The year 2013 was defined by investments, mergers and acquisitions and government regulations that will surely impact the nonwovens industry for years to come. While growth is continuing in nonwovens, it seems to be coming from different sources as investments in new regions and new technologies dominate the headlines. Additionally, the marriage of some of the world’s largest nonwovens producers has created new powerhouses in the industry that will guide developments moving forward.
While many new stories were important to the global nonwovens industry, the following headlines stood out as having the most lasting impact on the shape of the future of nonwovens.
While it has not matched the unprecedented level of nonwovens investment seen in 2010 and 2011, when nearly every company in the business seemed to announce a large-scale new line, investment has continued in nonwovens in 2013. As the lines announced two years ago begin ramping up, a number of lines, representing a variety of nonwovens technologies, were announced this year.
In November, Brazil’s Fitesa confirmed it would invest $50 million at its existing facility in Greenville County, SC, to increase production capacity for its spunmelt nonwoven hygiene products.
“Our mission is to be the preferred choice for the supply of nonwoven fabrics to the global hygiene industry, and to deliver high quality products with exceptional service and sustainable processes,” says Ray Dunleavy, director of marketing for Fitesa Simpsonville, Inc. “We are pleased to continue to grow our operations here in Greenville County, and appreciate the support of the Greenville Area Development Corporation and South Carolina Department of Commerce in making this announcement a reality.”
This investment follows similar efforts in South Carolina, Peru and Brazil.
Also in the Carolinas, Jacob Holm Industries announced in September it would add a new line, representing a $60 million investment at its Candler, NC site, where a large-scale spunlace line has been operating at nearly full capacity for several years. While the company has remained mum on the scope of this investment, executives have said the new line will start up in early 2015.
Meanwhile, in more technical areas, filtration specialist Hollingsworth & Vose will expand production of its Nanowave technology in Europe and its Technostat production in North America; Johns Manville has added a lightweight spunbond line in Berlin; and Mogul has added a new bicomponent spunbond line in Turkey.
Looking toward China, this year PGI announced it would replace its existing facility in Nanhai with a more modern operation. The investment will allow PGI to expand its manufacturing capacity for high quality nonwoven products for the global hygiene and healthcare markets. The investment will allow PGI to expand production of chemical bond products for hygiene applications.
While these are just a spattering of the many investments and upgrades announced by nonwovens producers in the past 12 months, they are great example of where the nonwovens industry is heading in the future.
Domtar’s expansion into the hygiene market
Just as we went to press with this issue, Canadian paper maker Domtar announced plans to acquire Laboratorios Indas, a Spanish hygiene company for a reported €285 million. The acquisition marks Domtar’s second major hygiene acquisition in 2013—the other being diaper giant Associated Home Products in May—and its third in just a few years. Domtar bought adult incontinence brand Attends in late 2011.
According to Domtar, the acquisition of Indas should close this year and immediately add to earnings. The company’s previous two acquisitions, also designed to shield Domtar from unstable pulp prices, increased the size of its personal care business from $71 million in 2011 to $399 million 2012, accounting for 7% of sales.
The Indas business will help Domtar grow in Europe, making it one of the leading adult incontinence products manufacturers in Europe. Meanwhile, the AHP acquisition will give the company better exposure to the store brand diaper market, which has seen steady growth in North America driven by high quality products as well as strong market expansion opportunities.
AHP manufactures and markets infant diapers in the U.S. with established long-term relationships in the retail distribution channels. AHP operates two large modern facilities—a 376,000 square foot manufacturing facility in Delaware, OH, and a 312,000 square foot manufacturing facility in Waco, TX. The company also has administrative offices and operates a distribution center in Duluth, GA.
AHP has 621 employees and has annual run rate sales and EBITDA of $320 million and $31 million respectively. It is anticipated that the integration to Domtar’s personal care division will provide annualized synergies of $10 million within two years. The synergies will come from a combination of lower purchasing costs, a reduction in general and administrative costs and sharing of best practices in manufacturing and product development.
“This acquisition will add a key product line to our offering, a competitive manufacturing base to our existing footprint and solid access to the retail channels for our adult incontinence products,” says Michael Fagan, senior vice president, personal care, Domtar. “AHP invests heavily in research and development and brings to the marketplace quality products, a highly trained workforce and the know-how to service large retailers. I am also impressed with the substantial investments made in the past five years in the facilities which will limit the capital requirements for the foreseeable future.”
