THE C-LEVEL INTERVIEW

10 questions to Michele Bianchi, CEO of RDM Group - Reno De Medici

Amidst the turbulent moments the global economy is going through, it takes some wisdom for a CEO to run an international company and keep a clear vision of the long-term strategy. At the head of the Milan based cartonboard producer RDM Group since 2016, Michele Bianchi certainly holds that wisdom. He explains here how the group has been expanding recently, how he is coping with the pandemic, and what his prospects are. 1. How many mills do you operate globally and what is your production/sales volume?

MICHELE BIANCHI: We can boast a strategic presence at international level thanks to our 7 cartonboard mills - 3 of which in Italy, 2 in France, 1 in Germany and 1 in Spain –, 2 specialized sheeting centres and sales offices that ensure idespread coverage across Europe, as well as sales all over the globe. This strategic network of production plants has led us to become the second largest European producer of coated recycled cartonboard, the largest in Italy, France and the Iberian Peninsula with 1.26 thousand tons produced annually. About Spain, on September 30th, RDM Group announced that its subsidiary RDM Barcelona Cartonboard S.A.U. has signed four preliminary agreements for the acquisition of 100% of the share capital of four companies incorporated in Spain. The deal covers the acquisition of one of the main European players of the coated chipboard industry, Papelera del Principado S.A. (“Paprinsa”), and three smaller companies operating in contiguous businesses based in the same site: Fergerdell S.L., Cogeneraciò del Pla S.A. and Ondupacart S.A.

Founded in 1977, Paprinsa operates in the recycled White Lined Chipboard (WLC) business. The company has both its headquarters and mill in Mollerussa, just 130 km from Barcelona and less than one hour from the plant of RDM Barcelona Cartonboard. It manufactures 120,000 tons of recycled chipboard, with a potential capacity of 140,000 tons. Over the past six years, Paprinsa has made significant investments for more than million in its plant. roduction includes a ide range of grades and grammages (from 180 to 550g).

Today, Paprinsa is the No. 2 chipboard producer in Spain, and the eighth WLC producer in Europe. The paper mill has a trim width of 4.8 meters, which will make it the widest plant in RDM Group, as it is one of the largest paper mills of this sector in Europe. By further exploiting this size, RDM Group can count on a potential increase in the factory’s production capacity from the current 140,000 tons a year to over 200,000 tons a year, in line with the other top plants today part of the Group. Ondupacart S.A. is a small corrugator manufacturer. Fergerdell S.L. is the real estate company that owns the 30,000 sqm area on which the two manufacturing companies stand. Cogeneraciò del Pla S.A. is the former cogeneration plant recently sold to Paprinsa. The company currently provides both plants with maintenance services.

2. How has it been evolving for the past 5 years?

MB: Since I joined RDM Group, we have undertaken a major transformation process, which included the definition of a clear vision that guides us in all our activities. Our ambition is to become the Partner of choice for all our main stakeholders, with three strategic goals in mind: provide product and service excellence, optimise costs, and maximise stakeholder satisfaction. Since 2016, we have made this possible thanks to a growth process that has allowed us, on the one hand, to benefit from internal synergies and greater efficiencies in production and, on the other hand, to continue to grow through several acquisitions, as also demonstrated by the recent preliminary agreement for the acquisition of Papelera del Principado S.A. (“Paprinsa”).

3. What is your range of products and what are your main markets geographically? For what kind of use?

MB: The WLC (White Lined Chipboard) segment represents our core business and accounts for 82% of our consolidated turnover. Then, through La Rochette Mill, we also produce folding virgin fibre cartonboard BB olding Bo Board and, through Ovaro Mill, some specialty products (OG GK - UD – UT), well suited to luxury packaging and the publishing market. Our cartonboard is mainly used as primary and secondary packaging for consumer goods: it can indeed become packaging for food or medicine, for household appliances, accessories, cosmetics and personal care products. It can also be used in the publishing sector in order to create sales displays or for toys in high performance printed form.

In South Europe we are market leaders: we generate about 28% and 58% of our turnover, respectively, in Italy and in the other European Countries, while the remaining 13% is represented by Extra-EU countries, among which South America, Turkey, Saudi Arabia…

«In South Europe we are market leaders». «Our ambition is to become the Partner of choice for all our main stakeholders».

