The North American Nonwoven Filtration Market · 1 Endless Possibilities and Growth for Nonwovens The North American Nonwoven Filtration Market Brad Kalil Director of Market Research

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Endless Possibilities and Growth for Nonwovens

The North American Nonwoven Filtration Market

Brad Kalil Director of Market Research and Statistics

April 4, 2017

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Today’s Discussion

The North America Nonwovens Market

North American Nonwovens Filtration Market

What’s At the Forefront

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Nonwovens Definition

An Engineered Fabric

“An engineered fibrous assembly which has been given a designed level of structural integrity by physical and/or chemical means, with the exclusion of paper, woven, or knitted material .”

A successful, growing, continuously evolving, dynamic and diverse industry

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─ Supply Side Growth – Capacity – Investments – Mergers & Acquisitions

─ Demand Side Growth

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Robust Global Production Production Growth in Tonnes, Historical and Forecast Average Annual Growth Rates

Source: Worldwide Nonwovens Industry Outlook, INDA/EDANA, 2015

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North America Investments Exceed GDP North America Capacity by Process in Tonnes

Source: INDA North American Nonwovens Supply Report, 2017

26 years Nonwovens 5.4% U.S. GDP 2.4%

915

3,596

1990 1995 2000 2005 2010 2016

Airlaid Pulp

Wetlaid

Spunlaid

Drylaid

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Incumbent & New to Nonwovens, Region North America Capacity Additions, 2015 (8 new lines)

– 1 airlaid hydroentangle line: wipes

– 2 drylaid hydroentangle line: wipes (1 New to Industry)

– 1 drylaid needlepunch line: filtration

– 1 drylaid needlepunch line: home & office furnishings

– 1 meltblown line: wipes, filtration

– 1 meltblown line: filtration

– 1 wetlaid glass line: construction

Source: INDA

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Significant Uptick in Number of Lines North America Capacity Additions, 2016 (17 new lines)

– 1 airform thermal bond line: home & office furnishings

– 1 airform thermal bond line: automotive, home & office furnishings, bldg. construction

– 1 carded hydroentangle line: filtration

– 1 carded line: wipes, hygiene, filtration, automotive

– 7 carded needlepunch lines: filtration (4), automotive and other durable products

– 1 carded thermal bond line: absorbent hygiene

– 1 spunmelt needlepunch line: high-temperature durable products

– 3 spunmelt lines: hygiene

– 1 wetlaid glass lines: battery separator, filtration

Source: INDA

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Growth Continues North America Capacity Additions, 2017 (14 new lines… so far)

– 1 airformed needlepunch line – industrial products

– 1 carded hydroentangle line – wipes, medical, hygiene

– 1 carded hydroentangle line – filtration

– 3 carded needlepunch lines – automotive, home&office furnishings

– 1 carded stitchbond line – automotive

– 2 spunlaid lines – hygiene, medical

– 1 spunlaid line – construction

– 1 wetlaid thermal bond line – filtration

– 1 wetlaid hydroentangle line – wipes

– 1 wetlaid glass line – filtration, building construction

– 1 wetlaid line – wipes

Source: INDA

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Variety of Production Investments

• Companies with a North American Footprint expanding – Numerous

• Companies adding a North American footprint – Sandler, Germany – Mogul, Turkey – Norafin, Germany – Uniquetex, China

• Companies entering into the nonwovens industry – Carver Nonwoven Technologies – U.S. Cotton

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Healthy M&A Activity

• Nonwovens companies acquiring other nonwoven companies – Lydall acquired Texel – TWE acquired Vita Nonwovens – Foss Manufacturing acquiring Beaulieu America

• Adjacent companies acquiring nonwoven related companies – Clacor acquiring FibeRio Technology – Parker Hannifin acquiring Clarcor – Drylock acquiring Presto Absorbent Products

• CPGs companies acquiring nonwoven related companies – S.C. Johnson acquired Babyganics – Unilever acquired Seventh Generation

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Healthy M&A Activity

• Paper companies investing in and acquiring nonwoven companies – Neenah (conversion and acquiring Crane Technical Markets)

– Schweitzer-Mauduit International (SWM) (DelStar, Conwed)

– Glatfelter – Domtar

• Adjacent companies acquiring nonwoven companies – Berry Plastics acquired Avintiv – AstenJohnson acquired Eagle Nonwovens

• Nonwoven companies acquiring nonwoven related companies – 3M acquired Polypore International’s ultrafiltration business

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─ Supply Side Growth

─ Demand Side Growth – Existing Markets Expanding

– Economic Drivers – Demographic Drivers – Product Innovation

– Taking Share from Other Materials – Entirely New Uses (Markets)

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Absorbent Hygiene

Wipes

Filtration

Medical/ Surgical

PPE

Other Disposables

Building Construction

Geosynthetics

Home and Office Furnishings

Transportation

Apparel

Other Durable Applications

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0% 2% 4% 6% 8% 10% 12%

Historical 2008‒2013

CAGR

Forecast 2013‒2018

CAGR

Recovery of the Durables North America End Use Categories – Size and Growth in Tonnes

Source: INDA North American Industry Outlook Report, 2015

Average 1.4% 2008-2013 5.1% 2013-2018

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2.2%

3.0% 3.2%

2.8% 2.7%

2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

Forecast Based on GDP Forecast… Annual Growth of Real GDP in the United States, Percent Change from Preceding


2.4% 2.6%

1.6%

2.2% 2.4%

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North American Nonwovens Filtration Market

