Analysis: The energy crisis tests the resilience of Italian companies

• Dealing with the energy crisis holds the key to the economic outlook
• Bankers say firms are more resilient than credit given
• Italy has beaten expectations so far this year

MILAN (Reuters) – At a time when Italian media are just beginning to talk about the threat of winter gas rationing, Marco Cecchi has taken action and bottle-top maker Perriconi has supplied customers such as Coca-Cola, Heineken and Guinness. made it possible to continue.

Producing 35 billion bottle tops per year, mainly in Italy, but also in Egypt and China, Pelliconi has strengthened its production of energy-intensive semi-finished products, invested in solar panels, We commissioned a prototype of a new digital printer for sheets. I didn’t need a gas oven.

“When you run a business and you keep hearing news that your gas supply is in jeopardy, you have to do something. It’s not like you can scream or stamp your feet,” Checchi told Reuters.

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Like other Italian companies grappling with the energy crisis sparked by the war in Ukraine, Pelliconi’s electricity and gas costs have more than tripled this year’s sales, slashing the problems posed by rising steel prices. making it worse.

In some cases, we were able to pass almost two-thirds of the cost increase on to our customers, and we plan to raise prices further next year.

Higher prices helped Italy report a 16.2% increase in manufacturing sales in July on a calendar-adjusted basis, while volumes also increased by 1.7%. This roughly compares to Germany’s 0.8% annual decline.

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Italy, traditionally lagging among the eurozone’s largest economies, has seen a stronger post-pandemic recovery than France and Germany in terms of industrial output, according to Intesa Sanpaolo economist Paolo Mameli. have experienced

After better-than-expected growth in the first half of the year, the situation deteriorated rapidly, with the government now expecting Italy’s economy to contract in the third quarter and continue to contract until mid-2023.

Investors are having a hard time judging the depth of the recession that awaits the European economy and debt-laden Italy.

“The outlook for the eurozone remains unusually uncertain,” Goldman Sachs economists said.

Goldman expects the bloc’s economy to contract about 1% by the second quarter of next year, and resilient industrial activity could limit the decline to 0.2%, but a worst-case scenario He added that it could approach 3%.

According to UniCredit CEO Andrea Orcel, the coping strategies employed by companies like Bologna-based Pelliconi are factors in the equation that determine the ultimate outcome.

“Companies are adapting. It would be wrong to assume otherwise. Looking at clients, companies are reorganizing their value chains, logistics, everything,” he said at a recent labor conference. rice field.

“So far, households and businesses have proven more resilient than expected… the market has overlooked the fact that Italy continues to grow bigger than France and Germany. We are very concerned about Italy’s performance in the eurozone,” he added, noting that business deposits have increased 10% from pre-pandemic levels.

According to UniCredit, which finances corporate investments to increase renewable energy capacity, some customers in non-energy intensive sectors are self-sufficient to 30% to 40%, and in some cases 50%, of their electricity demand. It is said that it was generated.

Most companies are rushing to install solar panels, but others are more ambitious. Fastener maker SBE-Varvit has secured his 400 gas containers to be shipped to factories in northeastern Italy by January to offset the shortfall.

Do-it-yourself power

Even in devastated industries like ceramics that have been hit hard by rising energy prices, as well as the glass and paper sectors, high-end tile maker Italcer has completed two plants that combine heat and power generation. We expect to cover a quarter of our energy consumption if Under construction.

“Already in September 2021 there were warnings about what was to come,” Chief Executive Graziano Verdi told Reuters, adding that Italcer this year will see gas and electricity costs rise to 6,000. million euros, and accounted for 70% of manufacturing costs, up from the previous 20%, he added.

“We invested 10 million euros in building two cogeneration plants and saved 4 million euros this year,” he says, adding that Italcer has reduced the tile thickness from 10 mm to 8.5. He added that it saved another million euros.

“The market responded well, raising prices by 30-35%. The weaker euro certainly helped, as did government support measures.”

Outgoing Prime Minister Mario Draghi’s government has set aside €66 billion so far this year for tax cuts and subsidies to support energy-intensive businesses and poor households.

Italy’s business lobby, Confindustria, has warned of an “economic earthquake” and said the new government would struggle to offset the hit of energy prices to companies like Draghi, threatening Italy’s fragile finances. I made it through without hurting myself.

But others are more positive.

Veteran banker Corrado Passera says the crisis is making natural selection among firms and his digital lender Illicit (ILTY.MI) seeks acquisitions, or funding innovation and internalization projects He said he continues to face increasing demands.

Giuseppe Castagna, who heads Italy’s third-largest bank Banco BPM (BAMI.MI), recently said, “When I speak to business owners personally outside Confindustria, they have great confidence in their ability to respond. ‘ said.

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Reported by Valentina Za and Elvira Pollina.Editing: Keith Weir, Kirsten Donovan

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