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Avilon Fibres and Carbatec file for bankruptcy

March 7, 2013

The companies of Neo Industrial's discontinued viscose segment—Avilon Fibres Ltd. and Carbatec Ltd.—have filed for bankcruptcy at the District Court of Pirkanmaa in Finland. Avilon Fibres applied for corporate restructuring on September 7, 2011 and was accepted for a restructuring program on June 28, 2012. The restructuring's objective was to secure the company's long-term development by ensuring short-term operating conditions. After bankcruptcy the restructuring program expires and the cut debts of Avilon Fibres will revert to former state accordingly.

The company reports the most significant factor for the current situation has been the extremely low market price level of viscose fiber during the last two years, a trend that is still continuing. Therefore, it says restarting and financing profitable viscose production has not been possible. Despite of the fact that global viscose market is growing annually by more than 10 percent, the market price level is not expected to go up. The biggest viscose producer is China. The most crucial factor that reduced the competitiveness of Avilon Fibres has been the cost of energy which is remarkably lower in the operational environments of its competitors. The production of viscose is typically an energy-intensive process where the Finnish cost of labor is not a critical factor.

Avilon Fibres Oy has aimed at specializing in niche products with high degree processing. The fire-retardant fiber products developed by Avilon Fibres and Carbatec  have not been selling according to expectations due to the weak level of construction business during the last two years in the U.S., the main market of this product. Launching of the company's antimicrobial fibers have been delayed. First test batches have been delivered and positively tested by the customers but the actual volume sales is still under negotiation.

First steps taken for the commercialization of PPV (paper pulp to viscose) technology, enabling the usage of paper pulp in the viscose manufacturing process, could not bring enough cash flow to ensure the operation of Avilon Fibres and Carbatec.

The above mentioned factors together with the financing situation have led Avilon Fibres to its current situation where it says the continuity of present operations is not possible. It was also decided that Carbatec, the parent company of Avilon Fibres, will also file for bankcruptcy. Carbatec owns PPV and other technologies connected with viscose manufacturing.

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