Growth in Southeast Asia
While China has been in the spotlight the past couple of years, other areas of Asia, like Southeast Asia, have more recently seen aggressive investment. This growth has been led by the hygiene market and a number of suppliers of nonwoven materials to this market have unveiled ambitious growth strategies in countries like Thailand, Vietnam, Malaysia and Indonesia.
A number of local and international producers are leading the way in this investment. In Janaury, CNC International Company, Ltd. said it would add a 24,000-ton nonwovens production line near its existing facility in Rayong, Thailand. The new line will enable CNC to make a variety of valued-added spunbond/ SMS nonwovens. In addition, the new facility will be equipped with robot packaging, allowing of no hand contact to nonwovens roll goods, enhancing of high-end hygienic application with consistency high quality of nonwovens roll goods.
Like Thailand, other Pacific Rim countries including Indonesia, Malaysia and Vietnam, are seeing growth in hygiene products driven by increases in the gross domestic product (GDP) as consumers gain more disposable income for items like disposable diapers and/or feminine hygiene pads. Nonwovens producers like Denmark’s Fibertex and Korea’s Toray Advanced Materials both have ambitious expansion plans in the works as hygiene manufacturers from around the world build new plants in the region.
At the forefront of this investment is consumer goods giant Procter & Gamble, which announced last August it would spend $100 million on a new diaper plant in Indonesia.
“Indonesia with its population of more than 220 million must be considered to be the next booming country in the areas of nonwoven and disposable hygiene products,” says Johan Berlin, managing director of Sweden-based machinery broker Investkonsult. “This will be driven not only by its own population but also to compete on export markets for the neighboring countries such as Thailand, Vietnam, Philippines and even Australia.”
Leading the way here is Korean nonwovens maker Toray Advanced Materials. After establishing large-scale nonwovens production sites in Korea and later China, the company announced last year it would set up a subsidiary in Jakarta, Indonesia, known as Toray Polytech Jakarta, in an effort to capitalize on growth in the ASEAN region. At the time of the investment, executives said Indonesia was chosen because of its large population and strong economic growth.
“In the global hygiene market there is not another place like China or in the ASEAN regions where the diaper business is growing so quickly,” says Evan Lee of TAK. “That is why we chose those sites.”
According to data provided by TAK, in Indonesia, the market for disposable baby diapers is estimated to grow at a pace of 14% per year, increasing from approximately 1.9 billion diapers in 2010 to 3.7 billion diapers in 2015. This has prompted major hygiene product manufacturers to build new production facilities and expand existing facilities, according to the company.
While Toray targets Indonesia, Fibertex Personal Care continues to build on the success of its Malaysian operation. In April, the Danish company said it would invest $55 million in a state-of-the-art production line in Malaysia. The new line will be the third for the subsidiary, which Fibertex founded in 2002. Expected to be operational by the end of next year, line number three will increase production capacity by 30% to 70,000 tons.
On the end product front, Japanese hygiene giant Unicharm has made a pair of acquisitions in the region. In March, the company acquired 100% of outstanding shares in Myanmar Care Products (Mycare), a leading supplier of feminine hygiene products and disposable diapers in Myanmar, an ASEAN country with a population of 62 million, nearly the same size of Thailand. Founded in 1995, Mycare is the manufacturer of brands including Eva, which is number one in the country’s feminine hygiene napkins market, and MyBaby diapers, which is the second largest baby diaper brand in Myanmar after Unicharm’s MamyPoko.
“Our management decision to acquire Mycare has been made on the grounds that new markets are being created and overwhelming share is further secured by accelerating the speed of brand penetration through the expansion of product availability and mutual utilization of manufacturing technology and marketing know-how as a result of Mycare to become a part of the Unicharm group,” the company said in a release announcing the acquisition.
After Indonesia, the Phillipines and Vietnam, Myanmar is one of the top ranking countries in the ASEAN in terms of population size and GDP growth potential. Also in the region, Unicharm purchased Diana, a Vietnamese hygiene manufacture in 2012, hoping to capitalize on that country’s large population and 7% annual GDP growth.
At the time of the acquisition, executives said they expect that Diana’s knowledge of the market and Vietnamese-specific behaviors and Unicharm’s product development expertise will add up to growth in the country.
