energy, automotive, media and IT sectors most affected – Corriere.it

Almost 1 out of 10 European companies in crisis, for Italy the ratio is 1 out of 8. These are the report numbers of the global consulting firm Alvarez & Marsal, Distress Alert, which evaluates the financial performance and balance sheet solidity of over 4,400 companies in Europe. According to the survey, one out of ten European companies is in difficulty and needs a turnaround (a recovery plan, ed). The figure increased by 0.5 percentage points compared to the previous year. Analysts say: This figure is expected to rise as performance deteriorates, particularly among highly leveraged firms. The research also shows that 20% of the companies examined have a fragile balance sheet, a slight increase from the previous year.

The most affected sectors

The consumer sectors (excluding fashion and food), healthcare and manufacturing industry recorded the largest increases in the level of non-performing loans in 2022 compared to 2021. The consumer goods sectors – we read – such as electronics, articles for the home and furnishings, as well as hypermarkets, recorded a 72% increase in non-performing loans year on year, due to a marked reduction in consumer spending due to the crisis, the increase in the cost of living and the consequent increase in operating costs. Likewisethe percentage of companies in the healthcare sector in difficulty increased by 47%, between 2021 and 2022, while corporate bad debts in the manufacturing industry grew by 39% in the same period, due to the increase in energy prices and supply chain disruptions that impacted productivity and profitability. Positive data for the travel, hospitality and leisure sector. The number of distressed businesses decreased by 63% in the period under review, reflecting last year’s sharp rebound in sales on the back of squeezed tourism demand in past years.

Italy

The Italian market ranks fourth in 2022 in terms of increase in the percentage of companies in difficulty compared to the previous year: with +1.7% for 2022 over 2021, followed by the GCC (Gulf Cooperation Council) countries, Israel and Turkey (3.8%), the Nordic countries (4.7%) and the average of the CEE countries (5.5%). The percentage of companies in difficulty in Italy increased from 6% in 2021 to 7.7% in 2022. Commodities, media and entertainment, information technology: these are the sectors that faced the highest levels of corporate non-performing loans in 2022, followed by infrastructure and logistics and the manufacturing sector. Furthermore, the surge in energy prices also affected the utilities sector because many companies in the sector had already sold fixed-price contracts and this did not allow the increases to be passed on to consumers, they add. In the infrastructure sector, and logistics in particular, companies have suffered from a significant increase in transport costs, which has contributed to eroding margins. Even companies in the automotive sector have been affected by the increase in energy costs, which has forced many suppliers to reduce production, but also by the shortage of materials (primarily metals).

Says Alberto Franzone, country head of Alvarez & Marsal in Italy: The support measures linked to Covid and the high levels of liquidity have kept companies in difficulty afloat for a long time, but the situation is changing. Many of them have debt maturities in 2024 and boards of directors are now having to deal with the new reality of inflation, which is reducing demand, broken supply chains, higher interest rates and greater caution on the part of the of lenders. Our advice to both companies and lenders is to start acting now to avoid a more serious turnaround scenario in the medium, or even the short, term.