Annual review 2020: Kiilto Group
Kiilto’s first quarter of 2020 was very strong. Demand was strong in our market area in both the construction and industrial business areas There were also difficulties, of course. For one thing, the industrial action in the forest industry in Finland at the beginning of the year was reflected in a drop in industrial sales.
In March, we began to worry about the effects of the Covid-19 virus on our health, our daily lives and our business operations. The second quarter saw a rapid slowdown in demand from industrial customers throughout our market area. Turnover in the industrial sector fell from the previous year. Nonetheless, we worked extremely well with customers and won new customers, thanks to our green technology. Our unique biodegradable hot melt adhesive also helped us to profile ourselves as environmentally conscious in our industry.
The disruptions caused by the Covid-19 pandemic were also reflected in the construction business. The operation of our distribution channels faced more difficulties due to the crisis restrictions on the opening of businesses imposed by the authorities in many of the countries we operate in. With the exception of Russia, however, work largely continued on construction sites, and the housing sector remained active.
Thanks to a good first and last quarter, construction sales eventually ended up a little bit higher than in the previous year. Our growth projects progressed rapidly, although the fact that the Russian rouble weakened against the euro was a setback. Despite this, our Russian company did well and achieved profitability target.
Of the large group companies in terms of sales, we did best in Sweden, where we reached the budget in terms of turnover. The Estonian, Latvian and Lithuanian companies all had a great year both in terms of profitability and sales. Due to the savings measures taken in response to the exceptionally low level of raw material prices, the group’s relative profitability was better than budgeted.
Good demand from the Finnish construction business helped a lot even on Group level. Ultimately, the effect of the Covid-19 on the group’s figures was that it depleted our growth for 2020. Turnover in euros terms was on the same level as in the previous year.
The Covid-19 pandemic was naturally a difficult time for our staff, and we made efforts to help alleviate the stress through various virtual gatherings, among other things. The renovation of the Lempäälä head office premises fortunately occurred at a time when we were working remotely in any case. We avoided infection clusters in all the countries we operate in, and kept our supply chains running. The Covid-19 working group was very successful in its work. At the same time, we provided training in remote working and launched customer webinars in many of our operating countries.
We have acquired know-how and equipment for remote monitoring of product trials at customer premises. We also improved our internal communication. Our promise to the environment inspired us all, and significantly influenced work. As is typical of us, our deeds spoke for themselves. We implemented numerous development measures in all four areas of the promise. The topic also speaks volumes to our customers, and our environmental promise of a carbon-neutral Kiilto by 2028 was received very well.
At the end of the year, the Swedish companies TM Progress AB and Kiilto AB were merged into a new company, Kiilto AB. We paved the way for the merger with an integration project that started in the spring. The new company is a significantly stronger local player in Sweden in terms of resources and supply.
We made progress in Finland on the floor-as-a-service concept implemented in accordance with the Swedish operating model. We focused on the development of our partnership with our logistics partner KPK, the acquisition of a factory in Forssa, and active sales work. The product portfolio project, which began in the previous year with groundwork and a focus on analysing the volume and profitability of the product range of the Finnish factories, was implemented together with external partner. It has progressed to the point that we can now work independently with the tools created. Based on the same refinement of production cost accounting, a comprehensive pricing reform of subsidiary sales was planned for execution 2021.
The strategy work we began in the spring was a major effort, with numerous remote workshops. The work involved a wide range of senior and middle management of our companies, and resulted in a commitment and pathway to double revenue by 2025, supported by designated strategic projects. We are achieving our goals by leading the market in customer experience and environmentally friendly solutions.
Annual review 2020: KiiltoClean Group
The Covid-19 pandemic brought strong growth in demand at the beginning of the year 2020. At that time, it was not yet possible to foresee what the overall year would look like. We started the year with two divestments: the Safety business and the Hungarian company. We were able to finalise these deals just before the Covid-19 pandemic took hold. From the beginning of March, the pandemic dominated the outlook virtually throughout the whole year, and to some extent this continues.
Compared to many other business, we were in a fortunate position. The Covid-19 crisis caused a completely exceptional increase in demand, especially for disinfection solutions. In just a few weeks, we switched to round-the-clock production in both Turku and Assens. We also started hand disinfectant production in Hankasalmi. In addition, we used external partners and created several new partnerships. We introduced new products and modified existing ones in order to meet demand even when there were problems with the availability of raw materials and packaging materials.
Despite all these efforts, though, we were unable to meet the overall market need. The situation eased off towards the autumn, but volumes remained high. At the same time, some customer sectors suffered from the restrictive measures, which led to negative developments in certain solution areas.
Financially, the year was excellent in terms of sales and earnings. The Covid-19 situation led to a major increase in the amount of remote working, among other things. Travel virtually came to a complete halt internationally from last March. In retrospect, it was fortunate that the CCS deal was concluded in early March 2019, as it allowed us to progress in the integration process by face-to-face meetings over the year. This provided a much better basis for managing the difficulties of the pandemic situation remotely as well.
Remote working has also led to challenges to the coping ability of staff. We have not yet seen all the consequences. Kiilto´s Covid-19 working group was set up in the spring 2020, and continues to operate. Internal communication was further improved in many ways by creating internal Covid-19 working groups and switching from quarterly to monthly information sessions. The rush and the number of meetings seemed to cause more stress for staff than before, and after the summer we first experimented with a period without meetings in the middle of the working day. We then adopted this practice for the longer term.
In 2020, we made progress in line with our strategy as far as possible. We promoted and monitored Top 5 priority projects during the year. In Scandinavia, the growth plan for professional cleaning and kitchen solutions suffered severely from the effects of the pandemic. Nonetheless, we also made progress and laid groundwork that will certainly pay off in the future. The previous strategy period ended at the end of 2020, and last year we did extensive strategy work using the new play-to-win model. This was new to us as a process. We received outside help with implementing it, especially regarding the facilitation of remote workshops. At the same time, we learned new operating models and use of new tools.
As a result of the strategy work, we have a new strategy for the 2021–2025 period, a modified vision, and winning aspiration. We made clear choices about our focus areas and how we are going to succeed in them, as well as in a few areas that we are actively trying to discontinue. This is something that has not been easy for us so far.
The pursuit of growth will remain strong in the new strategy period as well. In addition, we have made the customer experience and environmental leadership key goals guiding our operations. By 2021, we were heading forward in a very uncertain situation. The effects of the Covid-19 crisis are still clearly visible, and demand has been strong in Scandinavia compared to the beginning of 2020. At the same time, the outlook for Finland, Russia and the Baltic countries is very uncertain. Our growth target for 2021 is strong, and we are moving towards it at full speed. In line with this goal, we already made this year’s first acquisition by acquiring Svenska Diskbolaget Ab. The deal was concluded on 1 February 2021. It strengthens our position in serving customers of the food service segment in Sweden, while ensuring that the production of solid dishwashing detergents has transferred to our control. We have been working together for years, so we are in a good position to continue to increase our market share together.
At the same time, we are in the process of relocating production to new, larger premises in Russia. This will increase the efficiency of our manufacturing operations in the country and provide room for future growth.