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• Feltex Automotive
• Industrial Footwear
• Hosaf Fibres
• Jordan & Co
• Bull Brand Foods
• Glodina

OPERATIONAL REVIEW: HOSAF FIBRES

Year under review

Hosaf made significant strategic capital investments in recent years to expand its PET capacity and thereby make its production base flexible and able to service both the staple fibre and PET resin markets. This ability, to interchange production between PET resin and polyester staple fibres as market conditions change, began to deliver returns in 2005.

Hosaf Fibres showed a pleasing performance against budget and good profit growth in spite of volatile raw material prices, increased textile imports from China and a stronger than expected Rand. The division grew turnover and volumes, by 21% and 7% respectively, compared to 2004.

As expected market conditions in the traditional textile sector were poor; however, this market constitutes only 17% of Hosaf’s turnover. There was a significant reduction in traditional staple fibre demand due to Chinese competition in customer markets and weak cotton prices.

The industrial and niche markets for staple fibres were affected to a lesser degree and sales volumes were in line with 2004. In this sector, Hosaf benefited from the advantage of using feedstock from its recycling plant which accounted for 16% of all raw materials used at its Cape Town site.

Lost volumes in the traditional textile sector were more than offset by growth in PET resin volumes, which increased by 35% year on year. Hosaf was able to service rising demand in this market by increasing the capacity of its existing plants in Durban and through the recommissioning of its original 12,000 ton per annum PET plant. The efforts of management and staff are to be commended as the capacity increase was achieved at negligible capital cost.

Prospects

Hosaf expects growth in local PET resin demand to continue. The de-bottlenecking and recommissioning of existing assets is complete and PET sales volumes are expected to grow by a further 18% in 2006.

The lack of government intervention to curtail imports of Chinese textiles means that growth in the traditional cotton staple textiles is unlikely. Shrinkage in this market, however, offers opportunity for Hosaf to further divert polymer capacity into PET resin or speciality type industrial fibres as a continuation of its capital strategy, which commenced in 2003.

In the industrial and niche fibre markets, Hosaf anticipates growth of volumes and margins through the introduction of new product types (such as an anti-microbial fibre for duvets and pillows which was launched in 2005) and increased use of recycled raw materials. Capital has been provided to allow for the development of new fibre types, and the focus of the management team is to bring these products to the market in 2006.

Hosaf will continue to develop and bring new products to its existing markets. This will be achieved by forming technology partnerships which are currently being negotiated.

Hosaf is also investigating the feasibility of diversifying into new polyester markets. This would require the introduction of different technologies for which capital proposals are being evaluated.