The Italian ceramic machinery industry sees a contraction
After five years of record growth, the signs of a slowdown that had already emerged in 2018, intensified in 2019, leading to a 19.8% drop in revenues, falling to 1.73 million euros.
The Italian ceramic and brick machinery and equipment sector has returned to the turnover levels of 2013, closing 2019 with revenues of 1.73 billion euros. After five years of record growth that had seen Italian manufacturers reach a turnover of more than 2.2 billion euros, the signs of a slowdown that had already emerged the previous year intensified in 2019, leading to a 19.8% drop in volumes. This decline was a combined result of the expiry of the Industry 4.0 tax incentives in Italy and the slowdown in international construction sector investments.
Ten years on from the disastrous year 2009 when the sector abruptly lost more than 30% of its revenues, this niche segment of the Italian mechanical engineering industry, 73% of which is dependent on foreign markets, is now facing a second severe contraction. In particular, it suffered a more than one fifth decline in exports, which slumped by 20.4% to 1,262 million euros in 2019. Meanwhile, the decline in the Italian market amounted to -18.3%, corresponding to a domestic turnover of 468 million euros.
This photograph with its many shadows and just a few bright spots was captured by the 28th edition of the Statistical Survey conducted by the MECS - Acimac Research Department and unveiled at the annual meeting of the Italian Ceramic Machinery and Equipment Manufacturers’ Association, an association that currently represents 141 companies with 6,971 employees. One positive aspect is the fact that employment has remained stable, rising by one percentage point in 2019 despite the slump in turnover and the consolidation of the sector’s manufacturing structure. 70% of activities are concentrated along the Via Emilia, in particular around the Sassuolo ceramic tile district, while the provinces of Bologna, Modena and Reggio Emilia alone account for over 80% of the total employment and turnover of the sector, which despite the economic difficulties maintains its world leadership.
“From the indications at the end of 2018 we were already expecting a decline in volumes, although not of this magnitude, especially after the significant technological investments driven by the Industry 4.0 incentives,” said Acimac’s outgoing chairman Paolo Sassi. “The weakness of the global construction industry isn’t helping us and now we also have to deal with the effects of the Covid-19 emergency and the lockdown, which have impacted our manufacturing operations and disrupted world trade. We are counting on a rebound effect next year and in 2022.”
Exports have always been the sector’s main strength but in 2019 saw an even worse decline than in 2018, dropping by 20.4% year on year to reach 1,262 million euros, 73% of total turnover.
The European Union remains the Italian ceramic machinery industry’s most dependable market with a very small decline in sales (-0.9% on 2018) and has also confirmed its role as the top export destination with a 28.8% share of total exports (363.8 million euros).
And while exports to Greater China (China together with Hong Kong and Taiwan) fell by a half in the space of twelve months (at 63.5 million euros, the region dropped to eighth place in the market rankings), the rest of Asia (“others Asia”) climbed to second position with 186.7 million euros in exports (14.8% of the total) despite a 21% decrease compared to the previous year.
Africa rose to third place with 12.5% of total exports and a turnover of 157.7 million euros (-15%), while South America recorded 2.9% growth in 2019 and a sales volume of 143.4 million euros to become the fourth largest market. Non-EU Europe saw a 43% decline to 135.4 million euros, or 11% of total exports, dropping to fifth place from second in 2018. The Middle East likewise saw a contraction (-31.3%), falling to sixth place with a volume of 122.1 million euros (9.7% of the total). In contrast, North America rose by one position to seventh place despite an 18.4% fall in turnover to 87.9 million euros. Oceania played an increasingly marginal role with just 1.3 million euros of exports (down 53% on 2018).
Client sectors and families of machinery
Despite the severe decline (-21.2%), the tile industry remains the leading client sector for the Italian ceramic machinery manufacturers and accounts for 85% of total turnover and a total value of 1,471 million euros.
The sanitaryware machinery market remains in second place with sales of 84.5 million euros (compared to 106.7 million euros in 2018). Despite registering a 20.7% decrease on an annual basis, it is the only sector that last year saw a significant expansion in the domestic market (+15.2%), offset however by a bigger decline in export sales (-24.1%).
The heavy clay machinery manufacturers ranked third with a turnover of 80.5 million euros (8.4% of the total) despite a further 11.1% contraction. In fourth position with a turnover of 60.9 million euros is the refractory machinery sector. With 10.4% growth in turnover compared to 2018, it remains the most dynamic client segment.
The tableware industry saw a 21.1% reduction in turnover to 23.7 million euros, 97.5% of which was generated by exports. Although the technical ceramics sector marked up 9.3% growth, its 9.5 million euro turnover accounted for less than one percentage point of overall export sales.
Among the various types of machines, digital and green technologies registered particularly strong growth as a result of investments in environmental sustainability: digital decoration systems +4.8% (turnover of 164 million euros), purification systems +10.5% (36.2 million euros), quality and process control machines +27.1% (17.2 million euros) and laboratory instruments +9.9%.
Competitiveness of the sector
While the structural consolidation underway in the sector bodes well for the future (the average number of employees per company has risen to 49.4), there continues to be an excessively large disparity in terms of profitability between small and large companies.
Half of the companies in the sector (70 out of 141) account for just 5.1% of total turnover, while the 18 companies with revenues of more than 10 million euros generate 80.6% of the total turnover and almost the same share of exports.
All categories of companies suffered a severe decline in volumes in 2019, resulting in a 20% fall in average turnover per employee, although more structured companies have a three times higher profitability than that of micro companies. Companies with revenues above 10 million euros reported a turnover per employee of 304,000 euros compared to the 104,000 euros of companies with revenues below 2.5 million euros.
Just one in ten of all Italian ceramic technology manufacturers expect to see an improvement in performance in 2020 (10.9% of the total to be precise), while the share of those predicting a fall in revenues is double that of the previous year: 65% of entrepreneurs are pessimistic and two out of three of these expect to see an even worse contraction than that of last year. The impact of Covid-19 has compounded both the uncertainty surrounding the international scenario and the changes taking place in the construction sector worldwide, where innovative materials such as vinyl and resilient flooring are gaining market share.