Primario operatore del settore della progettazione e ... Diligence Studio Vienna.pdf · a complete range of edge banding solutions for the furniture industry Giplast’s product range

High Level Business Review

09.02.2016

Giplast Group

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Also, Giplast Group reserves the right not to accept any proposal and to terminate, at any time, further participation in the

investigation and proposal process of any party and to modify data, documentation and other procedures without assigning any

reason therefore.

DOCUMENTO RISERVATO E NON RIPRODUCIBILE

S T U D I O V I E N N A

Glossary

3



ABS

ABS (Acrylonitrile-Butadiene-Styrene) is an opaque thermoplastic polymer material made from the monomers Acrylonitrile, 1,3-Butadiene and Styrene. Strong and durable even at low temperatures, it offers good resistance to heat and chemicals and is easy to process.

B Billion

ca. circa

EU European Union

EMU European Monetary Union

e.g. Example given

hc Headcount

K Thousands

M Million

n.a. Not applicable/available

PF Pro forma

PMMA Polipropilene Alternative Material

PVC

Polyvinyl chloride,, commonly abbreviated PVC, is the third-most widely produced synthetic plastic polymer, after polyethylene and polypropylene.

PVC comes in two basic forms: rigid and flexible. The rigid form of PVC is used in construction for pipe and profile applications such as doors and windows.

Sales Also Revenues

YoY Year on Year

YTD Year to Date

4



The purpose of this document is to

provide a high level company profile,

market description and business analysis

of Giplast SpA.

Our work commenced on the 9.01.2016. We have

been provided access to the management of Giplast.

Our interaction with the management involved several

phone calls with the CEO, Mr. Marozzi, the CFO, Mr.

Bruno Sabattini, and Commercial Director, Mr. Patrizio

Marozzi. The main source of our information are the

management accounts of the company supported by

qualitative information gathered during phone calls and

on site meetings.

The edge band market is part of the much bigger

furniture components’ sector and extremely

specialized. No specific market studies are available

and we based our findings mostly on customers and

industry experts interviews

Our findings are based on selected public

information & reports, the Company’s

Business Plan and market interviews:

Ernst&Young Business Analysis July 2013

Accuracy Report

Italian Furniture Market Forecast Report

2016/1028, CSIL

www.fedelegnoarredo.it

www.repubblica.it

Market Interviews:

Mr. P , Client 1

Mr. D, Client 2

Mr. Z, Client 3

Ms. F , Client 4

Mr. M, Client 5

Scope of Work and Sources

http://www.fedelegnoarredo.it





Table of Content

5

Company Profile

Product Portfolio

Strengths, Weaknesses, Opportunities & Threats

Executive Summary

Market Overview

Italian Furniture Market Trends

Italian Furniture Export Market

European Edgeband Market

Italian Edgeband Market

Italian Edgeband Market – Key Players

Company Overview

Manufacturing Footprint

Customer Concentration

Top Ten Clients

Customer Interviews



Company Profile

6



Founded in 1977 and headquartered in Giulianova (centre of Italy, about 100 km

south of Ancona), Giplast Group or Giplast is a private Italian company that offers

a complete range of edge banding solutions for the furniture industry

Giplast’s product range is developed and manufactured by the company and can

be grouped into PVC, ABS and specialized products. Until 2000, the Company

concentrated on its PVC core products. Gradually, the product mix shifted to

ABS material (now 95% total revenues), driven by its superior resistance and

processing ease

Since the acquisition of a key competitor, Flexi-Board in 2013, the company more

than doubled its revenues and it became the leading player in the Italian market

The acquisition of Flexi-Board was financed by the private equity fund Vertis,

which owns ca. 11% of the Company, with the rest controlled by the Marozzi

family

Flexi-Board has been restructured since and its only plant recently shut-down,

with production being transferred to Giplast plant in Giulianova. Giplast has 188

employees in Italy (175 hc) and Romania (13 hc).

Giplast operates in a small niche market estimated at approximately €65M-

€100M in Italy and ca. €800M in Europe. The edge banding industry is driven by

the Italian furniture industry which experienced a sharp downturn in the 2008-

2013 period.