Adult incontinence growth
It is estimated that 25 million American experience incontinence symptoms. As more and more of these sufferers seek to lead active lifestyles, despite these symptoms, major adult incontinence products companies are tailoring their product lineups to meet these needs.
Perhaps the most aggressive of these companies has been Kimberly-Clark, which has launched a line of disposable underwear products—Depend Silhouette for Women and Real Fit for Men briefs—with innovative new features offering protection with the same look, fit and feel and as real underwear as well as bladder shields aimed directly as male bladder leakage.
And, K-C is certainly not the only hygiene maker looking at adult incontinence. Domtar, the owner of the Attends brand of adult incontinence product, continues to invest in its hygiene related assets, most recently announcing plans to spend $100,000 at its plant in Greenville, NC. Also in investment mode in Medline, which is expanding its state-of-the-art adult incontinence site in Lithia Springs, GA, and Sweden’s SCA, which has purchased hygiene companies in Taiwan and Chile and introduced a number of new products in its TENA product range.
These efforts will surely pay off in the long, if not near, term. Already, there are signs that the adult incontinence market could challenge the disposable baby diaper market in terms of sales and volumes. Already, there are reports in Japan that adult diapers are outselling baby diapers, where nearly one in every four people is over 65 years old.
While the U.S. market is not quite as dominated by adult incontinence, INDA estimated that adult incontinence product sales will outpace both baby diapers and fem hygiene products with an annual growth rate of 3.5% in terms of units sold, compared to an AAG of 1.5% for baby diapers and 2.1% for fem hy.
One of the key shape shifters in the adult incontinence market is the fact that attitudes among bay boomers are very different from older generations. That realization is driving marketing efforts as home use of incontinence products is accelerating. This is especially true of women, who are more prone to incontinence due to the effects of pregnancy and childbirth.
G-P buys Buckeye Technologies
This summer Buckeye Technologies Inc. and Georgia-Pacific LLC reached a definitive agreement for Georgia-Pacific to acquire all of the outstanding shares of Buckeye’s common stock. The deal, which was finalized in August, makes G-P the world’s largest maker of airlaid nonwovens due to Buckeye’s sizable operations in North Carolina and Germany.
“This transaction enables our stockholders to realize significant value, while also representing an important next step in the growth of Buckeye Technologies,” says John Crowe, chairman and CEO. “We are pleased that Georgia-Pacific recognizes the significant value of our company’s special and unique assets, talented employees, and research and development capabilities. Georgia-Pacific’s acquisition of Buckeye will provide our company and our employees with exciting future growth opportunities. We will continue to execute on our business plan in partnership with a committed new owner that has a long history of delivering superior business performance through its dedication to operational excellence and innovation.”
“Buckeye Technologies’ competitive assets and capabilities strongly complement Georgia-Pacific’s existing cellulose business and products. The talented employees, innovation capabilities, advanced technologies, and specialty fibers and nonwovens businesses of Buckeye Technologies will provide a significant platform for continued growth and success,” says Jim Hannan, CEO and president, Georgia-Pacific.
Headquartered in Atlanta, GA, Georgia-Pacific is one of the world’s leading manufacturers and marketers of building products, tissue, packaging, paper, cellulose and related chemicals.
EPA wiper ruling finalized
In July, the U.S. Environmental Protection Agency released a long awaited rule modifying federal hazardous waste management regulations that apply to non-laundered and laundered wipes. The ruling ended several decades of efforts to level the playing field between the two wipers when it comes to disposing and reversing regulations enacted in the 1970s to govern the treatment, storage and disposal of hazardous waste in the U.S.
Under the final rule, both types of contaminated wipes will be given the opportunity to be excluded from the definition of hazardous waste under the Resource Conservation and Recovery Act (RCRA). In order to be excluded, wipes will need to be managed in closed, labeled containers and may not contain free liquids when sent for either cleaning or disposal. In addition, facilities that use these wipes will be prohibited from storing wipes for longer than 180 days and will be required to meet certain record keeping requirements. EPA estimates these changes will result in a net savings of more than $20 million per year in avoided regulatory costs and other expected benefits, including pollution prevention, waste minimization and fire prevention benefits.
