Prima Industries – Case analysis

Résumé du document

The machine tool industry is not very concentrated; there are a lot of small and medium companies and only a few leaders. This implies for the actors of this industry such as Prima the need for special focus on the quality of the products delivered for obvious security reasons. It is a very competitive market because the means of differentiating between the different competitors is via investment in new products.

The industry was severely hit by the economic recession. The industrial production in Europe collapsed and caused substantial trouble for the actors of machine tools. The economic perspective is not very optimistic for 2010. According to a study led by Xerfi, if in 2000 sales were at a 100 basis, today, sales are only 66.2.

The industry Prima is in relies mainly on the global growth: producing machines for other companies makes it hard for this industry to emancipate from the global financial situation. Moreover, the industry is very dependent on the credit system: more than 70% of Prima's sales in Italy are under the form of leasing contracts. This sector is based on a distribution system which includes other companies, independent or not, which activity is fully dedicated to lease the machines of the constructors. The recent credit restrictions which struck Europe and other economic zones, hit Prima's sector hard, and investments in the sector have dropped by more than 50% these two years.

Extraits

[...] His analysis is based on studies of the CECIMO, the European Association of Machine Tools Industries and of the VDMA, the German Association of the engineering industry. Besides, he takes into account the will of the management to integrate Finn-Power and to curd costs thanks to synergies. Indeed, almost 20% of the employees of Finn-Power are supposed to leave and a plant of Finn-Power Vilppula will be closed. This is why the EBITDA margin is expected to grow in the next years. The whole analysis of the perspectives for the industry and for the company seems perfectly reliable. [...]

[...] Products include laser sculpt, laser welding machine and laser machinery and related parts. Mori Seiki Ltd (Japan): The Group's principal activities are to manufacture and sell industrial machinery and equipments including cutting tools, lathes, automobile parts, metalworking, grinding machines and multi processing machines. The choice of Prima's comparables is particularly touchy: Prima Industrie is specialized in Laser Machines and Machines for sheet metal treatment. So we cannot assimilate its business to the whole machinery industry. Furthermore, machinery industry is strongly affected by the recession in the worldwide industrial sector. [...]

[...] The Group's operations are carried out through several divisions. The Sheet Metal Processing System division includes laser cutting, bending and water jet cutting machines. Rofin- Mori Seiki Co., Ltd: The Group's principal activities are to manufacture and sell industrial machinery and equipments including cutting tools, lathes, automobile parts, metalworking, grinding machines and multi processing machines. The products include laser marking products and lasers for cutting and welding. These products are manufactured and tested in the United States, Germany, the United Kingdom and other Europe. [...]

[...] The economic perspectives are not very optimistic for 2010. According to a study led by Xerfi, if in 2000 sales were at a 100 basis today sales are only 66,2. The industry Prima is in relies mainly on the global growth: producing machines for other companies makes it hard for this industry to emancipate from global financial situation. Moreover, the industry is very dependent of the credit system: more than 70% of Prima's sales in Italy are under the form of leasing contracts. [...]

[...] Industrial Electronics: it includes development and design of power and control electronics, with relevant software. Furthermore the Group designs and produces internally the Numeric Controls to be installed on its own Laser Machines. Today's main challenge for Prima is to get back on rails: the credit crunch during the crisis slowed down the sector and hit very hard Prima: 2009 EBITDA estimate is 0,3. Prima bought just before the crisis in 2007, Finn Power, which made its debt soar up to 161. [...]