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Pegas A/S


Location: Znojmo, Czech Republic

Sales: $65 million

Description: Key Personnel
Milos Bogdan, managing director; Libor Ondracek, commercial director; Frantisek Klaska, technical director

Plants
Znojmo, Bucovice, Czech Republic

ISO Status
ISO-9001: 2000, ISO-14001: 1996

Processes
Spunbond, meltblown, SMS

Major Markets
Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel

Eastern Europe’s largest roll goods producer, Pegas a.s., Znojmo, Czech Republic, reported sales of approximately $66 million last year, 90% of which were conducted within Europe. The company was founded in 1990. In 1995, Pegas entered the hygiene market where it has consistently increased its position through line investments, mainly concerning spunmelt technology.
 
This focus has contributed to an increase in nonwovens capacity from 5000 tons per year in 1996 to 36000 tons per year in 2003. Also during this time, hygiene’s importance to the company has grown significantly. “Today, the hygiene market represents nearly 90% of sales (compared to 42% in 1996),” explained commercial director Libor Ondracek. “We think this trend will continue in the future as well. The hygiene market is highly competitive and demanding, however this has encouraged us to improve our processes and our materials continuously.”
 
Pegas currently operates two Czech Plants, one in Bucovice and the other one in Znojmo. These facilities house six nonwovens production lines. The company’s most recent investment, in 2001, was 9500-ton-per-year, three-beam Reifenhauser line in its Znojmo plant. This line is scheduled to be equipped with bicomponent technology later this year. And, while no final plans have yet been made for capacity expansion, Mr. Ondracek did say that the Znojmo site has enough vacant land for another production line.
 
On the new product front, Pegas has been focusing on the development of bicomponent spunbond materials for added value products in hygiene applications. These new products are expected to improve sales for Pegas and significantly increase its competitive position on the market.
 
Looking ahead, Pegas will continue to focus on its strong European position to maintain growth. Other initiatives include investment in new technologies, closer relationships with clients, global market participation and further expansion in  Europe.
Location: Znojmo, Czech Republic

Sales: $78 MILLION

Description: Key Personnel
Milos Bogdan, managing director, Frantisek Klaska, technical director; Frantisek Rezack, commercial director

Plants
Znojmo, Bucovice, Czech Republic

ISO Status
ISO-9001: 2000, ISO-14001: 1996

Processes
Spunbond, meltblown, SMS

Major Markets
Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel

Good cooperation with customers was a main factor behind Pegas Nonwovens’ increase in sales last year. The company was able to increase its sales from about E65 to E69 million on functional relationships, quality management and leadership in the European bicomponent spunmelt market as well as investment in state-of-the-art technology.
 
The Znojmo, Czech Republic-based company is currently adding its seventh production line, which will be able to produce 15,000-17,000 tons of spunmelt nonwovens per year. Set to come onstream by the end of the year, the new line, Pegas’ seventh, will mainly target European hygiene markets. It will be situated at Pegas’ Znojmo, Czech Republic site
 
Even without the new line, Pegas  is its region’s largest nonwovens producer, capable of producing 36,000 tons of spunmelt nonwovens on six production lines in Znojmo and at Pegas’ other facility in Bucovice, Czeck Republic.
 
More than 70% of its output targets the hygiene market, an area in which Pegas has achieved considerable growth during the past several years.
 
“Our focus has been on real and functional partnerships which respects all elements of the business, from the base to the details,” explained commercial director Frantisek Rezack,. “We also focus on speedy reactions, flexibility and the capability to easily find effective solutions. Partnership with our customers from a product point of view is based on efficient quality management and innovative potential of Pegas’ research and development. The last point of strategy, to grow in the hygiene market, is achieved through perpetual upgrade of older technologies but mainly investment in state-of-the-art equipment.”
 
