1. style and fashion
2. beauty
3. face and body care
4. hygiene and toiletries

Discussions with
Investors
ING 11th Annual EMEA Forum
in Prague
December 2008
Cautionary Statement
This document has been prepared by PEGAS NONWOVENS SA (the “Company”) solely for use at the
Presentation. Any forward looking statements concerning future economic and financial performance of the
Company contained in this Presentation are based on assumptions and expectations of future development of
factors having a material influence on the future economic and financial performance of the Company. These
factors include, but are not limited to, the legal environment, the future macroeconomic situation, the market
competition, the future demand for nonwoven textiles and other related products and services and development
of raw material prices. The actual development of these factors, however, may be different. Consequently, the
actual future financial performance of the Company could materially differ from that expressed in any forward
looking statements contained in this Presentation.
Although the Company makes every effort to provide accurate information, we cannot accept liability for any
misprints or other errors. In preparation of this document we used certain publicly available data. While the
sources we used are generally regarded as reliable we did not verify their content. PEGAS does not accept any
responsibility for using any such information.
This document is provided for information and as a matter of record only. It does not constitute an offer to sell or
a solicitation of an offer to buy or sell securities or other financial instruments in any jurisdictions or any advice
or recommendation with respect to such securities or other financial instruments of the Company.
The distribution of this document in certain jurisdictions may be restricted by law. This document may not be
used for, or in connection with, and does not constitute, any offer to sell, or an invitation to purchase, any
securities or other financial instruments of the Company in any jurisdiction in which such offer or invitation
would be unlawful. Persons in possession of this document are required to inform themselves about and to
observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the
securities laws of any such jurisdiction.
… every single detail …
2
September 2008
Agenda
Company Introduction
Strategic Objectives
9M 2008 Financial Performance
2008 Guidance
2009 Outlook
Appendix
… every single detail …
3
September 2008
Company Introduction
… every single detail …
4
September 2008
Overview
Annual Production Growth
• Product: Spunmelt Nonwoven Textiles –
PP/PE
80 000
70 000
60 000
50 000
40 000
30 000
20 000
10 000
0
• Experienced and Growing: since 1990
• 389 Employees
• 8 Production Lines
• Approx. 70 000 tons production based on
current product mix (2008e)
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
0
20 7
08
E
• Luxembourg entity listed in Prague and
Warsaw
Production in tonnes
• 100% Free Float
Source: Company Data
… every single detail …
5
September 2008
Products
Nonwoven Spunmelt Textiles
• Hygiene (87% production in 9M 2008)
– Baby Diapers
– Feminine Hygiene
– Adult Incontinence
• Technical (13% production 9M 2008)
– Medical
– Resistant textiles for Building Industry
– Furniture
– Agriculture
– Filtration
– Wipes
… every single detail …
6
September 2008
Geographical Advantage
Optimal Location
• Central European Base
• Low Cost Area (Staff costs and
Energy)
• Government Incentives
• Room for Expansion in the current
Production Site in Znojmo
Znojmo
… every single detail …
Bučovice
7
September 2008
Meeting Market Needs
• Highest Quality
• Competitive Pricing
• Continuous Development
• Close cooperation with customers to
identify and develop new products
• On time delivery
• Regular Increase in Production
Efficiency
• Flexibility
… every single detail …
8
September 2008
Strategic Objectives
… every single detail …
9
September 2008
Strategic Objectives
Technological Leadership
•
•
•
To maintain technology leader position in Europe
Develop and deliver technologically advanced products for the market
To work with our customers and suppliers in developing new products ahead of the market
Market Growth Opportunities
•
•
•
New capacity installations in line with market demand
