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    Features

    The Year That Was 2012

    New investments, new business strategies dominated the headlines this year.

    The Year That Was 2012
    2012 saw an explosion of investment in the Chinese diaper market with both western and eastern manufacturers adding new plants.
    Karen McIntyre, Editor12.04.12
    While the rest of the world focused on the U.S. presidential election,continued unrest in the Middle East and the affects of global warming on the environment, the nonwovens industry continued to monitor the unprecedented expansion of the spunmelt market, growth in China, sustainability and a bunch of other stories.

    By all accounts, 2012 was a good year for nonwovens as companies expanded in some areas and cut back in others, old markets continued to recover and new ones were uncovered. While many news stories were important to the future direction of the global nonwovens industry, the following headlines stood out as defining the current state of the industry.

    Chinese diaper boom

    As western markets continue to face the challenges of high penetration levels and increased competition, diaper makers are relying more than ever on growth in emerging markets. In 2012, Asia emerged as the hot area for diaper investment as markets here, particularly China, saw significant investment from companies based in the east and west. This investment has come in the form of large-scale diaper plant construction and acquisition of local brands alike.

    Kimberly-Clark, Dallas, TX, started construction on a new diaper manufacturing base in the Jiangning Development Zone, according to China Sourcing News. The company will reportedly invest more than $100 million in this new manufacturing base and product development center, integrating product manufacturing, quality control, product innovation, engineering project management and logistics management.

    Meanwhile, K-C rival, Procter & Gamble, the maker of Pampers and Luvs diapers, has started stage one of a three-stage investment operation in Luogang, Gaungzhou, China that will ultimately be one of the largest manufacturing sites in Asia. The first stage of the plant will reportedly make a number of consumer goods including Pampers and is part of the company’s goal of investing as much as $1 billion in China by 2015. The plant is expected to add as much as $490 million of production value to the Cincinnati, OH-based company annually.

    Also investing in the Chinese diaper market’s future growth is Japan’s Pigeon Corporation. In early March, the company voted to increase investment in its Changzhou-based Chinese operation, which was completed in late 2011. According to company documents, this site currently makes breast pads, baby wipes and other baby items, and the new investment will add baby diaper production to the operation. When construction is complete, which is forecasted for 2013, the site will be able to make about 85 million diapers per year. Pigeon also operates a manufacturing site in Shanghai.

    Meanwhile, Sweden’s SCA acquired Everybeauty, a Taiwanese producer of baby diapers and adult incontinence products and Unicharm announced it would expand its current operations within China.

    Fiberweb exits hygiene

    Fiberweb, London, U.K., started off 2012 with the sale of its hygiene business to Petropar, the owner of Fitesa, its former Brazilian partner. The deal includes Fiberweb’s stake in the FitesaFiberweb joint venture, which was already half owned by Petropar, as well as Fiberweb’s European spunmelt business with sites in Italy and Sweden and an airlaid operation in Tianjin, China. Executives at Fiberweb said exiting hygiene has allowed it to focus more narrowly on its industrial businesses, becoming a fundamentally transformed business with a new focus, a strong balance sheet and strong potential for further operational improvement and strategic development.

    “The affect of the sale of the business has been more focus,” CEO Daniel Dayan said this summer. “We are operating in a less board area for it’s easy to focus and prioritize investments.”
    Fiberweb received a reported $286 million for the sale, making it a company infused with cash, rather than debt. The company has hinted it will take its time determining where to spend the bulk of this cash but has continued to invest moderately in its business. Recent efforts have included an upgrade to a breathable film line in Germany, a new air-through bonding line in Italy and a new generation needlepunch line in Maldon, U.K.

    Fiberweb is not the only nonwovens leader shifting gears. Ahlstrom sold its label and processing businesses in the past two years, intending to focus instead only on high performance businesses. Based on its activities, these businesses include filtration, wall covering, medical fabrics, food packaging and building applications. Meanwhile, Denmark-based Fibertex has separated its hygiene-related business, now known as Fibertex Personal Care, from its more industrial interests, which are now known as Fibertex Nonwovens, reportedly because the differences between these two business were so great, it was difficult to group them together.

    These examples reflect a trend within the industry whereby companies are choosing to focus either n the high volumes, low margin business of hygiene or on more specialty areas, which can command higher profits but are generally sold in lower quantities.

