High energy prices, Made in Italy in distress

High bills shake up Italian fashion. And most strikingly, the energy crisis comes at a time when there is no shortage of orders, especially from foreign markets. MFF has been feeling the pulse of the five key Made-in-Italy sectors, with the supply chain witnessing new acquisitions by big players, but also seeing cash-strapped companies looking for new solutions to overcome the hurdle. «Until September, 2022 was a good year and companies' balance sheets will be satisfactory, but the next one will be one of reflection, especially based on the response of the European and North American markets,» Sergio Tamborini, president of Smi - Sistema moda Italia, representing the textile-clothing sector, which employs 400,000 people with 43,000 companies and more than 53 billion euros in turnover, told MFF.

«The damage estimate for the high energy price is difficult to make, but the most energy-intensive companies will struggle on the income statement with budgets in the red, especially those in the upstream part of the supply chain that may lack cash. For the time being, the levels are acceptable. The worry would come if a double-digit number of companies in crisis is reached. In any case, we will see acquisitions by groups in the garment industry and smaller workshops». And to the question of whether the current scenario could undermine reshoring policies, after a possible productive rapprochement to Italy due also to Chinese lockdowns, Tamborini added that «spinning and weaving do not reposition themselves in a short time, while in the garment industry reshoring is possible and it would be desirable to involve Southern Italy, which has excellent potential. Even before defending Made in Italy in the world, the Government must give entrepreneurs the opportunity to exercise it, that is, to do business».

In leather goods, a sector with 5.5 billion in exports in the first half of the year (+18.5%), the incidence of energy costs fluctuated between 3% and 5%, but the weight is set to grow in the presence of bills that, as Franco Gabbrielli, president of Assopellettieri, said, «are seven or eight times higher than in the same period in 2021. Then considering the increased costs of raw materials, transportation and all other expense items, companies risk closing at a loss to maintain current production». And Gabbrielli does not rule out the possibility that in the coming months, in order not to go into the red, some companies will have to stop operations, despite the strong demand for bags and other leather goods. Possible solutions? Assopellettieri joins the call for intervention from the top but is also moving with some partners to accelerate the energy transaction in the companies, in order to reach the goal of self-production through renewable sources.

Two other open fronts are those of seeking lower-priced supplies and applying for tax credits, studying the opportunities present at the regulatory level. «Our companies are not energy-intensive, but the energy price increase greatly affects the chain,» Giovanna Ceolini, president of Assocalzaturifici, an association representing a sector of about 4,000 companies and more than 70,000 employees for a turnover of 7.1 billion euros in 2021, stated. Ceolini highlighted price increases of 700% for leather suppliers: «The compression of operational margins, which were low already, is becoming unsustainable for manufacturing companies, putting their existence at risk». Assocalzaturifici is asking, alongside Confindustria Moda, to put a cap on gas prices, a reform of the energy market and other interventions included in the document of six requests to the future Government. And it stressed how the majority of shoemakers, as emerged in a study carried out by the association, especially fears costs of raw materials and semi-finished products (indicated by 90% of the interviewed), which after the surge registered during 2021 are still very high.

In the leather world, during a general meeting, Concerie Italiane (UNIC) launched the alarm for the cost surge already in August, indicating a 360% increase in gas and electricity, affecting not only direct operations in the tanneries, but also purification (+42%), chemical products (+31%) and third-party processing (+24%). «We have been working on new co-generative, photovoltaic plants and heat-recovering systems to reduce energy consumption, but this requires significant investments and long periods of time to achieve concrete goals due to the complexity of the tanning process,» Fabrizio Nuti, President of UNIC, the association representing about 1,100 companies for a 2021 turnover of 4.2 billion euros, stated. Tanners’ efforts are not enough to contain prices, and an increase in price lists becomes inevitable, but customers often put up a wall in front of requests for adjustments. «We need to make it clear to our customers that the supply situation is now unsustainable, we need sharing and solidarity at a time of genuine tsunami. Those who want to continue to have a top-quality industry like the Italian tannery must understand and support our efforts,» Nuti remarked.

Finally, on the eyewear front, after the Italian eyewear production reached 4.17 billion euros in 2021 (+35% year-on-year), with exports registering +39.9% to over 4 billion euros, and after export continued its excellent performance in the first quarter of the year with +32.3% over the same period of 2019 and +35.3% over 2021, the impact of cost increases could affect the sector already in December. «Energy costs have increased by three to four times, and this affects the accounts, with the fear that for SMEs some of them could already go in the red at the end of the year. Sales are good, also in the Asian markets, but margins are low,» Giovanni Vitaloni, President of Anfao, added. «The uncertainty for 2023 is still here, but the driving force of the market will be the next MIDO in Milan, which we have brought forward to February 4 to February 6 to help the system already at the beginning of the year. Another fundamental aspect to support companies is the request of defiscalization of training, as there is a shortage of both skilled labor and creative experts». (All rights reserved)