Charlotte, NC-based Polymer Group, Inc. (PGI) announced solid fourth quarter and year-end earnings results for 2011 despite a volatile raw materials cost environment, severe flooding at the company’s Colombia operation and new market dynamics that have led to softer volumes in the US.
 
Sequential improvements in 2011 led to $1.18 billion in net sales, compared to $1.106 billion in 2010, says Ronee Hagen, CEO of PGI, during an April 2 webcast. She also notes annual adjusted EBITDA of $141 million in 2011 as well as cash increases to $72.7 million.
 
According to a company press release, “The year-over-year [sales] increase was due primarily to additional volume in the company’s Nonwovens segments, with increases in Latin America, Asia and Europe offset somewhat from lower volumes in the U.S., and lower volumes in the Oriented Polymers segment. Net sales also benefitted from a higher price/mix in all Nonwovens segments and Oriented Polymers, primarily due to price increases resulting from the higher raw material costs. Foreign currency translation rates negatively impacted sales by approximately $2.9 million compared with the fourth quarter of 2010.”
 
Raw material costs were $19 million higher in Q4 2011 compared to the prior year and $101 million higher in 2011, noted Hagen. Polypropylene costs moderated in Q4 2011 but have accelerated to date in Q1 2012, she adds.
 
Gross profit, including the impact of purchase accounting, was $186.5 million for 2011—representing a gross profit margin of 15.7%—compared with a gross profit of $209.9 million the prior year.
 
“Although moderating in the fourth quarter of 2011, raw material costs impacted profitability throughout 2011 and have risen to date in 2012,” according to a company statement. “The positive impact of the company’s U.S. plant consolidation activities and operational improvements throughout its global base during the year were offset somewhat by the disruption to operations from the flood in Cali, Colombia.”
 
Hagen calls the return of that Colombia facility to normal operating levels “a significant achievement,” given the impact of flooding, although it is still running a bit under its peak.
 
As for other PGI facilities, Hagen points to benefits during the year from “plant consolidation and realignment initiatives, particularly in the US, as our manufacturing costs were $10 million less compared to 2010.”
 
The company refined its focus on its core functions in 2011 with the sale of its Difco business, which was fully closed down by early fourth quarter. “We are taking additional steps to reposition resources and to refine our strategic focus on growth markets,” says Hagen.
 
Growth investments the company had underway since late 2010 came online in the second half of 211, with ramp up achieved by the fourth quarter in both the Suzhou, China, and Waynesboro, VA, lines.
 
“With this new capacity nearly 80% of our nonwovens business is comprised of spunmelt capacity,” Hagen says. While the company saw some contribution from the operations in the fourth quarter, the impact will be felt more fully in 2012.
 
Capabilities at the Waynesboro, VA, line include the company’s new Arium platform technology, which is expected to open new opportunities in healthcare, industrial, filtration and new emerging market applications.
 
Challenges for the future, however, include new competition in the nonwovens market. “We are managing through an environment that has seen new competitive capacity come online at the same time,” Hagen says suggesting “the pace of ramp up may be slowed a bit.”
 
Opportunities in Asia are ripe, as medical volumes lead the way. “The new spunmelt line in China is online and contributed to fourth quarter profitability as expected,” Hagen says. “The new hygiene investment we are making in China is underway and the installation of the line is now expected in early 2013 and commercialization to begin later in 2013.”
 
PGI also has eyes on Brazil. While the company continues to finalize its plan for entering that market it has “slowed the pace of that decision due to the current capacity situation in the region.” The company continues to be a Latin American leader with plants in Colombia, Argentina and Mexico.
 
With softer demand in the US hygiene market, the company’s new Arium technology supports a shift into non-hygiene and higher growth markets. As it moves forward, PGI will leverage market leadership in high-growth regions with additional focus on wipes, filtration and new healthcare markets.