In 2015PF, the company recorded revenues of €30.0M with a EBITDA margin of

10,7%, making Giplast the largest edge band manufacturer in Italy

The company caters to over 700 customers, of which the first two – IKEA and

Media Profili - make ca. 25% of sales. Direct exports represent ca. 50% of

revenues; however, this percentage is likely much higher as some of Giplast’s

large customers use the Company’s edge bands in furniture sold abroad


S T U D I O V I E N N A 7

PVC PVC ABS ABS ABS PMMA

Products T-Profile Soft PVC Flat Edge PVC Flat Edge ABS Standard Flat Edge ABS Special Flat Edge ABS HT Deep Edge 3D

Key Feature Manual assembly; low end product category; phasing out

0,3-5mm thickness; low end product category;

0,3-5mm thickness; covers product offerings from low to high end

0,3-5mm thickness; covers product offerings from low to high end

Laser/Hot air technology; innovative high end/ high technology product

Polipropilene alternative material, lower price point, new product introduction

Overview

Giplast's core product until 2000. Replaced by more recent technologically improved and environmentally friendlier products. Available in 200 shapes and 300 solid colors/wood colors

Decreasing PVC business; Available in many colors and finishing variations

Core business; available in many colors and finishing variations

Core business; extra glossy finishing variants

Innovative product, one of 3 producers worldwide

Strategic product that relies on non-ABS raw material

Clients Developing markets where cost savings are key

Developing markets where cost savings are key

Furniture producers and resellers in Europe and US



Interested potential customers: IKEA & Media Profili

The company’s product mix is concentrated on ABS products generating 95% of revenue. The remaining 5% of products are

composed of the low-end PVC category and other products with marginal impact on the overall output such as dust seal profiles in

soft and rigid PVC. The new PMMA material is in the development phase.

Product Portfolio

Edgeband Market leader

Following the consolidation of the market over

the past years, which included the acquisition

of Flexi-Board, the company has positioned

itself as the market leader in Italy.

Furniture Market trend is positive

The edgeband niche generally follows the

furniture market trend, which has recovered

from a severe crisis and has now plateaued.

In addition, there is an increasing need for

edgebands as the lower end flat-pack

furniture market expands including an

always larger variety of furniture types.

Integration completed

Integration of Flexiboard seems to have

been completed successfully without

the loss of any major customers.

Flexibility to reach wide customer base

The company is large enough to reach

companies such as IKEA but retains the

flexibility to reach the small companies typical

of the furniture industry

Barriers to entry

Giplast operates in a small niche market with

a loyal customer base. For manufacturers a

change in providers implies time consuming

fine tuning of colour and material choices

and quality risks. The need for flexibility and

speed keep Asian competitors away.

8

Dependence on raw material supplier

Key raw materials supplier ‘Versalis’ limits

negotiation power and potential benefits

resulting from price swings

Sources for growth

Growth is predicated on a further push into

foreign markets and an increase in exports.

The company’s current financial profile does

not allow for the required investments.

Large customers dependence

The combined customer base of the Flexi-Board/Giplast have

made Giplast more vulnerable to price pressure. The loss of

any large clients would mean a significant revenue decrease.

Lack of market transparency

The high fragmentation of this components’

market does not allow for a clear analysis

and measurement of trends or product use.

Vulnerability to economic trends

The furniture market is based on

discretionary spending and is sensitive to

GDP variations

Strenghts, Weaknesses, Opportunities & Threats


ABS product concentration

The company’s product mix is concentrated on

the more profitable ABS segment.

Innovation

Customer interviews revealed that there is

room for improvement regarding more

innovative and high end products.

Reputation

Client interviews revealed a well regarded company

that provides well priced, good quality products with

accessible and dynamic management.

Low EBITDA margin

A first margin of 40% with 10% EBITDA

reflects high fixed costs. Improvements are

required.

Management Risk

The maximization of synergies resulting from

the merger of Giplast and Flexiboard,

including the reduction of fixed costs, is

highly dependent on management

effectiveness.

