The Italian textile industry 10 years after the great crisis

The Italian textile industry 10 years after the great crisis

June 8, 2018

Giampaolo Morittu

The sector still plays an important role in the entire national manufacturing, although deeply resized compared to the first half of the last decade

 

The Italian textile industry still plays an important role in the fashion sector and in the entire national manufacturing, although deeply resized compared to the first half of the last decade. On European scale, Italy stands on the podium of the main producers with a high level of specialization in the different stages of the value chain. In Italy today there are 14 thousand textile companies, for a production value of over 20 billion euros. Relevant numbers but significantly lower than those of 2007. The Italian textile industry, in fact, shows a gap of about 3.5 billion in terms of production value, which means 4 thousand companies and 40 thousand less workers compared to 10 years ago.

These challenges long pre-date the global financial crisis, which has just amplified pre-existing problems and trends already in progress since1990s. The global structure of the global fashion industry has been undergoing in a deep transformation for a long time. This is happening because of the displacement to China, and Asia in general, of the center of balance for both production and demand. The new competitive context penalized primarily small companies (especially the contractors) specialized in lower quality products, without a direct access to market, and more exposed to competitive pressure from emerging countries.

 
The Italian textile industry 10 years after the great crisis
 

On the other hand, successful enterprises have been able to react to a rapidly changing global environment, increasing the quality of the product offered and improving the integration in the supply chain. At the same time, they significantly invested in innovation and rationalization of production processes in through co-operation with suppliers of textile machines (an important partner in this industry). Product innovation focused on technical performance of fabrics and yarns in order to extend the application areas. With regard to this issue, in the most recent years, the 4.0 technologies has led to a significant development of the so-called E-Textile. We are talking about fabrics that enable digital components such as a battery and a light (including small computers), and electronics to be embedded in them. Smart textiles are fabrics developed with new technologies able to provide benefit to the wearer. Still in the testing phase, this type of product could have very interesting business perspectives, for example in the sportswear producing t-shirts with sensors used for monitoring the vital functions.

Recent years, with the exit of the weakest players and the consolidation of companies able to adapt the business model to the new global context, marked the completion of the selection process. Today Italian textile industry shows a more solid production structure, strongly export oriented (with exports accounting for over 45% of turnover) and characterized by the presence of a good number of leading companies at the forefront of technological innovation. This aim - achieved after a years-long process - only in recent years started to give fruits. Total sector turnover (at constant price) grew by over 2% in 2017, the best performance of the last decade (except the 2010 statistical rebound following the drastic fall of 2008-'09).

However the company financial statements, and in particular the profitability indicators, better reflects the strengthening of the Italian textile sector. In the last two years, the average Roi of the Italian textile industry has permanently positioned over 7%, exceeding 2008 levels after a decade of steady growth and partially bridging the profitability gap with the fashion industry as a whole. The decomposition of Return on Investment in its sub-indices, shows that the increase of Roi has been the result of the improvement in sales profitability (the Return in Sales has doubled in 10 years), reflecting the upgrading of Made in Italy fabrics. The improvement of fixed asset turnover ratio (+16% from 2010 to date), indicates more efficiency of production processes. 

 
The Italian textile industry 10 years after the great crisis