While Pegas is working on development projects outside of hygiene, they are not expected to change the landscape of its business considerably. These projects contain added-value features that will allow Pegas to penetrate niche and specialty markets both within hygiene and beyond. “The practice of focusing on developing added value, bicomponent spunbond products has influenced and improved our competitiveness,” said Mr. Rezack. “We are going to continue on this effort.”
Location: Znojmo, Czech Republic

Sales: $93 million

Description: Key Personnel
Milos Bogdan, managing director, Frantisek Klaska, technical director; Frantisek Rezac, commercial director

Plants
Znojmo, Bucovice, Czech Republic

ISO Status
ISO-9001: 2000, ISO-14001: 1996

Nonwovens Processes
Spunbond, meltblown, SMS

Major Markets:
Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel

Sales reached €75 million in 2004 for Central Europe’s largest nonwovens producer Pegas A/S. Among the year’s highlights was the completion of a seventh spunbond production line at its Znojmo, Czech Republic facility. Capable of producing 15,000-17,000 tons per year, the new line is based on Reifenhauser Reicofil technology to increase Pegas’ flexibility. Output from the new line, like Pegas’ other lines, have initially targeted hygiene markets in Central and Eastern Europe.
 
The new line, which began operation in early 2005, brings Pegas’ total nonwovens output to 55,000 tons per year. Currently, the bulk of Pegas’ sales are conducted domestically, in its neighboring countries of Slovakia, Poland and Hungary and in Western Europe. While pricing levels in its key raw material component have presented challenges, undersupply levels in spunbond material in Europe have presented opportunities, according to commercial director Frantisek Rezack.   “Raw material increases have had some impact and someone has had to pay for it but there is also a capacity shortage in Europe right now, which has opened up the market somewhat,” he said.
 
While nearly 90% of its nonwovens output is sold into the hygiene market, Pegas opted for the Reicofil 4 line because of its flexibility. “We have the intention of finding more possibilities and business fields beyond hygiene but so far it has not had any results.”
 
One area of interest is in bicomponent materials that will not only add value to spunmelt nonwoven substrates but will also lessen the suppliers’ reliance on a single raw material.  “Beyond commodity products, you also have to produce specialties,” Mr. Rezack said. “We don’t know the right ratio between the two but we are focused in that direction. You have to continue to invest in new lines. You have to step up or you won’t survive.”
 
In 13 years, Pegas has erected seven lines, an impressive growth rate by any industry standards. The company has not yet unveiled a plan for an eighth production line but executives indicated that room for one does exist in its Znojmo site.

 “All of our lines were state-of-the-art when we added them. Every line has been able to produce something special, something better than before,” said Mr. Rezack. “This is why we have always been able to sell all of our capacity.”
 
Beyond new construction, Pegas is also exploring the possibility of modifying older lines to target specialty applications, a measure that would save money and diversify the company’s output.
 
Also keen on the company’s radar is quality control and efforts in that area have been stepped up considerably in recent years. “All of our product lines are focused on quality,” Mr. Rezack explained. “This can minimize risk and increase waste but most importantly it can help in customer relations. A customer does not want to hear any problem or have any questions when it comes to the quality of the product they are buying.”
Location: Znojmo, Czech Republic

Sales: $150 million

Description: Key Personnel:
Milos Bogdan, managing director, Frantisek Klaska, technical director; Frantisek Rezac, commercial director

Plants
Znojmo, Bucovice, Czech Republic

ISO Status
ISO-9001: 2000, ISO-14001: 1996

Nonwovens Processes
Spunbond, meltblown, SMS, BiCo

Major Markets:
Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel

Sales reached €110 million for Pegas A/S, Central Europe’s largest nonwovens producer. Commercial director Frantisek Rezac attributed increases—sales clocked in at €75 million in 2004—to new capacity. Last year, the company brought its seventh spunbond production line, capable of producing approx. 15,000 tons of material annually, onstream. Like Pegas’ other lines, output from this Reifenhauser Reicofil line is mainly targeting hygiene markets in Western and Central Europe, including Russia.
 
