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Discussions with Investors ING 11th Annual EMEA Forum in Prague

Discussions with Investors ING 11th Annual EMEA Forum in Prague. December 2008. Cautionary Statement.

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Discussions with Investors ING 11th Annual EMEA Forum in Prague

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  1. Discussions with InvestorsING 11th Annual EMEA Forumin Prague December 2008

  2. Cautionary Statement This document has been prepared by PEGAS NONWOVENS SA (the “Company”) solely for use at the Presentation. Any forward looking statements concerning future economic and financial performance of the Company contained in this Presentation are based on assumptions and expectations of future development of factors having a material influence on the future economic and financial performance of the Company. These factors include, but are not limited to, the legal environment, the future macroeconomic situation, the market competition, the future demand for nonwoven textiles and other related products and services and development of raw material prices. The actual development of these factors, however, may be different. Consequently, the actual future financial performance of the Company could materially differ from that expressed in any forward looking statements contained in this Presentation. Although the Company makes every effort to provide accurate information, we cannot accept liability for any misprints or other errors. In preparation of this document we used certain publicly available data. While the sources we used are generally regarded as reliable we did not verify their content. PEGAS does not accept any responsibility for using any such information. This document is provided for information and as a matter of record only. It does not constitute an offer to sell or a solicitation of an offer to buy or sell securities or other financial instruments in any jurisdictions or any advice or recommendation with respect to such securities or other financial instruments of the Company. The distribution of this document in certain jurisdictions may be restricted by law. This document may not be used for, or in connection with, and does not constitute, any offer to sell, or an invitation to purchase, any securities or other financial instruments of the Company in any jurisdiction in which such offer or invitation would be unlawful. Persons in possession of this document are required to inform themselves about and to observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

  3. Agenda Company Introduction Strategic Objectives 9M 2008 Financial Performance 2008 Guidance 2009 Outlook Appendix

  4. Company Introduction

  5. Overview AnnualProduction Growth • Product: SpunmeltNonwoven Textiles –PP/PE • Experienced and Growing: since 1990 • 389 Employees • 8 Production Lines • Approx. 70 000 tons production based on current product mix (2008e) • Luxembourg entity listed in Prague and Warsaw • 100% Free Float Source: Company Data

  6. Products Nonwoven Spunmelt Textiles • Hygiene (87% production in 9M 2008) • Baby Diapers • Feminine Hygiene • Adult Incontinence • Technical (13% production 9M 2008) • Medical • Resistant textiles for Building Industry • Furniture • Agriculture • Filtration • Wipes

  7. Bučovice Znojmo Geographical Advantage Optimal Location • Central European Base • Low Cost Area (Staff costs and Energy) • Government Incentives • Room for Expansion in the current Production Site in Znojmo

  8. Meeting Market Needs • Highest Quality • Competitive Pricing • Continuous Development • Close cooperation with customers to identify and develop new products • On time delivery • Regular Increase in Production Efficiency • Flexibility

  9. Strategic Objectives

  10. Strategic Objectives Technological Leadership • To maintain technology leader position in Europe • Develop and deliver technologically advanced products for the market • To work with our customers and suppliers in developing new products ahead of the market Market Growth Opportunities • New capacity installations in line with market demand • To have sufficient capacity to satisfy the leading European manufacturers • Monitoring M&A opportunities to become most strategic supplier to global customers Delivering Financial Performance • Growing revenues in line with market growth • To maintain our leading margin position in the industry • Use cash flow to support expansion,repay debt and to pay out dividends

