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PGI Plans To Improve Profits

August 17, 2006

Leading roll goods producer Polymer Group (PGI), Charlotte, NC, reported mixed results from operations for the second quarter and six-month period ended July 1, 2006. On the up side, sales increased 5.4% to $249 million over the second quarter of 2005 and 6% for the first six months compared to the same period of the prior year.

However, gross profit was $36.5 million in the second quarter and $79.7 million for the first six months compared to $41.9 million and $85.9 million, respectively, the prior year, impacted primarily by higher manufacturing costs resulting from lower efficiencies associated with weak volumes in certain market segments and higher raw material costs that were not fully mitigated during the quarter due to timing lags associated with contracted business.
As a result of the above, the company reported an operating loss of $5.8 million during the quarter compared to operating income of $16.0 million for the second quarter of 2005.

Business improvement initiatives and new program platforms were initiated during the quarter to drive profitability going forward. Additionally, the company reported that each of the three capacity installations initiated in late 2004 and 2005 are complete and at various stages of start-up. During the quarter, the company successfully addressed start-up issues at its Cali, Colombia plant that negatively impacted results for the first half of 2006. According to PGI, these issues have been fully resolved and the Cali line was operating at commercial production rates by the end of the second quarter.

PGI held a commissioning ceremony on June 20, 2006 for its new line in Mooresville, NC. The line started up during the quarter and has initiated production of lightweight material. This line is expected to continue ramping up during the third quarter and to be at commercial production rates by the end of the quarter.

The new facility in Suzhou, China is complete and the line is fully installed. First shipments were made from the line in the third quarter and the line will continue to ramp up through the end of the year.
PGI said that capital expenditures for the lines are predominantly complete, with approximately $11 million remaining to be paid at the end of the second quarter associated with the new lines.

As previously announced, the company intends to begin construction on a new line near Buenos Aires, Argentina that is expected to be complete by the end of 2007.

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