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Creation of leading spunbond joint venture in the Americas

26 June 2009

PART I

Fiberweb plc ("Fiberweb", the "Company")
Creation of leading spunbond joint venture in the Americas

Further to the announcement made on 30 April 2009, Fiberweb is pleased to announce that it has conditionally entered into an agreement with Petropar S.A. ("Petropar") to establish a 50/50 joint venture intended to create the second largest producer of spunbond nonwoven fabrics in the Americas (the "Joint Venture Transaction"). The joint venture (the "Joint Venture") will be named FitesaFiberweb and will focus on the large and growing markets for lightweight nonwoven fabrics, serving producers of disposable hygiene products such as baby and adult diapers and feminine care products. The Joint Venture will initially comprise the following businesses/assets:  Fiberweb's plants in Washougal, US and Queretaro, Mexico (the "American Consumer Fabrics Business"), land and buildings at Fiberweb's Simpsonville site (the "Simpsonville Property"), and Petropar's existing nonwoven business consisting of Fitesa Industrial Ltda ("Fitesa Brazil") and Fitesa, Inc. (together, "Fitesa"). There are advanced plans for the Joint Venture to invest in a new production line in the US in the near term.

The Joint Venture Transaction is conditional, inter alia, upon approval of the shareholders of both Fiberweb and Petropar.

Highlights

The combination of the American Consumer Fabrics Business with Fitesa will create a leading producer of spunbond nonwovens in the Americas, with the potential to serve regional and global customers more effectively from its leading asset and technology base. For the year ended 31 December 2008 the Joint Venture would have had proforma combined sales of US$191.7 million, EBITDA of US$22.9 million and 345 employees1. From the outset, the companies holding the assets and conducting the business of the Joint Venture (the "JV Entities") will:

• combine manufacturing capabilities in US, Mexico and Brazil with the geographic reach to supply major hygiene consumer products manufacturers across the Americas;
• facilitate the construction of a new manufacturing facility in the US to meet growing demand for sophisticated and ultra-lightweight fabrics;
• expand Fiberweb's geographical footprint into large and growing markets in South and Central America, enhancing Fiberweb's customer base;
• allow Fiberweb to access low cost manufacturing of the state-of-the art production facilities of Fitesa in Brazil;
• expand Fitesa's geographical footprint into North America; and
• provide Fitesa with access to Fiberweb's global customer base and leading technology capabilities.

The Joint Venture Transaction is expected to modestly enhance underlying2 earnings for Fiberweb in the first full year and to be materially earnings enhancing in 2011.

Daniel Dayan, CEO of Fiberweb commented:

"We are delighted that Petropar and Fiberweb have been able to negotiate the creation of this imaginative venture swiftly and smoothly. We share a common interest in building a leading player in all parts of the Americas and in accelerating and derisking investment plans that both parties were considering individually. In these challenging times, we are implementing a model that focuses scarce capital on cost-effective investment to meet customers' needs for leading-edge products on a regional and global basis and that allows economies of scale to be achieved."

Geraldo Enck, President of Petropar commented:

"It is clear to us that there is strategic value in this joint venture for both companies. The joint venture creates a leading player in the Americas with complementary geographic presence, customer relationships and technologies which provide a platform for future investment and growth. Petropar is pleased to be working together with Fiberweb in the creation of this venture that will maximise the utilisation of existing and future assets of both companies."

Note: The statement that the Joint Venture Transaction is expected to modestly enhance earnings for Fiberweb in 2010 (the first full year following completion of the Joint Venture Transaction) and to be materially earnings enhancing in 2011 relates to future actions and circumstances, which, by their nature, involve risks, uncertainties and other factors.

Lazard & Co., Limited ("Lazard") is acting as financial adviser to Fiberweb. Panmure Gordon & Co. plc ("Panmure Gordon") is acting as corporate broker to Fiberweb.

Enquiries

Fiberweb plc

Fiberweb plc
+44 (0)20 8439 8310
Daniel Dayan, Group Chief Executive Officer
Daniel Abrams, Group Chief Financial Officer

Lazard & Co., Limited (Financial Adviser)
+44 (0)20 7187 2000
Paul Gismondi
Vasco Litchfield
Aamir Khan

Panmure Gordon & Co. plc (Corporate Broker)
+44 (0)20 7459 3600
Adam Pollock
Giles Stewart

Weber Shandwick Financial (PR Adviser)
+44 (0)20 7067 0000
Terry Garrett
Nick Dibden

Petropar S.A.

