Interview with Angelo Radici

The signs of recovery coming from the major world economies show a slow but steady strengthening involving all industrial sectors, including chemical fibres. In chemicals and textiles, the depletion of inventories in the production chain of several segments — above all technical and industrial applications — caused by a turnaround in demand during the course of 2009 has resulted in an increase in business activity in Europe and America, spurred by the cautious rebuilding of minimum stocks.

Apparel is now the most critical end use, in view of the high stock levels throughout the entire synthetic fibres and textiles chain.

The recovery appears to be constant but slow for many reasons. It is still difficult to find credit and there is widespread excess production capacity, which also affects chemical fibres and reduces investments. Moreover, the slow pace of the upturn is a consequence of reduced available income caused by the high unemployment rate, which reduces final consumption and durable goods purchases, in particular. Indeed, in 2009, world industrial consumption of chemical fibres recorded a rise of 1.3% compared to a fall of 5.5% in 2008. For 2010 an increase of 2% is forecast.

The recovery can be mostly attributed to the rise in industrial consumption in China, the leading textile producer in the world with a 48% market share. The expansive fiscal policy of the Chinese government has stimulated not only growth in domestic consumption of textile products but also an excessive expansion of production all along the chain, in the face of depressed world demand for textile products due to the economic crisis. As a result, the rise of 7% in China mill consumption of chemical fibres in 2009, in a situation of reduced export demand, translated into into a heavy increase in stock levels by the end of the year.

During 2010, China will have to deal with the excess inventory from the prior year in one of two ways: by pushing hard on exports, which will surely hit against the limit set by weak worldwide demand, or by encouraging stronger domestic demand, which, given the current scenario, appears to be the best way to go.

For RadiciGroup, the most interesting market after Europe is certainly Latin America, which has a good domestic market and is also in an advantaged position to meet North American textile market demand.

During our eleven years in Brazil, we have invested about USD 110 million (approximately EUR 75 million). This country has great potential yet to be tapped. We have worked, and are still working, to increase our market share in the synthetic fibres and plastics fields. We have also focused our efforts on improving our production quality and broadening our range of high-tech products. In the nylon fibres segment, we are planning to increase texturing capacity in 2010 with the start-up of three new lines, which will increase our textured yarn production by about 1,500 tons per year. We can also exploit synergies with Radici Spandex, a Group company located in the USA and engaged in the production of elastane fibre for sportswear, lingerie, body contouring and shaping items, ready-to-wear, hosiery, trimmings and braids, industrial applications, nappies and other applications in the sanitary-medical sector. Regarding acrylic fibre in South America, in addition to maintaining our presence in the traditional segments of fibre spinning and processing, we have recently expanded our new product offering in asnetos substitutes and technical applications. We have, as a matter of fact, launched a new Raditeck® acrylic fibre for industrial use available in six versions: AC, anti-crack fibre for cement; RF, for fibrocement; FL, flocked; ML, ground; HP, high pressure; and OX, oxidized.

Also regarding RadiciGroup global business, worth mentioning are several important investments in the engineering plastics sector. Guided by a philosophy that aims at supporting customers in their globalization strategies, in the plastics area we took our first steps toward the globalization of our organization in 1997, with the opening of our first production plant in Latin America. Today we are also based in Asia — China and India —, in Europe and in North America, where we concluded an important take-over just a few weeks ago. We acquired the American plastics compounder MDE, allowing the Group to be present locally in a notoriously conservative market that demands products made in the USA. What's more, we now own a considerable number of American automotive approvals, which are extremely valuable to get new projects underway.

First of all, the transfer of the textile and synthetic fibre business to Asia – to China, in particular, and India, a lesser extent — continues at a constant and unrelenting pace. Apparel is most certainly the sector where the move is most evident. In furnishings and industrial applications, after the steep plunge caused by the economic crisis, the recovery has started in those very countries and then extended to Europe and North America, with more stability expected in the mid term.

The economic crisis has redimensioned future growth prospects and postponed expansion until at least 2011 and, in certain sectors, until 2010-2012. Polyester is expected to continue to grow in the medium term at an average rate of 4%, much lower than the 7% of the prior decade. After losing 7.6% in 2009, nylon yarn should grow by 1% in 2010 and return to a medium-term growth trend of 1%. After falling 22% in 2008 and recovering by a little more than 3% in 2009, acrylic should see an increase of 2.4% in 2010. For all fibres, the growth leaders in terms of volume will be China and India.

In North America and Europe, the trend in the textile business towards downsizing and specialization in high value added sectors is going to persist. In particular, for European producers strategic competitive tool will be, also in the future, the ability to supply products that offer better comfort, safeguard the health and give technical performance at competitive prices. Offering timeliness and collaboration with customers in developing new functionalities and delivering the needed performance in the most effective and efficient way opens up a window of opportunity in domestic and foreign markets for experienced European manufacturers. Another important issue that we have to deal with in a serious manner is sustainability. There is more and more consumer demand for textile products that are eco-sustainable from the standpoint of carbon emissions, water usage and recyclability. We are talking about a complex issue that is central to our Group, an issue that the entire production chain is working on and coming up with different solutions, from improvement in process efficiency to the development of products made of renewable raw materials and the use of recycled materials.