─ Taxonomy

─ Demand Drivers

─ Size

─ Outlook

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Harmonize Industry Taxonomies

Air Filtration Transportation (8)

• Induction/Air Intake, Cabin Air

Commercial HVAC (4) • HEPA/ULPA, MERV 9-15, MERV 1-8

Residential HVAC/Furnace (3) • Low End, High End, HEPA/ULPA

Personal Protection/Face Masks (4) • Molded/Pleated, Respirator

Industrial (4) • Dust Removal/Baghouse, Air Intake

Vacuum Cleaner Bags (3) • Standard, Standard w/MB, HEPA w/MB

Liquid Filtration Water (3)

• Water Treatment, Wastewater, Pool/Spa

Transportation • Oil, Lubrication, Fuel, Transmission

Manufacturing (4) • Hydraulics, Manufacturing, High-Tech

Food Processing (6) • Tea Bags, Coffee Filters, Cooking Oil

Healthcare (3) • Blood, Pharma, Bio

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Demand Drivers

• Main Drivers – The Economy

– Construction, Transportation

– Consumers Awareness and Sensitivity – Air and Water Quality Concerns

– Legislation and Regulatory Control – Clean Air Act – Environmental Protection and Pollution Control

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Demand Drivers

• Secondary Drivers – Increasing Share of Filter Media

– Filter Efficiency Improvements

– Use of Nanofibers

– Sustainability

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22 22 Source: INDA North American Industry Outlook Report, 2015

Transportation Commercial HVAC

Residential HVAC

Personal Protection

Industrial Filtration

Vacuum Cleaner Bags

Value ($MM) Tonnes (M)

Square Meters (MM)

Tonnes Material Value ($MM) Square Meters (MM)

Different Ways to Measure “Size” Air Filtration Nonwoven Material Consumption, 2013

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-12%

-8%

-4%

0%

4%

8%

12%

16%

20%

0% 2% 4% 6% 8% 10% 12%


AAGR


AAGR

Forecast from the 2015 Report Historical CAGR, Forecast CAGR and Size in Tonnes of Production by End-Use, 2014


8%

North American Average 1.4%, 5.1%

Filtration 2.4% Historical 3.5% Forecast

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Air 1.8%, 3.2%

Liquid 4.1%, 4.4%

-2%

0%

2%

4%

6%

8%

10%

0% 2% 4% 6% 8% 10%


AAGR


AAGR

Forecast from the 2015 Report Historical CAGR, Forecast CAGR and Size in Tonnes of Production by End-Use, 2014


Filtration Average 2.4%, 3.5%

Air Filtration Categories Transportation + Commercial HVAC + Residential HVAC Personal Protection Industrial + Vacuum Cleaner Bags

2013–2018 3.7%

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-12%

-8%

-4%

0%

4%

8%

12%

16%

20%

0% 2% 4% 6% 8% 10% 12%


AAGR


AAGR

Updated Forecast to the 2015 Report Filtration Demand Size and Growth



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-12%

-8%

-4%

0%

4%

8%

12%

16%

20%

0% 2% 4% 6% 8% 10% 12%


AAGR


AAGR

Updated Forecast to the 2015 Report Filtration Demand Growth Update



3.9% Updated

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What’s At the Forefront

─ Material Development

─ Product Innovation

─ Machinery Development

─ Market Developments

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Material Development

• Functionalizing Nonwoven Fabrics

– Main Processes… Just Faster, Better

– Nanotechnology / Meltblown / Fine Fibers

– Proprietary Developments

– Nonwovens Approaching Membrane Efficiency

– Composites

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Nanofiber Composite Media Technology

Spunbond

Nanofiber

Meltblown

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Material Development

• Fibers/Resins

– Biopolymers

– Engineered Staple Fibers

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Machinery Development

• Machinery – Reifenhäuser Reicofil High Loft Spunbond

– Resurgence of Wetlaid

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Product Innovation

• Transportation Air Induction Filters

• Transportation Cabin Air Filtration

• Air Treatment in Healthcare

• Personal Protective Equipment

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Nonwoven Producer Developments 170 Producers in North America with nearly 700 lines, Top 10 Account for Only 46%

• Berry Plastics

• Kimberly-Clark

• Hollingsworth & Vose

• Johns Manville

• DuPont

• Ahlstrom

• 3M

• Lydall

• Freudenberg

• Neenah

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Filter System Manufacturer Developments

• Mann + Hummel

• Cummins Filtration

• Pall Corporation

• Parker-Hannifin / Clarcor

• Donaldson

• 3M

• Pentair

• The Filtration Group

• Camfil

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Market Developments

• Very Fragmented Industry – Supply Chain

– Numerous End-Uses

– Media, Fibers and Polymers Used

• Growing Market – Numerous Drivers

– Steady Revenue

– Continuous Innovation

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Market Developments

• Attracts Attention – Within the Industry

– Companies Outside the Industry

– Financial Sector

Resulting in… – Strategic Alliances and Mergers

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Market Developments

• Types of Mergers and Acquisitions – Consolidators

– Expanders – Nonwoven Producers

– Filter System Manufacturers

– Joiners

Invites… – Private Equity

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In Conclusion

• The Market – Growing Markets with Steady Revenue

– Highly-Fragmented

– Continuous Innovation

• Attracts Attention – Within the Industry

– Companies Outside the Industry

– Financial Sector

• Will Continue

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Thank You

[email protected]

Questions

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The North American Nonwoven Filtration Market · 1 Endless Possibilities and Growth for Nonwovens The North American Nonwoven Filtration Market Brad Kalil Director of Market Research