“After so many years of hard work, we are extremely gratified that the EPA has finalized this common sense regulation that will reduce unnecessary regulatory burden and simplify the landscape for those who use and make wipes,” says INDA director of government affairs Jessica Franken. INDA urges state officials to implement it as expeditiously as possible.
The final rule will conditionally exempt single-use wipes in industrial settings from the waste regulations the definition of hazardous waste while laundered shop towels, which are subject to looser state regulations, will be brought under federal mandate.
“We believe this rule will enhance flexibility and increase the options available to the thousands of businesses that use these wipes and are hopeful it will create new opportunities for nonwoven wipes,” says INDA president Dave Rousse.
Additionally, they are no less expensive. Industry analyses shows that the hidden costs of laundered rags—including rental fees, delivery and fuel charges and replacement and disposal—make them about 18-28 cents per use while the average cost of a single-use wipe is about 16 cents.
To date, growth in the industrial wipes market has lagged behind the consumer wipes market and much of this can largely be blamed on regulatory issues. Currently, industrial wipes comprise only about 38% of the total wipes market in North America and experts expect this share could grow as these burdens are lifted. As growth in consumer wipes is impacted by market maturity and penetration, new markets, like industrial ones, will be important moving forward.
Flushability guidelines updated
EDANA and INDA, the two global associations of the nonwovens industries announced the full release of a new third edition of the Guidance Document for Assessing Flushability of Nonwoven Disposable Products. The guidelines, first developed in 2008 and last updated in 2009, define what is flushable and establish a “Do Not Flush” symbol for products not meeting the Guidelines in order to prevent the disposal of products down the toilet which are unsuitable for this system.
The third edition, complete with detailed test methods, is a product of the continued efforts by the nonwovens industry to help reduce the amount of non-flushable materials thrown incorrectly in the wastewater stream. It also strives to educate consumers on the proper disposal route for nonwoven disposable products through better labeling.
The new third edition streamlines and improves on the previous two editions by adopting a straight line approach to the assessment of a product. This approach requires a yes/no answer to each of the technical questions which need to be answered in the affirmative to establish flushability, eliminating some of the ambiguity in previous editions. The third edition also now directly addresses an additional wastewater infrastructure concern with the inclusion of a municipal sewage pump test and disintegration test.
The two associations have gathered feedback from stakeholders, including wastewater authorities, and industry, which have led to the changes in the current edition, and the updated Code of Practice with enhanced labeling requirements for products that do not meet the guidelines. For companies assessing nonwoven disposable products, all products are now subject to a much more straight-forward process, with the number of tests in the technical assessment been reduced from twenty three to seven core tests.
The revised protocol means a much more approachable testing process in the current edition, while keeping the rigorous assessment of products to ensure the continued health of our waterways.
“Over the last few years, the work undertaken by our two associations has resulted in a simpler, easy to follow assessment to determine if a product is flushable or not,” says Dave Rousse, INDA president. “We are taking a more rigorous approach where products must pass all seven tests to be labeled as flushable.”
“The third edition addresses two important concerns raised by wastewater operators with the addition of a Municipal Sewage Pump Test and a Disintegration Test,” says Pierre Wiertz, general manager EDANA. “It also includes an updated Code of Practice in which for the first time, includes minimum size requirements for the “Do Not Flush” symbol.” Companies who use the guidelines to assess flushability can ensure that under normal conditions, products that are best disposed of via the wastewater system will pass safely through the sewers and wastewater treatment system. They can also be sure products that do not meet the guidelines are properly labeled “Do Not Flush”.
Rousse adds, “For those companies who are not using the Guidelines and Code of Practice today, we strongly encourage them to get on board. Adopting the Guidelines and Code of Practice is the right thing to do for our environment and will benefit local communities as well.”
“Because this new edition is simpler to use, less costly and easier to implement compared to previous versions, we are confident more and more companies globally will embrace the Guidelines and Code of Practice. In doing so, we can best deliver our part of the solution towards reducing non-flushable material in the wastewater stream, educate consumers and thwart potentially harmful legislation,” says Wiertz.
PGI buys Fiberweb
In November, PGI finalized the acquisition of Fiberweb, combining the world’s 5th and 9th largest nonwovens producer, and creating perhaps the world’s largest nonwovens company with about 4000 employees and operations in 13 countries. The merger is also symbolic in that it marries together two companies once notorious for acquiring up and coming nonwovens companies including Veratec, International Paper, Chicopee and Fitesa, to name a few.
