2016 Nonwovens Sales: $236 million
Frantisek Rezac, CEO; Fratisek Klaska, CTO; Marian Rasik, CFO
Znojmo and Bucovice, Czech Republic; 6th of October City, Egypt; Capetown, South Africa
Spunbond, meltblown, SMS, bicomponent
Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel, industrial
Pegas, the Czech Republic’s largest nonwovens producer, is poised for growth in the near term thanks to a new line in the Czech Republic and a new operation in South Africa. Last year, the company’s sales were down about 10% to $236 million, due to lower polymer prices, while earnings increased a little more than 5%. Volumes remained virtually unchanged but are expected to rise in 2017 thanks to the full utilization of its new line in Znojmo, Czech Republic, the company’s ninth line in the country, which came onstream during the second quarter of 2017 and is completely used. The new line, a S-TwinMB-S 2600 Reicofil 4S Compact bicomponent machine, adds 10,000 tons of new capacity per year.
“The new line helps us to ease the lack of production capacity which was weighing on us in Europe,” financial controller Jan Židek says. “This was also the reason why we decided to redirect the installation of the production line from Egypt to Europe. Generally, it fulfills our expectations.”
The new line was originally intended for Pegas’ Egyptian operation but the board of directors moved it based on an uptick in European demand for spunmelt nonwovens. At the time of the change, executives indicated that expansion in Egypt continues to be a priority but so far no announcements have been made.
The new line is based on a “flat-floor” concept, representing the first-of-its-kind installation in the nonwovens industry, according to the company. “We consider this to be an expansion platform which can be successfully replicated especially in emerging economies,” Zidek says. “We decided to install the line in the Czech Republic to see how it would behave in real life and test it in an environment where we can provide full support in case something should go wrong.”
Pegas will install a similar line at its new site in South Africa. Pegas first announced it was establishing a subsidiary in South Africa in June 2016 and, in July 2017, purchased a land parcel owned by the City of Capetown. In August, Pegas finalized a contract with Reicofil for the sale of a new line. Like its latest line in the Czech Republic, the South African line will be a 10,000-ton S-Twin MB-S RF4S Compact BiCo line. Construction on it will start later this year and it should be up and running from the beginning of 2019. Pegas is finalizing negotiation of a long-term agreement with an existing customer for the delivery of a significant part of the new line’s output.
“The motivation to expand into South Africa was mainly driven by the absence of local production capacities for nonwoven materials used in the hygiene segment,” Zidek says. “Also, our long-standing clients have their established production plants in South Africa and currently they need to import most of the material inputs for their operations. It only came natural to us that we would plug this gap.”
Now with operations in three countries, Pegas reports that a market’s attractiveness depends on its customers.
“We do not target particular markets,” Zidek says. “It is our clients who choose us to deliver the material to their plants across the world. We appreciate the possibility to grow with our clients. Where that is, does not practically matter to us because we aim to achieve the same profitability irrespective of the delivery destination.”