Lenzing Aktiengesellschaft (LNZ) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the analyst conference call. I am Maria, the Chorus Call operator. And the conference is being recorded. [Operator Instructions]. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Stephen Sielaff, CEO. Please go ahead.

Yes. Thanks a lot and a very warm welcome also from my side to the presentation of the Lenzing results for the first half of 2024. With me, as usual, is our CFO, Nico Reiner. So as a first start, let's go through the agenda for today. We will start, as you know, it from former calls with the executive summary, followed by a market update. Nico will guide you through the financials afterwards, and I will share an update on our holistic performance program as well as the outlook. And as usual, at the end, we are looking forward to your questions in our Q&A session. Let's start with an overview of the key developments. And to sum it up, generic markets rather than to Lenzing have not really recovered. But we, as Lenzing, see further increasing positive impacts from our holistic performance program, both on the top line as well as on the bottom line. In a bit more detail, when we look at the generic market, in particular, fibers, relevant for us, we see only the little signs of recovery and especially prices for generic fibers continue to remain under pressure. On the other side, when we look at our performance program, we see a steadily improving progress across cost and top line. In both dimensions, we are significantly ahead of plan. As we have already communicated, Rohit Aggarwal was appointed as Chief Fiber Officer. He will assume the responsibility for the fiber division in the course of this quarter and after onboarding taking over the position as CEO. Now let's look quickly at our financial results with a continued increase in sales and earnings, mainly driven by our performance program. The revenue increased by 5% versus half year 1 2023 to EUR 1.3 billion. EBITDA significantly increased by EUR 28 million compared to EUR 137 million in half year 1, 2023 to EUR 164 million. The net result reached minus EUR 71 million, which compares to minus EUR 104 million in the first half of 2023. Free cash flow was at plus EUR 54 million in the second quarter and thereby, positive for the fourth time in a row. So we have 4 quarters in a row with positive free cash flow, leading to a further decrease of our net financial debt. Overall, our financials continue to show positive development despite the lack of market recovery and more needs to come and will come. We are not yet satisfied with the absolute results. However, we are very satisfied with the trend of development of our operating performance. Looking at the outlook, we continue to take the future in our hands by exploiting the full potential of the performance program and will further drive both top and bottom line. We still have a cautious outlook on the generic fiber market development. However, we continue to see for ourselves a good and healthy order book in the beginning of quarter 3, too. All in all, we are well on track with the performance program and the second half of this year is expected to be positively impacted by it. With half year 1 in our books and our view on the next quarter, we clearly confirm our expectation for EBITDA for '24 to be higher than the EBITDA in the previous year. Let's come to the changes in the Management Board. As just mentioned, Rohit Aggarwal has been appointed as a new member of the Management Board of the Lenzing Group. Rohit Aggarwal is a business economist and has an outstanding experience in all relevant markets for Lenzing. He will assume responsibilities for the fiber division during this quarter, so quarter 3 2024. I will not renew my management board contract and will leave the company latest end of March 2025. After onboarding, Rohit is designated to take over the position of CEO of Lenzing Group. Let's continue with a market update. Our supply markets are key ingredients and energy and the markets of our customers, an example of Texas apparel and some developments of [indiscernible]. If I mentioned, we saw no or very little positive development on the market perspective, maybe with one exception, and that is the balanced inventory level on apparel. So if we now look, you see on the left-hand side, the textile market on the right-hand side the nonwoven market. Let's start by looking at how the clothing retail sales have developed in half year 1 of 2024 compared to last year on an inflated adjusted basis. Global apparel demand was slightly negative in the first half of 2024 versus 23% by minus 1%, while the U.S. was slightly up by plus 2% year-on-year. China dropped with minus 1% and Europe saw a decrease in demand in the first half of minus 