Letter to Stakeholders

The scale and interconnection of the problems, starting with the energy crisis, have once again shown the importance of relying on strong relationships with our stakeholders to identify risks early, proactively deal with difficulties, and maximize the impact of interventions aimed at safeguarding production efficiency, promoting people’s well-being, and protecting the Planet.

This is what the Group has committed to do – on different levels and looking at both the short and medium to long-term – during the year.

Sofidel has constantly monitored its production cost structure to ensure product quality and safeguard continuity of supply for customers and consumers by repeatedly taking transparent and responsible action with customers, based on increases in the prices of energy goods and raw materials, to adjust the selling price of products to the increased production costs.

The operation was successfully pursued in both Europe and the United States. This, coupled with other factors, has allowed Sofidel to achieve positive economic results, with turnover rising to 2.8 bn (+34% over 2021) and an EBITDA of 13.94% despite the extremely difficult scenario, with constantly changing estimates and forecasts. These abovementioned factors included the international presence of the Group, its long-term energy supply contractual hedges, the interventions put in place by governments to combat high energy prices, the slowdown in energy commodity prices recorded in the last months of the year, and the fact that the United States – where the rise in energy prices has been more restrained – has been confirmed, by its turnover (26.7%), as the Group’s first market.

In markets, the strong inflationary pressure experienced in many countries has led consumers to implement defensive buying strategies, with an inevitable shift in focus toward products from retailer brands (Private Label or PL) and growth of the discount channel.

A situation that was reflected in sales performance, with the Brand line declining slightly and the PL line confirming last year’s satisfactory levels. Positive performance of the Away-from-Home line, which is back to pre-Covid levels, and that of e-commerce. In terms of volume, we must highlight the significant growth in sales in the United States, where the PL line is Sofidel’s flagship line. In terms of advertising investments, those activated in Italy and France at the end of the year on the Brand line (Regina and Le Trèfle brands) are significant.

On the sustainability front, work continued on ESG ratings to have the effective capacity to manage environmental, social and governance risks assessed and shared externally in an increasingly timely and transparent manner. In August, the award of the ‘Low Risk’ level in the ESG rating was obtained, carried out by Morningstar Sustainalytics (which placed the Group first in its reference industry globally); in December, the awarding of the EcoVadis Platinum Medal – Top 1% rating, the Leadership level (A-) in the CDP Climate Change 2022 report and the Leadership level (A-) in the CDP Forests 2022 report.

In the fight against climate change and the commitment to increase the use of energy from renewable sources, we should highlight the fact that in Italy, in May, one year after signing a contract with RWE Renewables for the long-term supply of energy from the Alcamo II onshore wind farm in Sicily, 30,000 metric tons of paper were produced – the equivalent of 150 million Rotoloni Regina rolls – using clean energy only, with a reduction of 15,000 tons of CO2 emissions into the atmosphere.

Still pursuing the goal of having 84% of purchased energy from renewable sources by 2030, two new long-term power supply (PPA) contracts were signed at the end of the year in Spain and Greece.

Two projects to safeguard and increase business know-how were also pursued. These included the launch of the ‘Sofidel Manufacturing System’ (SMS) with which the concepts of Lean Production were applied in the Group and the culture of continuous improvement was strengthened, through a multi-year journey involving 17 plants in 9 European countries, affecting 130 converting lines and training more than 2,000 people. And, on the subject of innovation, the activation of the ‘Sofidel 2030’ pilot project organized with the Polytechnic University of Milan and dedicated to promoting innovation throughout the company.

During the year, the Sofidel community was emotionally affected by the acute loss of Emi Stefani, co-founder and Chairman of the Group until March 2021, who passed away on 28 June. A figure whose entrepreneurial courage and work culture has continued and continues to be a point of reference in values and identity for all the people who are part of the Sofidel world.

To reinforce the sense of belonging and corporate identity, we celebrated three important anniversaries, three milestones that have contributed significantly to making Sofidel’s growth and development possible: the 25th anniversary of our presence in France; the 15th anniversary of our collaboration with WWF; and the 10th anniversary of our presence in the United States.

Overall, in 2022 Sofidel confirmed its ability to implement its ecological, social and digital transition strategy, which, carried out through dialog and collaboration with all its stakeholders, sees the Group increasingly working as a stakeholder company in its shared value creation process.

Long-term enabling factors are confirmed in this context: asset quality (with the availability of production facilities that are younger and perform better on average than those in the industry), geographic coverage (with the presence of plants close to outlet markets), sustainability (as a factor in cultural development and competitive growth), and digitalization (the impacts of digital transformation: from production processes to logistics, from customer experience to cyber security).

The war in Ukraine, uncertainty over energy and commodity prices, risks of possible gas supply disruptions, the struggle to control inflation, rising bank interest rates, widespread predictions of a generalized slowdown in economies, and potential aftermath related to the Covid-19 pandemic mean that people are looking at 2023 as a year which will still be characterized by uncertain and unstable conditions.

Against this economic and social backdrop, Sofidel’s attitude toward the future is one of caution and responsibility, with its objectives of substantial consolidation in Europe and confirmation of a stronger orientation toward production and market growth in the United States.

Ever mindful that the world is plural, a dense fabric of threads to be woven together.