Dogi International Fabrics S.A

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Dogi International Fabrics S.A

08320 El Masnou
Barcelona
Spain
Telephone: (+34) 93-462-80-00
Fax: (+34) 93-462-80-36
Web site: http://www.dogi.com

Public Company
Incorporated: 1954 as Dogi SA
Employees: 2,010
Sales: EUR 169 million ($149.7 million) (2001)
Stock Exchanges: Madrid
Ticker Symbol: DGI
NAIC: 313312 Textile and Fabric Finishing (Except Broadwoven Fabric) Mills; 313311 Broadwoven Fabric Finishing Mills; 313230 Nonwoven Fabric Mills

Dogi International Fabrics S.A. is the world’s leading manufacturer of elastic textiles for the lingerie, swimwear, and sportswear markets. Based in El Masnou, in Barcelona, Spain, Dogi has achieved its leading position through technological innovation and acquisitions—including the purchase of four plants in Germany, China, the Philippines, and Thailand from Courtaulds Textiles, a Sara Lee subsidiary, in 2001. Following the integration of that acquisition Dogi expects its sales to near EUR 240 million by the end of 2002, up from nearly EUR 170 million in 2001. The acquisition also doubles the company’s manufacturing park, which is centered primarily in Spain and includes one plant in France (sold in 2002 but which remains managed by the company until 2005). More than two-thirds of Dogi’s sales take place outside of Spain; 56 percent of the company’s sales come from the European market, where the company is the number one elastic textiles manufacturer with a market share of more than 18 percent. Dogi has targeted the NAFTA market, particularly the United States, for intensified growth; the NAFTA trade zone accounts for 13 percent of the company’s sales, and the company holds a 5 percent share of that market. The Sara Lee/Courtaulds Textiles acquisition also has raised Dogi’s profile in the Asian market, a chief source of elastic textile-based clothing. Following the acquisition, Dogi expects the Asian markets to top 30 percent of its sales; the company’s market position in those markets is near 10 percent. Dogi is listed on the Madrid stock exchange and is led by Chairman Josep Domènech Giménez, son of the company’s founder.

Family Textiles Manufacturer in the 1950s

Dogi was founded by Josep Domènech Farre, a bricklayer by trade, and his wife Conception as a small, family-owned weaving workshop in El Masnou, in Barcelona. In 1954, however, their son, Josep Domènech Giménez, joined the family business and helped organize a weaving cooperative with other local weaving shops. In addition to manufacturing the broader category of “commodity” textiles, the cooperative also began producing elastic fabrics, which, with the generalization of plastics-based fibers, such as nylon and its derivatives, were in the process of revolutionizing the undergarments industry.

The younger Domènech was quick to recognize the importance of an emerging category in the textiles industry, that of elastic fabrics. Taking control of the cooperative—and renaming it Dogi, using a contraction of his own last names—Domènech also had recognized the need to invest in new technologies in order to claim a place in the elastic fabrics market, unlike more basic textiles. The company’s willingness to invest early gave it a long advance over potential competitors as the price of entry rose with the development of new fabric types, such as Dupont’s Lycra, first introduced in the late 1950s, and weaving and other technologies. A breakthrough in the elastic fibers market came with the ability to dye elastic textiles and the Domènechs added their first dying and fixing machinery in 1962. Three years later, the company made its mark on the textiles industry, pioneering the blending of elastomer (i.e., elastic) fibers with woven fabrics to create new and more supple textile materials.

Josep Domènech Giménez helped build the company into the leading elastic textiles producer in Spain. In the 1970s, the company expanded rapidly, building up its industrial base with a second factory in Cardedou, Spain. The company’s fortunes soared, especially with the beginning of the production of Lycra on an industrial scale. Although Domènech’s company continued to produce “commodity” elastic fabrics, it turned its production more and more toward the manufacture of value-added elastics, especially those based on the new Dupont materials.

The successful adaptation of Lycra as a textile material represented another breakthrough in the textiles industry, permitting fabrics that were lightweight, highly elastic, colorful, comfortable to wear, and waterproof. These qualities quickly made Lycra the material of choice for swimsuit fashions, and that industry became an important market for Dogi’s elastic products as well. Nonetheless, low-end commodity elastic retained a strong part of the company’s sales.

Internationalization in the 1990s

At the beginning of the 1990s, Dogi had captured the leading share in its domestic market, yet remained a minor player on the international scene. Only about one-fourth of Dogi’s sales, which reached around 5.5 billion Spanish pesetas (worth approximately EUR 33 million) in the early 1990s, came from outside of Spain. Yet, with the dominant player in the elastics market in Spain, the company found little room for further domestic growth.