And, Pegas has already announced its intent to build an eighth line, based on Reicofil 4 technology. Representing a reported €40 million investment, this new line will target hygiene applications as well as technical markets when it comes onstream next year, according to Mr. Rezac. “I think that we are looking for a balance between hygiene and non-hygiene markets,” he explained. “In the past we have dedicated a huge portion of our capacity to hygiene and now we are ready to focus also on other applications.”
 
Also in the headlines in 2005 was Pegas’ purchase by a U.K.-based private equity fund, Pamplona Capital Partners, in December.
 
Pegas’ current nonwovens output is 55,000 tons per year, and it will rise to 70,000 tons upon the completion of the new line. Currently, the bulk of Pegas’ sales are conducted in Europe, with an increasing share in Eastern Europe and the Russian market, but a significant part of capacity, mainly specialty products, is exported beyond Europe. “Pegas has the advantage of having some very modern technology and I think this can bring us some new territory in the future,” Mr. Rezac said.
 
While pricing levels in its key raw material component have presented challenges, there continues to be opportunity for spunmelt nonwovens in Europe, despite planned investments by some of Pegas’ competitors. “You have to keep investing if you want to be competitive,” Mr. Rezac said. “If you wait for a time when no one else is investing, you would never do it.”
Location: Znojmo, Czech Republic

Sales: $152 million

Description: Key Personnel
Milos Bogdan, managing director, Frantisek Klaska, technical director; Frantisek Rezac, commercial director

Plants
Znojmo, Bucovice, Czech Republic

ISO Status
ISO-9001: 2000, ISO-14001: 1996

Nonwovens Processes
Spunbond, meltblown, SMS, BiCo

Major Markets
Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel

Nonwovens sales increased 10.5% to reach €121 million for the Czech Republic’s largest nonwovens producer Pegas Nonwovens, thanks to a 6% increase in output, a larger reliance on specialty products and the passage of higher raw material prices to consumers. And, earnings growth has continued into 2007, with first quarter results up 6.1% compared to the prior year, thanks to higher sales volumes.

“Pegas is operating in a highly competitive market and therefore is constantly facing pressure from competition,” said Frantisek Klaska. technical director. “At the same time, Pegas is one of few producers in Europe of added-value specialty products using the most modern technology. Through its technological innovation, Pegas is maintaining its market position.”
 
In 2006, the bulk of Pegas’ nonwovens sales were conducted in the hygiene commodity market; however the percentage of sales in this market decreased from 72.3% in 2005 to 65.2% last year. Meanwhile, sales to hygiene specialty segments increased from 16.3% to 23.6% and non-hygiene sales remained essentially flat, according to Mr. Klaska. “These results confirm the company's focus on specialty production and sales,” he said.
 
Pegas currently produces 55,000 tons of spunmelt nonwovens on seven lines at two plants in the Czech Republic. Plans for an eighth line, which will add 15,000 tons of material per year to the company’s output, are already underway with a commercial launch expected for the fourth quarter of 2007. Like other Pegas lines, the new line will be based on Reicofil technology. “The European personal hygiene industry will remain the company's key target market. In addition, the company is further aiming to penetrate other markets, such as the medical market,” Mr. Klaska explained.
 
During the past five years, Pegas has benefited from growth in the European market for spunbond nonwovens aimed at hygiene, particularly on the specialty end. While this market is expected to remain most important to Pegas, executives have indicated that the company would like to benefit from growth in emerging markets such as Central and Eastern Europe, Russia and Turkey. In fact, Pegas has even hinted that it would, under the right circumstances, consider expanding its operations beyond the Czech Republic into other areas such as Russia.
 