«Fibre-based packaging has played a vital role in fostering the hygienic and efficient movement of products across Europe». 4. COVID-19 has been a real game changer. Can you already perceive some long-term effects on your business and organisation?

MB: I like to think that uncertain times are precisely those in which we have to prove our abilities and strengths... and in this regard the Covid-19 pandemic has been a real testing ground for the Group. Overall, we’ve promptly reacted in order to minimize the risks related to the pandemic, by introducing precautionary measures for all our sites, and to guarantee the fulfilment of the orders received from customers. In fact, our business is an integrated part of the so-called essential materials supply chain, and this is the reason why we have never halted our production plants; on the contrary, we have guaranteed the production continuity in order to meet the increasing market demands for food, medicines and hygiene products, that lockdown generated.

5. For which segments do you see the best prospects at the moment?

MB: uring the pandemic, the value of fibre based materials has been recognized by many governments, retailers and brand-owners around the world as a key element to keep citizens supplied with essential products. In particular, fi re based packaging has played a vital role in fostering the h gienic and efficient movement of products across Europe: today, consumers perceive packaged products as safer, more hygienic and durable. We are therefore optimistic that the food sector, which now accounts for almost 60% of our sales, will remain the leading one, followed by pharmaceuticals and cleanings. Moreover, we expect good prospects in the electronics sector as well.

6. E-commerce has been a driver for the containerboard producers over the past decade. How heavy is this sector for you and is the demand still growing despite the economic crisis?

ness driver in recent years, and now the pandemic has fostered this trend. Many companies around the world are implementing smart-working on a permanent basis and this will impact consumption and purchasing patterns: for example, work from home creates demand for more in-home cooking as well as e-commerce. Indeed, during the lockdown, many have experienced the benefits of buying goods and products online and I’m sure this trend is only just beginning. his can benefit us.

7. What are your current preoccupations and what could make your life easier at the moment?

MB: The main concerns are certainly related to the pandemic. If Covid-19 cases increase in Europe, the runnability of our facilities becomes more challenging. Our production processes run 24 hours a day, 7 days a week: as well as running production with the greatest attention to health and hygiene dispositions, we have to make sure we have enough staff to cover all shifts. Moreover, if during the crisis the leading sectors were food and pharma, we may have to deal with the downsizing of fashion and luxury markets that we serve overall with one of our mill.

8. Sustainability and competitive prices are efinite a ue ri ers for consumers these days, and thus your clients by extension. How do you respond to these requirements?

MB: According to many studies, consumers prefer and appreciate paper and cartonboard packaging: this happens because it is practical (lightweight and easy to open and close), it is perceived as safer and durable, but also because it is based on natural and renewable raw materials. Therefore, it is clear that consumers are willing to pay more to receive a 100% sustainable product. Anyway, there aren’t many industries around that can aspire to becoming genuinely sustainable. The paper and board industry, however, is one of them: our products are renewable, recyclable and actually recycled. Besides, in a context where raw materials are considered as precious

resources, we constantly invest in engineering and technology upgrades to make our industrial processes more sustainable and efficient.

9. Are you maintaining your investment programme? If yes, can you specify?

MB: Yes, of course. In 2020 the expected capital expenditure is 23-25 million Euros, of which maintenance and health & Safety investments are 11-13 million Euros. Other important investments are energy efficiency, digitali ation, environment and quality. We remain committed to invest and keep updating our operations, actually we want to accelerate some of the key investments as we believe it is in time of crises that we need to remain strategic to target an even higher competitiveness after the “storm”.

. Do ou thin R D in fi re ase pro ucts is sufficient to ma e our industry a true alternative to fossil economy?

MB: R&D is an essential approach to meet the increasingly challenging market demands for sustainable and environmental-friendly materials and packaging. In recognition of this, we have recently created a department dedicated explicitly to Innovation and Sustainability. However, this is not the only way: RDM Group is an integrated part of a wider virtuous industry and we firmly believe that only by or ing together ith our suppliers and customers, we can lead to a real change. This is the reason why for example RDM Group joined 4Evergreen Alliance, which bring together the entire fibre based pac aging value chain, in order to raise awareness about the advantages of using cartonboard for packaging, and also supports the development of new packaging solutions through innovation and product design, as well as the development of appropriate recycling infrastructure and collection systems. But it is not the only initiative, we are actually involved in many other partnerships and strategic developments that will support us in positioning our product and company strongly in the future. «We constantly invest in engineering and technology upgrades».