Group president’s overview

KWH Group invests heavily in sustainable development

As expected, the first half of 2023 was challenging. However, in the latter part of the year we started to observe a gradual recovery in our manufacturing units, while an increase in volume in the logistics sector was slow to materialise.

Europe was affected politically by the ongoing war in Ukraine and concerns about a potential protracted new conflict in the Middle East. During the summer, the continent also experienced the first serious consequences of climate change, in the form of extreme heat, forest fires, heavy rainfall and flooding.

The US economy, which is the largest in the world, is expected to decelerate gently and it is predicted that the Federal Reserve (Fed) will start cutting its key interest rate in 2024. However, the political uncertainty surrounding the upcoming presidential election is causing turmoil in markets around the world.

In addition, there is a risk of the trade dispute with China escalating, and of the US returning to a more isolated position, which could mean that cooperation with Europe and NATO assumes lower priority. With its heavy reliance on foreign trade, Europe would be seriously affected by a potential trade war. As the KWH Group cannot influence global events, we have to focus on adapting our activities to the current situation.

Kjell Antus.During the past year, the entire shareholding in the joint venture Uponor Infra Oy was divested to Uponor Oyj. Uponor Infra Oy was established in 2013 with the aim of restructuring the pipe system industry. The KWH Group started its pipe manufacturing around 70 years ago. The operations expanded and gradually became a main branch of the Group, in the KWH Pipe business division. The divestment thus marked the end of one of KWH’s former core operations.

The deal freed up resources that will be used to accelerate growth and strengthen the competitiveness of our wholly owned companies. In addition, some of these resources will be used to diversify investments into new areas with future growth potential.

Despite a difficult operating environment with declining demand, we still managed to maintain our market positions, although we saw volume reductions in all our business divisions. Sales decreased marginally by 1.3% to EUR 610.8 million compared to the previous year. Operating profit was EUR 67.3 million, slightly lower than in the previous year. However, we continued our high rate of investment for the future, with total investments reaching EUR 85.7 million.

Our commitment to sustainability continues to be intense and extensive. We have improved our monitoring and reporting systems to make the process more efficient and to ensure the reliability of our sustainability reporting. The aim of these measures is to ensure a sustainable future for our business areas and to show our stakeholders that we focus on responsibility, long-term thinking and sustainability in our operations.

Our strategy is to be a committed, long-term owner that helps create value in our business areas and develop successful structures. It is essential that we embed sustainability thinking throughout the group to create lasting value in our companies over time. Promoting sustainable business models is essential to mitigate the effects of climate change and manage its consequences, as well as to ensure a fair and democratic society.

Mirka continues to lead the way for the entire abrasives industry by initiating the construction of an innovative new factory for circular abrasive grain production. The investment will reduce Mirka’s carbon footprint by around 5,000 tonnes, and the first circular sanding products are planned to be launched in 2026. To support the ambitious development work towards a greener future, Business Finland has awarded Mirka co-financing of EUR 5.89 million for this project. The facility is designed to reuse industrial waste streams and abrasive waste from both manufacturing and end use to create new abrasive grains.

Looking ahead to 2024, we expect cautious economic recovery, characterised by a stable growth rate and unchanged profit levels. Despite the current market uncertainty, we have taken important decisions and launched several major investment projects, which are expected to be fully implemented in 2025 and 2026.

Kjell Antus
Group President, CEO