To have sufficient capacity to satisfy the leading European manufacturers
Monitoring M&A opportunities to become most strategic supplier to global customers
Delivering Financial Performance
•
•
•
Growing revenues in line with market growth
To maintain our leading margin position in the industry
Use cash flow to support expansion, repay debt and to pay out dividends
… every single detail …
10
September 2008
First 9 Months and Q3 2008 Financial
Performance
… every single detail …
11
September 2008
9 Months and Q3 2008 Key Highlights
•
Financial
Performance
•
•
•
•
Markets and
Business
•
•
•
•
Growth &
Technology
•
•
… every single detail …
Revenue growth of 22.1% yoy in 9M 2008 on the back of higher production output
and annual growth in material prices
EBITDA up by 0.8% yoy in 9M 2008 and by 4.7% yoy in Q3 2008
Profitability was mostly affected by CZK development, volatility of polymer price
indices and higher stock levels related to a lower demand for technical materials
High net profit of EUR 23.5 million in 9M 2008 mainly due to unrealized FX gains
and lower interest expenses
Steady net debt levels after the dividend pay-out and financial stability
The polymer price decline should positively impact EBITDA in Q4 2008
Higher stock levels of finished products due to demand decline from the
construction industry should continue also for the rest of this year
Negotiations with customers for 2009 to-date are satisfactory in terms of committed
volumes
Finalisation of investment incentives conditions related to the possible
construction of the next production line
PEGAS will continue monitoring M&A opportunities
Commercialisation of new R&D projects and anticipated launch of pilot equipment
for plasma treated nonwovens
12
September 2008
9M and Q3 2008 Profit and Loss Statement
(EUR’000s)
Revenue
Raw materials & consumables
Staff costs
of which Share price bonus
Other net operating income/(expense)
EBITDA
EBITDA margin (%)
Depreciation
Profit from operations (EBIT)
EBIT margin (%)
FX gains and other financial income (net)
Interest costs (net)
Income tax expense
Net Profit
Net Profit Margin (%)
Q3
9M
2007
2008
% change
2007
2008
% change
30,014
(19,464)
(1,563)
35,421
(24,246)
(1,809)
18.0%
24.6%
15.7%
90,731
(57,373)
(4,326)
110,768
(75,651)
(4,929)
22.1%
31.9%
13.9%
(50)
11
n/a
(107)
489
n/a
317
9,304
31.0%
(3,058)
6,246
20.8%
5,467
(1,699)
(174)
9,840
32.8%
378
9,744
27.5%
(4,358)
5,386
15.2%
(4,469)
(1,634)
982
265
0.7%
19.2%
4.7%
(3.5pp)
42.5%
(13.8%)
(5.6pp)
n/a
(3.8%)
n/a
(97.3%)
(32.1pp)
1,162
30,194
33.3%
(9,110)
21,084
23.2%
(690)
(8,148)
239
12,485
13.8%
246
30,434
27.5%
(12,636)
17,798
16.1%
13,066
(4,805)
(2,561)
23,498
21.2%
n/a
0.8%
(5.8pp)
38.7%
(15.6%)
(7.1pp)
n/a
(41.0%)
n/a
88.2%
7.4pp
Note: Unaudited consolidated financial results in accordance with IFRS. 9M 2007 Results include the one-off revenue from the arbitration proceeds of Euro 1.03 million
… every single detail …
13
September 2008
Cost Composition
Cost Breakdown in 9M 2007
Staff costs
6%
Cost Breakdown in 9M 2008
Electricity
5%
Staff costs
5%
Other raw
materials and
consumables
9%
Electricity
6%
Other raw
materials and
consumables
8%
Depreciation
13%
Depreciation
14%
Polypropylene &
polyethylene
67%
•
•
•
•
Polypropylene &
polyethylene
67%
Overall cost level impacted by additional production capacity, higher prices of raw
materials and energy and CZK appreciation
Staff costs positively impacted by the fair value of phantom share option plan in 9M 2008
Polymers and electricity up by 30.8% and 62.2% yoy respectively, due to higher consumed
volumes based on the new production line and higher energy prices
Depreciation higher due to the new line and CZK appreciation
… every single detail …
14
September 2008
Balance Sheet
(EUR’000s)
Sep 30th, 2007
Dec 31st, 2007
Sep 30th, 2008
Unaudited
Audited
Unaudited
204,965
120,735
84,230
36,962
10,195
26,200
567
241,927
82,550
132,210
117,225
14,912
73
27,167
19,156
45
7,966
224,708
137,355
87,353
39,171
12,416
26,244
511
263,879
93,885
128,799
116,508
12,190
101
41,195
33,218
1,427
6,550
230,948
136,591
94,357
45,967
15,437
30,165
365
276,915
113,621
117,735
104,777
12,957
1
45,559
23,946
2,487
19,126
Non-current assets
Property, plant and equipment
Intangible assets incl. goodwill
Current assets
Inventories
Trade and other receivables
Bank balances and cash
Total assets
Total share capital and reserves