“This is a milestone in our proud history and a critical moment for our industry,” says J. Joel Hackney Jr., CEO of PGI. “PGI and Fiberweb are stronger together, and we are now well-positioned to deliver on the industry’s growing demand for global scale, innovation and leadership.”
Fiberweb’s offerings in filtration, building and construction, agriculture, healthcare, technical fabrics, geosynthetics and hygiene will complement PGI’s established presence across hygiene, healthcare, wipes and industrial markets. “We are committed to investing and growing our presence in our key market segments as well as those in which Fiberweb operates,” says Hackney. “We look forward to welcoming the Fiberweb team as they join us in our mission of creating a safer, cleaner, healthier world for our families and communities.”
PGI’s acquisition of Fiberweb comes two years after the London, U.K.-based company sold much of its hygiene-related business to Brazil’s Fitesa, a deal that left Fiberweb with a significant amount of cash on hand. Post hygiene sale, Fiberweb primarily serves a range of industrial markets and has a significant presence in the geosynthetics market. PGI, meanwhile, is the world’s largest producer of spunmelt nonwovens for hygiene applications but also has interests in some industrial markets.
The two companies agreed on the terms of the purchase in September. Under the terms of the deal, Fiberweb shareholders wil receive a total value of 103.2 pence per Fiberweb share and retain the interim dividend of 1.2 pence per share. This offer represents a premium of 17% to the closing price on August 19, which was the last business day prior to the Fiberweb announcement it had received a revised offer from PGI.
“The Fiberweb board is pleased to recommend this offer, which we believe allows Fiberweb shareholders to realize attractive value from their investment,” says Fiberweb chairman Malcolm Coster. “While Fiberweb remains on track to achieve its medium-term targets over time, the process would have entailed significant ongoing investment, with attendant execution risk. As part of PGI, we look forward to Fiberweb’s businesses flourishing within a larger and more global entity, able to provide the resources necessary to accelerate their development.”
Growth continues for nonwovens
Global demand for nonwovens is forecast to rise 5.3% annually to 9 metric tons in 2017. However, there is a great deal of variation among different regions and countries, according to RnR Market Research. Countries with well developed manufacturing sectors and a population with relatively high personal incomes, such as the U.S., Japan, and West European countries, have well established nonwovens markets. In these areas, nonwovens are prevalent in the production of a variety of goods, and individuals have the financial capability to purchase nonwoven-based consumer items.
The Dallas, TX-based research firm says demand for nonwovens in developed countries is expected to accelerate from the pace set from 2007-2012, when recessionary conditions for most of the period brought outright declines in manufacturing and construction activity. Despite the acceleration, growth in nonwovens demand in developed areas will remain well below the global average as continued industrialization and increasing personal incomes in developing countries promote nonwovens demand.
Ongoing economic advances in China and other developing countries will promote the development of manufacturing sectors, providing opportunities for nonwovens in a variety of goods, such as filters. With respect to consumer goods, rising incomes and standards of living will propel individuals to purchase convenience items, promoting the production of disposable infant diapers among other items that are made with significant amounts of nonwoven fabrics.
The largest regional market for nonwovens in 2012 was the Asia Pacific region, with 39% of the global total. Two of the top three nonwovens consuming countries—China and Japan—are located in the region. Advances will be driven by China, which will account for 60% of the regional sales in 2017 and nearly 40% of additional global volume demand through 2017.
In 2012, North America and Western Europe each accounted for roughly 20% of the market. Gains will benefit from economic improvements, and a rebound in the manufacturing and construction sectors through 2017. The Central and South America, Eastern Europe, and Africa/Mideast regions each accounted for less than 10% of the global nonwovens market in 2012. Arising from a small base, nonwovens demand is projected to post above average growth.
The nonwovens industry in key export-related countries—Brazil, Russia, and Egypt—continues to rapidly develop with investment from both domestic and foreign multinational companies. Spunmelt nonwovens are to be fastest growing by process. They accounted for 46% of global sales in 2012, and are projected to post the most rapid gains through 2017. Growth will benefit from increased production in key markets such as personal hygiene products, particularly disposable infant diapers in developing countries, and adult incontinence products in developed areas.