Nonwovens Industry
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Freudenberg



Published January 1, 2008
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Freudenberg
Freudenberg
Related Sales Reports
Location: WEINHEIM, GERMANY

Sales: $1.45 billion

Description: Key Personnel
Management Board: Bruce Olson, president and CEO; René Wollert, CFO; Thomas Reibelt, CTO
Worldwide Divisions: Dr. Heino Freudenberg, general manager of interlinings; Dr. Jörg Sievert and Dr. Andreas Kreuter, general managers of filter; Christian Marx, general manager Spunlaid; Juan Charlos Borchardt, general manager Southern Hemisphere,;Helmut Beck, general manager industrial nonwovens

Plants
Weinheim, Germany; Neuenburg, Germany; Kaiser­slautern, Germany; Greetland, U.K.; Swindon U.K.; Colmar, France; Barcelona, Spain; St. Omero, Italy; Cape Town, South Africa; San Martin/Buenos Aires, Argentina; Jacarei, Brazil; Suzhou, China; Changchun, China; Nantong, China; Yang Mei Tao-Yuan, Taiwan; Tayuan, Taiwan; Durham, NC; Hopkinsville, KY and Pyungtaek, South Korea (Korea Vilene Company); Mumbai, India; Chennai, India

Processes
Drylaid staple fiber, wetlaid, spunbonded, meltblown, electrostatic spun microfiber, needlepunched, thermal bonded, chemical bonded, water entanglement

ISO Status
All locations are ISO 9001 and ISO 14001 certified; locations serving the automotive industry are QS 9000 certified; 21 out of 23 plants are OSHAS 18001 certified

Brand Names
Vilene, Viledon, Vilmed, micronAir, Vlieseline, Vildona, Fliselina, Lutradur, Lutrasil, Evolon, Comfortemp, Vitech, Celestia, Soundtex

Major Markets
Apparel interlinings, filtration, medical, protective clothing, automotive interior trim, electrical insulation, electrical specialties, home furnishings, industrial wipes, hygiene, shoe components, coating substrates, carpet backings, landscape fabrics, geotextiles, agriculture, furniture and bedding and industrial nonwoven specialties

Sales rose just 2% for the world’s largest roll goods producer Freudenberg Nonwovens. The Weinheim, Germany-based company reported that economic problems in the U.S. are impacting sales throughout the world and does not expect to see sales grow much more in 2008, according to CEO Bruce Olson.
 
“Two or three months ago, I would have been more optimistic about growth but we are starting to see negative effects in both the U.S. and in other regions—as a result of economic problems in the U.S.,” he said. “How we do going forward will depend on how severe the economic recession gets on a worldwide basis.”
 
While Mr. Olson declined to comment on his company’s earnings, he did say that there has been a serious erosion of profitability within the nonwovens industry during the past 18 months, which he blames largely on difficulty among producers to pass on raw material and energy price increases. “We are putting a lot of effort into raising prices. I am spending more and more of my time working with my sales people to more quickly and effectively implement price increases.”
 
Freudenberg Nonwovens announced its most recent price increase in early July when it said it would raise sales prices for its nonwoven products immediately due to raw material prices that have risen in excess of 25% since the beginning of 2008. According to executives, the decision to increase prices has been taken only after a number of other streamlining efforts have been executed.
 
Among these efforts was the closure of two lines in Freudenberg’s Hopkinsville, KY facility. One line produces staple fiber/binder bonded nonwovens and the other is an adhesive web operation. Both serve the North American automotive market and Freudenberg blamed the closures on declining production volumes as well as decreased profitability. Materials made on the two lines were supplying commodity materials for automotives and profitability in this area had deteriorated to the point where it made no point to participate. About 15-20% of the output on these lines was transferred to Durham, NC.
 
Following the shutdown, Freudenberg’s Filtration Division will continue its production in Hopkinsville, as will Freudenberg Vitech, L.P., which serves the North American automotive market. The spunlaid and staple fiber operations in Durham, NC will continue to serve the North American interlining, industrial and building products segments as well as the automotive market. While no plans have been finalized, Mr. Olson said efficiency levels in the Durham facility, which was once dedicated largely to interlinings, are being examined. With this business faltering in the U.S., the site is now oversized.
 
As it deals with challenges like raw material prices and improving efficiencies, Freudenberg’s business is not without its bright spots such as its European automotive business and some industrial nonwovens applications relating to infrastructure improvements, according to Mr. Olson. By region, Europe continues to outperform the U.S. while Asia is doing well from a sales standpoint; however, the effects of the negative U.S. economy are beginning to be felt around the world.
 
Set to benefit Freudenberg’s global nonwovens business is a new operational structure, a major priority of Mr. Olson’s since he joined the company in June 2007. Established in January 2008, the new structure consolidated the tuft division with the spunlaid activities of the hygiene and Evolon divisions into a new spunlaid division, which is now being headed by Christian Marx. Additionally, the staple fiber operations of the technical nonwovens and hygiene divisions were consolidated into the new global industrial nonwovens division, which is now headed by Helmut Beck. Freudenberg’s Interlining business, not affected by the restructure, forms the company’s third division under the leadership of Dr. Heino Freudenberg.
 
Due to the special regional conditions in Latin America and South Africa, Freudenberg’s nonwovens operations in those countries have been merged into one division headed by Juan Carlos Borchard. This division contains staple fiber and industrial application interests in the southern hemisphere. According to Mr. Olson this group was kept separate because it had been operating so successfully on its own prior to the restructure.
 