Petropar S.A.
+55 51 3489 7524
Geraldo Enck, Group Chief Executive
Silvio Partiti, Group Corporate Director

Fitesa Industrial Ltda
+55 51 3489 7524
Silverio Baranzano, Chief Executive

This announcement has been issued by, and is the sole responsibility of, Fiberweb.

Lazard, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Fiberweb and no one else in connection with the Joint Venture Transaction and this announcement and will not be responsible to anyone other than Fiberweb for providing the protections afforded to clients of Lazard nor for providing advice in connection with the Joint Venture Transaction or this announcement or any matter referred to herein.

This announcement contains forward-looking statements which are subject to assumptions, risk and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, there can be no assurance that these expectations will prove to have been correct. As these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by those forward-looking statements. Each forward-looking statement is correct only at the date of the particular statement. The Company does not undertake any obligation publicly to update or revise any forward-looking statement as a result of new information, future events or other information, although such forward-looking statements will be publicly updated if required by the Listing Rules, the Prospectus Rules, the Disclosure and Transparency Rules, the rules of the London Stock Exchange or by law.

No statement in this announcement is intended to be a profit forecast or to imply that the earnings of the Company for the current year or future years will necessarily match or exceed the historical or published earnings of the Company.

PART II

Fiberweb plc ("Fiberweb", the "Company") Fiberweb plc
Creation of leading spunbond joint venture in the Americas

1. Introduction

Further to the announcement made on 30 April 2009, Fiberweb is pleased to announce that it has conditionally entered into an agreement with Petropar to establish a 50/50 joint venture intended to create the second largest producer of spunbond nonwoven fabrics in the Americas. The Joint Venture will be named FitesaFiberweb and will focus on the large and growing markets for lightweight nonwoven fabrics, serving producers of disposable hygiene products such as baby and adult diapers and feminine care products. The Joint Venture will initially comprise the following businesses/assets: Fiberweb's plants in Washougal, US and Queretaro, Mexico, land and buildings at Fiberweb's Simpsonville site, and Petropar's existing nonwoven business consisting of Fitesa Brazil and Fitesa, Inc. There are advanced plans for the Joint Venture to invest in a new production line in the US in the near term.

In accordance with the Listing Rules, due to the fact that the default and exit provisions in the joint venture agreement to be entered into by Fiberweb and Petropar in connection with the Joint Venture Transaction (the "Joint Venture Agreement") mean that in certain circumstances and, in the case of the exit provisions, only after the second anniversary of the Joint Venture Transaction (the "Completion"), Fiberweb may be required to choose to either sell all of its shares in the JV Entities or buy all of Petropar's shares in the JV Entities without obtaining further approval of Fiberweb Shareholders, the Joint Venture Transaction is conditional, inter alia, upon Fiberweb Shareholder approval. By approving the Joint Venture Transaction, Fiberweb Shareholders are therefore approving these default and exit provisions.

The General Meeting for shareholders of the Company will be held at the offices of Baker & McKenzie LLP, 100 New Bridge Street, London EC4V 6JA at 10:00am on 15 July 2009.

2. Principal Terms and Conditions of the Joint Venture

Pursuant to the terms of the Principal Joint Venture Transaction Documents:

• The Transaction will be executed through an asset swap. Upon Completion the Fiberweb group and Petropar will each hold 50 per cent. in Fiberweb's and Petropar's respective contributed assets.
• Fiberweb and Petropar will have equal board representation and voting rights in the JV Entities.
• Fiberweb will contribute the American Consumer Business on a debt free and cash free basis and Petropar will contribute Fitesa with debt of no greater than US$95 million. Cash generated by the JV Entities prior to Completion, but post 31 December 2008 will remain in the Joint Venture. Fitesa is forecast to generate approximately US$11 million of cash between 31 December 2008 and Completion, which will be left in Fitesa on Completion. Petropar has made a downpayment of €5.8 million in relation to the construction of a new Reicofil line. This downpayment will also be contributed to the JV Entities. The Fiberweb group will contribute an estimated US$10 million of cash (representing the cash generated by the American Consumer Fabrics Business between 31 December 2008 and Completion). Apart from these payments, neither Fiberweb nor Petropar will be obliged to provide any further finance to the JV Entities after Completion and the JV entities will be operated on a standalone basis, with their own working capital facilities independent of and without recourse to the Fiberweb group.
• If Fiberweb materially defaults on certain provisions in the Joint Venture Agreement, this could result in Fiberweb being required to choose to either sell all of its shares in the JV Entities or buy all of Petropar's shares in the JV Entities. 
• There are also certain circumstances where, if Fiberweb and Petropar are unable to unanimously agree on a position with respect to certain matters defined in the Joint Venture Agreement after the second anniversary of Completion, exit provisions will be triggered that could result in Fiberweb being required to choose to either sell all of its shares in the JV Entities or buy all of Petropar's shares in the JV Entities.

