IPACK-IMA Monitor reveals upturn in domestic demand in first half of year
The 2017 first-half figures for the Italian processing and packaging industry revealed higher-than-expected domestic revenues driven by government incentives on the purchase of capital goods. The trend is expected to continue in the second half of the year as exports also pick up.
The main risks and threats perceived by companies include increased competition, commodity prices, taxation and labour and service costs.
Slower growth in exports compared to domestic Italian sales is the most significant figure to have emerged from the latest findings of the Ipack-Ima Monitor, the survey linked to the most important European exhibition in 2018 for the processing and packaging industry to be held at the Fiera Milano exhibition centre from 29 May to 1 June next year.
The half-yearly business study was conducted over a sample of companies representing the entire supply chain. The industry, consisting of manufacturers of processing and packaging machinery, suppliers of components and producers of materials, serves a range of industrial sectors divided up into a number of business communities: Food, Fresh & Convenience; Meat & Fish; Pasta, Bakery, Milling; Beverage; Confectionery; Chemicals, Home & Industrial; Health & Personal Care. The results of the survey reveal how the breakdown of sales has changed in the first half of 2017: export sales grew on average less than domestic turnover, a phenomenon largely driven by the Italian government’s incentives on capital goods purchases.
The positive domestic market trend is continuing in the second half of the year, with exports also expected to pick up. The proportion of companies reporting turnover growth is set to rise by 10 percentage points to reach 85%, half of whom will see increases of more than 5%.
Looking in detail at the various business communities, in the first half year of 2017 most companies in the Food Fresh & Convenience segment posted growth of between 0 and +5%. Export turnover was 2 percentage points higher than forecast, and total turnover (Italian + exports) 11 points higher due to strong domestic sales. Estimates for the current half year point to a further improvement in all three variables investigated (total sales, export sales and employment).
Although the Meat & Fish segment has displayed limited growth, it has regained ground and closed the first half of 2017 ten percentage points higher than expected. The evident improvements have led to expectations for the second half of the year being revised up, bringing to 83% the percentage of companies forecasting turnover growth.
The Pasta, Bakery & Milling sector reported growth, again more in terms of total turnover (73% of companies) than export turnover (53%). The forecasts for the current year point to more widespread growth expectations in terms of both total sales (86% of companies) and export sales (almost 3/4 of companies).
The Beverage segment confirmed its export growth forecasts (although with smaller average percentages) while revealing a better-than-expected performance in terms of total turnover, with 79% of companies reporting growth compared to the estimated 71%. The growth rates were also higher. The second half of 2017 is expected to see growth rates more or less in line with those of the first half, especially as regards companies making growth forecasts higher than 5%.
Contrary to the widely overestimated expectations for 2017, only 60% of companies in the Confectionery segment reported export growth (they had all predicted increases). This percentage rises to 80% for total sales. As a result, companies have revised down their expectations for the current half-year, which are now roughly in line with the final figures for the first six months. The same picture emerges for the Chemicals Home & Industrial segment, where the percentage of companies reporting export growth was 20 percentage points lower than expected (10 points lower in the case of total turnover growth). Exports are expected to see a stronger recovery in the current half year.
Unlike the first half results which failed to meet expectations, the Health & Personal Care segment is expected to grow in the current half year, especially in terms of export turnover (+17%). Companies also expressed a very positive sentiment with regard to the sector’s total growth.
Breaking down the trends according to types of machines or materials produced by the companies, the process machines sector saw a discrepancy between forecasts and actual data (52% of companies posted export growth and 48.6% growth in total turnover), prompting them to revise down their growth expectations for the current year: 69.7% of companies expect to post overall turnover growth, while 71.4% are anticipating growth in export turnover. By contrast, a strong correspondence between forecast and actual results was observed in the other capital goods segment consisting of packaging machinery manufacturers. Growth expectations in the second half of the year are intensifying, with 78% of companies anticipating an increase in export sales (compared to 63% in the first half) and 83% expecting growth in total revenues (72% in the first half). The share of companies predicting strong turnover growth (>10%) has also increased. As in the case of packaging machinery, the second-half projections made by packaging materials producers are similar to the final results reported in the first half, consisting in both cases of essentially stable growth. The optimistic forecasts made by the component producers in 2016 were confirmed, with 70.5% of companies posting export turnover growth and significantly higher-than-expected domestic sales. A large majority of sector companies believe that the second half of the year will follow the same positive trend as the first half of 2017.
The survey also assessed the perceived risks to business profitability reported by companies in the sample. While the severity of perceived risk varies between the different production segments, the main threats include an escalation of the competitive climate due to greater aggressiveness of competitors (25.6% of respondents compared to 20% in the previous half year), macroeconomic factors that affect sales in various ways (8.9% compared to 12%), rising raw materials and energy prices (20% compared to 25%), the costs of services (12%) and labour (13%, perception stable) and adverse changes in taxation (12% in line with the sentiment in the previous half-year period). Threats that directly impact on the financial management of companies, such as access to credit and the relevant costs, appear less significant and were reported by just 6% of respondents.
The IPACK-IMA Monitor therefore reveals a general climate of confidence that is reflected in trade fair participation. Six months before the exhibition is due to begin, more than 800 companies have confirmed that they will be taking part and are preparing to present their latest innovations at the show.
