2013 Nonwoven Sales: $269 million
Frantisek Rezac, CEO; Frantisek Klaska, CTO; Marian Rasik, CFO
Znojmo and Bucovice in Czech Republic; Egypt
Spunbond, meltblown, SMS, bicomponent
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.”