Non-current liabilities
Bank loans due after 1 year
Deferred tax
Other payables
Current liabilities
Trade and other payables
Tax liabilities
Bank overdrafts and loans
•
•
Sep 30th, 2008/
Dec 31st, 2007
change in %
2.8%
(0.6%)
8.0%
17.3%
24.3%
14.9%
(28.6%)
4.9%
21.0%
(8.6%)
(10.1%)
6.3%
(99.0%)
10.6%
(27.9%)
74.3%
192.0%
Increase in inventories on the back of higher stock of raw materials and spare parts
Stable net debt / net cash position after the dividend pay-out confirming strong and secure
financial position of the Company
Note: Unaudited consolidated financial results in accordance with IFRS
… every single detail …
15
September 2008
Cash Flow Statement
(EUR ’000s)
Profit before tax
Amortization/ Depreciation
Foreign Exchange
Nine Months to September 30th
2007
2008
Unaudited
Unaudited
Change in %
12,246
26,059
112.8%
9,110
12,636
38.7%
727
(3,891)
n/a
Interest Expense
8,343
4,816
(42.3%)
Fair value changes of interest rate swaps
(455)
219
n/a
Other financial (expense) / income
(414)
130
n/a
Change in inventories
(1,832)
(2,025)
10.5%
Change in receivables
(2,105)
(2,122)
0.8%
Change in payables
(2,229)
5,614
n/a
(120)
(1,774)
1,378.3%
Income tax paid
Net Cash Flow from Operating activities
23,271
39,662
70.4%
Purchases of property, plant and equipment
(18,678)
(17,824)
(4.6%)
Net Cash Flow used in Investment activities
(18,678)
(17,824)
(4.6%)
Change in bank loans
(11,817)
(9,198)
(22.2%)
Change in long term debt
(202)
(100)
(50.5%)
Distribution (Dividends)
(7,014)
(7,845)
11.8%
Interest paid
(7,421)
(4,711)
(36.5%)
414
(130)
n/a
(26,040)
(21,984)
(15.6%)
22,014
511
(97.7%)
(21,447)
(146)
(99.3%)
567
365
(35.6%)
Other financial income / (expense)
Net Cash Flow used in Financing activities
Bank balances and cash at the beginning of the year
Change in cash and cash equivalents
Bank balances and cash at the end of the period
Note : Unaudited consolidated financial results in accordance with IFRS
… every single detail …
16
September 2008
CAPEX Development
CAPEX Breakdown Q3
CAPEX Breakdown 9M
€ 3.5 m
20,0
€ 0.7 m
2,0
3.5
0.4
0.3
0,0
Q3 2007
Expansion CAPEX
0.3
(4.8%)
€ 17.8 m
1.1
15,0
Euro million
4,0
Euro million
€ 18.7 m
(80.0)%
10,0
18.4
16.7
5,0
0,0
Q3 2008
9M 2007
Maintenance CAPEX
Expansion CAPEX
9M 2008
Maintenance CAPEX
Source: Company data
•
•
Expansion CAPEX in 2008 relates to the remaining payments for the 8th line project
Full year 2008 CAPEX Guidance of Euro 18 million at constant currency of CZK/ EUR 26
… every single detail …
17
September 2008
2008 Guidance
• The achieved results in the first nine months of 2008 indicate a strong
position of the Company in its core market and an outstanding
performance in a highly volatile financial and economic environment
• Number
of unforeseen developments had negative impacts on the
financial performance to date - lower demand for technical materials,
unexpected appreciation of the CZK and extreme polymer price
volatility in 2008
• In Q4 2008 the Company will benefit from the decline in polymer prices
• EBITDA for the full year is expected to exceed the one achieved in 2007,
however the communicated guidance range might not be met
… every single detail …
18
September 2008
2009 Outlook
• Negotiations
with customers to-date for 2009 indicate that production
capacity should be sold out
• Level of inventories should decline in Q2 and Q3 2009
• Anticipated further debt repayment to improve leverage
if no other
investment opportunities materialize
• Rising operating costs and lower demand for technical materials leading
to more competition in hygienic segment
• Tailormade R&D projects to satisfy needs of key customers
… every single detail …
19
September 2008
Appendix
… every single detail …
20
September 2008
Relevant Market Overview - Spunmelt
European Spunmelt (SM) Nonwovens (PP/PE) Market (2004-2009e)
Tonnes
600 000
400 000
578 700
524 000
462 700
9,8%
9,4%
8,8%
8,0%
714 121
672 346
633 000
10,4%
15%
10,3%
10%
5%
200 000
51 300
37 100
54 200
70 000
56 000
73 500
0%
0
2004
2005
NW SM PP,PE
•
•
•
Market share in %
800 000
2006
2007
NW SM Pegas
2008f
2009f
NW SM Pegas market share %
Nonwovens spunmelt PP/PE market in Europe was growing 11% CAGR (2004-2007)
PEGAS market share in Europe was rising by 14.7% CAGR (2004-2007) – faster than its
core market as a result of regular capacity additions
PEGAS market share in Europe is currently 10.4% based on 2008 production output