Product diversification is another possibility for Pegas’ future growth strategy. “However, it is not so easy to start with new, different technology from point zero, we are investigating more combining two or more technologies together, but there are not concrete plans at the moment,” said Mr. Klaska.
Location: CZECH REPUBLIC

Sales: $167 million

Description: Key Personnel
Milos Bogdan, managing director; Frantisek Klaska, technical director; Frantisek Rezac, commercial director, Ales Gerza, financial director; Rostislav Vrbacky, production director

Plants
Znojmo, Bucovice, Czech Republic

ISO Status
ISO-9001: 2000, ISO-14001: 2004, ISO-9004: 2004

Nonwovens Processes
Spunbond, meltblown, SMS, BiCo

Major Markets
Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel, industrial

With its ninth production line project currently underway, the Czech Republic’s largest nonwovens producer Pegas Nonwovens is improving its technology to strengthen its operating margins. While sales remained relatively flat between 2006 and 2007, net profits attributable to shareholders increased 9.2%.
 
“Pegas for example is one of the very few suppliers of bicomponent materials in Europe combining polypropylene and polyethylene,” said commercial director Frantisek Rezac. “In 2008, we expect to increase the absolute level of technologically advanced materials compared with 2007. Pegas’ focus is on technologically advanced materials as these materials give us better margins than commodity products.”
 
For 2008, Pegas expects sales to grow 21-25% thanks to capacity increases created by its latest production line launched in November last year.  
 
Pegas’ key market continues to be the European hygiene market and hygiene products constitute 86% of the company’s total sales. With sales in this market forecast to grow at about 5% per year, Pegas also hopes to increase its market share in this segment. “The market is relatively fragmented with too many small nonwovens producers and we are now seeing some signs of consolidation on the horizon. Our customers are consolidated and their markets are dominated by a few big players and we predict a similar situation developing at our level,” commented Mr. Rezac
 
During the past several years, Pegas has been adding a new production line every two to three years. Pegas’ latest line, a 15,000-ton-per-year, 3.2-meter-wide SSMMMS line officially launched in November 2007 is expected to increase the company’s capacity by 28% and its sales by 21-25% in 2008. As this capacity is already fully utilized, Pegas has already announced a plan to add a ninth line, for which it has established a new subsidiary company under the name Pegas NS a.s. This wholly-owned subsidiary was registered by Pegas in early December 2007. Conditions of the investment are being negotiated with the Czech authorities. Pegas expects the new line to be operational in 2011.
 
Pegas’ rapid growth has been the result of investment into the latest technology available on the market and its geographically advantageous central European location, which has given it access to both Western and Eastern markets. “Recently, the European market has become somewhat more challenging due to a slight overcapacity, which has led to lower margins of all nonwovens producers,” Mr. Rezac said. “We believe that this slight overcapacity will be better balanced in the next one to two years and present an opportunity primarily for producers of technologically demanding materials.”
 
With all eight of its lines based on Reicofil-based spunbond and/or spunmelt technology, Pegas has at this time no ongoing plans to add different technologies. “We believe that spunmelt and spunbond technologies are the winning formula and therefore we will continue to focus on them,” Mr. Rezac said. “We are closely monitoring the market situation and its trends and if we discover other opportunities, we are ready to react accordingly. Rather than a shift to different textile technologies, we see the future in the integration of demanded products like ultra-light weight, resistant, elastic or biodegradable textiles into our research and manufacturing, utilizing the opportunities and economies of scale offered by our large modern fleet of production lines.”
Location: ZNOJMO, CZECH REPUBLIC


Sales: $209 Million


Description: Key Personnel
Frantisek Rezac, Chief executive officer; Frantisek Klaska, Technical director; Ales Gerza, Chief financial officer; Rostislav Vrbacky, Production director

Plants
Znojmo, Bucovice, Czech Republic

ISO Status
ISO-9001: 2000, ISO-14001: 2004, ISO-9004: 2004

Nonwovens Processes
Spunbond, meltblown, SMS, BiCo

Major Markets
Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel, industrial

Sales at the Czech Republic-based Pegas increased an impressive17.1% to €142.8 million last year thanks to increased usage of itslatest nonwovens line, launched in November 2007.

