Italy Sector report

February 2021

Sectors @ a glance

Industry performance outlook

Agriculture

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Automotive/ Transport

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Chemicals/Pharma

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Construction/ Const. Materials

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Consumer Durables

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Electronics/ICT

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Financial Services

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Food

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Machines/ Engineering

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Metals

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Paper

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Services

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Steel

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Textiles

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Agriculture

The arrows in this overview represent the direction of change in the Atradius outlook for the industry since the previous update. No arrow will appear if there has been no change in our overall outlook.

Remains Poor In H1 of 2020, the sector was impacted by the consequences of the lockdown (e.g. transport and supply chain issues, as well as lack of foreign seasonal workers). The sector additionally suffered from adverse weather conditions in summer and a decrease in prices for agricultural products. Agriculture value added is forecast contract by about 0.5% in 2021 after an estimated 0.6% decrease in 2020.

Automotive/Transport

Remains Bleak In 2020 automotive producers and suppliers suffered from globally deteriorating sales for passenger cars and commercial vehicles, which has led to severe liquidity strains and cash shortfalls. Automotive added value is estimated to have contracted 24% last year. Margins were already under pressure before the coronavirus outbreak, due to disappointing sales in 2019 and increased investment to cope with the shift away from combustion engines towards e-mobility. The industry registered a rebound of production and demand since September 2020, but the performance deteriorated again in November due to the second lockdown. While a moderate rebound is expected in 2021, an increase in business failures over the course of the year seems to be probable.

Chemicals/ Pharmaceuticals

Remains Poor In 2020 many chemical businesses suffered from deteriorated demand from key buyer sectors like automotive. Chemicals value added is estimated to have contracted by 7.5% in 2020, followed by a forecast 7% rebound in 2021. Pharmaceuticals value added is forecast to increase 4% this year. Compared to other sectors, the number of non-payment cases remains low.

Construction/Construction Materials

Remains Bleak Over the past couple of years, the industry has been negatively impacted by the subdued performance of the Italian economy. Construction suffered from low demand, fierce competition, uncertainty about the future spending capacity of public bodies and their persistently bad payment behaviour. There has been high gearing, coupled with tight lending conditions. Investments in construction decreased 9% in 2020, but they are expected to rebound 8% in 2021. No major increase in insolvencies is expected. However, there have been high numbers of business failures over the past couple of years, including the failure of several larger players.

Consumer Durables

Remains Bleak Private consumption of non-food consumer goods has deteriorated due to the coronavirus impact, with many businesses temporarily closed as a result of the lockdowns. The financial strength of many businesses has seriously deteriorated. Retail value added is estimated to have contracted by more than 19% last year with just a 4% rebound forecast this year. While sales have started to rebound in Q3 of 2020, the situation remains shaky, due to renewed lockdown measures and the ongoing second wave of the pandemic. While retail value added is currently forecast to increase 4%, deteriorated consumer sentiment and sharply rising unemployment could hamper a rebound in 2021. Insolvencies could start to increase in H1 of 2021, subject to the expiry of fiscal measures intended to support households and businesses.

Electronics/ICT

Remains Poor In H1 of 2020, sales deteriorated due to the closure of businesses as a result of the first lockdown. Meanwhile, certain segments have benefited from increasing digitalisation due to the sharp expansion of remote working and e-learning. ICT value added is forecast to increase by about 1% in 2021.

Financial Services

Remains Poor The sector has been severely impacted by the general economic downturn, with increased financial troubles for businesses and consumers alike, leading to increased non-performing loans and deteriorating profits. Sector value added is estimated to have decreased 3.5% in 2020.

Food

Remains Poor Due to renewed lockdown measures since November 2020, a large number of businesses continues to suffer from the new closure of several distribution channels, the most drastic one being restaurants, bars and other places food is consumed outside the home. This and the negative impact on the catering distribution channel have impacted the whole food industry, which was already operated on thin margins before the pandemic. While the number of payment delays increased in H1 of 2020, there was a slight improvement in Q3, due to the beneficial effects of the summer season on businesses´ liquidity. However, with the current lockdown ongoing, it is expected that late payments will increase again in H1 of 2020, and the insolvency situation will deteriorate.

Machines/Engineering

Remains Poor This export-oriented industry was among the better performing Italian sectors over the past couple of years. However, its performance deteriorated in 2020, as orders on hand and production sharply decreased. Engineering value added is estimated to have contracted by almost 16% in 2020. Last year, the number of payment defaults was on par with those of 2019, but quite high compared to the average recorded over the past five years. Currently, engineering value added is forecast to increase 11% in 2021, but this remains subject to a comprehensive rebound and a surge in demand from key buyer industries like automotive and energy.

Metals

Remains Bleak In 2020 metal producers and traders suffered due to deteriorated demand from key buyer sectors (automotive, construction and machines). Metals value added is estimated to have contracted by 14% in 2020. The financial strength of businesses has seriously deteriorated, and payment delays increased in 2020. However, the payment situation has improved somewhat since Q4 of 2020, and it is expected to remain stable in H1 of 2020.

Paper

Remains Bleak Paper producers and printing have been impacted by supply chain disruption in H1 of 2020 and by the ongoing digitalization, leading to less demand. Paper value added is estimated to have shrunk by 6.5% in 2020, with just a 1.5% increase forecast in 2021. The printing and publishing segment is estimated to have contracted by almost 12% last year. Payment delays increased in 2020, and this negative trend is expected to continue in 2021.

Services

Remains Bleak Due to the comprehensive lockdown measures and the ongoing pandemic, many segments have suffered heavily, especially hotels and catering, restaurants, bars, entertainment and cultural events, travel agencies and tour operators. Services value added is estimated to have contracted by more than 9% in 2020 (hotels and catering down 19%). Payment delays and insolvencies have increased in 2020, and they are expected to increase further in H1 of 2020. This is due to the fact that the second lockdown since November 2020 will hurt sector performance further, especially in the restaurant, hotel and personal care segments.

Steel

Remains Bleak In 2020 steel producers and traders suffered due to deteriorating demand from key buyer sectors (automotive, construction and machines) and high iron ore prices. After a 3% contraction in 2019, value added is estimated to have shrunk again in 2020, by 15%. The financial strength of businesses has seriously deteriorated, and payment delays increased in 2020. However, the payment situation has improved somewhat since Q4 of 2020, and it is expected to remain rather stable in H1 of 2020.

Textiles

Remains Bleak Producers, wholesalers and retailers already suffered before the coronavirus outbreak from fierce competition and thin margins. Furthermore, they have been additionally affected by deteriorating sales domestically and internationally. After shrinking 7% in 2019, a contraction in textiles value added is estimated at 21% in 2020. Payment delays and insolvencies have sharply increased, and the outlook remains bleak, with no substantial rebound of sales on the horizon due to ongoing lockdown measures, subdued consumer sentiment and high unemployment.

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