The Italian tile industry looks beyond the crisis

It is now undisputable that 2009 has been the worst year on record for the Italian ceramic industry. The preliminary figures published by Confindustria Ceramica reveal a fall in quantities of 19.4%. Sales volumes have dropped to 406 million square metres, the level of twenty years ago. Production has consequently also fallen, dropping by 150 million sq.m in a year to reach 360 million sq.m, around 30% down on the already difficult 2008.
However, the differential between production and sales has enabled warehouse stock to be reduced by 50 million sq.m, equivalent to 19% of the tiles stored in yards of factories in the Sassuolo ceramic district at the end of 2008.

These results are largely due to the fact that the countries most severely affected by the international crisis are those where Italian producers sell 90% of their products.
The decreases in sales reported by Italian companies are similar in both the domestic and export markets. Domestic sales have fallen by 122 million sq.m (-19.1%), while exports have reached 286 million sq.m (-19.6%), with peak downturns in the first nine months of the year of 39% in the United States and 46% in Russia.

Positive elements

However, there are plenty of positive aspects, as Franco Manfredini proudly noted during the 2009 end-of-year press conference. “We remain the unchallenged leader in terms of quality and exports,” affirmed the Chairman of the Italian ceramic tile manufacturers’ association Confindustria Ceramica. “Although this terrible year has wiped out around a billion euro in turnover for the sector, our companies have continued to believe and invest in innovation, earmarking more than 270 million euro for Research & Development and the purchase of latest-generation machinery to enable us to further increase our lead in terms of quality and aesthetics over our international competitors.”

The export market offers further good news. Of the 1.8 billion square metres of world tile imports and exports registered in 2009, 20% in volume and 35% in value were Italian. “Even in these last twelve months we have succeeded in raising the average prices of our export sales, demonstrating our ability to create added value and keep ahead of the competition,” noted Manfredini.

2010

Confindustria Ceramica is convinced that the lowest point of the crisis has now passed even though the outlook for next year is not particularly rosy.
As for the Italian tile industry, sales are expected to fall further to 394 million sq.m, while production may remain at 2009 levels for another two years (until 2011) due to a simultaneous reduction in warehouse stocks.
In 2010 sales will continue to be impacted by a deterioration of the Italian tile industry’s main export markets. As a result, Italian tile exports are expected to fall further in 2010 to 275 million sq.m (-3.8%), while sales in Italy are likewise expected to fall to 119,4 million sq.m (-2,1%).

The impact on costs and profitability

The falls in turnover and production are also affecting the profitability, productivity and costs of the Italian ceramic tile manufacturers.
In the two-year period 2008-2009 the downturn in production seriously impacted the companies’ cost structures. Operating costs per unit product are estimated to have increased by 3.4% in 2009, while production costs have likewise risen by 1.8%. The negative differential between prices and costs has led to a fall in mark-up in 2009, pushing down margins on sales to minimal levels.
Even in 2010 the situation is unlikely to improve as production levels will remain well below pre-crisis levels leading to problems of productivity, surplus labour and high costs.