pvc windows producer - blind profile

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Page 1: PVC Windows Producer - Blind Profile

Arkios Italy

PVC Windows & Doors Producer – Blind Profile

Transaction Outline

Our client (“the Company”) is one of the top 5 PVC windows producers in Italy. We are charged by the Company

in order to find a strategic partner who may take over it. Such partner may be able to sustain the continuous

growth of the Company and to increase the Company’s market positioning and its excellent economic-financial

performance.

The Company

The Company is leader in the production and sale of PVC windows and aluminium shutters. It is in the

high/medium market range of the sector, with a significant market share which is continuously increasing. Now

the Company is one of the top 5 Italian producers in the PVC sector.

The Company is characterised by its excellent and wide production, its high-quality products and its innovative

technology, as well as by its widespread distribution system and its efficient production system which has

enabled the Company to grow at more than 45% every year. In 2011 the Company achieved about €10 million

sales.

In particular, the Company is equipped with up-to-dates facilities, computerised work stations/isles and a

production system which guarantee a very high quality of products and the maximum efficiency and

performance, so its products are in the top range of the market with an excellent quality/price ratio. This allows

the Company to have an extremely significant profitability.

In the last years, investments made by the Company allowed it to gain growing market shares. Now it is entering

in the aluminium and the combined wood-aluminium segment, adopting the same production concepts of PVC to

the aluminium, with a partner and a project unique for the Italian market.

Furthermore, the Company distributes its products via a widespread network of dealers (400) in Italy.

Products

The Company produces any kind of PVC windows (frame & casing), with a particular flexibility, beside a complete

line of aluminium shutters, in order to meet any requirements of clients.

Economics

The Company’s turnover in 2011 was above € 10 million (+38% vs 2010)

and average (adjusted) EBITDAL is 25%.

The Company invested an average of 300-350K€ every year, with a

strong increase of investments in 2012 (over 700K€) in production lines

and work stations.

(/000 €) 2009 2010 2011 CAGR

Sales 4,650 7,400 10,000 48%

EBITDAL 1,300 1,900 2,400

EBITDA % 27% 25% 24%

NFP* 660 1,400 1,800

* NFP includes also the remaining financial debt of Leasings

Page 2: PVC Windows Producer - Blind Profile

Arkios Italy

The Company’s key success factors:

(a) Efficient Production System, unique in Italy and Europe: the Company has invested in up-to-date

equipment/computerised work stations and in a production system which can guarantee high-quality

products, the maximum efficiency and performance and therefore significantly high margins.

(b) Market Share: in terms of number of finished products, it is among the first 5 Italian producers,

continuously growing, and with a large production capacity.

(c) Widespread Distribution Network and Customer Services: thanks to 400 Dealers and to a highly efficient

production/logistics system, the Company is able to offer a very rich products range with the maximum

efficiency and punctuality, which are the key factor in gaining quickly market shares.

(d) High/Medium Product Positioning: the Company’s products are located in the high/medium range on the

market and together with the production efficiency it enables the Company to have margins above the

market average.

(e) Margins: thanks to an advanced production system and an accurate control on the efficiency, the

Company is able to achieve margins above the average in the sector.

Positioning and Strategic Value of the Company

The Company is among the first 5 Italian players in the PVC windows production, in particular in the high/medium range of

the market. Thanks to significant investments in computerised systems/work stations/isles and to its widespread and

consolidated distribution network, the Company is able to achieve margins above the market average, a high ROI and a

positioning on a market which is growing quickly. This is also due to barriers to entry posted by the Company (efficient

production = high margins; widespread distribution), which give the advantages towards either Italian or foreign competitors

(PVC and Aluminium) who are trying to enter into Italian market.

The Market

The Italian windows & doors market (historically extremely fragmented, due to the presence of craftsmen/firms

operating in the wood sector); starts to be a concentrated market, due to the increasing demand of PVC and

aluminium products.

The Italian PVC windows market is not affected by the worldwide contraction of the construction sector,

thanks to fiscal bonus and new regulations regarding the energy conservation (Italian Law permits to the final

customer a tax deduction of 55% of sustained costs for renovations involving energy improvements).