    K-C exits diaper market in Europe

    In October, Kimberly-Clark announced it would stop selling diapers in most of Western and Eastern Europe in a move that would lead to the closure of five plants and the termination of more than 1200 employees.

    While this move was not unexpected—K-C has been struggling in these markets for some time—it was big news in the industry as suppliers to the business gauge how it will impact supply and demand in the market.

    “We all knew K-C was struggling in Europe, but not that they were planning to (completely exit the whole European continent except Italy),” says industry consultant Carlos Richer.

    During its third quarter earnings conference, K-C said it would exit the diaper category in the region, except for Italy, and would divest or exit some lower margin businesses in the consumer tissue market. The company will also streamline its European manufacturing footprint and administrative organization to align its cost structure with these decisions. The company’s activities in Eastern Europe, including Russia, remain unchanged.

    The strategic changes we will be making in Europe should allow us to better focus on our best market positions and growth opportunities, improve our underlying profitability and enable more sustainable returns going forward in this part of the world,” says chairman and CEO Thomas Falk. “These moves are further evidence of the portfolio management approach we use to run our company and the financial discipline embedded in our Global Business Plan.”

    Pricie Hanna, principal of Price Hanna consultants, described the decision as an important strategic move for K-C because it frees up cash for continuing investment in higher growth emerging markets where the company has better scale, such as Latin America, and has experienced greater market success.

    “The impact on the diaper markets that they are exiting will be positive for private label diaper producers,” Hanna adds. “The strength of retailer brands in these countries combined with the lack of category growth is the reason why K-C was not able to achieve attractive profitability. K-C entered these markets too late when they were highly penetrated and had little growth prospects.”

    While this move should open up opportunities for other companies doing business in the European diaper market, suppliers to this market—including Pegas, Fitesa, Fibertex, Texbond, Union and PGI—will have to wait to see what this will mean for its customer base in a market that is already being challenged by overcapacity. Hopefully, the exit of one large customer will be replaced by one or more smaller customers in the region.

    Spunmelt capacity comes online

    The biggest story of 2011—the unprecedented expansion of global spunmelt capacity—has continued into 2012. While the rate of new line announcements has slowed with only a few being announced this year, many of the lines announced in 2010 and 2011 have started to come onstream.

    These new lines—being added literally all over the world—offer high capacities, superior levels of uniformity, lower basis weights and, hopefully, higher profit margins for nonwovens producers looking to do business in the hygiene market. This new capacity will chase growth in the global hygiene markets in areas like China, North Africa, the Middle East and South America and provide users in developed regions line North America and Europe with the more sophisticated products they crave.

    These new installations are oftentimes blazing new trails for the nonwovens industry. Gulsan and Pegas Nonwovens are setting up large spunmelt lines in Egypt, an area that has not seen much nonwovens investment until recently while a new company called Global Nonwovens is reportedly building India’s first large-scale Reifenhauser line. Other investments in developing regions include First Quality, Avgol, Jofo, Mitsui and Toray in China, Asahi Kasei in Thailand, Toray in Indonesia, Fibertex in Malaysia, Mada and SAAF in Saudi Arabia, Fitesa in Peru and Companhia Providencia in Brazil while in more developed regions, PGI, Avgol, Providencia and FItesa have recently started lines in North America and Union and Dounor have added lines in Europe.

    Incontinences growth

    As markets for diapers and feminine hygiene markets continue to grapple with high penetration levels in the developed world, adult incontinence has stood out as a source of growth. As the population continues to age during the next couple of decades, this growth pattern is expected to continue and nonwovens producers are adjusting their outputs accordingly. In fact, much of the new spunmelt capacity coming onstream in North America is likely targeting adult incontinence applications.

    Medline, a U.S.-based manufacturer and distributor of healthcare products, is already benefitting from this growth. In April, the company said it had opened a  600,000-square-foot site in Douglasville, GA, dedicated to the production of FitRight adult incontinence products on technologically advanced, high speed lines.

    The new plant was dedicated solely to the production of FitRight adult incontinence briefs, Medline’s latest addition to its product lineup. FitRight is designed to enhance the comfort and dignity of long-term care residents with product improvements including better fit around the legs, odor elimination, improved absorption rates and skin-safe closures.

