(Repeats story for media clients with amended media identifier)
Response to energy crisis key for economic outlook
Bankers say firms more resilient than given credit for
Italy performed better than expected so far this year
MILAN, Oct 21 (Reuters) - Italian media had only just
begun talking about the threat of winter gas rationing when
Marco Checchi sprung into action to ensure bottle top maker
Pelliconi would continue to supply customers including
Coca-Cola, Heineken and Guinness.
Pelliconi, which produces 35 billion bottle tops a year,
mostly in Italy but also in Egypt and China, stepped up
production of energy-intensive semi-finished goods, invested in
solar panels and commissioned a prototype of a new digital
printer for metal sheets that did not require gas ovens.
"When you run a business, if you keep hearing on the news
that gas supplies are at risk, you've got to do something. It's
not like you can start screaming and stamping your foot when
they actually do halt flows for two hours a day," Checchi told
Like other Italian businesses wrestling with the energy
crisis sparked by the Ukraine war, Pelliconi has seen costs for
electricity and gas more than triple in relation to turnover
this year, compounding problems posed by higher steel prices.
In some cases it has been able to pass on almost two thirds
of the cost increases to its customers and plans to further hike
prices next year.
Higher prices contributed to the 16.2% rise in manufacturing
turnover Italy reported in July on a calendar adjusted basis,
but volumes also increased by 1.7%. That broadly compares with a
0.8% yearly drop in Germany.
Traditionally the laggard among the biggest euro zone
economies, Italy has experienced a more vigorous post-pandemic
rebound in terms of industrial output than France and Germany,
Intesa Sanpaolo economist Paolo Mameli said.
After growth exceeded expectations in the first half, the
situation has worsened rapidly and the government now expects
the Italian economy to have shrunk in the third quarter, with
the contraction seen lasting until mid-2023.
Investors have trouble gauging the depth of the slump
awaiting the European economy and debt-laden Italy.
"The euro area outlook remains unusually uncertain," Goldman
Sachs economists said.
Goldman expects an around 1% contraction in the bloc's
economy through the second quarter of next year, adding that
resilient industrial activity could limit the fall to 0.2% while
it would approach 3% in a worst case scenario.
The coping strategies adopted by firms like Bologna-based
Pelliconi are an element in the equation that will determine the
final outcome, according to UniCredit CEO Andrea Orcel.
"Companies are adjusting, it's wrong to assume they aren't.
We see that all the time when we look at our clients: businesses
are reorganising their value chains, their logistics,
everything," he recently told a labour conference.
"So far households and companies have proven more resilient
than anticipated ... markets worry a lot over Italy's
performance within the euro zone overlooking the fact that Italy
keeps growing more than France or Germany," he added, noting
that corporate deposits were up 35% from pre-pandemic levels.
UniCredit, which is financing companies' investments to
boost installed capacity for renewable energy, said some of its
customers in non-energy intensive sectors were able to generate
independently 30-40% of their power needs, in some cases as much
Most companies are rushing to install solar panels, but some
are more ambitious. Fastener maker SBE-Varvit has secured 400
gas containers that will be shipped to its plant in north
eastern Italy by January to offset any shortages.
Even in a battered industry like ceramics, which like the
glass and paper sectors has been hit hard by soaring energy
bills, high-end tile maker Italcer expects to cover a quarter of
its energy consumption once it completes the two combined heat
and power plants it is building.
"Already in September 2021 there were warnings of what was
to come," CEO Graziano Verdi told Reuters, adding Italcer faced
an extra 60 million euros in costs for gas and electricity this
year - accounting for 70% of manufacturing costs from 20%
"We invested 10 million euros to build two cogeneration
plants and save 4 million euros this year," he said, adding
Italcer saved another million by reducing the tiles' thickness
to 8.5 from 10 millimetres.
"We raised prices by 30-35% with a good market response. A
weaker euro certainly helped, as did the government's support
Outgoing Prime Minister Mario Draghi's government has set
aside 66 billion euros so far this year for tax breaks and
subsidies to help energy-intensive firms and poor households.
Italian business lobby Confindustria has warned of an
"economic earthquake", saying the new government will struggle
to offset the hit from energy prices on firms like Draghi
managed to do without hurting Italy's fragile public finances.
But others are more positive.
Veteran banker Corrado Passera said the crises had operated
a natural selection among businesses and his digital lender
illimity continued to face growing requests to fund
acquisitions, or innovation and internalisation projects.
"When you speak to business owners in private ... outside
Confindustria ... they have great confidence about their ability
to react," Giuseppe Castagna, who leads Italy's third-biggest
bank Banco BPM, said recently.
(Reporting by Valentina Za and Elvira Pollina; Editing by Keith
Weir, Kirsten Donovan)