single results. So therefore, I'm not in the position to give any comments on EBITDA level reflecting the joint venture. And on the pulp price side, I would hand over to my colleague, Christian. He probably is able to give you an answer there.

Yes, I will take it. We saw, beginning of the year, improved pricing for the key grade, which is a hardwood dissolving wood pulp and with a flattening out over the last couple of weeks now, and that is the expectation for the months to come as well.

Okay. Why I'm asking about the Brazil project specifically is because you consolidate your numbers. I was trying to -- what I am really after is the EBITDA guidance. How much of that is coming from Brazil. In fact to make a fair conciliation, I have to know, I have sort of to take 49% or 50% roughly of your earnings from that project because these are not yours. So you give us the debt on an economic basis, good. I like to know the -- your earnings on an economic basis as well because your range obviously is fainted by the share that you don't own.

Yes. I can understand your question, but please understand also me, it's not possible. We are not guiding on a single entity, and we are not commenting on EBITDA levels for a joint venture. And so therefore, please accept my apologies, and we are not able to give you any detailed answers on this question.

Okay. The final one maybe, regarding the capital structure. You've got the permanent, you've got the [ hybrid ] due in December '25. So where -- how do you see your long-term capital structure? Do you see permanent or hybrid as part of the capital structure. How are you thinking about that?

I mean it's a very fair question. Capital structure is an important topic. How do we see? First of all, we fully manage our balance sheet. And basically, as you look on the balance sheet, there is always possibilities on the equity side and also on the debt side, for sure. And so we are holistically managing this. And we do see here no special things, which we have to align or have to address at this point of time. So we are doing a holistic, professional and efficient management of our capital structure going forward to support our profitable growth strategy.

There is another question from Teresa Schinwald from Raiffeisen Bank International.

Coming back to the positive reevaluation effect. Gross cash flows included about EUR 62 million of noncash income. Is it fair to assume that this is about the size of this positive reevaluation effect? Second question, and I was a bit late in joining the conference call, my apologies. The financial result was deep in the red. So, can you please elaborate on the details, in particular the interest rate effects and potential currency effects. And the last one is on the energy hedging. You mentioned that you hedged 2/3 of your energy needs. Does this also apply to sales from the Paskov side? So as far as I'm aware, Paskov was selling spot. And does Paskov now also sell on forward contract terms or longer-term forward contracts? And that would be about it from my side.

So first question, I would hand over to Nico Reiner.

So basically, if you are asking about the EBITDA and the key impacts here, so as mentioned already by Stephan, the key developments in Q1 has been, for sure, the recovery in volume. Also the decrease in prices of energy and chemicals. So these have key major impacts and also the positive development in the utilization of our plants. On special numbers like the reevaluation or accruals topic, we do not comment on these topics here. So please accept my excuse here. And also the same happens to be with the FX effects you have been referring to, this is the same case over here. And in regards to the last portion of your question, I would love to hand over to my colleague, to Christian, in regards to your question with the energy hedging.

Yes, the hedging question, energy hedging, as presented, focuses on the purchasing activities only. So in regards of your sub-question, we do not have any hedges in place for sales of electricity or heat.

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

Yes. Thanks a lot, everyone, for listening and for the good Q&A session. As we stated before, we've been cautiously optimistic in the year, and we will stay realistic and confident about the year. We have a plan, and we execute it very well and with a high degree of discipline. All our implementations are on track. And looking back for the next quarter, what gives us the confidence, we see the contribution of the new and renew side coming into month by month, the same on the cost savings, the same on the energy and raw materials, and we see the market recovery in textile driven by volume mix and price. And last but not least, our higher operating rate. Therefore, we stay cautiously optimistic and confident for the year 2023 to make it the comeback year of Lenzing. Thank you very much, and have a good rest of the week.