6% year-on-year. So why is that? Well, that's on one hand side, low consumer confidence and inflationary pressure, which led to consumers trading down. However, consumers are also tending to be more selective in what they buy and buying in both apparel and food items. We also saw an impact from weather, unusually cold and weather delayed the start of the spring and summer season in several regions, in particular in Europe, whether, therefore, had a significant impact on apparel retail sales in the first half of the year. That is also what we were hearing from the one other brand and retailer in their burning coal. On the positive side, when we look at the inventory level in the apparel industry, and you may remember our elucidations about the perfect storm where we had very high inventory level, we see much more balanced levels than last year. Surely, we see a trend towards more sustainable fashion as many brands are getting under pressure to fulfill their sustainability goals. However, uncertainty for this year's second half remains high. On one hand side, there is the geopolitical events and the momentum behind those events, which are increasing and they are, for sure, still quite some disruptions in the supply chain. Now looking on the right-hand side, the nonwoven market, we see a much more stable consumer demand, especially for hygiene products in developed markets. Looking in particular at the fiber mix in wipes and hygiene applications, we see a clear trend towards cellulosic fibers, which is further increasing accelerated by new regulatory changes, such as the U.K. plastic ban in wipes. So if we look at our fiber sales volume overall, for instance, in half year 1, we see that we are well on the way, and we have beaten the market and the competition among some places. So our growth was, for example, significantly more than the production volume of Chinese, Indonesian, or Japanese chemical fiber industry. And when we look at the published Q1 figures of our competition, we can also see that our sales volume growth left the one or other competition behind us. Now let's move to prices. And before we start to go into the individual segments, please remember when we are showing these slides that we are here looking at generic market prices in China, not lenzing fiber/pulp prices. Those products, our products, the Lenzing products are mainly traded at a premium. And to give you an idea, meanwhile, and we are proud about that achievement, more than 92% of our fibers are traded with a premium. Now looking in detail here at Viscose, we saw that in the beginning of Q2, business prices were declining. May broadened some unexpected viscose mill outages in China. And that, together with high pulp prices helped for a slight, I underpin slight recovery. And we are still, despite the slight recovery on low levels of viscose prices at RMB 3,350 per tonne. And this trend of slight recovery continued into Q3. When we now look at cotton, international cotton prices remained volatile in quarter 2. The prices dropped in line with futures after positive expectations on the coming harvest and some speculative effect. While on the first one, the $0.85 per account looked pretty low if you compare it to the average price for -- in the period of 2012 to 2019, which is pre-pandemic that is more or less in line with that average. Dissolving pulp prices remained stable throughout the quarter, balancing supply shortages on one hand and the limited buying power of some Chinese viscose millers on the other hand. Now let's look at our input costs. And here, you see a graph where the arrows give you an indication of the development in Q2 versus Q1 and the bars themselves show how much the individual input costs are elevated versus 2020. And we see that energy and chemical costs showed a mixed picture in the second quarter compared to the first quarter. However, what is unchanged if you compare those costs to the previous years, most prices are still elevated. For example, natural gas prices in Europe were still more than 3x as high as in Q2 2024 compared to 2020. And coal prices in China were still higher by 49% and in Indonesia even by 65% compared to 2020. Prices for caustic soda decreased in Europe in the second quarter, whilst they were increasing in China and Southeast Asia in the second quarter of this year. Compared to 2020, those market prices were still 19% to 69% higher in Q2 2024. So to sum it up, we still see no sustainable recovery on the fiber market as we have seen in the slide before, especially on the prices remaining under pressure. And at the same token, we see input costs still on elevated levels compared to 2020. And with this update on the market environment, I want to hand over to Nico to see what we have done and how we delivered our financial results. Nico?

