Outlook for Group economic and financial performance

Performance of the world economy

Global growth remained subdued during 2019. International trade expanded again in the third quarter. GDP in the United States and Japan grew at rates similar to those of the previous period; in the United Kingdom it picked up, while in China economic activity slowed in the summer months, but the most recent indicators point to a stabilisation. Growth fell more sharply in India, and remained modest in Russia and Brazil. Risks to global growth remain downward; the likelihood of an escalation in trade tensions between the US and China has diminished; geopolitical tensions, particularly between the US and Iran, are on the rise; and fears remain that the Chinese economy may slow down more markedly than expected.

Economic activity in the euro area was held back by weakness in the manufacturing sector; in the third quarter GDP growth remained at 0.2%, in line with the previous period. Economic activity was sustained by domestic demand and in particular by consumption, which strengthened thanks to positive trends in employment. The weakness was concentrated in the industrial sector, where activity contracted again in the summer months, with a particularly marked decline in Germany; value added in the services sector grew both across the area and in the three largest economies. There is still a risk that, if prolonged, the weakness of the industrial sector will be transmitted to the service sector. In the December Eurosystem projections, GDP growth in 2019 is estimated at 1.2%, falling to 1.1% in 2020 and rising to 1.4% in the following two years. Compared to what was predicted in September, the growth projection was revised upwards by a tenth of a point in 2019 and downwards by a tenth in 2020. At its meeting on 12 December, the Governing Council of the ECB confirmed the monetary policy stance introduced in September: official rates will remain at or below current levels until the inflation outlook reaches a stable level close to 2%.

In Italy, GDP grew slightly in the third quarter and, on the basis of the available information, will have remained almost stationary in the fourth quarter, continuing to suffer mainly from the weakness of the manufacturing sector; on the basis of these estimates, it can be estimated that GDP growth in 2019 is about 0.2%.

The budget manoeuvre for the three-year period 2020-2022, approved last December by the Italian Parliament, increases the deficit by 0.7 percentage points of GDP on average per year compared to trend values; in the Government's programmes, the incidence of net borrowing and debt on GDP, after stabilisation in 2020, would be reduced in the following two years. Specifically for Italy, GDP is expected to increase by 0.5% in 2020, 0.9% in 2021 and 1.1% in 2022.

The activity would be supported both by the gradual recovery of international trade and the moderate expansion of domestic demand. While suffering from persistent uncertainty, investment would be boosted by a progressive recovery in global demand prospects and looser financing conditions.

(Source: Economic Bulletin, Bank of Italy, Eurosystem, no. 1/2020)

Group economic and financial performance

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

Operating costs

During 2019, the Group pursued its investment policies, concentrating the majority of expenditure on strengthening the production capacity of the Circleville, Ohio plant, which was started up in 2018, and on completing the integrated production site in Inola, Oklahoma.

In Oklahoma, production of the finished product began in mid-2019 with the use of the new machines installed and those already in use at the temporary site in Tulsa.

In addition, the first continuous machine was started up in January 2020 and the second continuous machine is scheduled to be started up by the summer of 2020.

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.

Inevitably, operating costs are currently burdened by higher costs for:

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

Cellulose and energy

The cost of cellulose, the main material for the production cycle, which had peaked at the end of 2018, began to decrease in early 2019. In the end, the average reduction compared to the previous year was 12%. At the beginning of the year, following the start-up of the new paper mills (Poland, Spain, Ohio), the cost of energy was higher than in the second half of 2019, when plant efficiency also optimised energy consumption.

Furthermore, during 2019 the cost of energy commodities dropped sharply, pushed down by a mild winter and high stocks of natural gas, the return to production of several French nuclear power plants and the continuous growth in the production of electricity from renewable sources.

Increasing imports of shale gas from the United States and Australia and the stabilization of CO2 prices have also contributed to the fall in prices.


The presence of its production sites in the main outlet markets continues to enable the Group to achieve greater production integration and a consequent reduction in logistics costs.

In fact, the Group saw a significant reduction in the impact of transport costs coinciding with the start-up of the Circleville site in Ohio at the end of 2018. During 2019, in fact, levels of cost impact in the USA came down to the same level as in Europe, in spite of the inefficiencies still present due to the start-up phase of the plant in Oklahoma


Taking advantage of the synergies owing to its size, the Group continues 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, overheads remained almost unchanged from the previous year. For the plants in the US, the growth in fixed costs, aimed at maintaining the quantitative and qualitative performance of the products and services offered, is clearly linked to the new investments in Ohio and Oklahoma.

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