The new structure reportedly gives clearer accountability over who manages production assets throughout the business. “I found quite a complicated matrix where accountability wasn’t particularly clear as to who was responsible for production assets,” Mr. Olson explained. “From my perspective, we are now seeing production quality yields and seeing other improvements from having clearer accountability for assets.”
 
For instance, grouping tuft with the spunlaid divisions of hygiene and Evolon—the brand name for Freudenberg’s microfiber and bicomponent microfilament technology—made sense because the technologies share production lines. Under the old structure, it was unclear who was responsible for capital improvement and yield improvement projects on shared lines, such as one known internally as PK6, which makes microfiber products as well as Tuft products and underwent a major upgrade in 2007.
 
“Before the restructure, the tuft business was in charge of PK6 and the operators of this line had no incentive to use capacity from PK6 for Evolon even though it’s all spunlaid technology,” Mr. Olson explained. By grouping together the divisions, these operators are now more encouraged to devote output to microfiber applications, a profitable technology for Freudenberg.
 
Evolon is also made on a pilot size line in Colmar, France. Since its introduction in 1999, Freudenberg has been growing Evolon in a number of areas, many of which are new to the nonwovens industry. With more capacity on PK6 centering on this technology, executives expect it to expand even further, most likely to the point that larger investment supporting the technology will need to be made in the 2010-2012 time period, according to Mr. Olson.
 
Among the many applications for Evolon is signage. In fact, banners using Evolon were used by Palexpo at INDEX 2008 in Geneva, Switzerland. Selected in particular for its certified flame-retardant and unique matte look, Evolon was used in an attention-grabbing signage application comprising large, four-sided cubes measuring up to 130cm by 260 cm. Printed to display important directional information to the show’s 520 exhibitors and almost 12,500 visitors, each cube was suspended at a prominent point from the ceiling of the 50,000 square meter exhibition hall. Geneva-based Palexpo used its internal production capability to print and cut the Evolon material.
 
In announcing the restructuring, Freudenberg also said it would spin off its filter division in January 2009 to become a separate business group within the Freudenberg Group of companies. This decision has evolved from Freu­denberg’s business model, which favors small entrepreneurial companies. “It’s not unusual for Freudenberg to carve out a segment like that,” Mr. Olson said. “It’s been the experience that it grows more quickly based on that structure.”
 
Currently, a converting operation within Freudenberg’s nonwovens group, the filtration division converts nonwovens into finished filter products, which are sold to OEMs or, in some cases, directly on the retail market. When spun off, the division will be Freudenberg’s 15th subgroup company, not to mention one of Freudenberg Nonwovens’ largest single customers.
 
Filtration has grown significantly in recent years thanks not only to new product introductions but also to increased demand for cleaner air and water. One particularly nice growth area for Freudenberg has been its micronair filters, which began targeting car interior filtration and has now expanded into office machine filtration with the introduction of micronAir office  Fine Dust Filter. This consists of environmentally-neutral, fully recyclable nonwovens in a triple-layer construction, one layer of which contains electrostatically charged microfibers. Together, these layers permanently bind even the finest breathable ultra-fine particles, irrespective of their specific chemical compositions. With a filtering performance of well above 94%, the micronAir office printer filter captures even the smallest respirable particles.
 
Also benefiting Freudenberg’s filtration business is the acquisition of Spasciani Air Filter SpA in Milan. This takeover further expands Freudenberg Nonwovens' filter business and strengthens its operations in the European filter market. Spasciani Air Filter manufactures filters for general HVAC (Heating, Ventilation and Air Conditioning) and for industrial process ventilation. The company has around 50 employees in its Milan site.
 
In addition to adding to Freudenberg’s HVAC offerings, the acquisition gives the filtration division an Italian manufacturing facility from which to supply its Viledon cassette filters. “The takeover of Spasciani Air Filter operations will provide our customers with a seamless expansion of our one-source, air filter portfolio,” said Dr. Jörg Sievert, managing director of the filtration division.
 
Meanwhile, Freudenberg’s interlining division, once a core business, continues to face stiff competition in Asia as apparel production in the U.S. and Europe is increasingly being outsourced there. Freudenberg makes nonwoven ma­terials for interlinings in five factories in China, Korea, Taiwan and India and has nearly 1000 employees there. Still, as local companies have become more sophisticated in their production, it has become more difficult for foreign companies—like Freudenberg—to compete.
 
In addition to localization challenges, the interlining business has been negatively impacted by economic pressures, which have decreased clothing sales around the world.
 
On the industrial side, Freudenberg has been boosting this business with a number of new investments including a €7 million upgrade to a wetlaid line in Neuenberg, a new needlepunch line for automotive interior applications in China as well as increased production for filter media in Korea.
 
“These are three major investments we are currently undertaking,” Mr. Olson explained. “If you look at our capital budget, we tend to invest where it makes sense to expand but also invest quite a bit to improve our process technologies for better yields and higher speeds—all of the things you do when faced with a market with deteriorating margins.”
 
Freudenberg’s spunlaid division continues to face challenges in some areas while growing in new areas such as microfiber and fine filament technology. In its continued effort to develop new markets for its nonwovens, Freudenberg has commercially launched a post consumer recycled product range in the U.S. These PCR products are now available in a variety of weights and widths for all market segments and have similar product properties as all other high quality Lutradur products.
 
The PCR polyester nonwoven products are made using PCR chips made from recycled polyester bottles that are being collected and reclaimed everyday throughout the country. Each square yard of the 85-gram nonwoven fabric contains one PET bottle that is not being sent to a landfill.