Along the path towards a new ‘normal’, increases in the prices of raw materials have a heavy impact.
LETTER
TO STAKEHOLDERS
The very sharp rises in raw materials and in energy, pulp and transport prices particularly, together with the markets’ struggle to return to ‘normal’, also as a result of the spread of new Covid-19 variants, have had a significant impact on the Sofidel Group's production cost structure and margins in 2021. The situation worsened during the second half of the year, when the price of natural gas reached very high levels in Europe, also due to the geopolitical crisis involving Ukraine. At the same time, the tissue market, which saw a sharp rise in sales in the retail channel and a strong fall in the Away-from-Home channel in 2020, has undergone a gradual, albeit slow, rebalancing of the situation.
In this scenario, Sofidel has worked at various levels to limit the impact of increases in production costs and to strengthen its competitiveness in the medium to long term. In early spring, and then again in the fall, the Group asked customers for price adjustments on its products. In the U.S., the increased production capacity available (at full capacity for the entire year for the very first time) and the improved geographical coverage and logistics have enabled Sofidel to strengthen its relationship with some of the major operators in large-scale retail distribution and to launch, with Nicky, the first Sofidel consumer brand in that country.
The North American market has proven to be the fastest growing market and the one where the Group, focusing on innovation and ‘sustainable hygiene’, expects the greatest growth and is considering further investments in new production capacity.
Sofidel continued to consolidate its market shares in Europe, where the average growth rate of the tissue market in Western countries remained slightly above 1% per year. Key points include:
- new investments in advertising (mainly digital);
- the launch of new products designed for more specific hygiene needs (Regina Fast & Clean, Regina disposable towels, Regina Power, Nicky Pour Elle);
- the strengthening of the relationship with large-scale retail customers to offer not only the best price, but also the best value;
- work to develop the brand presence and penetration in markets such as Spain, France, Germany and Belgium;
- continuous focus on updating and development of production technologies and the promotion of the culture of innovation.
Overall, the sales trend closed 2021 with a recovery in volumes, recorded particularly in the second half of the year, and especially in the Away-from-Home channel where Sofidel is planning to grow.
On the energy front, which is experiencing a moment of profound transformation globally, Sofidel has launched a new strategic phase in its procurement policy; in pursuing its path towards the decarbonization of the economy, the Group is committed to the purchase and self-production of electricity from renewable sources, generated by newly built plants under long-term supply agreements. This is the nature of the agreements we have already signed in Italy with RWE Renewables for the supply of wind energy and, in Sweden at the Kisa production site, with Meva Energy for the construction of a renewable gas production plant (syngas produced from woody biomass from the local supply chain), the first plant of this type in the world in the paper industry.
This multi-option approach will be implemented gradually, according to the national climate, technical and legislative contexts, in the other countries where the Group operates.
Sofidel has also increased its commitment to protect forests, preserve biodiversity and help protect the rights of local communities that depend on them by being one of the first companies in the world to join the ‘Forests Forward’ platform launched internationally by the WWF. Also on the subject of environmental protection, Sofidel America has partnered with Ocean Conservancy to protect ocean ecosystems. We should also highlight Sofidel’s inclusion in CDP’s 2021 A List for combating climate change and the Platinum rating awarded by EcoVadis for its approach to sustainability. A noteworthy activity supplier engagement activity involved the promotion of a common commitment to sustainable development is the new edition – in virtual form, after a two-year interruption – of the Sofidel Suppliers Sustainability Award (3SAward), the recognition that the Group gives to suppliers who stand out for environmental and social sustainability actions.
The projects concerned a number of hospitals in the areas where our plants are located, families in difficulty – identified through collaboration with public bodies and non-governmental organizations – and sectors particularly affected by lockdown periods, such as the catering industry.
Also with regard to our commitment to responsible development, our targets for reducing greenhouse gas emissions by 2030 were approved by the Science Based Targets initiative (SBTi).
Sofidel believes in measuring sustainability performance and sharing the actual impacts it has on the value creation process, which is why it intends to boost its investment in sustainability ratings (ESG ratings). The key environmental sustainability objectives for 2030 have been confirmed: 40% reduction in Scope 1, 2 and Scope 3 CO2 emissions related to its suppliers' pulp production activities compared to base year 2018; 24% reduction in Scope 3 CO2 emissions per ton of paper compared to base year 2018; 50% reduction in the impact of conventional plastic in production compared to 2013.
The size that the Group has reached in terms of economic volumes and geographical presence has also led to the decision to bolster the governance of the company by introducing external directors in the Board for the first time, and completing the generational change at the top of the company where Edilio Stefani has taken over as Chairman from his father Emi Stefani, who co-founded the company with Giuseppe Lazzareschi.
The year ended amid contradictory signals. On the one hand, in the international economic context several countries showed significant signs of economic recovery. On the other hand, uncertainties continued due to the pandemic, the extremely alarming conditions - especially in Europe - of the energy market, and the inflationary pressures that cannot fail to cause concern, also because of the possible impact on price dynamics and the related social effects on large segments of the population already strained by the Covid-19 emergency.
Within this context, in confirming its three fundamental development axes – ecological transition, technological and digital transformation, inclusion and social cohesion – Sofidel will work in 2022 to safeguard its margins, strengthen its competitive position (particularly in the U.S.) and implement, together with all its stakeholders, its responsible development policies for the creation of long-term shared added value.
LIVING
FOR A HEALTHIER PLANET
FOR INTEGRITY AND RESPECT
Edilio Stefani
Presidente Sofidel
Luigi Lazzareschi
AD Sofidel
“OUR DEVELOPMENT PATH IS ORIENTED ALONG THREE
FUNDAMENTAL AXES: ECOLOGICAL TRANSITION, TECHNOLOGICAL
AND DIGITAL TRANSFORMATION, INCLUSION AND SOCIAL COHESION.”