High-potential SMEs

Egm X-rayed: Grifal paid employees a bonus of EUR 1,915

The Bergamo-based packaging company also increased its workforce by 10 employees. Collaboration with the University of Pavia on digital networking

by Valeria Novellini

8 July 2024

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5' min read

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A falling tree makes more noise than a growing forest. And Grifal makes no noise, but quietly continues to grow and develop its environmentally sustainable packaging solutions. It is now well known that the group's flagship product, the patented cArtù cardboard (characterised by a parabolic wave instead of the sinusoidal wave of traditional corrugated cardboard) is able to save up to 70% of raw material and up to 80% of CO2 emissions, as well as requiring no water consumption and low energy levels for its production.

Since the product is there, the Bergamo-based group intends to focus mainly on new markets. In 2023, 31.6 per cent of the turnover was realised abroad (against 24.9 per cent in 2022) and in 2024 this share is bound to increase, since this year Seven cArtù Lda, a 50/50 joint venture with the Portuguese group José Neves based in Ponte Guimaraes, became operational.

The numbers

Last year Grifal saw its overall revenues rise by 2.5% to 37.8 million (+30% to 11.9 million for the international share, of which 9.7 million in the EU area). It is not only packaging: in fact, turnover in this sector fell by 1.8% to 33.6 million, but that of machinery, the prerogative of the subsidiary Tieng Srl, jumped by 79.7% to 3.4 million, offering the group an interesting opportunity for vertical expansion.

The road is mapped out and Grifal has announced the creation of a network of production sites in Europe (around 14) in partnership with local operators in the wake of the agreement with José Neves, for each of which the planned investment is around EUR 2 million with the aim of reaching investment break-even in 12 months with a potential turnover of EUR 10 million. But the money? As at 31.12.2023, Grifal showed a net financial debt of 18.5 million, resulting in a Debt/Equity ratio of almost 1. It should be noted that investments of EUR 9 million were incurred during the year, but despite this, the net financial debt decreased from EUR 18.9 million at the end of 2022.

Minibond to finance production expansion

Meanwhile, in June 2024 a6million, 6-year minibond was issued with a rate equal to the 3-month Euribor plus a spread of 340 basis points, which was subscribed jointly by UniCredit and Cassa Depositi e Prestiti and is backed by a guarantee from the EIB European Guarantee Fund. It is the first ESG scoring Basket Bond issued in Italy and Credit Rating Agency will monitor its sustainability level starting from the third year.

Attention, however: this 6 million is intended to finance the initiatives already in place, i.e. research and development activities (which at the moment focus, among other things, on a 'multilayer tissue', i.e. a real paper tissue distributed by the colossus Smurfit Kappa), the completion of the expansion of the central production site in Cologno Al Serio, the purchase of new machinery, and the setting up of the Portuguese joint venture. However, it should be emphasised that the creation of the new network of European production sites will take place gradually and in partnership, thus requiring a not excessively heavy financial commitment from Grifal.

In any case, the interest on the bond and the new investments will burden the balance of financial management, so the group will continue to optimise intermediate profit margins. In 2023, against a modest increase in revenue, ebitda rose by 27.8% to EUR 5.6m, ebit by 66.6% to EUR 2.17m, and net profit more than doubled from EUR 432,000 to EUR 887,000. This was due to a reduction in raw material costs by 12.3% to EUR 15.3 million, while service costs rose by 7.1% to EUR 10.8 million and labour costs by 8.7% to EUR 10.1 million.

The group increased the number of employees from 165 to 175 and paid the staff a performance bonus of EUR 1,915 from March 2024. The ebitda margin of the Packaging area in 2023 was 14.3%, an increase of 19.9% to EUR 4.9 million, and that of the Machinery area reached 19.6% to EUR 0.7 million.

Artù's promotion

After the shock on raw materials and energy that had affected 2022 has (hopefully definitively) passed, the challenge for Grifal is now the national and international promotion of cArtù as a substitute not only for traditional corrugated cardboard but also for polystyrene and other plastic packaging, which comes in the wake of the new EU Packaging Regulation approved in April at the last session before the end of the European legislature. However, it will also have to be approved by the European Council, thus coming into force towards the end of the year.

Particularly stringent will be the obligations to reduce plastic packaging and, in order to limit waste, a maximum empty space ratio of 50 per cent (respected by Grifal products) has been set, which will apply to multiple packaging and transport and e-commerce packaging. Most importantly, all packaging (with some limited exceptions) will have to be recyclable according to strict criteria.

Numerous initiatives in the field of Esg

Thus, for Grifal there is no shortage of opportunities. Aside from its 'core business' of packaging, the company has for some time been working to promote the use of its products, in particular cArtù, also for the creation of furnishing accessories that can also be used for merchandising, currently on sale among other things on the Mara Paper Lab website (a new division of Bergamo-based Cartotecnica Mara, which has already announced the complete elimination of plastic from the packaging of its products for this year).

Grifal should easily be able to fulfil the ESG requirements for the recently issued bond. At the end of 2023, among other things, a 150 Kw photovoltaic plant was inaugurated on the new area of the Cologno al Serio plant, which covers up to 25% of the plant's energy needs with an average daily production of 800 Kwh. Since 2018, the Sustainability Report has been drawn up and in April 2024 the PackInPro project was launched in collaboration with the Institute for Transformative Innovation Research of the University of Pavia, which from next September should give rise to a 'digital network' of box makers, packaging companies and other companies with in-house packaging lines that will thus be able to automate cArtù's orders by adapting them to their own needs. The system will also make it possible to calculate the CO2 footprint generated by each package.

Is the market able to adequately assess the group's development prospects? Grifal has a rather high free float (almost 36.5% of the share capital). As of 2023, increased voting (actually multiple voting as it is three votes for each share) has been introduced, and as a result the majority shareholder (the Gritti family) with 63.2% of the share capital holds 83.7% of the voting rights. Potentially, there would be room for new financial as well as industrial partners to enter the capital, with whom to implement the production expansion on a pan-European level. And the Board of Directors already holds a proxy to increase the capital up to EUR 2 million, even excluding pre-emptive rights. When will this be exercised?