Annual review 2021: Kiilto Group
2021 was marked by difficulties related to raw materials and the ongoing COVID pandemic, as well as very high industrial demand following lower demand in the previous year. The year went well for the Kiilto Group as a whole, and we achieved record turnover and record results.
Difficulties in the global availability of raw materials reflected in raw material prices, which rose very rapidly in the spring and remained high throughout the year. Due to the difficulties, many of our major raw material suppliers invoked the force majeure clause in our agreements with them. Our order-supply chain performed excellently in the difficult circumstances. We were able to keep the factories running and our supply security remained near normal levels.
Our industrial adhesives and fireproofing business performed well, driven by high demand. Growth in volume in our industrial customer segments was particularly strong in Poland, the Baltic countries, and Russia. Of the customer segments, we saw the most growth in the woodworking sector, which grew exceptionally in 2020, despite a tough year in terms of industrial demand. We also won significant new customers; in particular with green technology solutions, as was in line with our strategy. We made significant investments, and decided on new future investments at the Lempäälä chemical plant to support our future growth in the industrial adhesives and fire retardant business.
The start of the year was difficult for the construction business area, but demand improved towards the end of the year, and in the fourth quarter we achieved rapid growth. At the beginning of the year, we integrated our Finnish Floor as a service concept partner KPK into our operations, and in the spring we integrated the Forssa dry products factory – part of the same concept – into our Finnish construction operations. Due to the initialization costs of the new business concept and higher raw materials costs, our operating profit in our construction business area decreased slightly from the previous year. In euro terms, the highest growth was achieved in Finland and Russia, and in the flooring sector among strategic customer segments.
In line with our environmental leadership goals, we continued Our Promise to the Environment programme. We researched and introduced alternatives to fossil-based and virgin raw materials and packaging, and also focused on the life cycle assessment of products. We are well on track to meeting our main goal of carbon neutrality by 2028. We successfully developed solutions based on green technology, and launched them for our industrial customers in particular. We are making rapid progress towards our goal of increasing sales of green technology solutions tenfold during our strategy period. Business operations collaborated closely with Kiilto Ventures to find future growth opportunities.
We are committed to being the leader in our industry when it comes to the customer experience. We aim to strengthen our customer partnerships by launching new combinations of products and services in all our strategic customer segments. We built a strong foundation for these future business operations with an external partner. We created internal process descriptions of the range of solutions we currently offer, a solution development process, and a team of solution business ambassadors. We continued to develop Kiilto Way, our international sales concept, as well as developing audits among our operating countries. Our number one measure of customer experience, the net promoter score (NPS), developed positively, and we ended the year with an excellent score of 78.
We invested heavily in all aspects of our Data Driven Kiilto project. We strengthened our management team with the addition of the CIO of our parent company. We modernised and internationalised the processes and tools of the order-supply chain, and made investments in line with the Smart factory strategy. We renewed our customer relationship management tools and began systematic market intelligence work. We also invested in the use of customer data and sensor technology.
The pandemic has put a strain on staff well-being. Our COVID working group did a great job making sure that our guidelines for dealing with the crisis were kept up to date, and that a good standard of occupational health and safety was maintained. We aim to promote staff well-being and improve working conditions in line with our well-being at work programme, and by paying particular attention to challenges that have come to light through staff surveys. We drew up hybrid working guidelines for working once the pandemic has passed. Late in the year, we launched our renewed international staff training programmes, ProWay and Highway. We introduced changes to the working methods of the management group, with a clear increase in future-focused work.
Annual review 2021: KiiltoClean Group
After a completely exceptional year, we entered 2021 with considerable unease. Due to the unprecedentedly uncertain outlook it was extremely difficult to set expectations for the year. The effects of the coronavirus pandemic on sales varied throughout the year, in line with the changes caused by the development of the pandemic.
The financial targets for the year were not achieved. In terms of sales, the year was the second best in our history. In terms of the result, on the other hand, inventory management proved to be particularly difficult. During 2020 and from the beginning of 2021, procurement was based on volume forecasting in order to be able to maintain delivery capacity. In the end, actual demand did not meet our expectations.
The year was also tough in terms of the supply chain. Demand fluctuated rapidly, and the availability of raw materials and packaging materials was at times lower than normal. In addition, raw material price increases were substantial during the year, and this trend is continuing.
We made excellent progress in further improving the customer experience during the year. Our net promoter score (NPS), measured continuously, rose a great deal, from 67.8 in 2020 to 81. The customer survey on the professional hygiene business received good feedback and, in an exceptional development, our convergent development across countries was acknowledged in the feedback. This is a very encouraging indication of the systematic nature and effectiveness of the work done. In the Factum consumer business customer survey carried out in Finland, we came first in our peer group for the first time, thanks to our persistent and excellent efforts.
In line with our growth targets, on 1 February 2021 we acquired Svenska Diskbolaget Ab as part of the KiiltoClean group. This acquisition contributes to meeting our goal of expansion in the Foodservice category, while providing the technological know-how to manufacture solid dishwashing detergents and their dispensers. An extensive integration project was launched after the transaction, with the aim of integrating Svenska Diskbolaget into KiiltoClean Ab. The integration project was mainly carried out remotely, which caused additional challenges in the process. The merger took place in early November.
Remote working continued to be the dominant form of work for most of the year, with almost no travel. It was a breath of fresh air to be able to travel internationally for a while late in the year and meet colleagues, after a break of a year and a half. We certainly still haven’t seen all the longer-term challenges caused by remote working. There are many good things about working remotely, but face-to-face interactions are also essential to interpersonal communication. For this reason, we have developed a set of hybrid working guidelines that make onsite work the main way of working. We can achieve this if the measures imposed to combat the pandemic allow for the remote working recommendations to be discontinued.
2022 will mark the start of the third year of the pandemic, and hopefully the last. We start this year with a mission to grow. Our aim is to make particular progress in the Health care, Food industry and Foodservice categories. We are pursuing these goals through systematic work and targeting of resources. The coronavirus crisis continues to create considerable uncertainty about changes in overall demand, which remain exceptionally difficult to forecast.