“The launch of the new production line was the most importantevent for Pegas in respect to the 2008 financial results,” saidPegas CEO Frantisek Rezac. “The year-on-year increase in salesand EBITDA was driven primarily by this new line. The line metexpectations and was operating at maximum capacity.”

The new line, Pegas’ eighth, is a 15,000-ton-per-year, 3.2-meter-wide Reicofil SSMMMS line, which increased its capacityby 28%.

In 2008, EBITDA amounted to €39.5 million, up 2.9%from the previous year as a result of higher sales of finishedgoods due to the additional production capacity. The mainfactors negatively impacting the total EBITDA in 2008 werelower sales of materials to the construction industry, theappreciation of the Czech koruna, higher energy costs andmargin developments in the European nonwovens market,Mr. Rezac added.

In 2009, earnings growth has increased significantly already,up 33.8% in the first quarter thanks to extremelylower polymer prices, output prices reflecting polymerprices at the higher level and the successful sale of finishedgood stock held over from the end of 2008.

“However, these three factors will not be repeated in such apositive way in subsequent quarters,” he continued. “Due to continuinggood demand, we are confident that we will maintain bothproduction and sales volumes at good levels for the remainder of2009.

While Pegas has received a decision concerning investmentincentives for a ninth line from the Ministry of Industry andTrade of the Czech Republic, the final decision on when tobuild this new line is still subject to market conditions. Mr.Rezac said the final decision should be made in the next coupleof months.

“We still see some overcapacity in the (European) market, howeverthe overall situation is very unclear at the moment and thereforeany in-depth assessment is not possible. We continue to facethe challenges of the market through development of new products,cost control and increases of production efficiency,” he said.

Currently, 97% of Pegas’ sales are done in Europe, 56% ofwhich are sold in Western Europe. Eighty-seven percent of its totalsales are in the hygiene market where Pegas differentiates itselfwith technologically advanced materials—soft, ultra-lightweightand bicomponent textiles—which are difficult to produce. Othermarkets for Pegas include medical, construction, agriculture, furniture,wipes etc.

Moving forward, Pegas will continue to focus on technologicallyadvanced materials, fostering close relationships with customersand suppliers, maintaining superior financial performanceand monitoring investment opportunities. And, while up to now,all of its output is centered on Reicofil spunmelt lines, the companywould not be adverse to diversification if the right technologywere presented.

“We achieved significant position on the market using Reicofiltechnology, however we are closely monitoring the market situationand its trends. If we discover other opportunities, we are readyto react accordingly,” Mr. Rezac concluded.
Location: Znojmo, Czech Republic

Sales: $160 million

Description: Key Personnel
Milos Bogdan, managing director; Frantisek Klaska, technical director; Frantisek Rezac, commercial director, Ales Gerza, financial director; Rostislav Vrbacky, production director

Plants
Znojmo, Bucovice, Czech Republic

Processes
Spunbond, meltblown, SMS, BiCo

Major Markets
Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel, industrial