RadiciGroup is represented in the furnishings sector by a number of products. We have Radifloor® PA 6, PA 66 and PP BCF (carpet filament), ideal for the residential, automotive, contract and upholstery sectors. These products offer guaranteed anti-UV, anti-static and anti-bacterial performance together with high tenacity and resistance to wear over time. During the last Domotex, we officially launched the new Radifloor® Solid collection of polyamide 6 "solution-dyed" BCF yarn for the contract sector featuring excellent colour uniformity and colourfastness.

It must be noted that, thanks to the production technology used, this yarn helps to safeguard the environment. Since the yarn is coloured during the spinning process, no additional dyeing is needed. This special production technology, which yields great savings in water usage and treatment costs, besides reduced energy consumption, is also utilized for Radilon® solution-dyed PA 6 staple fibre and the REvive polyester yarn line. The latter two brands recently launched product portfolios are eco-sustainable and made with post-consumer recycled polymer. These products guarantee respect for the environment and maximum sustainability in both the raw and solution-dyed versions. The entire REvive range features 100% eco-compatible additives and colours certified OEKOTEX Class 1.

To better meet the needs of the market, and the requirements of the furnishings sector in particular, we have concentrated on the development and production of multi-functional polyester yarns combining different properties, such as, flame retardant (a characteristic of yarns such as MICRELL® FR – raw white and solution-dyed flame-retardant polyester microfibre – and STARLIGHT® FR - raw white flame-retardant polyester yarn) with anti-UV, bacteriostatic or antifungal (STARLIGHT® FR UV Guard and NANOFEEL).

The extensive know-how of our Group in the synthetic fibres sector covers the production technology of woven and knit fabric, above and beyond chemicals and yarn production. Our global presence in the textile machinery business and our knowledge of and experience in looms, machinery and components enables us to give additional support to our customers.

As we are a chemicals group, we more than others have to aim for the efficiency and quality of our production processes and our products and services by using new technologies and innovative systems that are compatible with safety in the workplace and the protection of the environment. Our participation in the Responsible Care programme and adherence to the REACH regulations and the development of shared ethical values are just some of the tools that RadiciGroup uses to improve its performance in the area of sustainability. We are constantly committed to meeting the needs of our customers, who are increasingly demanding eco-compatible products. Furthermore, we are working to evaluate the actual eco-sustainability of our supply chain in order to significantly reduce the environmental footprint of our products and, therefore, aid our customers in improving the sustainability of their own businesses. As far as the specifics of REACH are concerned, by the 1 December 2008 deadline required by law, we successfully completed the pre-registration of all the chemical substances produced or imported into Europe by Radici Chimica. Next, by the end of this year, we will file the final registration dossier with ECHA, the European Chemicals Agency. The chemicals industry occupies centre stage in the EU strategy for sustainable development; the industry plays an economic role of huge importance, since it supplies raw materials to the manufacturing industry, offers products needed to maintain and improve the quality of life, and is the stimulus of innovation. Ensuring competitiveness and innovation is thus a key objective.

I believe that engineering at the molecular scale, i.e., nanotechnology, is one of the main business areas at which the entire scientific and industrial world is directing its attention. This concerns the textile sector too, a sector in which, at least up to just a few years ago, it seemed that there was nothing left to discover. New opportunities for growth and development have been materializing in the international arena. The use of nanocomposite materials in the synthetic fibre sector is focused mainly on high-performance yarn and fabrics, in that it enables reaching equivalent performance levels with a very small quantity of additives. For some time now, extensive work has been going on for the development of materials with special properties: decorative, chameleon-like effect, antibacterial, anti-UV, chemically protective, flame retardant, antistatic, self-cleaning, or more in general, multifunctional. As regards our product range, I would like to mention Nanofeel®, a polyester fibre, featuring a silver-based nanostructured additive incorporated in the fibre matrix before spinning. The fibre's antibacterial properties help to reduce the proliferation of bacteria on the fabric. All this is achieved by "clean" technology that does not use any toxic materials. Greater comfort, freshness and hygiene are just some of the advantages for consumers who use products made of Nanofeel®.

Ever since we took our first steps towards the globalization of our organization in order to support our international clients, as well as develop local business, we have been guided by a philosophy aimed at respecting and caring for the communities where we have set up our operations. Today our companies are based in Italy and in the rest of Europe, in Asia, and in North and South America. In each of these geographical areas we have adopted and continue to implement a proactive approach to business development. This approach focuses our attention on both international development and our relationship with our community and all its stakeholders.