Austria's Lenzing and Brazil's Duratex to build $1 bln pulp mill
By Kirsti Knolle
VIENNA, June 22 (Reuters) - Austrian cellulose fibres producer Lenzing and Brazilian wood panels maker Duratex plan to build a $1 billion dissolving wood pulp plant in Brazil, the companies said.
Lenzing specialises in fibres made from wood and pulp, meeting increasing demand from the fashion industry for alternative textiles to cotton. It will hold 51 percent in a venture with Duratex that will operate the mill in the state of Minas Gerais, close to Sao Paulo, it said.
The decision for the new Brazilian plant is in line with Lenzing's strategy of expanding its international footprint and moving its cost base closer to where it makes revenues, Chief Executive Stefan Doboczky said in an investor call on Friday.
"We make a substantial contribution to the strategic goals of Lenzing, not only growing the company but also growing its EBITDA (core earnings)."
In 2017, Lenzing posted earnings before interest, tax, depreciation and amortisation (EBITDA) of 503 million euros ($587 million).
Duratex, which will bring its forest assets to the joint venture, expects the project to reduce its exposure to the domestic market and civil construction, it said in a presentation on its website. The Brazilian group reported revenues of 4 billion Brazilian Real ($1.1 billion) in 2017.
Both companies' investors welcomed the news, with Duratex shares jumping as much as 9 percent and Lenzing's as much as 5.2 percent.
"We continue to believe that the market is not giving Lenzing's unique innovation drive and leadership position in man-made specialty fiber the value it deserves and see the company ... as strongly undervalued," said Baader Helvea analyst Laura Lopez Pineda in a note to clients.
All conceptual work for the 450,000 tons dissolving wood pulp (DWP) plant has been done and approval processes are about to start, said Doboczky. The final investment decision for the largest single line DWP plant in the world is expected in the second half next year, with ramp-up in 2022, he said.
An area of 43,000 hectares in Brazil's Triângulo Mineiro region will provide biomass for production, according to Duratex.
The investment of "somewhat above $1 billion" will be divided according to the joint venture split, the Austrian group's CEO said.
About 60 percent is planned to be financed by debt and 40 percent by equity, said Lenzing finance chief Thomas Obendrauf.
($1 = 0.8576 euros)
($1 = 3.7633 reais) (Reporting by Kirsti Knolle; Editing by David Evans and Mark Potter)