3.   Recommendation

The Board has received financial advice from Lazard in the context of the Joint Venture Transaction. In providing its advice to the Board, Lazard has relied upon the Board's commercial assessment of the Joint Venture Transaction.

The Board considers the terms of the Joint Venture Transaction to be in the best interests of Fiberweb and the Fiberweb shareholders as a whole.

Accordingly, the Board unanimously recommends that Fiberweb shareholders vote in favour of the resolution to be proposed at the General Meeting to approve the Joint Venture, as each of the Directors intend to do in respect of their own beneficial holdings which amount, in aggregate, to 2,374,098 Ordinary Shares, representing approximately 1.94 per cent. of the current issued ordinary share capital of Fiberweb at the date of this document.

4.   Background to and Reasons for the Joint Venture

The nonwovens market has been characterised by rapid technological development, as new generations of production equipment have allowed the production of a wider range of lighter-weight fabrics at significantly higher speeds. As a result, customers are increasingly looking for suppliers to invest in the latest equipment in order to secure supplies of these more advanced fabrics. In recent years, Fiberweb has not been able to finance significant investment in this part of its North American business as it has focused its resources on the significant turnaround necessary in the Fiberweb group as a whole, which is now producing improved financial results. As a consequence, while the American Consumer Fabrics Business has some unique strengths and capabilities, it does not enjoy the benefits of the most modern technology. However, Fiberweb's management believes that the Joint Venture Transaction will not only bring forward but also reduce the financial risk of the significant investment required to maintain and expand Fiberweb's competitive position in North America.

The JV Entities propose to expand their operations in the US by investing in a new spunbond line to service anticipated demand for new, advanced products that Fiberweb is currently developing. It is estimated that this investment would involve expenditure of approximately US$65 million, inclusive of infrastructure costs and building costs. Fiberweb would be unlikely to be in a position to finance this investment by itself at the same pace as is contemplated following Completion.

The JV Entities will give Fiberweb much improved access to the attractive South American market. This region offers significant growth opportunities because the market penetration rates of disposable hygiene products remain significantly lower in South America compared to North America. In addition, important customers of Fiberweb have continued to invest in the region and require the same types of advanced products and production technology that exist in North America and Western Europe, where Fiberweb is a major supplier.

Fitesa's advanced production technology in Brazil provides an ideal production platform to service the South American operations of Fiberweb's global customers, utilising in part technology developed by Fiberweb in conjunction with its customers in Europe and North America. In addition, Fiberweb's current operations that will form part of the business of the JV Entity, will benefit from Fitesa's in-depth knowledge of emerging markets in South America. Both Fiberweb and Fitesa will be able to offer more efficient supply patterns to customers as a consequence of the wider geographic presence.

For the year ended 31 December 2008 the Joint Venture would have had combined sales of US$191.7 million, EBITDA of US$22.9 million and 345 employees3.

5.   Information on Fiberweb Contributed Businesses

Fiberweb will contribute its spunbond and spunmelt facilities based in Queretaro, Mexico, and Washougal, US, to the JV Entities. The two sites currently form part of Fiberweb's North American Hygiene business and service the US hygiene market. The sites' three Reicofil 3 lines offer both spunbond and, in Mexico, spunmelt technologies, with a total installed capacity of 38,000 metric tonnes per year. Fiberweb will also contribute the Simpsonville Property, plus an estimated US$10 million of cash (representing the cash generated by the American Consumer Fabrics Business between 31 December 2008 and Completion).

For the year ended 31 December 2008, these Mexican and US businesses generated sales of US$96.1 million, EBITDA of US$14.7 million and profit before tax of US$5.5 million. Gross assets as at 31 December 2008 were US$81.1 million.

6.   Current Trading of Fiberweb

At the Fiberweb Annual General Meeting on 30 April 2009, the Board made the following comments, which constitute the Company's Interim Management Statement, covering the period from 1 January 2009 to 30 April 2009, as required by the UK Listing Authority's Disclosure and Transparency Rules.

"Fiberweb has seen a solid start to trading in 2009. Reported sales are in-line with prior year, while underlying operating profit and margins continued to improve in line with our expectations.

As anticipated, volumes in the first quarter declined by 13%, primarily reflecting challenging conditions in Industrial markets that were noted at the time of our Preliminary Results in February, especially in housing-related segments. In the Hygiene business, volumes in consumer fabrics remained relatively stable, testifying to its defensive characteristics, while airlaid volumes suffered due to weak demand in Eastern Europe and Asia.

