BCG Transform Index:
Italy
Financial study on sector performance
APRIL, 2023

Disclaimer
The basis for this study is a data set extracted from Capital IQ for companies listed on European stock
exchanges with a minimum revenue of €500 million
Companies from the financial industry and Ukraine/Russia are excluded

The analysis covers data from 2018 through the last twelve months (LTM)
LTM refers to available data from Q4-2021 through Q3-2022
The ranking is based on a comparison with other industries within the same country
Please note that the statements made relate specifically to this data set
1Copyright © 2023 by Boston Consulting Group. All rights reserved.

Our data set includes 1,373 European companies, of which 78 are Italian, that meet these selection criteria

Sector performance and resilience in the face of past andprevailing crises

Take-aways
Operational view

Most impacted
sectors

Rankingcompared withEuropean average
BCG
recommendation
Source: BCG Analysis

The Chemicals sector in Italy which ranks amongst the top chemical exporters worldwide has taken part inglobal economic uplift in recent years and thus scores high across all financial dimensions•The Metals & Mining sector scores highly across all dimensions, capitalizing on the surging demand formetals and minerals and price increase from constrained supplies in the recent past•

Health Care sector shows a strong performance across all dimensions, taking advantage of digitalization andthe increase in demand for health care services since the pandemic•

The Industrials sector scores poorly in profitability and financial stability, with significantly lower EBITDA
margins compared with 2019. This development is very similar to the one shown by the Energy sector•The Energy sector struggles with solvency and financial stability and could not recover based on recent
increases in energy prices•

The TMT sector grapples particularly with issues concerning solvency, with 33% of its companies having
negative FCF in LTM. In addition, its EBITDA margin has not yet recovered to pre-pandemic levels•

The Italian Health Care sector has been more resilient amidst the crisis due to the strong brand names ofItalian pharmaceutical companies allowing for a better performance compared with the European average•

The Italian Industrials industry has been severely hit by increasing input prices, supply chain disruptions, andworsening industrial sentiment in the face of a looming recession. Energy also performs below European view

In the context of persistent crises, companies cannot continue to remain in a reactive firefighting mode, butrather must focus on proactively seizing opportunities supported by an adaptable cost structure (that fitsearnings), a strong financial position, and an adjusted go-to-market strategy. In a nutshell: Resilience is key tobeing successful

Revenues have surpassed pre pandemic levels and are currently on
the rise, particularly in the Energysector. However, EBITDA margins have
not yet returned to pre-Covid levels
across many industries and havedeclined in LTM. This trend is also
evident in other European countries

Solvency
After a significant rise in LTM, theproportion of Italian companies withnegative free cashflow is 26%, which iscompletely in line with the European
average of 27%

Financial stability
Contrary to developments in otherEuropean countries, net debt has
decreased in LTM with the percentageof investment grade debt being only15%, a significantly lower share than
the assumed 40% in 2018. The qualityof net debt is considerably worse thanthe European average of 45%
investment-grade debt
2Copyright © 2023 by Boston Consulting Group. All rights reserved.

Most resilientsectors•Sectors providing fundamental input for industrial production and healthproved to be the most resilient industries

12
34
5

Chemicals
Metals & Mining

Metals & Mining
Chemicals

Health Care
EnergyConsumer
Automotive

Other
Other

Profitability

Solvency

Financialstability

108826

89926

95721

78621

65

415

SUM

Industry position in the European ranking
Note: A ranking was assigned to each industry based on its performance in three dimensions. The detailed ranking methodology can be found in the appendix.
Source: Capital IQ, BCG analysis

3Copyright © 2023 by Boston Consulting Group. All rights reserved.

Points given for industry performance in three dimensions

TMT is the industry that has been most severely impacted, with performance inItaly worse than in the European ranking

678910

Leisure & Tourism
Industrials

Automotive
Health Care

Industrials
Consumer

EnergyTMTTMT
Leisure & Tourism

Profitability

Solvency

Financialstability1101

12425112621053193137SUM

Industry position in the European ranking
Note: A ranking was assigned to each industry based on its performance in three dimensions. The detailed ranking methodology can be found in the appendix.
Source: Capital IQ, BCG analysis

4

Copyright © 2023 by Boston Consulting Group. All rights reserved.

Points given for industry performance in three dimensions

Operational view | While revenues have surpassed pre-pandemic levels, EBITDA
margins decreased in the face of recent challenges
EBITDA margin in Italy in %, 2018–LTM40.5%
3.2%
323
15
119-20.1%

20267
1 18

36342
4 28

2018

1412211%

156
47352
4 24

2019

Note: LTM = LTM Q3-2022
Source: Capital IQ, BCG Analysis

43338
5 27

2020

4358
5 29

2021

6

4

27%

28%

222

621%

21%

367

7
62

17%
12%
21%

16%
12%
20%

12

205

204

26365

334
14017
1

3.7%

-1.3%

526

LTM

18%

10%
23%

16%
14%
21%

20%

19%

15%
14%
16%
15%

29%

30%

28%

14%

16%

20%

21%

30%

30%

29%

11%

12%

2018

2019

18%
632

9%

10%

-6.2%

-1%

12%

2020

AutomotiveChemicals

Health Care

Leisure and Tourism

TMTConsumer

EnergyIndustrials

Metals & Mining, Const. Mat.