  11. First 9 Months and Q3 2008 Financial Performance 11

  12. 9 Monthsand Q3 2008 Key Highlights • Revenue growth of 22.1% yoy in 9M 2008 on the back of higher production output and annual growth in material prices • EBITDA up by 0.8% yoy in 9M 2008 and by 4.7% yoy in Q3 2008 • Profitability was mostly affected by CZK development, volatility of polymer price indicesandhigher stock levels related to a lower demand for technical materials • High net profit of EUR 23.5 million in 9M 2008 mainly due to unrealized FX gains and lower interest expenses • Steady net debt levels after the dividend pay-out and financial stability Financial Performance Markets and Business • The polymer price decline should positively impact EBITDA in Q4 2008 • Higher stock levels of finished products due to demand decline from the construction industry should continue also for the rest of this year • Negotiations with customers for 2009 to-dateare satisfactory in terms of committed volumes • Finalisation of investment incentives conditions related to the possible construction of the next production line • PEGAS will continue monitoring M&A opportunities • Commercialisation of new R&D projects and anticipated launch of pilot equipment for plasma treated nonwovens Growth & Technology 12

  13. 9M and Q3 2008 Profit and Loss Statement Note: Unaudited consolidated financial results in accordance with IFRS. 9M 2007 Results include the one-off revenue from the arbitration proceeds of Euro 1.03 million 13

  14. Cost Composition Cost Breakdownin 9M 2007 Cost Breakdownin 9M 2008 +31.6% • Overall cost level impacted by additional production capacity, higher prices of raw materials and energy and CZK appreciation • Staff costs positively impacted by the fair value of phantom share option plan in 9M 2008 • Polymers and electricity up by 30.8% and 62.2% yoy respectively, due to higher consumed volumes based on the new production line and higher energy prices • Depreciation higher due to the new line and CZK appreciation 14

  15. Balance Sheet • Increase in inventories on the back of higher stock of raw materials and spare parts • Stable net debt / net cash position after the dividend pay-out confirming strong and secure financial position of the Company Note: Unaudited consolidated financial results in accordance with IFRS 15

  16. Cash Flow Statement Note : Unaudited consolidated financial results in accordance with IFRS 16

  17. CAPEX Development CAPEXBreakdownQ3 CAPEXBreakdown9M (4.8%) € 3.5 m €18.7 m (80.0)% €17.8m € 0.7m Source: Company data • Expansion CAPEX in 2008 relates to the remaining payments for the 8th line project • Full year 2008 CAPEX Guidance of Euro 18 million at constant currency of CZK/ EUR 26 17

  18. 2008 Guidance • The achieved results in the first nine months of 2008 indicate a strong position of the Company in its core market and an outstanding performance in a highly volatile financial and economic environment • Number of unforeseen developments had negative impacts on the financial performance to date - lower demand for technical materials, unexpected appreciation of the CZK and extreme polymer price volatility in 2008 • In Q4 2008 the Company will benefit from the decline in polymer prices • EBITDA for the full year is expected to exceed the one achieved in 2007, however the communicated guidance range might not be met 18

  19. 2009 Outlook • Negotiations with customers to-date for 2009 indicate that production capacity should be sold out • Level of inventories should decline in Q2 and Q3 2009 • Anticipated further debt repayment to improve leverage if no other investment opportunities materialize • Rising operating costs and lower demand for technical materials leading to more competition in hygienic segment • Tailormade R&D projects to satisfy needs of key customers 19

  20. Appendix

  21. Relevant Market Overview - Spunmelt European Spunmelt (SM) Nonwovens (PP/PE) Market (2004-2009e) • Nonwovensspunmelt PP/PE marketin Europe was growing11% CAGR (2004-2007) • PEGAS market share in Europe was rising by14.7% CAGR (2004-2007) – faster than its core market as a result of regular capacity additions • PEGAS market share in Europe is currently 10.4% based on 2008 production output Source: EDANA, PEGAS 21

  22. Market Overview - Hygiene European Nonwovens Spunmelt Hygiene Market (2004-2009e) • European hygiene nonwovens marketexpanded 7.4% CAGR (2004-2007) • European spunmelt hygiene nonwovens market grew 16% CAGR (2004-2007) • PEGAS market share in European hygiene spunmelt marketis anticipated to reach 16% in 2008 • PEGAS’s production for the hygiene market grew 15% CAGR from 2004 to 2007 in line with the core hygiene market Source: EDANA, PEGAS 22