    “There is nothing more demeaning than when a resident or patient has an incontinent episode and their brief does not perform adequately,” says Dan Love, president of Medline’s personal care division. “With Medline’s FitRight, we have completely redesigned adult incontinence products to fit better, be more absorbent and more comfortable to give residents a sense of normalcy and independence.”

    And, this product has been so successful, Medline has  already seen fit to expand the Douglasville operation. In September, the company announced it would  expanded capacity 50% and add a fifth machine, bringing the total investment in this facility to well over $100 million.
    “We’ve had tremendous response from our customers to the new adult incontinence products we’re making here,” says Love. “As the population ages, there is more and more demand for innovative products like our new FitRight brief, which help people manage their incontinence with dignity.”

    Another company betting on growth in adult incontinence is Domtar. Late last year, the paper company acquired the North American assets of Attends, a private label adult incontinence maker, following this acquisition with the purchase of Attends Europe as well as EAM, an airlaid absorbent core technology first developed by Rayonier and commonly used in adult incontinence and other absorbent products.

    At the time of the Attends purchase Domtar executives said they hoped to double the earnings of the incontinence products manufacturer.

    “This is a good transaction that allows us to take measured steps into the consumer products market in a product area where high single-digit global growth is expected,” says John Williams, president and CEO of Domtar. “We believe there is the potential to double Attends’ earnings within five years and we are committed to unleashing the great organic growth potential. With this acquisition, we will consume internally some of our high quality Lighthouse fluff pulp produced in our nearby Plymouth, NC, mill. Domtar will continue to look for innovative ways to build growing businesses based on sustainable wood fiber.”

    Alternative Raw Materials

    The use of recycled materials and other alternative fibers continued to grow in 2012. These efforts are helping companies make strides toward their sustainability goals while also helping them trim costs and be more attractive to their customers.

    In November, Procter & Gamble announced new fiber sourcing goals for the pulp it purchases for its tissue-towel, baby care and feminine hygiene brands. These new goals are in sync with P&G’s long-term environmental sustainability vision, which includes having all products and packaging made from 100% sustainably sourced renewable or recycled materials. Among these goals is a directive that all of the pulp used in P&G’s tissue, baby care and feminine hygiene businesses be third-party certified and at least 40% of P&G;s tissue-towel product b e Forest Stewardship Council certified.

    “We believe that partnering is essential to delivering our long-term sustainability vision,” says Len Sauers, vice president of global sustainability at P&G. “World Wildlife Fund is an invaluable partner, as they have challenged us and collaborated to work through the complexities of achieving third party-certification for our pulp. We are very proud of this commitment, and we are confident we have the plans in place to deliver the goals by 2015.”

    “While we don’t own or manage forests, we recognize the responsibility and opportunity P&G has to use our pulp procurement decisions to promote responsible management of the world’s forest resources,” says Stefano Zenezini, vice president of product supply.

    Similarly, K-C has started sourcing bamboo to use in its tissue and towel products and hints that other areas of its business could be close behind and SCA has received environmental certifications from its Tork industrial towel products.

    In more industrial-related businesses, a number of nonwovens producers including the world’s largest maker of nonwovens Freudenberg are relying more heavility on post consumer recycled materials particularly repurposed plastic water bottles. Freudenberg is using this material in its Lutradur Eco range of products as well as its Viledon Hydrotexx ECO, a green filtration media made from PCR polyester.

    The Search for New Customers

    In developed regions like North America, consumer products companies are constantly tasked with the challenge of finding new customers in areas with nearly 100% penetration rates. Kimberly-Clark responded to this challenge this year with the development of a female wellness line under its Poise brand name. Hoping to keep its feminine hygiene users a little longer, K-C targets this line at the post-menopausal woman with products like a cooling gel, towelettes and a personal lubricant.

    First launched in Chile in 2009, the Poise wellness line is part of K-C’s strategy of leverage strong brands and innovation to win in the marketplace, according to executives.

    Another result of this strategy is K-C’s U by Kotex brand, which was launched in 2010 to appeal to younger feminine hygiene consumers. Defying stereotypes traditionally associated with feminine hygiene brands, U by Kotex features brighter, sleeker packaging in an effort to appeal to young girls. So far, the strategy seems to have worked. In its first year on the North American market, the sub-brand achieved more than four points of marketshare, making it one of the company’s largest growing brand.