Other

9%

14%

20%

10%

14%

21%

24%

24%

13%

12%

2021

LTM

5Copyright © 2023 by Boston Consulting Group. All rights reserved.

Revenue in Italy in bn EUR, 2018–LTM

Solvency | 26% of Italian companies have negative FCF in LTM, which
is fully in line with the European average of 27%
Our data base contains only one
company within Chemicals

Distribution of companies with negative/positive FCF in 2021 and LTM
681%

67%

19%

33%

1883%
17%

114557%
100%

100%
43%

0%

9100%

100%

100%0%0%0%

1632

963%

67%

81%
19%

475%
25%

1874%

83%

83%

26%

17%

17%

AutomotiveConsumer

Chemicals

EnergyHealth Care

Industrials

Leisure andTourism

Metals &Mining,
Const. Mat.

TMT

Other

48%

28%

28%

31%

21%

29%

16%

32%

22%

16%

64%
36%

0%

52

6100%

14378

LTM

10%

1680%
20%

38%

100%

33%

0%

67%
33%

4

100%
0%

Total

Europeanbenchmark fornegative FCF in LTM
Positive FCF

27%

Negative FCF

Note: The number of companies within each sector is lower than 5 in Chemicals, Automotive, Leisure and Tourism, Metals & Mining, and Other
Source: Capital IQ, BCG Analysis

6Copyright © 2023 by Boston Consulting Group. All rights reserved.

2021

78

Financial stability | Net debt has increased in LTM while the quality of net debt
has deteriorated
Net debt by rating1 in Italy in % and bn EUR, 2018–LTM

Net debt in Italy in bn EUR, 2018–LTM

219

213
185
5160

70012251

51

53

1
31

10334248

00660215
187

041%

112

002021

34

2

15%
4%

41%8%17%

51%

47%

53%

2019

2020

2021

Investment Grade

Mid-Grade39%

42037%

207

6%

21%

4236

221

40%

153

339333

76205

113

109

92

107250

82%

0
2018

2018

2019

2020

Automotive

Chemicals

Health Care

Leisure and Tourism

TMT

Consumer

EnergyIndustrials

Metals & Mining, Const. Mat.

OtherLTM

LTM
Sub-Performing

1. The ratings are based on the Net Debt/EBITDA leverage measure. Debt with a Net Debt/EBITDA ratio below 3.5 is considered investment grade, while debt with a ratio between 3.5 and4.5 is classified as mid-grade. If the ratio exceeds 4.5, it is considered sub-performing debt. If EBITDA is negative, net debt is automatically classified as sub-performing.
7
Source: Capital IQ, BCG Analysis

Copyright © 2023 by Boston Consulting Group. All rights reserved.

8.9%
7

20.9%

-6.5%

8
Copyright © 2023 by Boston Consulting Group. All rights reserved.

Appendix

BackupProfitability

Solvency

Financial stability

Total ranking

The profitability ranking isbased on EBITDA growth
between 2019 and LTM, with
the industry having the lowest
EBITDA growth being assigned
the fewest points (1) and theindustry with strongest EBITDA
growth the most points (10)The solvency ranking is basedon the growth sector's overall
cash account LTM, thepercentage of companies withgrowth in cash LTM, and theinterest coverage ratio, withthe worst overall performanceassigned the fewest points (1point) and the strongest themost points (10)The financial stability
ranking is based on the LTM
equity ratio and net debt rank,which is determined by
the proportion of mid-grade
and sub-performing debt, withthe worst overall performanceassigned the fewest points andthe strongest the most pointsOnce the points for eachdimension have been
determined, a total ranking
score is calculated by summing
the points of each dimension.
The highest sum of points
indicates the best
performance, the lowest thepoorest performance

9Copyright © 2023 by Boston Consulting Group. All rights reserved.

Ranking methodology

Backup

Number of Italian companies within each industry in the underlying database

7818
6

Automotive Consumer Chemicals

Source: Capital IQ, BCG Analysis

1614

951Energy• Companies listedon European stock
exchange with atleast €500M
revenues

HealthCare

Industrials32LeisureandTourism

Metals& Mining,Const. Mat.

TMT

4• Financial industry
and companies
from Ukraine andRussia excluded

Other

10Copyright © 2023 by Boston Consulting Group. All rights reserved.

Selection criteria:

Backup

The data set consists of European companies that meet the selection criteria
for this study
1,373
244

105
78

2839

4335
27 12 3238
16

5632
125551 45
2115

8

1

38
Total

Count ofcompanies
that meetselectioncriteria

6895

Source: Capital IQ, BCG

11Copyright © 2023 by Boston Consulting Group. All rights reserved.

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