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Nonwovens-Invest Or Divest.

Deciding when to buy and sell can be difficult in all industries.

During the last decade we have witnessed tremendous investments in nearly every part of the nonwovens industry. We have also seen many nonwoven companies acquired as well as facilities sold or shut down. The investments get the most attention. We have seen new facilities built and furnished with expensive high tech machines new manufacturing equipment being installed in existing facilities, improvements and expansions to existing equipment and the hiring of more educated and capable people. There have also been significant investments in training, quality control, marketing and advertising. Have these investments provided a handsome return? How long did it take to break even and when did the large profits begin? Do these investments also bring growth and a secure market position? Could you have lost market position and profits if you had not made some of these investments?

The answer from the industry as whole would be yes to these questions. The investments proved to be beneficial providing growth, profits and in meeting company objectives. However, the accurate answer depends on the specific company. Just as we observe stock market conditions and comment that certain stocks should have been bought r sold at a particular time, so is it with investing in certain nonwoven areas. For example we hear that there is an over capacity of spunbond production today worldwide. This translates into "the producers can make more than they can sell." While this brings prices and profits down, making the investors nervous, it does not mean that there are no markets where additional fabrics could be sold. It may mean that new products should have been developed and that sales and marketing teams should be working overtime.

Some of these producers that entered the market years ago have in effect paid for their investment. They also proved that spunbond fabrics can satisfy their customers needs. Companies that more recently began production and those entering the market today with new facilities are at a manufacturing and marketing cost disadvantage. There is an additional disadvantage for the newcomers; most of the spunbond facilities that were installed during the last decade have been designed to directly compete with established spunbond materials in the giant markets. Most of these produce lightweight polypropylene, pattern bonded fabrics for diapers, sanitary facings, wipes, filtration and other fabrics for these very competitive markets discussed at every conference and in nearly every article regarding nonwoveus. This has been a profitable investment for those that were adept in setting up and running a business

Spunbond materials that are available today are viable products for a multitude of end use applications. Existing markets consume more than a billion pounds worldwide and the production capacity is continuing to increase with new facilities and innovations on existing lines.

The spunbond portion of the nonwnvens industry receives the spotlight because of its growth. dominance and the muscle of producers. However, other nonwoven processes share similar concerns regarding investing or divesting.

The U.S. economic picture today brings concern and doubt to most investors. A major portion of this dark cloud appears to have been generated by "predictions of doom" and not real or actual circumstances. When the political and economic leaders express concern and doubt, it is obvious that the news media will select the portions that are the most "newsworthy" and dramatize them. It follows that businesses will incorporate some of this in their operations and plans. Numerous companies have cut back in nearly all areas that they perceive to be viable and are looking for additional areas where they can reduce the risks of the "downturn in the economy.' Studies have shown that, during a recession, the businesses that continue rather strong are do-it-yourself products, alcoholic beverages and tobacco products. So you can chink and smoke while you are repairing the hole in the roof. In the future, we hope that the bottle has a nonwoven label, the cigarette has a nonwoven filter and the roofing material is made wit h a nonwoven.

Meanwhile, we will see nonwovens continue to serve markets that fill specific needs. A mother may buy fewer diapers because she is more conscious of the cost and more aware of how many times she changes her child day. Healthcare facilities may use fewer bed pads and other nonwoven products to cut costs, but this will be a small percent of their total usage.

As your stock broker would probably advise you "invest in stock for the long term." If you are for the quick buy and sell to make your fortune, you better have some inside information. So is it with nonwovens.

Tom Holliday is a well known consultant to the nonwovens and textile industries whose column on a wide range of nonwovens-related topics appears every other month in NONWOVENS INDUSTRY. Mr. Holliday operates his consultancy firm, Thomas M. Holliday & Associates, out of his office at 25 Edgewood Rd., Yardley, PA 19067; 215-493-2501; E-mail:
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Author:Holliday, Tom
Publication:Nonwovens Industry
Article Type:Brief Article
Geographic Code:1USA
Date:Aug 1, 2001
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