Underlying gross margins strengthened due to the ongoing benefit of cost reduction programmes and improvements in operating efficiencies, as well as lower raw material prices. The cost reduction programme in European Consumer Fabrics, announced in January 2009, proceeded as planned in the period, as did the commissioning of the new Italian spunbond line.

Positive cash flow in the first quarter, coupled with small improvements in working capital, brought net debt at the end of March 2009 down slightly to £144m, slightly better than expected."

7.   Information on Fitesa Contributed Businesses

Petropar will contribute Fitesa Inc. and Fitesa Brazil. Fitesa Inc. is a holding company that was incorporated in South Carolina, US on 1 October 2008 with the intention of conducting the proposed expansion of Fitesa's business into the US. Fitesa US did not trade prior to April 2008 and since that date trading activities have been immaterial. It does not have any material assets or liabilities.

Fitesa Brazil is the second largest nonwovens producer in Brazil and the third largest in South America with advanced production technology and well-established brands, serving the hygiene, medical and filtration, and industrial markets. Fitesa Brazil is a wholly-owned subsidiary of Fitesa S.A., which in turn is a wholly-owned subsidiary of Petropar, a Brazilian holding company with interests in packaging and nonwovens, which is headquartered in Porto Alegre, Rio Grande do Sul and listed on the Sao Paulo Stock Exchange. There is significant overlap between the technology and products of the American Consumer Fabrics Business and Fitesa Brazil, with complementary customers.

As a result of a significant operational restructuring and investment programme initiated in 2004, Fitesa Brazil's operations are now extremely well placed to benefit from the significant growth potential of the Latin American market.

At the onset of the restructuring programme, which is now complete, Fitesa Brazil was focussed on the industrial nonwovens market. The company operated two sites in Gravatai and Horizonte with a wide range of differing equipment and technologies, a total of nine lines and four different technologies; six of the lines were older than ten years. The large number of differing technologies, equipment and markets added significant complexity and overheads to the business, impacting profitability.

As part of its operational restructuring and investment programme, Fitesa Brazil closed its Horizonte plant and exited the production of staple fiber and carded nonwovens. The company took the decision to enter the hygiene market, which represents approximately 60 per cent. of the total South American market for spunbond, spunmelt and meltblown nonwovens and offers more stable demand. To underpin its new strategy, Fitesa Brazil made a total investment of US$110 million to install two Reicofil 4 lines in 2006 and 2008, with capacity of 34,000 metric tonnes per year, capable of producing the wide range of advanced lighterweight fabrics demanded by customers.

Fitesa Quarterly Financial Information 

Today, Fitesa Brazil has streamlined its operations and is now clearly focused on the production of spunbond, spunmelt and composites for the hygiene, industrial and medical markets from one production site strategically located to serve its main customers. Fitesa Brazil's installed manufacturing base, with six lines at its site in Gravatai, Rio Grande do Sul, represents approximately 24 per cent. of the total installed capacity in South America.

As a result of the restructuring and investment in new lines mentioned above, the company's financial results have shown significant improvement. The second Reicofil 4 line was brought on stream in July 2008, and revenues have risen from R$37.1 million (approximately US$21.2 million) in the first quarter of 20086 to R$45.5 million (approximately US$19.7) million in the first quarter of 20097. Over the same period, EBITDA increased from R$(2.9) million (approximately US$(1.6) million to R$11.2 million (approximately US$4.8 million)8.

For the year ended 31 December 2008, Fitesa Brazil generated sales of R$175.7 million (approximately US$95.6 million), EBITDA of R$15.1 million (approximately US$8.2 million) and a loss before tax of R$(67.5) million (approximately US$(36.8) million), including a one-off net currency exchange loss of R$(43.5) million (approximately US$(23.7) million), with a sales breakdown between hygiene, industrial, medical and filtration of 47, 41, 6 and 6 per cent., respectively. Gross assets as at 31 December 2008 were R$416.2 million (approximately US$178.1 million).

8.   Financial Effects of the Joint Venture

The Joint Venture Transaction is expected to modestly enhance underlying9 earnings for Fiberweb in the first full year and to be materially earnings enhancing in 2011. This statement should not be interpreted to mean that Fiberweb's earnings per share for the current or future financial years will necessarily match or exceed the historical published earnings per share.