A slump in the Spanish textile market in the early 1990s, coupled with the coming end of European trade barriers—which was set to open the Spanish market to outside competition, particularly from Italian elastic fabrics producers—brought the company to a crossroads. The family-owned company also was confronted with Domènech’s own approaching retirement and the need to make a decision: whether to maintain a small, family-owned status, or open itself to outside investment capital and a more professional management team.

Domènech chose the latter course. In 1992, the company sold a share of its capital to Spanish investment bank Mercapital, a move that solidified the company’s financial position as it braced itself for the new internationalization of the European market. The following year, Domènech brought in Richard Rechter as Dogi’s managing director. Rechter, whose grandparents had emigrated from Russia to France at the dawn of the 20th century, had come to Spain at the age of four, and had worked for a number of companies before becoming a top executive at Sony Spain.

Rechter, who also was given nearly 8 percent of the company, was given the mandate to transform Dogi into an internationally operating company. Domènech, who remained company chairman, and Rechter set about building a more professionally structured management team, including identifying the most promising members of the company’s existing staff. Rechter also helped instill a new corporate culture, transforming the company from a product-driven producer to a service-oriented manufacturing partner.

A major part of the company’s new strategy involved heightening its focus on higher-end, added-value fabrics—by the beginning of the next decade, the company’s product mix had shifted to the extent that nearly 90 percent of Dogi’s sales came from the high-end segment. To achieve this transformation, Dogi began an aggressive investment program, stepping up its in-house research and development capacity.

Dogi quickly began to see the fruits of its transformation, as sales began to rise by some 30 percent per year—already topping 7.4 billion pesetas (approximately EUR 45.5 million) in 1994. By 1995, sales had climbed past 10 billion pesetas (EUR 62 million), more than 40 percent of which now came from outside of Spain. An important breakthrough came when Marks & Spencer tapped Dogi as one of its primary elastic fabrics suppliers—and quickly came to represent some 5 percent of Dogi’s total sales. Although the importance of Marks & Spencer to the company’s revenues was to come to haunt it at the beginning of the next century—as the British retailer struggled with slipping sales—the contract helped raise Dogi’s profile on the international market.

In 1995, Dogi made its first true international expansion move when it acquired Nouvelle Elastelle, based in Le Puy, France. That company had built up a leading position in France, with a 50 percent share of that country’s domestic market for elastic fabrics. Yet Elastelle had been hit hard by the recession of the early 1990s and teetered on bankruptcy by mid-decade. Dogi restructured its new French holdings, and succeeded in quickly restoring the operation to profitability. The addition of Elastelle helped boost Dogi’s sales past 12.5 billion pesetas by the end of 1996, and also gave the company the leading position in the European market. International sales now represented more than 50 percent of Dogi’s total sales. For the time being, however, Dogi’s sales remained focused almost entirely on the European market.

Company Perspectives:

“I have always thought that in the business world, you should have your feet placed firmly in the present, and focus your attention, fully and clearly, on the future. In order to do so, you must be receptive to the needs of the moment, and sensitive enough to foresee the possibilities that may be ahead. I believe this spirit is very much present in DOGI International Fabrics, where a very realistic and demanding sense of what is going on coexists with a very open and adaptable mentality, capable of taking on different situations and challenges. Furthermore, I have always been very aware of the fact that the company is a living entity, in a constant process of movement and renewal; nothing can stand still or come to a stop. We must therefore nourish that life, sharing dreams and enthusiasm with all of those who make up the dynamic and dedicated human team that constitutes the very heart of DOGI International Fabrics. I would like these lines to serve as a tribute to the team that, throughout these years, has made DOGI International Fabrics joint project, possible.”

—Josep Domènech Giménez, chairman

Domènech bought back Mercapital’s share of the company in 1996, bringing his ownership position past 89 percent, as the company prepared for a public offering. That came at the beginning of 1998, when the company listed on the Spanish stock exchange and became one of the most successful initial public offerings (IPOs) of the year. The IPO enabled the company to begin planning its assault on the global market. Following the IPO, Domènech’s share of the company dropped back to slightly more than 50 percent.

Dogi set out to conquer two specific markets: the NAFTA market, especially the United States, which represented one of the world’s largest markets, and the Asian markets, which had become the epicenter of the world textiles industry as manufacturers shifted production to lower-cost facilities in China, Malaysia, and elsewhere in the region. Whereas the company managed to establish a foothold in Asia, which represented revenues of some EUR 5 million, its entry into the North American market was hampered by high trade barriers—including a surtax of more than 22 percent on textile goods manufactured outside of the NAFTA zone.