Executive Summary

9



The edgeband niche market is a small component of the overall furniture market that provides an indispensable product

to furniture makers. In particular, the lower-end or flat-pack furniture segment requires edgebands for virtually all their

product offerings

Edgebands represent approximately 1% of a furniture’s total production cost

There are few, well established players in the market that provide their products to the larger furniture manufacturers

(nine players in total in Europe, with Giplast in sixth position) and an unknown amount of small producers that engage

with equally small furniture makers. Giplast is able to engage with large and small customers through a dynamic and

flexible management approach

Market penetration for new entrants is challenging since customers rely on relationships built over time that have proven

records of good product performance and the ability to deliver products, product changes and last minute adjustments

quickly

The replacement of edgebands through new technologies is not expected by players in the industry in the near/medium

term

Giplast is a well regarded company in the edgeband market. Customers value the Company for its delivery speed, good

quality and a price point that is aligned with market expectations

Customers position Giplast’s products in the medium quality range, highlighting that there is margin for improvement in

their product range of high-end or innovative products.

The Company’s growth potential is dependent on expansion into new markets or the development of new

products/technologies. Both strategies require significant capital investments.

The Italian Furniture Market

10



In the past, the Italian furniture market was characterized by small, artisan companies predominantly working with

wooden furniture, which over the years created the basis for the reputation of the ‘made in Italy’ design. During the past

decades, this market has been revolutionized and transformed into an extremely varied and multi faceted industry that

shifted away from wooden furniture to processed wood components aiming to expand the ‘made in Italy’ brand

internationally

Today, mostly small and medium entities function as subcontractors for larger companies that produce components and

partly finished goods, which will be finalized and assembled by the company itself or a third party

Despite the presence of large, multinational furniture producers, ‘micro’ companies remain a dominant presence in the

furniture market and continue to distinguish themselves for high production level levels, quality and design.

The fragmentation of the Italian furniture market is illustrated by estimates that show more than 33,000 furniture

producers (artisan and industrial) of which 86% have less than 10 employees. In a screening of the industry, 580

players resulted to have revenues >€5M and a proven record of 5 year financial history.

These small companies rely on small and flexible suppliers to provide them with the necessary components for the

product they produce.



During the years 2007 - 2013, influenced by the global economic crisis, the Italian furniture production decreased by over 20%.

In 2013 a loss of 67.653 jobs had been registered (-4,3% vs 2012), the closure of 14.676 companies (-6,7% vs 2012) and a

decrease of 5,8% in imports.

2015 signalled an end to the falling consumption of furniture in Italy. The overall signs of improvement of the Italian economy

during 2015 generated an increase in domestic demand and is expected to drive production from €14,9B in 2014 by 8% (total of

all furniture segments at constant prices).

Furniture exports started regaining momentum in 2014 thanks to EU and especially non EU demand.

Italy Macro-economic profile, 2014-2018. (% variation)

-1,0

0,0

1,0

2,0

3,0

4,0

2014 2015 2016 2017 2018

Gross GDP EU (28

countries)

Gross GDP EMU

(19 countries)

Gross GDP Italy

General industrial

production index

-20%

-15%

-10%

-5%

0%

5%

10%

15%

2012 2013 2014 2015 2016 2017 2018

Production

Domestic

Consumption

Exports

Imports

Forecast Italian furniture sector, 2012-2018. (annual variation)

The Italian Furniture Market Trends



During the first months of 2015, exports continued to represent the key

growth driver of the Italian furniture market.

A growth rate of 4.7% is expected in 2015 based a weaker EUR and constant

external demand.

The presence of Italian furniture in many countries around the world makes

the overall industry less vulnerable to singular market swings

The first three Italian furniture destination countries are expected to remain

France, Germany and Italy, while the USA, China and Saudi Arabia present

double digit growth rates.

The Italian Furniture Export Market

Furniture Exports by Destination Country, 2014-2015.

% share 2014

Variation 14/13

Variation 14/15

(Jan-Jul)

France 15,1% 0,8% 1,8%

Germany 11,0% 0,0% 4,1%

Great Britain 9,3% 11 17,6%

USA 7,9% 15,0% 26,0%

Russia 7,4% -8,7% -25,2%

Switzerland 5,3% -2,2% 2,9%

Spain 2,9% 13,8% 20,4%

Belgium 2,5% -0,9% -1,7%

China 2,5% 28,2% 18,5%

Saudi Arabia 2,0% 16,0% 45,8%

EU28 53,1% 3,3% 6,6%

Extra EU28 46,9% 3,2% 5,4%

WW 100,0% 3,2% 6,1% 70%

28%

01%

Giplast Revenues 30.09.2015

Italy

Europe (excl. Italy)

Other countries

*Revenues include Giplast and Flexi-Board

*



In 2014 the European edgeband market was estimated at €770M. It is dominated by two large multinational companies that

retain 65% of the market.