Thank you, Stephan, and a warm welcome from my side Aggarwal. Let's start with the development of our fiber sales volume. As Stephan mentioned, the market, especially textile markets did not help us on the demand side. However, the measures taken in our holistic performance program is driving sales volumes. They increased by 21% in first half year 2024 compared to the first half year of 2023. As mentioned, this is a very solid growth compared to what we have seen in the market. We saw a clear outperformance of our sustainable fiber specialties. The share of our specialties of our fiber sales increased by 14 percentage points up to 92% with only little volumes remaining as standard viscose. I would like to especially highlight the development of our Lenzing ECOVERO fiber sales. They increased by more than 50% since first half year 2023. Let's look at our revenues. They increased in the first half of the year compared to the same period last year by 5% to EUR 1.3 billion. The revenue from the fiber division increased by 9.3% to slightly over EUR 1 billion, but pulp revenues decreased by 21% to EUR 291 million in the first half of 2024. To remind you, the level of pulp revenue depends to a large extent on the share of pulp we used for our own production. With the increase in fiber sales volumes, we also needed more pulp for the fiber production, which explains the drop in pulp revenues. Pulp revenues accounted for 22% of our revenue in the second quarter. EBITDA significantly increased by EUR 28 million to EUR 164 million in the first half of the year. This figure includes positive impact from the valuation of the biologic assets of EUR 11 million, which is much less than in the same period of the previous year. We show here also the development of our EBITDA, excluding the positive impact from biologic asset valuation and the sale of CO2 certificates where you see steadily improving numbers, reaching EUR 153 million in first half year 2024 or EUR 59 million more than in the first half year 2023. Let's move to the next slide. Looking at EBIT. It reached positive EUR 19 million with deterioration and amortization being at around EUR 145 million. To remind you, the strongly negative EBIT in the fourth quarter 2023 was heavily affected by the impairment of EUR 465 million. Without the impairment, EBIT would have been at minus EUR 1 million. Financial result was at minus EUR 41 million in first half year 2024, and income taxes were at EUR 43 million, impacted by FX development for LDC in the second quarter of 2024, which, in sum, led to a higher net loss in Q2 versus Q1 2024. As a result, for net profit after minorities and hybrid bonds, we reported a net loss of EUR 71 million in the first half of 2024, which compares to minus EUR 104 million in the first half of 2023. This is an improvement of EUR 33 million, but our ambition, of course, is to become positive here significantly as well. Let's move to the next slide. Looking now at cash flow. Lenzing increased its operating cash flow to EUR 82 million in the second quarter 2024, which compares to EUR 18 million in the second quarter 2023. With regards to CapEx, Lenzing is putting a clear focus on maintenance and license to operate projects as part of its performance program and CapEx significantly decreased to EUR 28 million. This compares to EUR 52 million in the second quarter 2023. As a result, free cash flow increased by EUR 87 million compared to the second quarter 2023 to EUR 54 million. Free cash flow has been positive now for 4 quarters in a row. This development shows clearly a positive impact from the measures defined in our performance program. Trade working capital continued to decrease in the second quarter and was down a solid EUR 115 million from the levels in Q2 2023. Let's move to the balance sheet. On the left side of the slide, we show the development of net financial debt. Net financial debt significantly decreased by EUR 525 million or 27% compared to the second quarter 2023 and was at EUR 1.4 billion at the end of the second quarter this year. On the right side, you see the development of our liquidity cushion is increased by EUR 448 million or 77% compared to the second quarter 2023 and reached EUR 1.03 billion at the end of the second quarter 2024, which is a result of our clear focus on free cash flow generation. I hand back now to Stephan, who will share an update on Lenzing's holistic performance program.

