Czech Pegas sees growth potential in east Europe

PRAGUE, Nov 29 (Reuters) - Non-woven textiles maker Pegas Nonwovens, which plans an initial public share offering in the coming weeks, sees potential for internal growth in eastern Europe, a company executive said on Wednesday.

"We see further growth potential, mainly in central Europe and even higher potential in eastern Europe," said Milos Bogdan, chief executive of Czech operating subsidiary, Pegas Nonwovens s.r.o.

"Acquisitions do not work in the sector that we are active in, because through acquisition you do not gain what we need -- that is state-of-the-art (production) line," he told a news conference.

Pegas Nonwovens SA, the Luxembourg-based holding company for the Czech operating company, plans to offer new and existing shares on the Prague and Warsaw bourses at the end of this year or in early 2007.

The holding company is owned by private equity fund Pamplona Capital Partners I, which is managed by London-based Pamplona Capital Management. The Pamplona is expected to retain majority control after the IPO.

Non-woven textiles are made from plastics produced from crude oil.

Bogdan said his firm was adding a new production line about every two to three years, with a 40 million euro line due to be completed next year in the Czech Republic.

The director said the company was also looking at the possibility of building future production lines in countries to the east of the Czech Republic to be close to customers.

Bogdan said Pegas had an 11 percent share of the European market of 1.38 billion euros per year in non-woven textiles used for hygiene products and that it ranked number two in the market, after Britain's BBA Group Plc <BBA.L>.

Pegas and real estate developer ECM are the first two firms to plan IPOs on the Czech bourse since drugmaker Zentiva <ZNTVsp.PR> made the first and so far only public offering two years ago.

A Pegas spokesman said a prospectus on the share offering would be released on Monday or later next week.

Chief Financial Officer Ales Gerza said the Czech operations had net profit of 11.8 million euros in the first half of 2006, down from 13.2 million in the first half of 2005 due to higher debt servicing.

Sales rose to 60.1 million from 52.8 million, while assets stood at 251.9 million at mid-2006. The firm had 138.3 million euros in long-term and 14.3 million in short-term bank debt in June. ((Reporting by Jan Lopatka, editing by Jane Baird; prague.newsroom@reuters.com; Reuters Messaging: jan.lopatka.reuters.com@reuters.net; +420-224 190 474))

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Keywords: PEGAS IPO/