In particular, thanks to PVC’s thermal and

acoustic insulations properties, PVC clearly

shows a steadly and strong increment in

terms of sold units and in terms of

penetration (% on total), starting from 2008-

2009.

With this constant increase of produced and

sold units, the producers of PVC windows &

doors have faced a strong competitive

pressure because of the introduction of

“first price” products imported from Eastern

Europe.

% Sales of Doors & Windows by Segments

Source:i SiPVC- PVC FORUM ITALIA data

The Italian and European windows market is strongly consolidating, and the producers of the high/medium

range are gaining relevant market shares, creating huge difficulties either to large producers of aluminium and

wood window & doors

16 16 18 18 18 18 22 25

33 32 30 30 30 3130

30

49 50 50 50 50 49 46 43

2 2 2 2 2 2 2 2

2004 2005 2006 2007 2008 2009 2010 2011

(stima)

PVC ALLUMINIO LEGNO ACCIAIO

Page 3: PVC Windows Producer - Blind Profile

Arkios Italy

Large companies in the aluminium segment are trying to broaden their offer in the PVC segment, by investing in

production facilities, but they are far behind the top 10 PVC windows & doors producers, which have a large

competitive advantage, given the investments made and the already consolidated sale network.

Future Prospective

for the Italian Market

In terms of future prospective, it is

interesting to see how the PVC

segment, constantly growing in any

case, is still far from average

European market shares (in Germany

PVC represents 57%) and how – such

penetration is difficult to reach

though - PVC shows nowadays

prospective of constant growth, in

absolute and relative terms.

Source :SiPVC- PVC FORUM ITALIA data

Source: German Association of Windows Producers

Investment Rationales

In order to evaluate this opportunity, the possible rationales for an investor/acquirer are the following:

MARKET

• PVC market is constantly growing, in terms of units sold and penetration on the market. To date in Italy it

represents around 25% of sales (by value) of windows and it is going to grow, thanks to its technical

features and to the persisting regulations on energy savings and related fiscal incentives.

o The gap between Italy and other European markets (e.g.: Germany with PVC = 57% market share)

has to be filled.

o Producers consolidation: only the first 10 firms are going to grow in a constantly growing market,

trough a consolidation process.

• Large alluminium (and wood) windows producers are trying to enter in the PVC market:

o There is a tendency of large aluminium (and wood) doors and windows producers to enter in the PVC

segment, in order to cover the entire products range and to meet different requirements of clients.

o Need of big aluminium doors and windows producers to invest in know-how and in production

equipment, where the main players in the PVC have already developed know-how and – thanks to

margins in PVC – they a consistent competitive advantage.

• Margins: the production process of PVC and the prices allow to achieve large margins, where aluminium

and wood, due to high production costs, cannot achieve the same results.

o Progressive shift of the market to the PVC.

Company

A. Margins: thanks to technologically advanced production systems and to an accurate control on the

efficiency, the Company is able to achieve margins higher than the sector average.

B. Market Share: The Company is surely among the first 5 Italian producers, with a production capacity

alined with the first 3 competitors in Italy.

25%

32%

43%

ITALIA

PVC METALLI LEGNO

57%19%

16%8%

GERMANIA

PVC METALLI LEGNO METALLO + LEGNO

Page 4: PVC Windows Producer - Blind Profile

Arkios Italy

C. Sales Organization with its widespread Distribution and Customers Services, thanks to:

- over 400 dealers, coordinated by 5 Agencies and a total of 20 Agents that cover the whole

North/Centre Italy

- Its highly efficient production/logistics system

the Company is able to offer high-range products with the maximum efficiency and punctuality, which

are the key factors in gaining quickly market shares

D. Medium/High Positioning: the Company’s products are located in the high – medium/high range on the

market and together with the production efficiency it enables the Company to have margins above the

market average.

E. Efficient Production System, unique in Italy and Europe: the Company has invested in up-to-date

equipment/computerised work stations and in a production system which can guarantee high-quality

products, the maximum efficiency and performance and therefore significantly high margins.

For any further information about this transaction, please contact:

Paolo Cirani Andrea Rossotti

Partner Senior Analyst

+39 335.68.40.737

[email protected]

www.arkios.it

+39 339.86.98..674

[email protected]

www.arkios.it