Plants: Znojmo and Bucovice, Czech Republic; 6th of October City, Egypt; Capetown, South Africa
Processes: Spunbond, meltblown, SMS, bicomponent
Major Markets: 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.”

Plants: Znojmo and Bucovice,Czech Republic; 6th of October City in Egypt
Processes: Spunbond, meltblown, SMS, bicomponent
Major Markets: Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel, industrial

Pegas Nonwovens, the Czech Republic’s largest nonwovens producer, reported record sales and volumes in 2015. Sales reached $254 million and volumes exceeded 100,000 tons. Although the company’s entire production capacity is sold out, growth came through optimization and efficiencies achieved in the production process of the company’s current lines, CEO Frantisek Rezac says.

With nine lines in the Czech Republic and one in Egypt, Pegas decided in June to position its next investment in a new warehouse at its site in Znojmo-Prímetice, Czech Republic. The company originally planned to install the new line, a S-TwinMB-S 2600 Reicofil 4s Compact bicomponent line capable of making about 10,000 tons of material per year, at its site in Cairo, Egypt, but later reconsidered.

“The decision to locate the new production line in the Czech Republic was based on a number of factors, primarily, though, on the product mix development and the related expected commercialization of several technical projects that necessitate the installation of specialized technological equipment,” Rezak says. “Of no less importance is the development of the demand situation in Europe and the lack of production capacities in the Czech Republic, that would enable us to meet this demand for technologically advanced products.”

In September 2015, Pegas announced it would add a new line to its Egyptian operation, which currently houses one line. Pegas established this operation—its first outside the Czech Republic in late 2011, reportedly at the request of a major customer. While no expansion plans are underway for now, Rezak says he remains bullish about this operation.

“We are satisfied with the performance of our Egyptian line. It successfully ran in standard commercial production mode for the entire year of 2015 and met our expectations,” he says. “We have always proclaimed that we intend to further expand the capacity in Egypt. The question is the timing of such an expansion.”

In other expansion news, in June Pegas’ board of directors voted to establish a South African subsidiary, which is the first step in purchasing land there. While it is early in the process, Rezak has said that the establishment of this company will likely lead to another production plant—likely featuring the same Compact technology going into the Czech Republic—outside of the Czech Republic.

“Due to its lower overall investment costs, lower demands on infrastructure and lower capacity, (Compact) represents a platform which is suitable for penetrating into new, especially developing markets,” he says.

In the meantime, Pegas is negotiating with customers that have expressed an interest in this region, with the objective of filling the new line’s capacity. A final decision on the line should be made by mid-2017.

Strong customer relationships, allowing Pegas to gauge market needs and demands, in fact, is one of the company’s biggest strengths, Rezac concludes. “This enables us to specifically address the clients’ needs and come with solutions that bring benefits to our customers,” he says. “We constantly aim to improve and enhance our products and look for new solutions in order to satisfy the needs of our customers.”

Plants: Znojmo and Bucovice,Czech Republic; 6th of October City in Egypt
Processes: Spunbond, meltblown, SMS, bicomponent
Major Markets: Hygiene, agriculture, healthcare, ecology, furniture, building, protective apparel, industrial

Spunmelt maker Pegas Nonwovens reported record sales in 2014 thanks to the full commercialization of its Egyptian line, the company’s first foreign venture, as well as continued usage of its nine lines in the Czech Republic.

The Egyptian line, Pegas’ first operation outside of the Czech Republic, was completed in July 2013 and began commercial production in January 2014. Pegas announced the new site in 2011, saying expansion into new geographies would allow it to increase its global profile and the Egyptian location would provide it with access to the Middle East and Africa. The line can make 20,000 tons of materials per year.

“We are very satisfied with the performance of our Egyptian line,” says Jan Židek, spokesperson of Pegas. “It successfully ran in standard commercial production mode for the entire year 2014 and met our expectations. In terms of operating parameters, the production line is achieving parameters comparable to the production lines in the Czech Republic.”

The investment represented an important milestone for Pegas, he continues. “The proximity of the production plant to the sea gives us greater flexibility and extends our delivery radius,” he adds. “From Egypt, we can reach the Middle East, Africa and Asia, as well as Europe.”

Executives did not comment on immediate plans for a second line at the site, a long-term plan that was announced along with the original expansion plan.

Meanwhile, in Europe, where the majority of both Pegas’ sales and production occurs, sales remain constant, Židek explains. While the success of the Egyptian line has lessened the percentage of European sales to about 75%, sales continue to grow in the region thanks to efforts toward optimizing existing capacity and focusing on research and development efforts.

Pegas has not added to its European capacity since mid-2011, and this new capacity was soon fully booked.

“These operations provide a stable performance,” Židek says. “We focus on research and development of new products and also continuously make steps to optimize the production processes. We do not comment on plans to expand our operations because such information would anyway be subject to a special regime and would need to be disclosed in accordance with applicable laws and stock market regulations.”

Currently, about 90% of Pegas’ output targets the hygiene market where the materials are used in diapers, fem care and adult incontinence product. The company remains committed to the hygiene market because its feels it has an edge in this segment due to its vast knowledge and experience.

“One of our strengths is a very narrow relationship with the customer which enables us to specifically address the client’s needs and come up with solutions that bring benefits to our customers,” says Židek. “Also, in terms of the quality, we fulfill the strict requirements and demands of our clients, which is extremely important especially in hygiene.”

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.”

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.