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Friday, December 9, 2022

Bormioli comes out of crisis

Following years of crisis, the most important Italian glass group is back in profit, recapitalized by EUR 100 million, and is targeting China. The most painful step in its rationalization will be comp…

Following years of crisis, the most important Italian glass group is back in profit, recapitalized by EUR 100 million, and is targeting China. The most painful step in its rationalization will be completed in the next 4-5 months when Bormioli closes the Saint Leonardo plant in Parma, which has been in operation since the establishment of the firm in 1825. However, the main part of the rationalization responsible for saving the group and returning it to profit, is now complete. In the first week of November 2003, a meeting of Bormioli Rocco shareholders gave their unanimous approval to an increase in capital of EUR 100 million (50% now and 50% to be decided by the board within a year) in order to finish off the rationalization, but also to undertake a relaunch that includes new plants in China and the Ukraine. According to group Chief Executive Boni Franc, with the approval of the recapitalization the shareholders confirmed their backing for a plan that has produced a return to low but solid profit in 2002 (EUR 6 million before the taxes) after three years of losses, with the doubling of the EBIT from EUR 15 million to over EUR 30 million. Things have not always gone smoothly for Boni, a manager with a long career in glass, or for president Antonio Aiello, the pair of top managers called on to save the glass group from disaster in 1999. In 2002, a previous recapitalization which lead to the entry of Banca Popolare di Lodi/Efibanca with 42% through Fin.Rocco, only happened after Aiello and Boni threatened to resign. The pair are now flanked on the board by the former right hand man of leader Pietro Barilla, Manfred Manfredi, the president of Unicredito Bank, Carl Salvatori, the president of Efibanca, Pietro Rastelli, and Lise Norbre, a manager of the Paribas group. The latter has a 7% stake in Bormioli dating back to 1997 when Paribas acquired businesses from the Saint-Gobain group. The break-neck pace of acquisitions in the 90s was almost the ruin of the Bormioli group. The acquisition of the Fidenza Vetraria from the Varasi group was followed in quick succession by another 11 acquisitions. The group got bigger, but so did organizational and managerial problems and indebtedness (reaching 500 billion in old Italian Lira on turnover which jumped to 1,200 billion). When the global glass sector was hit in 1998-99 by the worst crisis of the last few decades, Bormioli risked extinction. The cure, now entering its final phase with the recent approval of the recapitalization, has been radical: plant closures, the cession of companies in Italy and Germany, the transfer of the headquarters from Parma to Fidenza, a workforce cut from over 5,000 of 1999 to an approximate estimate of 3,100 by the time rationalization finishes at the end of 2004. Defending the changes, Boni points out that with 2,000 fewer employees (including ten managers) turnover is not far off the figure before the cuts. Currently, the group makes approximately 50% of sales from household glassware (with the Bormioli brands and French Duralex), where it is ranked third in the world behind French Arc and American Libby, 13% from pharmaceutical packaging, where it shares world leadership with Saint-Gobain, 17% from beauty care and cosmetics packaging, 7% from food packaging and 11% from plastic. Bormioli is hoping for big things from this last division (the source of “optimal” profits, says Boni) which is “attacking” glass, above all in cosmetics and pharmaceutics. The group still faces challenges: the strong EUR penalizes a company that has its entire production base in Italy, France and Spain (with high production costs in comparison to Turkish, Slovenian and Czech competitors), and one of its main markets in the USA (its number one for beauty and cosmetics). In Italy, high energy costs (25% higher than in France) also weigh heavily on the company. Bormioli expects to solve some of the problems through the new project in its launch phase, which includes investment in new technologies and the logistics. The company is to seek new markets beginning with China, where Arc has just touched down, and the Ukraine. And in the next 30 days, the subscription of the recapitalization will take place.

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