Giplast positions itselt 6th in the overall European Market and is the market leader in Italy.

Vertical integration characterizes the market. Eg: Rehau, Surteco, Romaplastik as part of the Swiss Egger Group, Sitech as

part of Mauro Saviola Group (this Italian group integrates several national and international companies focused on wood,

chemical and furniture).

Smaller companies distinguish themselves through their flexibility to adjust to a customers specific needs

Rehau Group is a large German multinational that generates €2.8B in

revenue with 20,000 employees across the globe producing windows &

doors; building technology; automotive (60% of revenue); furniture

solutions; hoses, profiles and seals;

Surteco, also a German multinational, that divides its total revenues of

€400M into Edgebands 30%, Foils 21%, Decorative Printing 13%,

Release Papers 17%, Skirtings 5%, Technical Extrusions 3%, Other 5%

Romaplastik is a Turkish company with revenues of €50M and 400

employees. It manufactures ABS, PVC, PMMA, melamine, and aluminum

edging products.

Probos Plasticos, a Portuguese company produces, supplies, and exports

protective, functional, and decorative thermoplastic edgings for the

furniture industry. The company was recently sold to private equity firms:

Portuguese fund Explorer and Spanish fund N+.1

MKT a German, medium-sized company, active on an international level,

produces thermoplastic edge bandings for the furniture industry and is the

number three in the German market.

2014 Estimated European Market

€770M

Rehau; 35%

Surteco;

30%

Roma

Plastik; 9%

Probos;

10%

MKT;

9%

Giplast; 4%

Sitech; 2% Plastivar;

1%

BVR; 1%

Italian Companies

. .

. .

The European Edgeband Market

1 2 3

Kitchen

Others

Office

Upholstered



In 2014 the Italian edgeband market was estimated at €65M-€100M where Giplast is the market leader followed by

Sitech.

Approximately 50% of the overall furniture market is composed of furniture that requires edgebands (ranging from 90%

for kitchen and bathroom furniture to close to 0% for upholstered or garden furniture).

Giplast’s clients can be found in all product segments except upholstered furniture and office furniture, thus tapping into a

segment estimated at €7.7B

Estimated relevant

Italian furniture

market segmented

by product type

Total Italian furniture

production 2014 -

Segmented by

product type

€14.9B

€7.7B

€65M - €100M

Estimated Italian

Edgeband Market

Others: divided between bedroom furniture (20%); dining ad living rooms (16%); outdoor, bedroom and occasional (29%); non upholstered seats (8%),

furniture parts (29%).

The Italian Edgeband Market

Giplast; 30%

Sitech; 25%

Plastivar;

11%

BVR; 11%

Others;

23%

The Italian Edgeband

market of ca. €65M -

€100M is divided between

4 major players and an

unknown amount of small

companies



In 2012-2013 a few events reshaped the Italian edge banding market giving it its current shape:

One of the company’s key competitors, Corbetta FIA Srl stopped manufacturing operations in Italy (and sold the remaining

distribution network to the German MKT), leaving market share to be gained by Giplast

Sitech, the former market leader, went through turbulent times as its holding company, Mauro Saviola Group, underwent a

series of restructuring events

The acquisition of 100% of Flexi-Board by Giplast Group

The combination of these events propelled Giplast to become the market leader of ABS and PVC edge banding solutions in Italy.

Competition in this niche segment in Italy is intense. As the Italian market continues to contract innovation, scale / efficiency, and

competitive product offerings are key.

There are many other very small producers in the market which in turn supply very small furniture producers which are not

represented in this analysis.

All products have to comply with UNI EN ISO 9001/08 regulations

€ 29,0

€ 19,2

€ 7,7 € 7,7

Giplast Sitech Plastivar BVR

ITALIAN COMPETITORS 2014 (€M)

The Italian Edgeband Market – Key Players

.



