Confindustria Ceramica

Stampo per ceramicaby Alfredo Ballarini27   Aprile   2018

Ceramic tile molding: financial management

The industry of ceramic tile molding, examined through a representative sample of 17 companies, increased its sales by 4.28% in 2016, its turnover rising from  €93.96 million to 97.98 million.  This time, however, EBITDA is only rising in absolute value, as impact on produced value falls from 7.84% to 7.78%. Gross margin decreases in percentages despite an increase in value added rising from 37.6 to 38.26% of produced value, thanks to an increase in labour cost (from 28.9% to around 29.2%) and  in other management fees accounting for around €500,000 (+ 0.5%). As highlighted many times in the past, the cost of labour feeds itself on a large share of value added generated, over 76% of the entire cake. Revenue per employee decreases by a mere 4,000 euros, remaining basically unvaried compared to last year. Leased assets (leasings and rentals) are on the increase, both in percentages and absolute value. This item weighs for 2.8% of produced value and indicates to what extent physical assets are located. On the other hand, had the investment choice fallen on equity, 2.8% of produced value would have remained available as cash flow for management. Amortisation is also rising while provisions, after last year's sharp increase, are falling. In the end, the profit and loss account highlights that Ebit is on the  increase in absolute value for the fifth consecutive year,  while this is the second time it is decreasing in percentages on produced value from 3.53% to 3.49%.

Financial expenses invert their previous trend falling both in percentages and in absolute value, despite a net financial position which greatly improves from 31.8% (2015) to 19.5% (2016). Such discrepancy with the general indebtedness is probably due to a worsening in extraordinary items, in particular in management of changes or costs on the whole. The ceramic tile molding industry closes its 2016 profit and loss account in the black, with a €942,000 final net profit, lower than 1.275 million of the previous year and with a 0.94% on produced value.

However, cash flow net of taxes increases for the third consecutive year, also thanks to the net financial position falling, therefore enabling reimbursement of net liquidity in about 3.5 years if conditions remain the same. Capitalization (intended as equity on total net equity) rises to 28.08% of assets; as to the financial cycle, if on one hand the average collection period improves from 140 to 100 days, on the other hand days payable outstanding shrink from 148 to 109 days.
Statistically, last year's forecasts on profitability, indicating a 59% chance that Ebitda should keep itself between 7.1% and 8.8%, have basically been met. Forecasts for 2017 foresee a stable Ebitda at around 7.8%, since its unpredictability has fallen to minimum levels.

Switching to a graphical analysis, carried out through the new WI-FROM application to automatically analyse end of year statements in just one minute,  a few evidences on the Financial Structure performance emerge at a glance:
1) Sector sales, represented by the triangle on the right, are lower than invested assets, which correspond to the rectangle on the left; therefore the financial efficiency of the sector is less than 1 -  0.84 to be precise, which means that earnings are lower than investments.
2) Net financial debts, as it is shown in the oval area, make up a limited percentage of sales (triangle on the right) and  of property and assets (rectangle on the left).
3) The net working capital of the tile molding industry is, though not abundantly, in the black: the two green rectangles on the right form a step overcoming the green rectangle on the left, thus financing liquidity and part of stock. This means financial stability since long-term financing are funding not only investments but also part of current assets.
4) Current liabilities, represented by the difference between the two red rectangles (if placed on the same base), are negative, as short-term funding (red rectangle right) is greater than liquidity (red rectangle left). This means that short-term Treasury is debited. It is not a negative factor in itself but, if it were adjusted by improving the financial cycle previously analysed, it would guarantee a better and more efficient management.
5) Last, we have the CCNo (the net operating working capital) identified by the edge between the light blue rectangle (customers and other operating receivables), the orange one (stock) on the left and the light blue rectangle on the right (suppliers and other operating payables). It is therefore the financial need created by the operating income net of suppliers. As it emerges from the image, the Net operating working capital was partly funded by short-term financial debts (red rectangle on the right) and partly by Net Working Capital as previously indicated at No.3.

The picture emerging from this chart is that of a more stable financial situation, despite there certainly is some room for improvement. The chart "What does it pay? Is there financial stability?" maybe expresses this idea in an even more optimistic way. The "cake", divided into a red (the factors to improve) and a green area (which acknowledges the positive things achieved) only highlights 3% of the red circle.
The graphic “How does it economically work?” on the other hand shows a "cake" expressing a good but stricter result: the red area of factors that could be improved through a more dynamic management widens to 25%, about a quarter, of the whole cake.
 Ideally summarizing the industry's economic and financial features in a unified rating value, assessed with the S&P index but according to calculations simplified by us, we have an improvement since last year's fiscal year up to an A- .