Sales decreased 13.5% at Eastern Europe’s largest nonwovens producer last year, due to the rapid decline of polymer prices beginning in late 2008, which translated into lower selling prices, according to Frantisek Rezac, CEO of Pegas Nonwovens, Znojmo, Czech Republic.
Despite this decrease, Pegas was able to achieve only slightly lower EBITDA during 2009 thanks to a significant upswing in the first quarter of 2009 when the company benefitted from the positive effect of the price pass-through mechanism and the successful sale of inventory held over from the end of 2008. In the second half of 2009, the company  experienced a higher than expected increase in input prices, which impacted its operational results, the impact of which were minimized thanks to improved production efficiency, strong sales and optimization measures, according to executives.
With nearly 90% of its output sold in the hygiene market, Pegas was lucky enough to avoid most of the effects of the global economic crisis. “The demand for hygiene products is non-cyclical and compared to other market segments, it was/is relatively unaffected by economic developments,” Mr. Rezac said. “This demand inelasticity was confirmed in 2009 as well, during the economic downturn, where growth in volumes continued regardless of external factors.”
In fact, business and future expectations has been so good that Pegas decided earlier this year to move forward with the construction of a new line, which will become commercial during the second half of next year.
According to executives, the line—the company’s ninth—will be a Reicofil 4 type production line designed to make materials for the hygiene market but it will have the flexibility targeting other applications. Additionally, the line will add up to 20,000 tons of capacity to the company’s current capacity. “The line, which will be Pegas’ most technologically advanced yet, will strengthen the position of the company as the technological leader in the field of nonwoven textile production and enable Pegas to be even more focused on ultralight materials, new bicomponent applications and other advanced materials,”  said Mr. Rezac. Pegas hopes to bring products featuring the capabilities to the market between 2012 and 2014.”
Currently, sales to the hygiene industry represent an 89% share of Pegas’ sales. Of these, 69.1% were to the commodity segments of the hygiene market while the rest of its sales to the hygiene market comprised lightweight and bicomponent materials for the hygiene segment. “Advanced materials, which are difficult to produce, remains the highest priority for the company. With respect to customer needs, there have been no significant shifts recently, however in the future we could expect additional movement to advanced products. Customers seek lighter materials due to raw materials expenses reduction.  Also our partners cooperate with us on improvements of properties of materials, such as softness, elasticity, extensibility, etc,” Mr. Rezac said.
For now, the company will continue to meet these goals with Reicofil technology. All eight of its current lines—as well as its ninth currently under construction—are based on the German spunmelt technology and the company attributes a lot of its success to Reicofil’s efficiency, flexibility and dependability. That’s not to say however, that Pegas is not closely monitoring other machinery offerings.
A close eye on the market, its demands and its offerings, are just a part of Pegas’s future growth strategy. Additionally, the company will grow its capacity, work on fostering close relationships with its customers and suppliers and focus on technologically advanced products, all while maintaining a solid financial performance, Mr. Rezac continued.
With most of its sales in Europe—60% in Western Europe alone—Pegas will continue to serve its customers from its plants in the Czech Republic. Moving forward, new growth in demand is expected to come from Central and Eastern Europe, the Middle East, including Turkey, and Africa. While Pegas continues to only make nonwovens in Czech Republic-and no plans for international expansion have been made—Pegas does continue to monitor investment opportunities outside the Czech Republic, whether through acquisition or Greenfield construction.

Znojmo, Czech Republic
www.pegas.cz
2011 Nonwovens Sales: $203 million

Key Personnel: Frantisek Rezac, CEO; Frantisek Klaska, technical director; Marian Rasik, CFO; Rostislav Vrbacky, production director

Plants: Znojmo and Bucovice, Czech Republic

Processes: Spunbond, meltblown, SMS, bicomponent

Major Markets: Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel, industrial

As it awaits the startup of its first foreign investment, an Egyptian production facility, Czech Republic-based Pegas Nonwovens reported an impressive 12% jump in sales last year. Growth was attributed largely to the year-on-year increase of polymer prices and the startup of the company’s latest Czech production line, which began operation during the third quarter. At the same time, earnings measured by EBITDA increased 2.4% thanks largely to the new product line, which offset a slowdown in demand in the European nonwovens industry during the last quarter of the year.

Currently, the majority of Pegas’ business is conducted in the broader European area but growth is expected to come in developing regions—something the company has prepared for by investing in the aforementioned Egyptian manufacturing site, which is set to become operational in the second half of 2013, according to CEO Frantisek Rezac. “To date, the entire project is proceeding according to the time schedule,” he says. “The new line moves the company from its current position as a major European nonwoven textile manufacturer to a company with a more global scope of operation and a focus on fast growing developing markets.”

Already, Pegas is considering a second line at the site in 2015-16, although no final decision will be made on this investment until closer to the date.