Company Overview

16

Giplast’s headquarters are located in Giulianova (TE). The location will continue to absorb Flexi-Board personnel as the

company’s integration proceeds.

Manufacturing Footprint

Location Giulianova (Giplast Group) Luzzara (Flexi-Board) Galati (Rumania) Giplast Balkans (80% Giplast, 20% local partner)

Activities Storage of raw materials, manufacturing of all product lines, stockage

Storage of raw materials, manufacturing of all product lines, stockage

Storage and product distribution & sales office in Bucarest

Workforce Circa 124 employees of which 22 specialized, 102 non-specialized

Circa 51 employees of which 11 specialized, 40 non-specialized

13 employees

Rental property 39.000 m2 of which 14.000 m2 covered 15.000 m2 of which 7.000 m2 covered

Operations 5 days/week; 3 shifts 5 days/week; 3 shifts

Capacity The combined capacity of both plants is of 50tons/day

Products Complete product range in ABS and PVC Single color ABS products and PVC sheet edge bands destined for the eastern european market

182 187 195 188 181 143

0

100

200

300

31/12/2014 30/06/2015 30/09/2015 31/12/2015 31/03/2016 31/12/2016

Total Giplast Group Headcount

At the end of 2015 the total headcount of the group was 188 which, during 2016 with the complete

closure of Luzzare, will decrease to 143.



Company Overview

17

Customer concentration

The company enjoys a high

overall margin of 41.7%

On average, top 13 clients

represent ca. 57% total revenues

and generate 50% of margins

Larger clients leverage their scale

and negotiating power to reduce

prices thus increasing pressure on

margins

Resellers generate higher margins

than users because resellers

purchase the product unpackaged

and uncut yielding in little or no

waste or scrap material

34% 26% 32%

23%

24% 43%

43% 50%

49%

0%

100%

Total Revenue 1H2015 % Margin Distribution Gross Margin/Sales

45% 40%

55% 33%

0%

50%

100%

Total Revenue 1H2015 Gross Margin/Sales

Users

Ikea

Media Profili

Monguzzi

Resellers

€12,6M

€7,2M

€5,3M

€2,6M



Customer Interviews

18

Summary

Customer interviews highlighted the following aspects:

Giplast is a well known and well regarded company in the edgebanding sector with recognition found within

a range of customers: from large furniture manufacturers to small edgeband distributors for the southern

part of the country

All these customers confirmed that Giplasts products priced in line with the market. This aspect is one of

the key discriminating points for a customer when choosing a supplier.

Speed and flexibility in adjusting to a customers requests was also listed as a valuable characteristic of the

company. This ability distinguishes Giplast from its large multinational competitors.

Efficient service delivered through accessible customer support was mentioned during every customer

interview

Customers perceived Giplast’s products within the low/medium to medium end products and there were no

quality complaints.

One of the company’s largest customers highlighted that Giplast has room for improvement as far as their

range and high end and technological advances are concerned.



Customer Interviews

19

Client 1 (1/5)

Client 1 is one of four large Italian subcontractors for low cost furniture retailers. The company employs approximately

500 people with revenues over €100M in 2015. It acquires industrial size composite wood panels and prepares them

for resale to the end-user (packaged and finished with instructions). Typical customers are large flat-pack furniture

producers.

Virtually all of this furniture type requires edgeband finishing.

The company’s edgeband suppliers include, among others, Giplast which supplies about 50% of their edgeband

needs

Larger customers sometimes request a particular finishing leaving the subcontractor little choice regarding the type

of edgebands to be used. However, usually when choosing among edgeband competitors quality and price are the

key differentiators.

Giplast positions itself in the medium price and quality range.

When looking for particularly high-end quality products areas such as highly glossy materials or virtually wood type

finishings Client 1 showed some reservation regarding Giplast’s ability to deliver.

Client 1 appreciates the flexibility and good service that Giplast provides.

Client 1 estimates that edgebands represent a few percentage points (1-5%) in the overall cost of producing their

furniture range. A small segment of furniture finishing is accomplished through 3D technology, which does not need

edgebands.

