The Transaction of the Year in Italian Extrusion

Bodega buys PFA, a positive sign for the industry

by Alberto Pomari

We are in the offices of Bodega in Cisano Bergamasco, with Giuseppe Bodega and the company’s General Director, Marco Del Gracco. They are the ones who designed and successfully concluded the most important corporate transaction in 2017 in the Italian aluminium extrusion world, that is, the acquisition by Bodega G. & C. Spa of PFA Srl, based in Cortenova, near Lecco.

In the Italian extrusion segment, still characterized by high production capacity, your move provides confidence to the market, even because the memory of the serious crisis of the past years is still fresh…
“It is true that Italian extrusion was heavily affected by the negative economic and industrial cycle which began in 2007, and it is also undeniable that in our industry in Italy there has always been a lot of installed production capacity; at any rate, while, as regards the latter aspect, our acquisition does not alter the state of affairs, when it comes to the market’s situation it must be said that the inversion in trend is fortunately an established fact,” Marco Del Gracco states. “Bodega is a historical company and it always evaluated very carefully every step and every investment, the acquisition of PFA fits into the strategic logic of merging production units, and it is a message of confidence for the entire segment, which essentially contributes to simplify the complex scenario of Italian producers. Personally I am convinced that our example will sooner or later be followed by other companies to create a more uniform and compact offer of extrusions in a market which today is excessively fragmented and characterised by an exasperated competitiveness which does not do anybody any good”.

Is the Bodega-PFA transaction therefore also a message for competitors?
“We do not intend launching messages, we are entrepreneurs and act with longstanding awareness and professionalism. If our actions will serve as a driving force or as food for thought, so much the better,” Del Gracco replies. “This having been said, our idea is that companies in this industry will have to reflect with great attention as to their future, it is an established fact that companies aiming at the lower bracket of the market will have less and less room for manoeuvre because of the increasing pressure of more or less fair international competition. Those looking ahead will have to go beyond the commodity logic, ours is a product which may have high technological content, there are countries and market segments yet to be discovered with unpredictable potential and developments, the world changes every day, I should say every minute, at any rate these are our reflections which people will be free to interpret as they think fit. Even the associative aspect should be taken into greater consideration: the Italian aluminium compartment shows little team spirit, while abroad, especially in Northern European countries, companies are cohesive and their representatives support them at the highest levels”.

The market sent out positive signals in 2017, did this influence your choice?
“Yes, definitely, market analyses had suggested for quite some time a change in trends even though in the European context the upswing of our country in the aluminium extrusion segment was slower than elsewhere,” Giuseppe Bodega states. “The increase in 2017 of the demand for extrusions which went up by 10% with respect to 2016 confirms a positive cycle, and we could not allow ourselves to be caught unprepared. Our production capacity was actually almost saturated, with the risk of finding ourselves under pressure and creating inefficiencies or actually having to refuse orders. The purchase of PFA is therefore functional to a growth and development plan and fits into a medium-long term project, allowing us to have in the future a greater production elasticity with respect to what we have now. No company in the world can afford not to keep abreast of the times, aiming at bleak survival in a market which, as we mentioned before, is increasingly competitive. Now Bodega with this first step fits in with the top companies n Italy as regards turnover, production capacity and above all in terms of profitability and economic results. An important signal”.

How many presses are now available and for what markets? What type of evolution can you see coming, and how do you stand as regards exports?
“By means of the PFA acquisition we added two presses to our plants, a 1,800-ton and a 3,200-ton press, thereby reaching with 6 presses an overall net production capacity for extrusions of 50,000 tons per year. It is evidently not just a matter of quantity, since our company during these years also went through an interesting evolution in the product mix, with less customised extrusions in the building and construction sector, which are today worth 25% of our output, but with significant increases in such segments as furnishing, mechanics and electronics, which together account for 40%; to these we must add the automotive segment and transportation in general, which today account for over 22% of the total. This is a very important datum, because it means entering a different world, it implies a shared approach on the part of the whole company to the concept of production efficiency, qualitative excellence, total digitization, in short, it is the mandatory process leading to Industry 40. Regarding finally the geographical destination of our products, the Italian market now represents a share equal to 70%, while the 30% share of exports ends up especially in German-speaking countries. Opening up to foreign markets represented and will represent our greatest effort for the future. Today as we said we mainly work with Germany and neighbouring countries, but we are evaluating approaches and developments even in other European areas and outside Europe. The acquisition of PFA definitely fits into this strategy”.

Besides the increase in capacity, what other advantages for the future of your Group do you think will be derived from the PFA acquisition?
“Undoubtedly there are first of all interesting complementarities from a business standpoint and as regards the strengthening of our client portfolio; as Bodega, we are already present on practically all typical segments of end uses of high margin extrusions, following well-tested and continuously monitored choices and settings, with the contribution of PFA this situation can only improve. Besides the natural acquisition of new clients, PFA works with interesting alloys which we do not use often, such as the 3000 Al-Mn series used for car air conditioners, or 500 Al-Mg alloys for mechanical or naval industries, this will allow an increase in the product mix. I must add that from a technological standpoint the Cortenova plant is modern and will not require special action on our part. It is also important to remark that PFA has all the ISO TS certifications for automotive uses which here at Bodega we are acquiring during these months, considering the increasing interest for this strategic sector. It is clear that such an important qualification brought along by PFA is a positive addition to our credentials and implies a highly appreciated bonus for the Group”.

Do you have any comments about the economic and financial expectations deriving from this new investment?
“For many years Bodega has been one of the companies with the best performances in the context of the specific industrial segment, in terms of increase in turnover, economic results and capability of generating cash flow,” Marco Del Gracco states. “Our operating margin has always been in the double-digit range and our company’s lean structure allows us to obtain good results even on difficult, low-margin markets. This allowed our company to envisage and conclude such a transaction, This acquisition has been an important, demanding step, but one which we took knowingly, which allows us to make a quantitative leap forward, considering we are now approaching 140 million euros in overall revenues, with 340 employees, therefore we expect and adequate economic and financial return on this investment. At any rate we shall carry on with the same mentality, determined but cautious, operating by leveraging on our management capabilities, taking the right action at the right moment”.

To conclude in a few words, what are your strengths?
“The extrusion market, as Marco was saying, is subdivided into products and commodities. From this standpoint our Group for many decades, if not from its very foundation, has selected clients who look for contents and added value”, Giuseppe Bodega concludes. “The mentality of selling at all costs in every type of market and to everyone is not part of our DNA. This is why for us the preparation of the sales force and the “family feeling” perceived throughout the company are essential. For this reason the sustainability of our strengths is fundamental: flexibility is a generic and often overused term, but for us it means service provided to clients, a fast time-to-market, speedy information as to deliveries, an efficient, competitive and fast additional machining service, technical servicing in the design phase and much more”.