For now, all of Pegas’ nonwovens are made on nine lines at two plants in the Czech Republic. The company’s latest line came on-line on schedule during the second half of 2011, featuring the most advanced technology that Pegas has had at its disposal to date and will strengthen its position as one of the technological leaders in the nonwoven textile production segment. “Apart from increasing our production capacity of ultra-light materials, this technology makes it possible for us to offer our customers new bicomponent nonwoven textiles and other special materials, which are planned to go into commercial production this year and in the years ahead,” Rezac explains.

Reporting that the company sold out nearly 100% of its capacity this year, including the new line, Rezac adds that he is not phased by the onslaught of spunmelt capacity coming on-stream to target the global hygiene market. “The majority of Pegas’ business is done in the broader European area where supply and demand is more or less balanced with just a minor overcapacity,” Rezac says. “New capacity installations should not significantly impact Europe but rather other regions, so we do not expect any changes in our core markets in the short or medium term. Besides, transportation costs to some extent limit the possibilities of imports into Europe.”

Currently, 52.7% of its sales are conducted in Western Europe while 43.5% are targeted at Central and Eastern Europe and Russia. Only 3.8% of sales are made beyond Europe, a percentage that will increase once the Egyptian site comes on-stream.

“Pegas has in-depth knowledge and know-how in the business environment in the Czech Republic and Europe as a whole,” Rezac notes. “Indeed, the new localization of a production facility outside of the Czech Republic has brought on new challenges.”

To meet these challenges, Pegas will rely on its expertise in constructing new facilities and production lines and will hire qualified local personnel to operate them. Now, as the company gets its feet wet with global expansion, it will continue to look for investment opportunities to fuel its growth, as well as its expansion outside of the Czech Republic. “The aim of the company is to follow its key customers to areas of their production facilities expansion,” Rezac explains. “We perceive the Egyptian project as a good ground for further projects of similar scope, however, at the moment we have to successfully finish this first project.” 
Znojmo, Czech Republic
www.pegas.cz
2012 Nonwoven Sales: $248 million
 
Key Personnel: Frantisek Rezac, CEO; Frantisek Klaska, technical director; Marian Rasik, CFO
 
Plants: Znojmo and Bucovice in Czech Republic; Egypt
 
Processes: Spunbond, meltblown, SMS, bicomponent
 
Major Markets: Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel, industrial
 
As its new Egyptian line, the company’s first foreign investment, gains steam, Pegas Nonwovens, Europe’s largest nonwovens producer for the hygiene segment, reports that sales increased 13.2% to €187.7 million ($248 million) in 2012, due to the installation of a new production line in Znojmo, Czech Republic, which came onstream in mid 2011. At the same time, earnings rose 5.7% due to the new production line, which offset lower than planned production volumes and an increase in electricity prices. Additionally, the impact of polymer price volatility on the full year 2012 ended up being negative, says CEO Frantisek Rezac.
 
With nine lines in the Czech Republic, as well as one starting up in Egypt, Pegas manufactures spunmelt nonwovens, largely for the hygiene market. Up until the Egyptian investment, much of the company’s sales were targeted in the greater European market but this is expected to shift moving forward as the new line broadens its scope in North Africa and the Middle East and other markets.
 
“We consider the investment in Egypt to represent an important milestone, which moves the company forward from its current position as a major European nonwoven textile manufacturer to that of becoming a company with a more global scope of operation and with a focus on fast growing developing markets,” Rezac says.
 
Currently, 46% of sales are conducted in Western Europe while sales to Central and Eastern Europe and Russia represent 49% of sales. Sales outside of these regions amounted to 5%.
 
Pegas’ new Egyptian line, which was announced in June 2011 based on a long-term delivery agreement with one of its customers, adds 20,000 tons to the company’s global footprint. Located near Cairo, in an area that has escaped much of the political unrest that has plagued Egypt this year, the new investment was valued at €64-67 million. In announcing the new line two years ago, executives said they would ultimately add a second line to this site in 2015-2016 but so far no firm plans have been announced.
 
