Italian foundries in crisis: free-falling margins and unsustainable energy costs

Twenty-eight million in profits, against 3.8 billion in revenues. The almost zero net profit of Italian foundries is a summary of the sector's competitive difficulties. Squeezed between high energy costs, an averagely weak market, customers towards whom it is complicated to increase prices in the presence of foreign competition that is often cheaper. A competitive stranglehold that translates not only into a drop in sales but also into a worrying contraction in margins.

The analysis carried out by Assofond's research office on a significant sample of the category sees for these indicators a fall to the lowest since the pre-Covid period. For overall profitability (Roe), it is a reversal of almost 80%, bringing the level to 1.6% of net assets, the lowest in six years. But all indicators are actually down, taking into account, for example, the return on investments in core business, which is down to 2.8% (-59%), again the lowest since 2018, just as the margin on sales is down to 2.3%. The same fate befell the ratio of gross margin to sales (Ebitda), which fell sharply to 8.8%, more than two points lower than the previous year. The year was particularly difficult for cast iron foundries, the segment showing the most critical results, registering an overall loss of 16 million, with a negative Roe (-1.9%) and a zero Roi.

"In the immediate future," explained Assofond president Fabio Zanardi, "we are asking the government to complete the urgent measures to support companies with measures that will finally put us on a par with our European competitors. After the start of the Energy Release and the aid for offsetting the indirect costs of carbon emissions, we expect the 'Energy' decree by the end of the year, which should also intervene on the spread between Psv and Ttf. There is, however, a more complex game that the government has to play, this time in the long term and at the European level. The fundamental principle on which the single market is based is a level playing field between companies in different member states. Today, this principle is called into question by uncoordinated national interventions, which produce significant distorting effects. Italian foundries have always competed in an open market, but this market must be fair'.

The figures confirm Assofond's long-standing thesis that the cost of energy in Italy is a factor 'destroying competitiveness'. While foundries see their margins plummeting,' the association explains, 'the Italian anomaly in the composition of electricity prices, with taxation and system charges among the highest in Europe, determines an unsustainable transfer of wealth for energy-intensive companies. 'In Italy,' Zanardi explains, 'there is an obvious anomaly, an energy tsunami that is not 'democratic' at all. While consumers are penalised by higher prices than elsewhere, energy producers, including publicly controlled groups, are making unprecedented profits: a situation that must change. At the moment,' he adds, 'capacity utilisation for smelters is on average 65-70% and it is clear that there is a loss of jobs in favour of other countries, where energy is cheaper'.

These words are confirmed by ISTAT surveys, which for the month of October see a drop in production of 6% for the sector, of 16 points for cast iron foundries. And looking at the seasonally adjusted index (73.7, with a base of 100 in 2021), to find worse data (leaving aside Covid) one has to go back to far-off 2009. Not good numbers, on which the 2026 outlook is not dissimilar, a situation that is pushing more than one company to slow down. "As of next week,' Zanardi explains, 'I am hearing colleagues planning an extended shutdown: if the Christmas break usually provided for a fortnight of stoppage, now in several cases it will rise to 3-4 weeks. A reversal is not visible at the moment'.