Dogi overcame this obstacle in 1999 when it acquired a majority share of Textiles ATA, based in Tlatleplatl, north of Mexico City, in Mexico. The purchase gave Dogi a 55.5 percent stake in ATA (the company took complete control in January 2001) and access to the North American markets. By then, Dogi had added a new component to its operations, rounding out its core production of fabrics for the lingerie and swimwear markets with the launch of new fabric lines for the sportswear market. Meanwhile, the company’s operations were boosted when it reached a cooperation agreement with France’s Noy on, one of the European market’s leading swimwear producers.

In 2001, Dogi turned its attention more fully to the Asian market. The rising importance of Asian textiles producers in Europe, which had seen its textile production capacity drastically diminished during the 1990s, required Dogi to establish itself in those markets as well. The company’s opportunity came in April 2001 when the Sara Lee Corporation, long one of Dogi’s major customers, announced its intention to sell off its elastic textiles operations, part of its Courtaulds Textiles division.

For $43 million, Dogi acquired Courtaulds’ four elastic fabrics divisions, which included Penn Elastics and its factories in Germany, China, Thailand, and the Philippines. The acquisition also made Dogi the clear worldwide leader in the high-end elastic fabrics sector, and especially boosted its Asian operations, which then accounted for some 31 percent of the company’s total sales. The enlarged company, which changed its name to Dogi International Fabrics, was now able to expand its customer targets beyond specialty manufacturers, such as Sara Lee, Victoria’s Secret, and others, and target the private labels of major department stores and other retail groups.

As the company integrated its new operations, it was able to forecast a rise in revenues to as high as EUR 240 million by the end of 2002—nearly 45 percent of which was expected to come from outside of the European market. The company also began restructuring its manufacturing operations, refocusing its European production around its Spanish and German facilities. In September 2002 the company announced that it had reached an agreement to sell its Elastelle manufacturing facility to French group Fontanille. Under terms of the sale, Dogi kept the Elastelle brand and commercial organization, as well as use of the Elastelle facility, until 2005. Dogi had completed its transformation from family-owned firm to international leader.

Principal Subsidiaries

Dogi International Fabrics, S.A.; Société Nouvelle Ellastelle; Dogi Holding, B.V. (Netherlands); Dogi Hong-Kong Limited; Textiles Ata, S.A. de C.V. (Mexico); Dogi UK; Seamfree Int (U.K.); Dogi USA Inc.; Courtaulds Textiles Holding GmbH; Penn Elastic GmbH; Penn Italia s.r.L.; Penn Fabrics Jiangsu Co. Ltd. (China); Penn Asia Co. Ltd (Thailand); Jareeporn Pranita Co. Ltd (Thailand; 50%); Laguna Realty Corporation (Philippines; 80%); Penn Philippines Inc.; Penn Philippines Export Inc.

Principal Competitors

Formosa Chemicals and Fibre Corp.; E.I. du Pont de Nemours and Co.; Asia Fiber PCL; Toray Industries Ine; DLH Industries Inc.; Owens Corning; InterTech Group Inc.; Milliken and Co.; Toyobo Company Ltd.; Collins and Aikman Products Co.; Springs Industries Inc.; Formosa Chemicals and Fibre Corp; Nisshinbo Industries Ine; Nam Liong Enterprise Company Ltd.; Beaulieu of America Inc.; Tulsyan NEC Ltd.; Burlington Industries Inc.; Midland Plastics Ine; Interface Inc.; Wellman Inc.; Nitto Boseki Company Ltd.; Pillowtex Corporation; Hexcel Corporation.

Key Dates:

1954:: Josep Domènech Giménez establishes a textile cooperative based around his family’s weaving shop in Barcelona and then takes control of the cooperative, giving it the name Dogi.
1962:: Dogi invests in dying and fixing machinery for elastic fabrics.
1970s:: The company expands its industrial capacity, including adding Lycra-based fabrics production; Dogi becomes the Spanish leader for elastic fabrics.
1992:: Domènech sells a share of the company to Mercapital as a first step in a new internationally oriented growth strategy.
1993:: Richard Rechter is hired as managing director to lead the internationalization of the company’s sales.
1995:: The company acquires Elastelle of France, giving it the leading share in France, which makes Dogi the leading elastic fabrics producer in Europe.
1996:: Domènech buys back its shares from Mercapital.
1998:: Dogi goes public on the Spanish stock exchange, becoming the most successful IPO of the year.
1999:: Dogi acquires 55.5 percent of Textiles ATA of Mexico, giving the company entry into the NAFTA market.
2001:: The company buys up the rest of Textiles ATA, and then acquires the Penn Elastics division from Sara Lee’s Courtaulds Textiles division, making Dogi the world leader in elastic fabrics.
2002:: Dogi announces a EUR 24 million investment and expansion program for Asia; the company sells its Elastelle factory to Fontanille.