market growth on the order of 4% expected

By John R. Starr John R. Starr, Inc. Osterville MA

By the end of 1998, U.S. and Canadian nonwoven roll goods sales will have grown at a 4% per year average to $3.3 billion, from $2.9 billion in 1995. A similar rate of growth is projected for the next four to five years. Fabric volume will be almost 22 billion square yards, or just over two billion pounds in North America in 1998. These estimates exclude wet laid chopped strand fiberglass (almost 600 million pounds) used primarily for roofing reinforcements, and fiberfill (almost 700 pounds) used in furniture and bedding, apparel, sleep products, filter media and other applications.

Revenue from nonwoven fabric sales splits approximately two-thirds/one-third single use disposables/durables. Revenue from sales of disposable nonwovens—an 18.5 billion square yard business in North America—has been growing faster than revenue from nonwovens for durable uses—a 3.1 billion square yard business. Volume in disposable uses has been growing faster than end product sales because fabricators, particularly disposable diaper makers, have been utilizing more nonwoven per unit to provide customers with new features and benefits.

Consumer products account for almost 80% of the $11.5 billion in end user sales of converted disposable products that will occur in North America in 1998. Medical and industrial products represent 15% and 7% respectively.

Future growth prospects for nonwoven fabrics vary by end use sector. The overall outlook for hygiene nonwovens in North America is for modest growth. Diaper unit volume in the U.S. and Canada is expected to decline slightly; training pant, sanitary napkin and panty liner unit volume should grow only very modestly, but consumer adult incontinence products will grow at an attractive rate. Institutional adult product consumption will grow very slowly. Baby wipe end product volume will grow modestly.

In the medical sector, only very modest end product growth is expected overall and no growth is the outlook for several large product categories, including surgical packs, parts, gowns and CSR wrap. Nonwoven medical sponge and bandage roll volume will grow modestly, as will other single-use medical items. The volume of industrial barrier garments will grow at a reasonably attractive rate and industrial/institutional wipers will likely grow slightly faster. Nonwovens used in filter media will also grow at an attractive rate in volume and faster as new, more costly and higher performance products gain share.

In durables, the interlining business will show only minimal growth. The home furnishings construction sheeting business will grow modestly and other home furnishing markets, such as textile replacements, could grow more rapidly, but from a small base. Nonwoven consumption in roofing and geotextiles will grow at about the industry average, or slightly above, and nonwovens in automotive applications will grow faster. Nonwoven carpet components will show some growth in the automotive area and in specialties applications, but not in broadloom.

Spun melt processes (spunbonded and melt blown) will continue to grow more rapidly than the industry as a whole because of superior cost/performance. Spunbonded and melt blown material now represents over 40% of total industry volume (tonnage). Spunlaced, air laid pulp and needlepunched will grow at above the industry average and carded and wet laid nonwovens below the industry average. In each process sector, companies that have proprietary technology that allows cost effective manufacture of high value-in-use fabrics will continue to be more profitable than those that do not have proprietary technology or are not cost effective producers.

Consolidating Acquisitions
Consolidations have been occurring in the industry at both the fabricated end product and roll goods manufacturing levels. The fabricated end product producers that have strong brand franchises, high marketshares and technology that allows cost effective manufacture of products with consumer-noticeable points of difference—such as Procter & Gamble, Cincinnati, OH, and Kimberly-Clark, Dallas, TX—have been strengthening their positions in nonwoven products in North America and worldwide through acquisitions and joint ventures. Smaller factors in the various end product businesses have been making add-on acquisitions to increase size and diversify their product lines.

In roll goods, there have been a number of consolidations. Perhaps the most visible have been those made by Polymer Group, Inc. (PGI), Dayton, NJ, and BBA, London, U.K. Polymer Group has acquired, during only the last few years, the nonwoven fabric-making businesses of Scott Paper, Bonlam (formerly Cydsa of Mexico), Chicopee (Johnson & Johnson), Fitesa (formerly owned by Petropar of Brazil), and Dominion Nonwovens (formerly owned by Dominion Textile). BBA, a £1.1 billion turnover diversified group with interests in friction materials, nonwovens and aviation services and products, now has a nonwovens division that accounts for about one-third of the company’s total revenue. This excludes the most recent (1998) acquisition of Veratec, which will add another large increment. BBA has acquired Reemay, Terram, Fiberweb, Corovin, Korma, Bidim, AQF (a specialized filter media company) and the Veratec division of International Paper. Several other roll goods acquisitions have occurred in North America recently. Johns Manville has acquired the Hoechst spunbonded polyester operations (after previously having acquired two melt blown producers) and Buckeye Technologies acquired Merfin, an air laid pulp producer, because of a growing interest in absorbent cores made by this technology, and for business diversification reasons. Lydall, Foss and others have made acquisitions and Western Nonwovens, a producer of highloft and needlepunched nonwovens in the Western U.S., has combined five West Coast highloft/needlepunched producers and then acquired Mid America Fiber and certain units of Reliance Upholstery, with the goal of becoming a dedicated national supplier.

In North America, combining all nonwoven converted products categories (all hygiene absorbent products, wipes, fabric softeners, medical and industrial disposables), K-C and P&G account for about two-thirds of manufacturers’ level sales. These two plus J&J, New Brunswick, NJ, Paragon Trade Brands, Norcross, GA, and Tyco International, Exeter, NH, account for almost 85% and including Playtex, Westport, CT, and Drypers, Houston, TX, eight companies represent 90% of manufacturers’ sales of converted disposable nonwoven products.

At the roll goods level in the U.S. and Canada, two companies, K-C and DuPont, Wilmington, DE, now account for one-third of the total value of production and six companies—these two plus PGI, BBA, Freudenberg, Weinheim, Germany—with U.S. headquarters in Durham, NC—and Dexter, Windsor Locks, CT—represent more than 60% of the total value. There are several other important competitors with significant roll goods positions.

In hygiene, a technology shift (carded to spun melt) involving large capital investments has been one of the factors stimulating consolidating acquisitions. Additional consolidations in the hygiene sector are possible, for example, in absorbent cores because of technology shifts and heavy investment needs. The medical products segment has been reasonably stable with three major competitors—K-C, Allegiance, McGaw Park, IL, and J&J—having strong positions at the end product level. K-C recently acquired Tecnol, which is an excellent fit for the company’s Professional Health Care unit. While the three majors have relatively stable positions, there are further opportunities for add-on acquisitions. The major medical nonwoven roll goods producers are DuPont, PGI, and K-C. Dexter is also a factor and BBA and others have small businesses.

The premoistened and dry wipes areas in North America are also reasonably well rationalized at the end product level. At the roll goods level for premoistened wipes, which is one of the largest segments, two-thirds of business is supplied captively and one-third by several merchant manufacturers. The dry wipes business is also largely captive. Several companies participated in specialty wipes segments and there are acquisition opportunities.

Filtration is an area where there have been some acquisitions and there are likely to be more. Several companies are focusing on filtration as an opportunity area because growth and margin prospects are excellent—and because there are acquisition candidates. There are also a number of attractive opportunities in durable specialty nonwoven roll goods and fabricated products.

The previous article is based on a recently published report “The North American Nonwoven Products Business Outlook To 2003” by John R. Starr, Inc., Osterville, MA. For more information: John R. Starr, Inc., P.O. Box 649, 749 Main Street, Osterville, MA 02655; 508-428-0070; Fax: 508-420-3171; E-mail: [email protected].