Rezac says the company will take its experience in Europe and parlay it into a successful operation in North Africa. “Pegas has indepth knowledge and know-how in the business environment in the Czech Republic and Europe as a whole,” he says. “Indeed the new localization of a production facility outside the Czech Republic has brought new challenges. We identified several key areas where we need to focus our efforts and we believe that our experienced management team will deal with all potential issues and the project will be successful.”
 
Even as it focuses on new investments, its main operation in the Czech Republic has not been ignored. The site’s ninth line, a Reicofil 4 Special line, came onstream there in the second half of 2011 and represents the most advanced technology Pegas has to date. “Currently, this line represents the most advanced technology that Pegas has at its disposal and confirms our position as one of the technological leaders in the nonwoven textile production sector,” Rezac says. “Apart from increasing our production capacity of ultralight materials, this technology makes it possible for us to offer our customers new bicomponent nonwovens.”
 
The ninth line added 20,000 tons to Pegas’ operation, much of which will comprise ultralight materials, new bicomponent applications and other advanced materials.
Znojmo, Czech Republic
www.pegas.cz
2013 Nonwoven Sales: $269 million

Key Personnel
Frantisek Rezac, CEO; Frantisek Klaska, CTO; Marian Rasik, CFO

Plants
Znojmo and Bucovice in Czech Republic; Egypt

Processes
Spunbond, meltblown, SMS, bicomponent

Major Markets
Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel, industrial

As it continues to expand its business activities into new areas, sales for Pegas Nonwovens continued to grow in 2013, up 6.1% compared to the prior year, due largely to the start-up of the company’s latest production line in Egypt, which began commercial deliveries in July 2013 and standard operations in January 2014.

“In terms of EBITDA we expect to see the contribution of the Egyptian line in this year’s consolidated financial results,” says CEO Frantisek Rezac. “The line serves mainly the Middle East and North Africa regions as was originally planned.”

Pegas announced the Egyptian investment in June 2011 based on a long-term delivery agreement with one of its customers. Located near Cairo, the line adds 20,000 tons to its global footprint and represents the company’s first operation outside of the Czech Republic.

When Pegas announced this expansion, executives indicated that it would eventually be a two-line site but as of yet the timing for line number two has not been determined. “This decision should be made in the first half of 2015 and a new line could be put into operation in late 2016,” Rezac says.

According to the company, expansion outside of its native Czech Republic has not been without its challenges, many of which were specific to the Egyptian market. “We see the most evident difference in the complexity and fragmentation of the Egyptian legislation and in this respect complicated state administration structure,” Rezac says. “This had placed some hurdles to setting up basic business processes in the initial phase. However, once a given issue is investigated and an appropriate process is properly implemented, everything runs in a standard manner. On the other hand, the quality of professional abilities and the skillfulness of our Egyptian employees has been a very pleasant surprise for us.”

As it gets its feet wet in the North Africa market, European expansion continues to be a focus of Pegas. With nine lines currently operating at its two sites in the Czech Republic, the company is considering expansion there, depending on the market situation and future sales prospect. Currently, the lines in Europe are fully booked.

“We continue to monitor interesting investment opportunities,” Rezac says. “We consider our first international expansion into Egypt to have been very successful and should a similar opportunity arise somewhere else on the globe we would explore it in detail and this could then potentially lead to further expansion.”

Pegas’ aggressive expansion strategy, which has meant adding a new line nearly every other year for the last decade has propelled it to a forefront position in the European nonwovens industry, where the majority of its sales are still conducted. Indeed, the company’s overall sales have grown steadily from just $65 million in 2002 and are expected to continue their upward climb as the Egyptian operation bears fruit.

In new product development, Pegas has managed to commercialize new materials, which changed its product mix and increased the proportion of technologically advanced materials.

Calling a good product mix the fundamental requirement for having satisfied customers and secured sales volumes, Rezac says, “These new materials, some of which have truly unique properties, should help the company to sell its production capacity both in 2014 as well as in future years. We are continually working on various innovations and new materials because we understand that this is the essential prerequisite for the long-term development of the company.”