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Pegas Posts Fourth-Quarter Loss on Currency Swings

March 15, 2012

Pegas Nonwovens SA (PEGAS), a Czech maker of textile products, posted a fourth-quarter loss as currency swings eroded profitability and the company paid more on a deferred tax.

The quarterly net loss totaled 2.28 million euros ($3 million), following a profit of 3.45 million euros a year earlier, the Znojmo, Czech Republic-based company said in a statement. Revenue rose 2 percent to 39.6 million euros, while foreign-exchange and other financial expenses more than tripled to 5.8 million euros and income tax payments totaled 2.5 million euros from a “significant” increase in deferred tax.

Pegas, which makes non-wovens fabrics mainly for hygiene products, the construction and medical industries, announced last year it would open a plant in Egypt as it expands facilities to meet rising demand outside of Europe.

“In 2012, our object is to stabilize our current production base and optimize the operation of our newest production line,” Chief Executive Officer Frantisek Rezac said in the statement. A project in Egypt is proceeding according to schedule and without “any major issues.”

The company operates two plants with nine production lines in the Czech Republic, supplying 70,000 tons of non-woven textiles annually. The new production line it added in the second half of last year should increase an annual production by 20 percent, it said.

Pegas shares fell 9.1 koruna, or 2 percent, to 439 koruna as of 11:11 in Prague trading.

EBITDA, Expenses

Earnings before interest, taxes, depreciation and amortization will probably grow between 5 percent and 15 percent from 36.1 million euros a year ago, it said. Expenses linked with the investment will reduce 2012 operating profit by about 1 million euros, Pegas said.

The board will propose a dividend from 2011 earnings to shareholders in the first half of May, Rezac said at a press conference. The company, which used to pay dividends from its share premium, will decide whether it will stick to its “progressive” dividend policy, Rezac said.

The Egyptian plant should start to generate the first cash in 2013, Rezac said.

The company’s goods inventories rose on slower demand at the end of 2011 and stocks have continued to rise in the current quarter, Pegas said. It expects to start destocking in the second half of the year.

Pegas expects continued volatility in polymer prices, which will affect profitability in each quarter of 2012. In contrast to the end of 2011, price indexes are currently experiencing “significant” growth.

To contact the reporter on this story: Lenka Ponikelska in Prague at

To contact the editor responsible for this story: James M. Gomez at

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