  23. Overview of European Production Capacity • PEGAS is no. 2 producer of spunmelt nonwovens in Europein terms of installed production capacity • European market has a stable surplus of exports over imports in spunmelt nonwovens, app. 98 thousand tonnes in 2007 • Share of capacity base held by modern, state-of-art technology is expected to increase and equal approximately 87% in Europe at the end of 2008 driven by needs of hygiene customers • European market is more fragmented than other region with over 30 producers in total Installed capacity1 in % – 2008eEOP Source: PEGAS, John Starr Note: 1) Installed spunmelt production capacity in Europe estimate, end of period 2008 23

  24. Capacity vs. Demand in Europe Position of PEGAS Supply vs. Demand proportion creates healthy market competition • The annual capacity increase in the European spunmelt nonwoven market between 2003 – 2007 was approx. by 72k tonnes • In 2007, 49k tonnes were added in Europe. In 2008 and 2009 capacity is expected to increase on average by 39k tonnes • End market is growing by 5-6% p.a. (by 28-30k tonnes in spunbond hygiene demand), the difference is as usual balanced by less than 100% utilization of capacities and European exports Structure of Capacity Increase is favourable for PEGAS • 50% of new capacities to be added in 2008-2009 represent unattested technologies • 37% of new capacities to be added in 2008-2009 represent new entrants into the industry • Structure of new capacities to be added in 2008- 2009 is highly advantageous for PEGAS and represents new market opportunities for growth

  25. European SB New Capacity Overview 2006-2007 by Technology 2006-2007 by New Entrants 2006-2007 by Segment 2008-2009 by Technology 2008-2009 by New Entrants 2008-2009 by Segment Source: John Star, Company data

  26. Revenue Breakdown by Product Q3 9M 15.6% 21.9% 42.9% 9.4% 19.4% 16.0% Source: Company data • Sales for the hygiene industry in the first 9M 2008 accounted for 86.6% share of total revenues confirming a strong performance in this segment • Rising share of technologically advanced materials on total sales - 25.5% in the first 9M 2008 up from 21.8% in 2007 Note: Company defines technologically advanced products as those with higher added value in terms of either higher margins or materialproperties that protect the Company from easy substitution of its products by its competitors. 26

  27. Revenue Breakdown by Geography1 Q3 9M (2.4%) 5.0% 58.7% 59.1% (8.3%) 95.8% Source: Company data • Sales in Western Europe remain a key focus with over 50% share on total revenues • Sales in CEE and Russia substantially up due to increased sales to the Czech Republic and Poland Note: (1) Revenues by georgraphy are based on the final location of delivery 27

  28. Personal hygiene market in Europe Baby care Feminine care • Multinationals (P&G, Kimberly-Clark, SCA, Johnson&Johnson, Ontex, etc.) • Regional leaders (e.g. TZMO in femcare in Poland) • Market leader (P&G) commands nearly 50% market share where the top three players control approximately 75% of the market • We supply most of the key players in Europe • Market consists of three major groups:- Baby care (70% of consumption)- Feminine care (10% of consumption)- Adult incontinence (20% of consumption) Adult incontinence Source: Company

  29. 2007 Q1 Q2 Q3 Q4 Sales Costs of PP Negative EBITDA impact Positive EBITDA impact Pass-through mechanism delays Development of PP Price Level1 Illustrative Pass-through Delays Avg. 2007 1,203 Avg. 2006 1,158 PP Composite Index • Avg. 2007 prices of polymers increased by 4% yoy • Regardless of other factors impacting the total costs, polymer costs remain its key driver • Changes in polypropylene prices are transferred to revenues with a delay according to the contracts with customers • Negative EBITDA impact of the delays for 2007 was Euro 0.8 million Source: Company data Note: (1) PP price level calculated on internal documents of PEGAS

  30. PEGAS Organizational Chart

  31. Reporting Schedule and IR Contact Investor Relations : Tel: +420 515 262 450 Fax: +420 515 262 505 E-mail: IRO@pegas.cz

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