Czech Republic – Pegas to invest €60 mln in Egypt plant

31 May, 2011 – Czech Republic

Pegas Nonwovens, the Prague-listed producer of textiles used in hygiene products and health care, plans to invest up to €60 million to build a new factory in Egypt that will supply a customer in the Middle East, the company announced on Wednesday.

“The establishment of the company is the result of successful negotiations with a major customer, who expressed interest in a supply arrangement for our products to its production plants in the Middle East. We have received a preliminary award letter for long-term deliveries to these plants,” Pegas Nonwovens CEO František Øezáè said.

The Czech company said in a press release it plans to build a production line with an annual capacity of 20 tons a year, which should be launched in the second half of 2013. If market conditions prove favorable, a second line could be added in 2015 or the following year, bringing capacity to 40,000 to 50,000 tons a year.

“A new production facility will be an entry point for the company to North Africa, Middle East and Asia markets. We regard the deal as the right investment decision and expect a positive market reaction,” Atlantik FT analyst Bohumil Trampota said Wednesday in a market comment. “Details about how the acquisition in Egypt will be funded were not released but the funding should be done through own sources or bank loans. We do not expect a share issue.”

Pegas Nonwovens is now finishing the construction of a new production line in the southern Moravian town of Znojmo of a similar size to the one planned for Egypt, with investment costs of about €50 million and production capacity of about 20 tons a year.

Trampota said the Egypt investment should not jeopardize Pegas Nonwovens’ progressive dividend policy, as confirmed in the 1Q11 conference call. “Last year the company paid a dividend of €0.95/share and this year (from 2010 profit) we expect €0.98 per share. More information should be given at the end of August,” he said.

Pegas Nonwovens is a manufacturer of polypropylene/polyethylene nonwoven textiles for the hygiene, industrial, construction, agricultural, medical and other specialized sectors. These textiles are primarily used for the manufacture of baby diapers, feminine hygiene and adult incontinence products.

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