9.   Management and Employees of the Joint Venture

The board of directors of each JV Entity will comprise four non-executive directors, two nominated by each of Fiberweb (through its subsidiaries) and Petropar (through Fitesa S.A.). The board of directors of each JV Entity will meet as often as determined by the relevant directors, but in the case of the principal JV holding companies in Brazil and the UK at least once per calendar quarter. Save for those matters reserved to the shareholders of the JV Entities, the board of directors of each JV Entity will have responsibility for the overall direction, supervision and management of that JV Entity. All JV Entities will have the same CEO and CFO. The initial CEO for all JV Entities will be an appointee of Petropar and the initial CFO for all JV Entities will be an appointee of Fiberweb. The appointment or removal of any subsequent CEO or CFO of the JV Entities will require the joint written agreement of Fiberweb and Petropar, provided that the initial CEO may be removed unilaterally by Petropar and the initial CFO may be removed unilaterally by Fiberweb, in each case on no less than 12 months' written notice to the other.

Fiberweb will contribute several key commercial and technical personnel who currently work predominantly or exclusively in the American Consumer Fabrics Business. The management of key global customers, that Fiberweb services across several continents and product areas, will remain under the control of Fiberweb, which will provide sales and technical support functions to the JV Entities.

10.   General

Enquiries

Fiberweb plc

Fiberweb plc
+44 (0)20 8439 8310
Daniel Dayan, Group Chief Executive Officer
Daniel Abrams, Group Chief Financial Officer

Lazard & Co., Limited (Financial Adviser)
+44 (0)20 7187 2000
Paul Gismondi
Vasco Litchfield
Aamir Khan

Panmure Gordon & Co. plc (Corporate Broker)
+44 (0)20 7459 3600
Adam Pollock
Giles Stewart

Weber Shandwick Financial (PR Adviser)
+44 (0)20 7067 0000
Terry Garrett
Nick Dibden

Petropar S.A.

Petropar S.A.
+55 51 3489 7524
Geraldo Enck, Group Chief Executive
Silvio Partiti, Group Corporate Director

Fitesa Industrial Ltda
+55 51 3489 7524
Silverio Baranzano, Chief Executive

This announcement has been issued by, and is the sole responsibility of, Fiberweb.

Lazard, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Fiberweb and no one else in connection with the Joint Venture Transaction and this announcement and will not be responsible to anyone other than Fiberweb for providing the protections afforded to clients of Lazard nor for providing advice in connection with the Joint Venture Transaction or this announcement or any matter referred to herein. 

This announcement contains forward-looking statements which are subject to assumptions, risk and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, there can be no assurance that these expectations will prove to have been correct. As these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by those forward-looking statements. Each forward-looking statement is correct only at the date of the particular statement. The Company does not undertake any obligation publicly to update or revise any forward-looking statement as a result of new information, future events or other information, although such forward-looking statements will be publicly updated if required by the Listing Rules, the Prospectus Rules, the Disclosure and Transparency Rules, the rules of the London Stock Exchange or by law.

No statement in this announcement is intended to be a profit forecast or to imply that the earnings of the Company for the current year or future years will necessarily match or exceed the historical or published earnings of the Company.

Copies of the Fiberweb Shareholder Circular will, from the date of posting to Fiberweb Shareholders, be available for inspection at the Document Viewing Facility which is situated at The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS.

Copies of the Fiberweb Shareholder Circular will, from the date of posting to Fiberweb Shareholders until the conclusion of the shareholder meeting, be available for inspection by Fiberweb Shareholders at the offices of Fiberweb plc, 1 Victoria Villas, Richmond on Thames, Surrey TW9 2GW during normal business hours on any business day. Copies will also be available for download from the Company's website (http://www.fiberweb.com) from the date of posting.

1 Sum of the individual figures for Fiberweb and Fitesa for the year ended 31 December 2008. Fiberweb had sales of US$96.1 million, EBITDA of US$14.7 million and 135 employees. Fitesa had sales of US$95.6 million, EBITDA of US$8.2 million and 210 employees.

2 Underlying earnings are before restructuring charges and other non-recurring items.

3 Sum of the individual figures for Fiberweb and Fitesa for the year ended 31 December 2008. Fiberweb had sales of US$96.1 million, EBITDA of US$14.7 million and 135 employees. Fitesa had sales of US$95.6 million, EBITDA of US$8.2 million and 210 employees.

4 Quarterly financial information is unaudited.

5 Q1 2009 sales impacted by the reduced cost of raw materials following a fall in oil prices in Q4 2008.

6 Average exchange rate of US$1:00 : R$1.75 used for the first quarter of 2008.

7 Average exchange rate of US$1:00 : R$2.32 used for the first quarter of 2009.

8 Average exchange rate of US$1:00 : R$1.84 for the year ended 31 December 2008 used for income statement items and exchange rate at 31 December 2008 of US$1:00 : R$2.34 used for balance sheet items.

9 Underlying earnings are before restructuring charges and other non-recurring items.