    In 2012, K-C expanded the line with sleek tampons and ClearnWear pads. Both of these products reportedly deliver great protection and performance thorugh innovative designs.
    In May, P&G followed this trend with the launch of the Radiant line, which combines several Always and Tampax products to help young girls make their periods invisible, according to company literature. The line includes Tampax tampons, Always infinity pads and incredibly thin liners and Radaint Wipes-to-Go, which are all packaged with a stylish new look.

    Vita Group exits nonwovens

    In September, U.K.-based Vita Group announced its exit from the nonwovens business through the sale of its two main divisions—Libeltex in Europe and Vita Nonwovens in the U.S. Vita sold the Libeltex Group of businesses in Europe to Beloh Beteiligungsgesellschaft, a subsidiary of the Germany-based needlepunch manufacturer TWE Group. The Libeltex Group has its head office at a production site in Meulebeke, Belgium, and other production facilities at Macon and Crepy-en-Valois, France and Bredaryd, Sweden.

    This sale followed the August divestment of Vita’s U.S. sites, in High Point, NC, Schertz, TX, and Fort Wayne, IN, to management backed by Capital South, a U.S.-based private equity firm that becomes the majority shareholder.

    Vita acquired Libeltex in 1979; while the original U.S. business in High Point was acquired in 1996.

    Speaking about the divestments, Vita Group CEO Joe Menendez says, “These divestments are part of a planned program to realize return on investment and are the third and fourth transaction by the group this year. The funds raised have been and will be used to pay down gross debt, hence reducing interest charges, as well as to invest in market growth for our remaining businesses. The Vita Group now sits with no net debt and significant cash availability—having no net debt is a comfortable position in these uncertain economic times.”

    Beyond its nonwovens business, the Vita Group produces cellular foams, industrial polymers and thermoplastic sheets.

    INDA gets a new president

    The Board of Directors at INDA, Association of the Nonwoven Fabrics Industry, appointed David Rousse as the new President of the leading global trade association. Effective October 15, Rousse assumed the position previously held by Rory Holmes, who announced his retirement in mid-2013. Mr. Holmes has held the position since October 2003.

    Rousse most recently served as CEO of HydroLogex LLC, a young Franklin, TN-based virtual manufacturer of proprietary decentralized wastewater treatment systems in the CleanTech sector. Prior to that he held leadership positions in Fiberweb, then a $1 billion global manufacturer of specialty nonwoven fabrics.  He entered Fiberweb in 2005 as president, Hygiene/Medical Americas in Simpsonville, SC, before being promoted in 2007 to president, Fiberweb Americas, based in Nashville.

    “With Rory Holmes planning to retire in the middle of next year, the Board felt it was important to begin the transition by bringing in an executive of Dave Rousse’s caliber as early as possible,” says INDA board chairman Todd Bassett. “With IDEA 2013 being held in Miami Beach next April, it is important to our members and the industry that the new leadership of INDA be in place for our signature event. We are pleased to be able to have Rory Holmes available to help with the transition.”

    “I am both excited and honored to lead a wonderful association like INDA,” said Rousse. “Having been actively involved with INDA throughout a large part of my career, I have experienced first-hand the benefits they bring to their members and the industry. Rory has done an exemplary
    job over the last nine years in building the INDA team and the organization and he’s leaving me in good hands. As I move into the role, he will be indispensable in ensuring a smooth transition.”

    When he joined Fiberweb in 2005, Rousse was given the responsibility to reverse the declining performance of the $400 million North American Hygiene/Medical business and led a major restructuring initiative.  He was promoted in April 2007 to president, Americas and given additional responsibilities for the $300 million Americas Industrial business, where he led the efforts that tripled Fiberweb Americas’ operating profit from $6.4 million in 2007 to $19.2 million in 2008.

    Prior to his tenure at Fiberweb, Rousse was a vice president at Monadnock Paper Mills, a manufacturer of nonwovens and specialty papers. He was also a vice president and general manager at FiberMark Inc., another specialty paper/nonwovens producer.  Prior to that he held a series of marketing/sales leadership positions at International Paper.
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