CashNews.co
ROME — Italy’s small, family-owned defense companies are more profitable and are growing faster than the country’s massive state-run firms or the foreign players in the Italian market, a new report has revealed.
Family-run firms have long been the backbone of Italian capitalism, pushing the country to become the eighth biggest manufacturing power in the world, and the report by Italy’s Mediobanca shows they are outperforming in the defense sector.
While accounting for a relatively small chunk of Italy’s defense industry – €6.3 billion ($6.6 billion), or 15.6 percent of sector revenue – medium-sized family firms boasted an Earnings Before Interest and Taxes (EBIT) margin last year of 12.2 percent, almost double the national average of 6.2 percent, the report said.
Top of the table for EBIT margin, which is a measure of profitability, was small cyber firm DEAS – Difesa e Analisi Sistemi, with a margin of 54 percent.
Boasting a margin of 44.5 percent, second place was taken by GEM Elettronica, a family-controlled company which has operated in the naval electronics sector since 1977 and became the exception that proves the rule when it was taken over by defense giant Leonardo in September.
“Italian family-owned medium-sized enterprises outperformed all the other categories, on the back of their leaner and more flexible operating structures,” the authors of the report claimed.
Family firms also outperformed state firms and foreign-owned firms when it came to growth, notching up 29.2 percent growth in 2023.
“They have bigger margins of growth and by forming part of the supply chain for the bigger firms they allow those firms to have greater flexibility,” said Carlo Festucci, the general secretary of Italian defense industry association AIAD.
“The big firms meanwhile help them secure financing from banks,” he added.
Small firms apart, the Mediobanca report revealed a series of other illuminating stats about the Italian defense industry, including how 36 of the top 100 firms in Italy are foreign owned and make up 25.1 percent of turnover in the sector, while the big, state-owned firms like Leonardo and shipyard Fincantieri contribute 59.3 percent of turnover.
Italy’s top 100 firms are dual use, in that they handle both civil and defense contracts, with only 49 percent of their total €40.7 billion turnover specifically derived from defense contracts – approximately €20 billion.
That figure was up 6.6 percent on 2022 the report noted.
Of the 181,000 employed by the firms, 54,000 are exclusively involved in defense work, it added.