italian corporates: renato panichi senior director ... · 1q11 2q11 3q11 4q11 1q12 2q12 3q12 4q12...
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Italian Corporates: Competition And Investments Lag
Renato PanichiSenior Director Corporate Ratings
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October 21, 2016Taormina
2
Italian companies operating and financial conditions stabilized, but at pretty weak levels
Corporate investmentas: a gap to still be filled to sustain Italy GDP growth
Italian companies key competitive disadvantages are well known
Agenda
Business confidence recovered, but production lacks growth
Private & Confidential 3
Italy Business Confidence in Manufacturing (2010=100)
Italy Industrial Production Index (2010=100)
Source: ISTAT
Italy Business Confidence: Construction, Services ,Trade (2010=100)
Italy Industry Turnover (2010=100)
70
80
90
100
110
Jan‐09
Jul‐0
9
Jan‐10
Jul‐1
0
Jan‐11
Jul‐1
1
Jan‐12
Jul‐1
2
Jan‐13
Jul‐1
3
Jan‐14
Jul‐1
4
Jan‐15
Jul‐1
5
Jan‐16
Jul‐1
6
IESI ‐ composite business confidence climate index
Manifacturing
60
70
80
90
100
110
120
130
Jan‐09
Jul‐0
9
Jan‐10
Jul‐1
0
Jan‐11
Jul‐1
1
Jan‐12
Jul‐1
2
Jan‐13
Jul‐1
3
Jan‐14
Jul‐1
4
Jan‐15
Jul‐1
5
Jan‐16
Jul‐1
6
Costruction Services Trade
90
92
94
96
98
100
102
104
Jan‐09
Jul‐0
9
Jan‐10
Jul‐1
0
Jan‐11
Jul‐1
1
Jan‐12
Jul‐1
2
Jan‐13
Jul‐1
3
Jan‐14
Jul‐1
4
Jan‐15
Jul‐1
5
Jan‐16
Jul‐1
6
Industrial production (excluding costruction)
80859095
100105110115120125
Jan‐09
Jul‐0
9
Jan‐10
Jul‐1
0
Jan‐11
Jul‐1
1
Jan‐12
Jul‐1
2
Jan‐13
Jul‐1
3
Jan‐14
Jul‐1
4
Jan‐15
Jul‐1
5
Jan‐16
Jul‐1
6
Total Domestic market Non domestic market
Margins and financial leverage stabilized, but at weak levels
Private & Confidential 4
Return on Capital – Italian Companies by Size Debt to EBITDA – Italian Companies by Size
Return on Capital – Italy versus Europe
Source: S&P Capital IQ and S&P Global calculations
Debt to EBITDA – Italy versus Europe
The gap between best and worst companies further widened
Private & Confidential 5
EBIT Margin – Distance Between Best And Worst Deciles 2006 – 2015
Source: S&P Capital IQ and S&P Global calculations
15%
20%
25%
30%
‐10%
‐5%
0%
5%
10%
15%
20%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Best Ebit Margin (Top 10% Companies) Worst Ebit Margin (Top 10% Companies)
Distance between best and worst (right scale)
Italian companies financial leverage is higher than peers
Private & Confidential 6
Debt/EBITDA And Growth In Leverage for 2010-2015 By Country
Australia
Brazil
Canada
China
France
Germany
Greece
Hong Kong
India
Indonesia
Italy
Japan
Korea
Malaysia Mexico
Netherlands
Portugal
Russia
SingaporeSpain
Switzerland
ThailandUK
US
2
2.5
3
3.5
4
4.5
5
5.5
6
6.5
‐10% 10% 30% 50% 70% 90% 110%
Debt/EBITD
A level 201
5
Growth in leverage 2010‐2015
Source: S&P Global Market Intelligence and S&P Global calculations
Size of bubble is proportionate to the size of non financial corporate debt for each country using Bank for International Settlements data at September 2015.
