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June 25, 2018

Giant US$1 billion pulp mill to be build in Brazil by Lenzing and Duratex

Giant US$1 billion pulp mill to be build in Brazil by Lenzing and Duratex

Lenzing, the Austrian cellulose fibres producer, and Duratex, the Brazilian wood panels maker, announced plan to build a dissolving wood pulp plant in Brazil. Investment raises up to $1 billion.

According to Reuters, 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.

Lenzing is currently developing a strategy of expanding its international footprint and moving its cost base closer to where it makes revenues and this plan comes in the hand with the decision for the new Brazilian plant.

We make a substantial contribution to the strategic goals of Lenzing, not only growing the company but also growing its EBITDA (core earnings),” Chief Executive Stefan Doboczky said.

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, Reuters reported.

The conceptual work for the dissolving wood pulp (DWP) plant was already done and the approval processes are about to start. The final investment decision for the largest single line DWP plant (450,000 tons) is expected to be done during the second half of 2018, with ramp-up in 2022, Doboczky 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.

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