Tough times for Italy's tanners

Last year the Italian tanning industry recorded a total turnover of e6.5 billion. This figure represents 66% of the entire European Union leather output and 20% of world output for finished leather. From the total production approximately 35.9% was consumed in the domestic market. Table 1 shows the top ten exporting countries. It is interesting to note the proportion of Italian leather which is shipped to Romania. Romania has become a base for many Italian owned shoe factories. In terms of raw materials Italy consumes 26% of the world's supply of hides and skins. Despite the strong overall figures, last year was very difficult for the Italian tanning sector. Demand from all but one of their major export markets fell according to figures released by the Italian statistical organisation ISTAT. According to ISTAT's estimates the Italian tanning industry is experiencing the current difficult trend in the global sector. In fact, the slowdown of the Italian tanning industry showed up clearly in the average annual data for 2002, which indicate exports down at rates exceeding 10%. The detailed country-by-country analysis of trade flows shows significant falls in the outflows for seven of the ten major markets for Italian leather. Exports to Hong Kong, which is the most important overseas market, suffered a drop of more than 6% in comparison with 2001, while sales in the United States (the third foreign market) fell off at more than double that rate (-14.6%). The results obtained in the major EU markets were also very disappointing: France and Germany reduced their purchases of Italian made leather by more than 20%. Of the top ten export markets for Italian leather, only Romania (+4.1%), which is the second foreign market and Poland (+25.3%) continued to increase their absorption capacities (table 1). In these cases the export figures have increased as production relocated out of Italy into Eastern Europe. Negative results were also evident with exports to Spain down by -12.7%, South Korea -0.2%, China -7.1% and United Kingdom -34.1%. According to the ISTAT estimates, from January to December 2002 the total export of Italian leather decreased by 10.7% in comparison with 2001 or by a total of €3.9 million. Activity within the Italian leather processing sector fell by -3.2% last year. Machinery sector In addition to their leading role in the tanning sector, Italy still leads the world in tannery machinery technology. In the first ten months of 2002 Italian exports of tanning machinery increased 10.3% in comparison with the same period of 2001. According to Assomac, it should be borne in mind that that this apparent upturn in business is the result of the previous low levels the year before. However, the growth involves all markets: +5.6% for Asia, +15.1% for Europe, +5.2% for the Americas. Despite this, total exports of Italian machinery for all sectors in the leather sector, from January to October 2002, decreased by 2.9% due mainly to the big fall in footwear machinery exports (-10.5%). The export of tanning machinery represents about 28% of the total export of Italian technology for the leather sectors. There have been a number of closures and mergers in the tanning machine sector in the past year. The most notable changes have centred on the Poletto Group which embarked on an apparent spending spree, buying up a number of companies and bringing them into the Poletto fold. Ultimately, the money was not there to underwrite the gamble which has resulted in some closures and some companies back in independent ownership. There can be no doubt that the name Poletto is important in terms of brand image and following the crisis and break up of this most important Italian group, a comeback has been staged and production recommenced on February 17. The name of the company is now Poletto Tecnology, located in San Pietro Mussolino, in the Vicenza tanning district. Walter Peretti, owner of the Peretti group in Montebello and president of the Italian tanning association (Unione Conciaria), and Mario Tolio, owner of the Tolio tannery based in Chiampo, are the new controlling shareholders. They have been helped in the relaunch operation by financial companies headed by other entrepreneurs of the district. 'Work has restarted in a big way. We have orders till August', says Achille Belloni, director of Poletto Tecnology with satisfaction. The previous structure has been streamlined and not only with regard to workers, reduced from 110 to 70. 'Above all, now we are able to offer the clientele a more functional company, especially in the post-sales assistance.' Belloni has gained a long experience inside Euroventilatori, a company making up part of the old Poletto Group. Now Euroventilatori has been taken over by Euroventilatori International, the company that has made the lifeboat operation possible. 'The Poletto trademark has been strongly rooted in the world markets since 1969', Belloni affirms. 'In the world there are still about 4,000 machines made by Poletto. 'With the new company we expect to close 2003 with a turnover of €13-14 million, 50% of which will be realized in the local market and the rest mostly in south-east Asia and in South America. Looking at the future, I consider China and Brazil but also Argentina, when it recovers from the current crisis, amongst our most interesting outlet markets.' Poletto Tecnology are introducing spraying lines, machines to lower atmospheric emissions, drying tunnels, drums, shaving, fleshing and setting-out machines. The presence of two important tanning companies in the venture should be a guarantee of a deep synergy: for example, in addition to research, technological innovation and the capacity of solving small and big problems of everyday tanning activity can also be considered. Of the other companies in the group, La Conciaria Master is reported as having closed; G.i.p.r.a has closed; Travel International has closed; Unimatik has been sold; and Mostardini remains in the hands of the Mostardini family. Finished goods The market trend for Italian footwear and leathergoods remains at negative levels. In the first nine months of 2002 exports of Italian shoes decreased by 9.4% in quantity and by 6.6% in value, although there was an increase of +3.1% in the medium price, compared with the same period of 2001. The export of leather shoes decreased 9.8% in quantity (166 million of pairs) and 6.7% in value (€4.4 billion). The export of bags, belts, luggage and the other leathergoods articles decreased, from January to October 2002, by 9.7% in value while imports increased by 7.2%.