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PGI continues investment streak, buys Providencia

By Karen McIntyre, senior editor | January 30, 2014

PGI gains access to new lines in North and South America.

Polymer Group Inc. continued its run at becoming the world’s largest nonwovens company this week when it signed a definitive agreement to buy Companhia Providencia, a Brazilian manufacturer of spunmelt nonwovens with production sites in Brazil and North Carolina. The deal not only adds significantly to PGI’s global capacity, it establishes a strong manufacturing footprint in Brazil for the company, which already has an established South American business with operations in Argentina and Colombia.
"The acquisition of Providencia is exciting for PGI, as it aligns directly with our strategic commitment to global growth," says J. Joel Hackney Jr., CEO of PGI. "Providencia has built a vibrant business serving customers focused on hygiene, healthcare and industrial applications, all of which are core focus areas for PGI. The complementary nature of our businesses and Providencia's established relationships with its customers make it a perfect fit to join the PGI family."
Providencia’s global nonwovens capacity was reported last year at 140,000 tons. The company entered the U.S. market in 2011 when it built its first foreign line in Statesville, NC where a second line followed in 2013. Total U.S. capacity is now reported at 40,000 tons.  Additionally, the company operates 11 lines, capable of making about 100,000 tons of material a year, at two sites in Brazil where the latest installation was complete in mid-2012. Sales in 2012 were $273 million, representing a 16% increase over 2011. About 60% of these sales were conducted in Brazil.
With the acquisition, Providencia CEO Herminio Vicente Smania de Frietas will join the board of PGI and will continue to lead the Providencia business.
"At Providencia, we are proud of our history in nonwovens manufacturing and the strong business we have built," says Freitas. "We look forward to this next chapter in our business, as we work with PGI's leadership to serve customers throughout Latin America with unmatched service, quality and innovation."

PGI invested heavily in South America in the early 2000s adding new lines at sites in Buenos Aires, Argentina and Cali, Colombia but has not invested in the region since the completion of its latest Argentinean line in 2007. While executives have hinted at plans to invest in a greenfield line in Brazil, more recent investments have been aimed at Asia.

In November 2013, PGI formed an agreement to buy Fiberweb, a London-based nonwovens producer with strong footholds in geotextiles and industrial markets. The acquisition expanded PGI’s scope into a number of durable markets and will add about $460 million to its total sales, which were reported at $1.15 billion in 2012, making it the world’s fifth largest nonwovens manufacturer.
David Price of Price Hanna Consultants has been predicting consolidation in the spunmelt market for some time. Calling the move a “smart one for PGI,” he says, “South America is an attractive market due to its growth characteristics and is quite profitable for producers of polypropylene-based spunbond and spunmelt when compared to other global regions."

Acquiring Providencia, significantly and quickly enhances PGI’s market position and asset portfolio in South America  without enduring the process of building new plants and installing assets on its own, he adds.  "Buying Providencia resolves the South America investment question for PGI and strengthens their position in the Americas region as a whole,” Price says. “It was a smart move.”

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