Thank you, Nico. As mentioned, the relevant market for us still show no or only little signs of a sustainable recovery with especially prices continuing to remain under pressure. Therefore, it was and is even more important that we took and take swift actions in the last year and are implementing the holistic performance program with the overarching goal of significantly increased our long-term resilience in crisis and great agility in the face of market changes. The program initiatives are preliminary aimed at generating free cash flow and improving our EBITDA through strengthening on one hand side, our sales as well as the margin. It contains of 3 pillars: profitable top line growth with defined sales initiatives, cost excellence in everything we do and free cash flow generation. The overall impact of the program should result in a significant positive free cash flow. So now let's look at a little bit more in detail on the global program. And we want to share with you, here some examples of the program. More than 550 new fiber sales leads have been identified in all regions in textile and nonwoven to strengthen our top line growth. As an example, [indiscernible], we have new developments for curtains and [indiscernible] brands and all in all, in half year 1, 2024, Lenzing reach record sales volume in lyocell, in Model as well as in ECOVERO. And in [indiscernible] we have, for example, further diversified into new and growing and more profitable segment. So we have, for example, developed our Veocel fibers based on lyocell technology with a dry technology component, which is newly launched in femcare products with global brand. To become more cost efficient, we are making significant operational improvements and are further strengthening our process expertise. To reduce our process costs, around 400 initiatives have been identified already as the good news is every day new initiatives are launched and recorded in our initiative database. Just to give you one example, we are about plan to significantly reduce our heavy fuel oil consumption in Brazil with the potential to save up to EUR 5 million on an annualized basis. We are, as I said before, continuously adding new initiatives to the pipeline. And we are currently focusing mainly on energy cost optimization ideas as well as a balanced yet improved maintenance cost basis. In addition, we are streamlining our overhead structure and reducing global personnel costs by reducing up to 500 full-time positions. We will continue to optimize our direct spending, including raw materials and other production materials, energy and wood as well as our indirect spending, for example, logistics costs. Of around 200 initiatives in direct and indirect spend, I would just highlight one example. We did a comprehensive logistics tender, which led to significant price reductions for logistics. To increase our free cash flow over and above the measures we just explained on top line and cost excellence, around 80 initiative buckets have been defined and freight working capital could be reduced as also shown by Nico around EUR 130 million since the start of the project in Q3 2023. And as you can see from the selected examples mentioned, the scope of the initiative is very wide, but very concrete, very tangible. And thanks to the great commitment of the teams and the great talent within Lenzing, we are executing excellently on these initiatives. And what does this do to our results? Let's see on the next page. Let's have now a closer look at the cost excellence pillar and the impact to the performance program. Overall, as we communicated before, we are aiming for a cost reduction of at least EUR 100 million in 2025, and we expect to achieve more than 50% of that already in 2024. And as you can see on the right-hand side, we are well ahead of the plan with regards to our savings. And when I say that, we are only recording and you see that here in the slide on the right-hand side, the realized savings with a P&L impact. There are various reasons for outperforming half year 1 plan. First and foremost, we see a strong commitment and contribution from all our Lenzing employees. In some areas, such as energy costs or purchasing, we could speed up the implementation efforts and hence, outperform our plan in half year 1. We can clearly be satisfied with our success so far, but it's important. There are still major improvement areas ahead of us, and they are needed to continue our journey of improvement. So let's turn to the outlook. And as usual, we start with some outlook from our customers. And here, we start with nonvolume. In nonvolume, some brands are positive with the outlook for the second half of 2024. As you can see, for example, with a quote from ESG, which expects to be fully back in Q4 '24. A number of brands in the textile market are also rather positive for the remainder of the year, as you can see in the quote from Levi Strauss, which talks about acceleration in sales and profitability in the second half of 2024. Even with more positive comments about inventory, some brands and resalers remain, however, cautious about the outlook for the second half of the year. H&M Group, for example, highlights external factors that will impact the second half more negatively than the group initially expected. Burberry, for instance, is experiencing slowdowns in their current trading in line with the overall market development as seen previously. So to sum it up, we see a mixed picture with still a number of brands being relatively optimistic already for the second half of the year, while others are remaining cautious for the second half, but more optimistic for the longer term. But let us switch now to our own expectations for the quarters to come. I can clearly say that we started 2024 better than originally expected with improved operational performance in Q2 '24 compared to Q1 2024. And that is mainly driven by the impact from our own holistic performance program. Now this is a good basis. I -- we cannot predict when and to what extent a full market recovery will occur. But so far, we assume a stable demand in pulp and have a cautious outlook on the generic fiber market development in the second half of 2024. But one thing is certain. We are not relying on tailwinds from the market, as we have proven to you in the first half of 2024. We continue to take the future of Lenzing in our own hands. As a result, we expect ongoing improvement of positive top line impact, which is also reflected in a good and healthy order book in the beginning of Q3. And on the cost side, we expect further positive impact of the cost excellence in the course of '24 and '24. We see as to do with effort, clearly confirm our expectation for the EBITDA in '24 to be higher than in the previous year. So when we look even further in the future, so how do we increase our performance further? Well, through 3 directions, we will master the crisis through our cost excellence. We will strengthen our core by improving the quality of our margins, and we will be shaping the future by increasing our innovation and sustainability leadership. As a result, we will emerge stronger from the crisis and will be fit for the future. I would like to thank you for your attention, and now both Nico and I are looking forward to your questions. And with that, my dear operator, I look forward for you to moderate the Q&A.

