Outlook for Group economic and financial performance

Performance of the world economy

In the last two years - 2017 and 2018 - the world economy has grown by 3.7% each year, net of inflation, with advanced economies - led by the United States - recording +2.5% and emerging economies close to +5%, supported by the persistent performance of countries in South-East Asia, China and above all India. The global economy started 2018 with high growth rates and then stopped at the beginning of the summer when, given the geopolitical uncertainties and the vulnerability recorded in emerging markets, investors’ confidence in the economic outlook dropped, giving way to uncertainty that led to shocks in the financial markets during the last months of the year.

One of the reasons for this slowdown was the trade war that characterised relations between the top two world economies: the tariffs levied by the United States in July on exports of Chinese products and the countermeasures approved by China on imports of products made in the United States as trade retaliation.

Despite the problems associated with trade tensions and falling global manufacturing output, the US economy grew faster in 2018 than in the last decade thanks to the cuts introduced by the tax reform, which reduced corporate taxes and increased public spending, stimulating demand but also raising the US deficit to record levels.

In the euro area, growth weakened in the third quarter of 2018, recording an increase of 0.2% over the previous period, following growth of 0.4% in the first two quarters; recent data continue to indicate a weaker trend than expected due to the slowdown in foreign demand, combined with specific factors at country and sector level.

In general, the global development outlook depends mainly on the outcome of the negotiations between the US and China and on the possible exacerbation of financial tensions in emerging countries, as well as the outcome of the Brexit negotiations.

(Sources: Periodic Bulletins Bank of Italy, European Central Bank and Il Sole24Ore)

Group economic and financial performance

The main aspects relating to the economic and financial performance of the Group are as follows:

Operating costs

In 2018, the Group pursued its investment policies in both Europe and the USA, expanding its existing sites in Poland and Spain and building two new production plants: one in Ohio, inaugurated in October, and the other in Oklahoma, which will be completed during 2020.

Inevitably, the operating costs were burdened by higher costs for:

  • staff recruited well in advance of plant start-up for the necessary on-site training;
  • production plant start-up costs;
  • staff training;
  • procurement costs of materials for the reorganisation of logistics;
  • distribution costs of finished products for the reorganisation of logistics.

Once completed, the investments will guarantee the Group high levels of effectiveness and efficiency that will last over time along with highly competitive operating costs.

Cellulose and energy

The price of cellulose, the main material for the production cycle, rose continuously throughout the year just ended, reaching historical records for the sector, with the euro-dollar exchange rate contributing to the increased purchase cost in the latter part of the year. The Group has continued to pursue its objectives by using cellulose, allowing it to maximise the efficiency and quality of its products.

As regards energy supply, 2018 was characterised by a significant increase in prices which, in conjunction with the startup phase of investments in America and Europe, led to an increase in operating costs.

The rise in the price of natural gas was influenced by:

  1. the increase in the price of oil and the particularly harsh winter that coincided with a low level of stockpiles;
  2. the low availability of nuclear energy in France with the consequent increased demand for gas from thermoelectric power plants;
  3. the low inflow to Europe of LNG (Liquefied Natural Gas) which, owing to higher prices, was diverted to the Asian market.

The price of electricity has risen as a result of rising oil, gas and coal prices and the dramatic rise in the price of CO2 emission allowances.

As in previous years, the Group has pursued a policy of carefully selecting suppliers with a high degree of reliability to ensure stability in supplies, has adopted measures to mitigate the effects of price fluctuations and has constantly monitored the markets to exploit any opportunities in terms of economic benefits. In order to reduce consumption, the Group carries out continuous maintenance and updates on its machinery and plant, taking into account the technical standards in terms of energy and the environment.


The presence of its production sites in the main outlet markets will enable the Group to achieve greater production integration and a consequent reduction in logistics costs. However, pending the entry into production of the new plants, the higher volumes acquired led, in the middle of the year, to an increase in transport costs and then a sharp decline in the final months of 2018, coinciding with the start-up phase of the Circleville site in Ohio.


Taking advantage of the synergies owing to its size, the Group has considered it necessary to pursue a path aimed at increasing the effectiveness and efficiency of its organisational structure in terms of optimising control of the processes and resources used. In Europe, on a like-for-like basis, overhead costs were reduced by about 12% compared to the previous year, while keeping quantitative and qualitative performance unchanged.

This policy of strengthening competitiveness has led to: the divestment of the Horwich plant in the United Kingdom, to be completed by March 2019; the closure of the logistics company Thüringer Hygiene Papier Logistik GmbH (THPL) in Germany; the start of winding up of Sofidel Turkey in Turkey, which will be completed by mid-2019; and a greater focus on cost management, which has led to a reduction of some of the non-strategic production costs. These are structural operations to increase economic efficiency designed to produce significant savings over time.

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