Source: EDANA, PEGAS
… every single detail …
21
September 2008
Market Overview - Hygiene
European Nonwovens Spunmelt Hygiene Market (2004-2009e)
700 000
30,0%
Tonnes
500 000
434 100
300 000
14,5% 227 000
16,4%
280 200
15,4%
14,3%
25,0%
413 139
382 536
354 200
318 900
400 000
565 005
538 100
501 100
472 700
16,1%
15,0%
15,6%
10,0%
200 000
5,0%
100 000
-
0,0%
2004
NW total Hygiene
•
•
•
•
20,0%
Market share in %
600 000
593 255
2005
2006
2007
NW SM Hygiene
2008f
2009f
Pegas market share SM Hygiene %
European hygiene nonwovens market expanded 7.4% CAGR (2004-2007)
European spunmelt hygiene nonwovens market grew 16% CAGR (2004-2007)
PEGAS market share in European hygiene spunmelt market is anticipated to reach
16% in 2008
PEGAS’s production for the hygiene market grew 15% CAGR from 2004 to 2007 in line
with the core hygiene market
Source: EDANA, PEGAS
… every single detail …
22
September 2008
Overview of European Production Capacity
Installed capacity1 in % – 2008e EOP
•
BBA
Fiberw eb
18%
Others
23%
Gulsan
4%
Radici
4%
Albis
5%
Dounor
5% Av gol
7%
•
PEGAS
11%
•
Union
8%
Fibertex
7%
•
Tesalca
8%
PEGAS is no. 2 producer of spunmelt
nonwovens in Europe
in terms of installed production capacity
European market has a stable surplus
of exports over imports in spunmelt
nonwovens, app. 98 thousand tonnes in
2007
Share of capacity base held by modern,
state-of-art technology is expected to
increase and equal approximately 87%
in Europe at the end of 2008 driven by
needs of hygiene customers
European market is more fragmented
than other region with over 30
producers in total
Source: PEGAS, John Starr
Note: 1) Installed spunmelt production capacity in Europe estimate, end of period 2008
… every single detail …
23
September 2008
Capacity vs. Demand in Europe
Position of PEGAS
•
Supply vs.
Demand
proportion
creates healthy
market
competition
The annual capacity increase in the European spunmelt nonwoven
market between 2003 – 2007 was approx. by 72k tonnes
•
In 2007, 49k tonnes were added in Europe. In 2008 and 2009 capacity is
expected to increase on average by 39k tonnes
•
End market is growing by 5-6% p.a. (by 28-30k tonnes in spunbond
hygiene demand), the difference is as usual balanced by less than 100%
utilization of capacities and European exports
•
Structure of
Capacity
Increase is
favourable for
PEGAS
… every single detail …
•
•
50% of new capacities to be added in 2008-2009 represent unattested
technologies
37% of new capacities to be added in 2008-2009 represent new entrants
into the industry
Structure of new capacities to be added in 2008- 2009 is highly
advantageous for PEGAS and represents new market opportunities for
growth
24
September 2008
European SB New Capacity Overview
2006-2007 by Segment
Total new capacity 96,000 tonnes
Nonhygiene
20%
2006-2007 by Technology
Reicofil
technology
hygiene
80%
Other
technology
nonhygiene
20%
2008-2009 by Technology
New
entrants
others
9%
2008-2009 by New Entrants
Existing
producers
nonhygiene
10%
Total new capacity 78,000 tonnes
Reicofil
technology
others
15%
Nonhygiene
31%
New
entrants
hygiene
9%
Existing
producers
others
10%
Existing
producers
hygiene
72%
Hygiene
80%
2008-2009 by Segment
2006-2007 by New Entrants
Other
technology
hygiene
33%
Hygiene
69%
Reicofil
technology
hygiene
35%
Other
technology
others
17%
Existing
producers
hygiene
53%
New
entrants
hygiene
16%
New
entrants
nonhygiene
21%
Source: John Star, Company data
… every single detail …
25
September 2008
Revenue Breakdown by Product
Q3
15.6%
21.9%
30
80
67.62
70
25
22.67
Revenues (EURm)
Revenues (EURm)
9M
18.60
20
9.4%
16.0%
15
10
7.21
4.20
5
7.89
4.87
58.49
60
42.9%
50
40
19.4%
28.26
30
19.77
20
12.47
14.89
10
0
0
Non-hygiene
Hygiene - commodity
Q3 2007
Source: Company data
•
•
Non-hygiene
Hygiene - TA
9M 2007
Q3 2008
Hygiene - commodity
Hygiene - TA
9M 2008
Sales for the hygiene industry in the first 9M 2008 accounted for 86.6% share of total revenues
confirming a strong performance in this segment
Rising share of technologically advanced materials on total sales - 25.5% in the first 9M 2008 up
from 21.8% in 2007
Note: Company defines technologically advanced products as those with higher added value in terms of either higher margins or material properties that protect the Company from easy
substitution of its products by its competitors.