[Operator Instructions]. The first question is from Christian Faitz of Kepler Cheuvreux.

Yes. Thank you. Two questions, please. First of all, Stephan, I note your remarks on your own premium pricing versus the mass market. But can you please be a bit more specific there, you are price points for your specialty products are? Because when I look at mass market prices, at least, Lyocell is trading below standard disclose at this point in time. That is question #1. And then question #2, can you please elucidate a bit more how you see free cash flow evolving into year-end?

Thank you, Christian. So the first question, I will give to Stephan Sielaff with regards to our premium prices. Stefan, please?

Yes. Thanks a lot for the question, Christian. As you rightly point out, the price premium we achieved really depends on the fiber type and on the demand. And that varies between the 3 fiber types we are trading. That means lyocell, viscose here with ECOVERO and Modal. We can clearly see that in all 3 fibers, we see better price premium over standard versus our own expectation because if you look at our price development versus the CCS, which is publicly available, you can see that our development is better. Having said so, I would say the spread you mentioned on lyocell is stronger, and it is a bit more difficult to achieve a price premium there than, for example, in Modal. But I know and you will understand that I'm, of course, not disclosing details on price premiums on individual fibers. And thanks for your understanding that.

Now the second question is with regards to free cash flow, I will hand over to Nico Reiner, please.

Yes. Thank you. So if you think about free cash flow, clearly, first of all, to state is we are not guiding on free cash flow, but we have given ourselves a clear target that we want to be free cash flow positive quarter-by-quarter and also within a year. So the development you have seen in quarter 1 and quarter 2 that have been really strong and very positive coming, first of all, from the operating cash flow, but also from the lower CapEx, which we have seen. Going forward, I would state that we will keep the positive trend, and we have a clear ambition to have overall a clearly positive free cash flow also for the fiscal year 2024. I think that's a clear guidance. Overall, you need to be also realistic when looking at working capital. For example, as we have done here, a lot of release on the volumes. So sometimes there is a bottoming out. So the expectation, for example, on the working capital side should be a little bit more on a realistic basis, more steadily going out there. So these are 1 or 2 key elements, which I can give you as some thoughts in relation to the free cash flow.

The next question is from Isha Sharma of Stifel.

I have 2 questions, please. First of all, could you quantify the savings that you have realized so far in the year and what do you expect for the second half? And then in regard with pulp, the underlying EBITDA margin in the second half is around 31%. Is it a good run rate that we can expect for the division going forward? I was expecting a bit of higher margin given the attractive economics of your Brazilian JV.

Thank you. Isha now, the first question with regards to the savings that we had in the first half and what we would expect for the second half, I would give to Stephan, please.

Yes. Thanks, Isha, and good to talk to you again, and thanks for your questions. Yes. Well, as we stated, we are targeting well above EUR 100 million. And we want to achieve more than 50% of that this year, and we are overachieving our targets significantly, as shown in the graph. But I'm sure you will fully understand that we cannot disclose details on the savings. But you can do your own math. If you look at the graph, you see we are well ahead of plan, right? And to your second question, are we satisfied with the EBITDA margin? No, we are clearly not. What I'm saying is the trend of our operational performance is right. We are getting better quarter-by-quarter. Are we satisfied to where we are? Not at all. And therefore, we keep on pushing, and we keep on pressuring both sides, the top line and as well as the bottom line on our cost excellence. And clearly, in the end, targeting, of course, also a higher percentage of EBITDA.

Yes. Just a follow-up. So I was specifically asking on the margin for pulp. Do you think there is also an upside there?