Comments on the Edgeband market:

The edgeband market is composed of a few major players, led in Italy by Giplast. However, there are many other small

producers that are ‘pulverized’ across the country. In Italy large multinational edgeband producers cannot reach the

SME furniture manufacturers, these tend to be loyal to equally small suppliers.

Among final users there is a clear trend towards a furniture type that requires edgeband or other technology that

finishes composite wood furniture. There are no signs that this need for edgeband finishing will change or decrease in

the future.



Customer Interviews

20

Client 2 (2/5)

The Client 2 group is the largest manufacturer of kitchens in Italy. Established in 1967 in B, the business today

employs 500 staff that manufactures ca. 60,000 new kitchens every year generating revenues of approximately €155M

in 2015. 70% of Client 2’s kitchens are exported.

Approximately 90% of Client 2’s production requires edgebands.

The company acquires edgeband products from Giplast since 2009.

Today 55% of Client 2’s edgeband need is supplied by Giplast. The remainder is imported from Rehau and/or

Surteco.

Given the low (ca. 0.6%) percentage that edgebands represent in the total manufacturing cost of a kitchen, the most

important characteristic this furniture maker requires from a supplier is quality and delivery speed. Giplast

distinguishes itself for its timeliness and quality of its products, however:

The product range that Giplast offers is limited, therefore reducing the scope of products that Client 2 purchases.

When choosing a supplier quality supersedes price.

Comments on the Edgeband market:

There are no strong competitors in the Italian market. Client 2 never purchases edgeband finishing from Asian

suppliers because of their concern about quality guarantee. There are no signs that edgeband finishing demand will

change or decrease in the future.



Customer Interviews

21

Client 3 (3/5)

Client 3 is a small Italian company with revenues of approximately €15M/year, that provides finished wood panels to

xxxxxxx in USA. Xxxxxxxx is an OEM manufacturer of affordable, contemporary, Italian furniture. It manufactures

finished wood panels in Italy, other components in Asian countries, then assembles and distributes to the American

market from North Carolina, USA. From the unfinished panel to the ready to use component, Client 3 produces

finished wood panels exclusively for export to the US. The company has no competition.

Giplast provides approximately 90% of the ‘medium-low’ end ABS edgebands, which for them comprises about

8% of total furniture costs.

Client 3 values Giplast’s speed and flexibility to adjust to new requirements. The price range is aligned with

competition and they are satisfied with the product quality.

Giplast distinguishes itself from large multinational competitors through its fast response time,

accessible management, reasonable prices and flexibility.



Customer Interviews

22

Client 4 (4/5)

Client 4 is a French company that designs and manufactures flat pack furniture for the home that is sold in 70

countries. With revenue of ca. €170M in 2015 and around 800 employees, the company produces and designs

almost 3 million products.

All of the company’s product range (bedroom, kids room, kitchen, bathroom, living room) requires edgebands.

Approximately 60% of the company’s edgebands are provided by Giplast.

The company’s supplier selection process has 3 stages including a request for samples, followed by a trial

period and a company inspection. It does not differentiate by production/revenue size.

In comparison to other suppliers Giplast distinguishes itself in quality, price and delivery time.

Price/Quality performance is good and Client 4 places Giplast’s products quality range at a medium-high level

For Client 4, Giplast is the first reference company also regarding new technological developments.



Customer Interviews

23

Client 5 (5/5)

Client 5 is a small edgeband distributor for southern Italy with revenues of approximately €3M per year.

The company receives large ‘mother rolls’ of edgebands, divides them and supplies them to small furniture makers

or furniture-product related stores. None of these products are exported and customer loyalty is high.

Giplast provides 70% of this reseller’s ABS product range

Giplast distinguishes itself for its flexibility and ability to adjust to the resellers’ need for specific product types,

limited quantities and delivery speed. In addition, the direct interaction with the provider is valued.

The price range is aligned with other suppliers

Comments on the edgeband market:

The high end range of edgeband products are used more frequently in the northern part of Italy, while in the less

affluent southern market the product generally aligns itself to the lower end.

As customers are small, volumes required are generally minimal making this part of the market unattractive to

multinational edgeband providers.



Appendix

24

Product description

Primario operatore del settore della progettazione e ... Diligence Studio Vienna.pdf · a complete range of edge banding solutions for the furniture industry Giplast’s product range

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