… every single detail …
26
September 2008
Revenue Breakdown by Geography1
Q3
9M
(2.4%)
22
20.11
19.63
5.0%
58.7%
70
60
18
57.69
60.56
59.1%
14
9.66
10
95.8%
6
2
0.24
Revenues (EURm)
Revenues (EURm)
15.33
47.02
50
40
29.56
30
(8.3%)
20
10
0.47
3.48
3.19
0
-2
WE
CEE and Russia
Q3 2007
Source: Company data
•
•
Other
WE
Q3 2008
9M 2007
CEE and Russia
Other
9M 2008
Sales in Western Europe remain a key focus with over 50% share on total revenues
Sales in CEE and Russia substantially up due to increased sales to the Czech Republic and
Poland
Note: (1) Revenues by georgraphy are based on the final location of delivery
… every single detail …
27
September 2008
Personal hygiene market in Europe
•
•
•
•
•
Baby care
Multinationals
(P&G, Kimberly-Clark, SCA,
Johnson&Johnson, Ontex, etc.)
Regional leaders (e.g. TZMO in femcare
in Poland)
Market leader (P&G) commands nearly
50% market share where the top three
players control approximately 75% of
the market
Others
13%
Ontex
10%
Others
12%
Kimberly-Clark
3%
TZMO
4%
Procter & Gamble
48%
SCA
8%
SCA
15%
Ontex
10%
Johnson &
Johnson 15%
Kimberly-Clark
14%
Adult incontinence
Others
Tyco TZMO 11%
3% 2%
Fater
3%
Ausonia
3%
Abena
3%
Artsana
3%
Indas
4%
PaperPak
Ontex
5%
Hartmann
8%
15%
We supply most of the key players in
Europe
Market consists of three major groups:
- Baby care (70% of consumption)
- Feminine care (10% of consumption)
- Adult incontinence (20% of
consumption)
… every single detail …
Procter & Gamble
48%
Feminine care
Source: Company
28
SCA
40%
September 2008
Pass-through mechanism delays
Development of PP Price Level1
Illustrative Pass-through Delays
1,300
Avg. 2006
1,158
1,200
2007
Avg. 2007
1,203
Sales/ raw
materials in Euro
Euro/ tonnes
1,250
1,150
1,100
1,050
Q1
Q2
•
•
•
•
Q4
Sales
Costs of PP
PP Composite Index
Positive
EBITDA impact
1,000
10/05 12/05 02/06 04/06 06/06 08/06 10/06 12/06 02/07 04/07 06/07 08/07 10/07 12/07
Q3
Negative
EBITDA impact
Avg. 2007 prices of polymers increased by 4% yoy
Regardless of other factors impacting the total costs, polymer costs remain its key driver
Changes in polypropylene prices are transferred to revenues with a delay according to the contracts with
customers
Negative EBITDA impact of the delays for 2007 was Euro 0.8 million
Source: Company data
Note: (1) PP price level calculated on internal documents of PEGAS
… every single detail …
29
September 2008
PEGAS Organizational Chart
… every single detail …
30
September 2008
Reporting Schedule and IR Contact
Investor Relations :
Tel: +420 515 262 450
Fax: +420 515 262 505
E-mail: IRO@pegas.cz
… every single detail …
31
September 2008