Well, we are so far on the pulp side as well as on the fiber side, not disclosing any individual numbers. When you look at where -- how we see the market, and we have commented on the pulp market, then you can make your own conclusion how we see the development of the EBITDA margin of pulp. Having said so, maybe that didn't come across clear enough. The VCP program is targeting all elements. So cost savings are also very warm welcomed in the pulp area as well as in the fiber area.

The next question is from Sebastian Bray of Berenberg.

Could I start with cash flow, please? Firstly, on the payables. The majority of the working capital improvement from Q1 to Q2 appears to have been achieved by stretching out or increasing payables by about EUR 50 million or so. Is that likely to be continued in the sense that they drift higher? Or are we looking at a roughly stable development from here? My second question on the cash flow was related to CapEx. If I take the run rate that Lenzing had in Q2, a touch under EUR 30 million, this in inflation-adjusted terms is pretty close to what the company was doing in 2015, which is before it invested about EUR 1.5 billion of fully consolidated growth CapEx. What is the long-term sustainable level of CapEx for the company, given the D&A seems to be at about EUR 280 million. And if you can't give me a number, what stops you from doing that?

So those 2 questions. First one with regards to the expected development of payables. First, maybe this one for Nico Reiner?

Yes. Thank you. So on the payable side, in regards to free cash flow, yes, we had a positive development, as you described on the payables, we are permanently pushing also on the paper side to positive trends to get here free cash flow generated. On the other side, as you mentioned it indirectly already in your speech, there are also certain limits going into this direction going forward. So there has been positive development yet. But going forward, I think it is also rational to think about that there are limits to this development. And so that would be my comment on your thoughts. Second question in regards to the CapEx, we are completely focusing at this point of time on maintenance CapEx and license to operate. And you can see the development also with the numbers you mentioned also. And clearly guiding here, we do not guide on CapEx overall. So I can't give you a number. But I think we are in a situation where we turn every single euro which we spent intensively before we are going to spend it. So coming from that approach to have even probably lower numbers would be difficult. So I would think if you take the numbers what you have and make your own predictions, you could get to the area what we are looking for.

That's helpful. And the last one was just on the tax charge. The -- what happened in Brazil to make the tax charge much bigger than was expected? It doesn't look like it's cash effective? And is this something that affects H2? Because it looks like on an underlying basis, Lenzing pays virtually no tax at the moment because the net income is not there. But what happened in Brazil in Q2? And could it happen again?

Yes, very happy to answer this question. So basically, if you look into the Brazil situation, you do have usually all your tax obligations in local currency, which is the Brazilian Real. And if you make now the conclusion that the Brazilian Real significantly dropped compared to hard currencies like the U.S. dollar and like the oil, the major impact was this FX effect because you have to calculate then also as our currency in our balance sheet is euro, the major loss of the Brazilian Real compared to the Euro, and this is the key element of the development.

That's helpful. So assuming that we don't have any big exchange rate swings in H2, this is not something that is going to recur.

Look, I'm pretty honest about that one. If I would be able to predict FX effect, I would be very happy. But honestly talking, I cannot. And -- but -- so therefore, it is really a pure FX effect, and that's the rationale behind of it.

That's helpful. And final one, depreciation, is just taking the H1 figure and multiplying it by 2 a good run rate for the whole year?

You do very good calculations.

The next question is from Sebastian Growe of BNP Paribas.

So 3, I would ask them one at a time. The first one is around the continuous performance program and related to sales. So considering the comments that you provided on the inventory levels and also on demand, would it be fair to assume that prices might have bottomed out here and that pricing might actually become a tavern the second half of the year as a result of the mentioned shift to specialty fibers?

Yes. Thank you very much Sebastian for the question. No, we can clearly see that we see a room for improvement for our pricing. I can disclose also that other than CCF, we could improve our pricing in Q2 versus Q1. So prices are moving up. Also the beginning of quarter 3 is trending in the right direction. Now how do we achieve it? It is also as looking at playing with the right players, qualifying also our brands like VEOCEL, ECOVERO. To give you an idea, we reached already today our annual performance when it comes to qualification of our VEOCEL brands with megabrand in the hygiene sector, and that will carry on into the second half, and that will help us on a different pricing levels. You have different market segments where we can sell our fiber to. So we have a clear strategy, and that's why these sales leads are so important that we can now really develop our business into more profitable business whilst the market recovery is not there. We can take our journey into our own hands through this program.

