The Belgian machines sector faces some troubles in the construction-related segment. Italian machinery scores abroad, but not yet in the domestic market.
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Sector playing field: machines/engineering industry
Belgium: some issues, but still performing well compared to other teams
Demand for Belgian machines and engineering businesses is still affected by the difficulties some major buyer industries are facing (e.g. construction). The situation is not expected to improve in the short-term.
In general, the profit margins of Belgian machinery/engineering businesses remained stable over the past 12 months as companies were able to reduce their cost base. In the coming months margins are expected to remain stable or to slightly deteriorate, depending on the level of activity (order books). While competition is strong, high quality producers usually enjoy a competitive edge.
A major issue for the industry is that banks are in general still restrictive in granting financing. Businesses that do not have access to financing cannot perform in a sustainable way: gearing has always been high in the machinery sector due to the required investments.
That said, compared to other industries the credit risk and business performance of the machinery sector remains at an acceptable level.
Italy: mainly scoring at away games
The Italian machines/engineering sector has proved to be relatively resilient during the downturn of Italy´s economic performance due to its export orientation, high specialization and added value products in precision mechanics. Both specialization and quality help to preserve satisfying profit margins for many (export-oriented) businesses.
However competition is strong in the domestic markets, especially among small and medium-sized machinery companies dependent on construction businesses.
The still subdued domestic investment growth and the weakness of some end-markets suggest that specific subsectors will be impacted by reduced production, mainly smaller machinery businesses dependent on the domestic market. On the contrary, export-oriented businesses are expected to improve performance and cash generation.
Players to watch
Belgium
Machinery for manufacturing and agriculture are performing quite well.
Machinery for the construction industry faces some trouble caused by subdued demand.
Italy
The machinery segment dependent on the manufacturing sector continues to benefit from export growth and from increased demand from the Italian manufacturing sector as the economic rebound continues.
The construction and road machinery segment performance is still hampered by weak construction performance in Italy.
The earthmoving machinery segment is highly dependent on public works and therefore exposed to structurally slow payments by public entities.
Demand for machinery related to the oil and gas sector is deteriorating.
Major strengths and weaknesses
Belgian machinery/engineering industry: strengths
Italian machinery/engineering industry: strengths
- Many businesses are part of large groups
- Many companies are flexible and used to managing ups and downs in terms of activity
- Suppliers of quality products
- High specialization and technological know-how
- Export orientation and good geographical diversification in end markets
- General sound financials of large engineering corporates
- Expected to benefit from the economic rebound in Italy
Belgian machinery/engineering industry: weaknesses
Italian machinery/engineering industry: weaknesses
- High fixed costs
- High competition
- Potential decrease of order books in the short-term future
- High number of small companies
- Low bargaining power
- Weakness of certain (domestic) end markets
Fair play ranking: payment behaviour and insolvencies
Belgian machinery/engineering industry
On average, payments in the Belgian machinery/engineering sector take around 60 days.
Payment experience is average, and the level of protracted payments has been low over the past couple of years.
Although still relatively low compared to other industries, the number of non-payment cases has increased over the past 9 months, and this negative trend is expected to continue.
The number of insolvencies in the industry is at a low level but is deteriorating slightly.
Italian machinery/engineering industry
Payment duration in the chemicals sector is about 100 days on average.
Payment experience has been good over the past two years, and the level of protracted payments is low. Non-payment notifications have decreased over the last 12 months, and are expected to decrease further in the coming months.
Machinery insolvencies have been stable over the past six months, and are expected to decrease in the coming six months.
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