Private & Confidential 7
Italian Non Financial Corporations – Funding Sources
Non Financial Corporations Funding Costs – Italy Vs Europe
Source: ECB and S&P Global calculation
Italian Corporate Bond Issuance 2006-2016
Italian Debut Bond Issuance 2010-2016 YTD
Deleverage is over, but credit growth remained nil in 2016
‐80
‐60
‐40
‐20
0
20
40
60
80
2008 2009 2010 2011 2012 2013 2014 2015 1Q16
€Bln
Net domestic loans Net Bonds
0
1
2
3
4
5
6
7
Apr‐08
Sep‐08
Feb‐09
Jul‐0
9De
c‐09
May‐10
Oct‐10
Mar‐11
Aug‐11
Jan‐12
Jun‐12
Nov
‐12
Apr‐13
Sep‐13
Feb‐14
Jul‐1
4De
c‐14
May‐15
Oct‐15
Mar‐16
(%)
Italy Spain Germany
0246810121416
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2010 2011 2012 2013 2014 2015 YTD19/7/15
YTD19/7/16
(#)€Bln
Volume Deal Count
Source: ECB and S&P Global calculation
Source: S&P Global Market Intelligence
Source: Dealogic
0
5
10
15
20
25
30
35
40
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1H16
€Bln
High‐Yield Investment‐Grade
Investments: contribution to GDP growth is still limited
Private & Confidential 8
GDP Quarterly Percentage Change And Contributions, Volumes (2010=100), Seasonally Adjusted Data
Source: ISTAT
‐2.5
‐2.0
‐1.5
‐1.0
‐0.5
0.0
0.5
1.0
1.51Q
11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
Households and NPISH consumption Government consumption
Gross fixed capital formation Changes in inventories
External balance of goods and services GDP (percentage change on previous period)
Private & Confidential 9
Gross Capital Formation as % of GDP – Italy Vs Europe, %
Italian Corporate: Credit Demand Drivers
Source: Bank Lending Survey, Bank of Italy
Italian Productive Capital Stock Index (2007=100)
Italian Industry Sector: Capacity Utilization, %
Source: EUROSTAT
Source: ISTAT and S&P Global Market Intelligence
Source: OECD
Investments: a gap to be filled to sustain Italy GDP growth
‐100%
‐75%
‐50%
‐25%
0%
25%
50%
75%
100%
Jan‐03
Sep‐03
May‐04
Jan‐05
Sep‐05
May‐06
Jan‐07
Sep‐07
May‐08
Jan‐09
Sep‐09
May‐10
Jan‐11
Sep‐11
May‐12
Jan‐13
Sep‐13
May‐14
Jan‐15
Sep‐15
May‐16
Fixed Investment Inventories and Working Capital
15.0
20.0
25.0
30.0
35.0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
(%)
Italy Spain FranceGermany Euro Area
62646668707274767880
2Q07
4Q07
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
4Q13
2Q14
4Q14
2Q15
4Q15
2Q16
(%)
85.0
90.0
95.0
100.0
105.0
110.0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
(f)
2017
(f)
Italian companies: key competitive disadvatages
Private & Confidential 10
Added Value By Employees Number And Export Exposure (€ bln)
Source: ISTAT
Multifactor Productivity (Log change, %)Market Capitalization Of Listed Domestic Companies on GDP (%)
Adde
d value (€
bln)
2520151050no
export 0‐55‐25
25‐5050‐75
75+Export exposure (%)
Employees number 1
2‐9
10‐19
20‐49
50‐249250+
5‐10 10‐15 15‐20 20‐250‐5
Limited Size Low Productivity Low Listed Capital
Source: ISTAT, IMF, WEO Source: The World Bank, London Stock Exchange, Borsa Italiana
0
40
80
120
160(%)
2009 2012 2015
A close look at drivers of Italy poor labor factor productivity
Private & Confidential 11
Labor Factor Productivity (2007=100) Italy – Labor Factor Productivity and its components (1996=100)
Multifactor productivity for selected countries (average growth, %)
Source: OECD and S&P Global calculations Source: OECD and ISTAT
Source: OECD
Italy – Potential Growth, %
Source: IMF Country Report No.15/166
‐1.0
‐0.5
0.0
0.5
1.0
1.5
2.0
1993‐2000 2001‐2007 2008‐2014 2015‐2020
Delta Capital Delta Trend EmploymentDelta Trend TFP Potential Growth
‐1.0
‐0.5
0.0
0.5
1.0
1.5
2.0
France Germany Italy Spain
1997‐1999 2000‐2002 2003‐20052006‐2008 2009‐2011 2012‐2014
70
90
110
130
150
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Labor Productivity Multifactor Productivity Capital Deepening
80
85
90
95
100
105
110
115
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Italy France Germany Spain Euro Area
Drivers of Italy lower total factor productivity are known
Private & Confidential 12
Days To Enforce A Contract For Selected Countries
Source: World Economic Forum
Source: Doing Business, 2016
Global Competitiveness Index
Perceived Quality of Infrastructure, The Global Competitiveness Report, 2015‐2016
Country Quality of
overall infrastructure
Quality of roads
Quality of railroad
infrastructure
Quality of air transport
infrastructure
Quality of electricity
supply
Austria 8 6 12 32 11Belgium 22 30 17 17 27France 10 7 6 15 14Germany 11 13 9 11 20Ireland 32 24 30 20 17Italy 66 49 32 63 34Netherland 5 2 7 4 8Spain 14 11 4 12 24Sweden 19 23 26 22 15UK 24 29 18 19 9
‐ 200 400 600 800
1,000 1,200 1,400 1,600 1,800
Days (#
)
1
3
5
7Institutions
Infrastructure
Macroeconomicenvironment
Health andprimary education
Higher educationand training
Goods marketefficiency
Labor marketefficiency
Financial marketdevelopment
Technologicalreadiness
Market size
Businesssophistication
InnovationItaly
Advancedeconomies
Source: World Economic Forum
Connectivity Degree Index – Italy Vs Europe
Source: ISTAT
00.10.20.30.40.50.60.70.8
Belgium
Nethe
rland
sSw
eden UK
Denm
ark
Luxembo
urg
Germany
Finland
Norway
Austria
Portugal
Czech Re
p.Ire
land EU
Hungary
France
Spain
Sloven
iaRo
mania
Poland
Greece
Italy
Croatia
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14Private & Confidential