Sounds good. If we can move on to the EBITDA impact and following the trajectory that we have seen so far in '24, I think it tends to point into an annualized run rate of getting at least close to the EUR 100 million target or above EUR 100 million target. So would it be fair to assume here that there is headroom to that very savings target in an absolute consideration? Or is the overachievement solely a timing effect.

Okay. Well, look, not 100% sure what you're trying to address with your question. But let me say again, we said it in quarter 1, and I can repeat it in quarter 2 and confirm it. We saw a good start in quarter 1. If you now see our half year results, we promised an EBITDA improvement, and we delivered an EBITDA improvement. And what I can tell you that, yes, for sure, we want to continue to improve our EBITDA in the coming quarters further. And if you do the math there, that will result into a higher EBITDA than last year. But further guidance, we will not give at this stage, taken the uncertainties we see for the 2 reasons I mentioned before, the global geopolitics, which may have an impact or not plus the supply chain disruption, which still have an impact when you look at the [indiscernible] crisis.

The back of my question was really to better understand if sort of the overall progress and momentum that you see in the program is kind of really lifting off so that things are simply turning out and playing out better than you would have expected them to play out? Or if there are other kind of aspects that, for instance, head count rating measures are coming through earlier because people are leaving the company? Or what is really behind it?

No. I think, look, our overachievement of the VCP program has basically both elements in it. There are certain measures which could be implemented earlier, so they are paying in earlier. And there are other measures where we overachieved our target, right? We had, for example, a target in a energy consumption reduction in Thailand. And when we now executed the project, the team was able to overachieve the original estimated savings. So the overachievement has both components, the acceleration of some of the initiatives as well as better output of the initiatives. Now what is good news, and therefore, that is good news for you as well, there is more to come. And we keep our foot on the pedal. We want to further increase the -- and accelerate the speed of implementation, and we want to increase also the number of initiatives we can implement. And therefore, I would expect further impact in both dimensions acceleration as well as overall impact of the program.

Okay. Sounds good. And then the last question is around the long-term partnership between Suzano and B&C Group that has been announced. And I acknowledge that the question might equally be asked to Suzano and/or B&C, but I would like to get your thoughts around the agreement as such and how you view the envisaged improvement that was for that revenue growth, profitability and international competitiveness improvements and whether you can share eventually what measures might be taken in this regard.

I think you partly gave the answer yourself, right? Where are we in this process? And therefore, we cannot answer on a lot of your detailed questions. We're still before closing. It's a shareholder in. Now one thing for sure, I can say it's good to have another long-term core shareholder who is ready to support the strategic and financial development of Lenzing. That is my view, my personal view as well as the view of the Board. So therefore, that I can say everything else you asked, that has to come after closing and we are looking forward to have a second strong and long-term core partner on our side.

Okay. Maybe just one very, very quick one in this regard on the closing. Do you have any sort of idea around the time line here?

No, because it's a shareholder deal. And as you said, you need to address those questions to the shareholders, B&C and Suzano.

[Operator Instructions] As there are no more questions at this time, I'll turn the call back to you.

Yes. Thanks a lot, and let me finish this call with our closing remarks. And first of all, thank you for joining the call, and thank you for the good question. So summing up, the market recovery is still lacking, but we see we at Lenzing see continued and increasing positive impact from our holistic performance program on both top line and bottom line in the second quarter and going forward. The EBITDA further developed in the right direction and the free cash flow has been positive now for 4 quarters in a row. Therefore, the first half year 2024 was already better than expected. That does not mean we are satisfied, that does not mean we are lying back just the opposite. We keep the foot on the pedal, and we continue the started progress and process of improving the health of Lenzing, making it stronger, fitter, agile, leaner and with that, strengthening the resilience of Lenzing. Now to give you more updates on the progress, we invite you for our next call on November 7 with our Q3 results. Thanks a lot for your attention. And with this, I will close the call. Thank you very much.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.