INTERNATIONAL OPERATIONS AND CORE MARKETS International presence The Sabaf Group is one of the world’s leading manufacturers of components for household gas cooking appliances, with a market share of around 50% in Europe and a global share of about 10%. Its core market consists of manufacturers of household appliances, particularly cookers, hobs, and ovens. The majority of Sabaf’s sales consist of the supply of original equipment, whereas sales of spare parts are negligible.
HEAD OFFICE
sales DEPT.
A market share of around 50% in Europe and a global share of about 10%.
productive units
SABAF - ANNUAL REPORT 2012
31
International operations and Core Markets
Main production lines Valves and thermostats
Burners
Hinges
Accessories
These components regulate the flow of gas to covered burners (in the oven or grill) or exposed burners; thermostats are characterised by the presence of a thermal regulator device to maintain a constant pre-set temperature.
These are the components that, via the mixing of gas with air and combustion of the gas used, produce one or more rings of flame.
These are the components that allow a smooth and balanced movement of oven, washing-machine or dishwasher doors when they are opened or closed.
The Group also produces and markets an extensive range of accessories, which supplement the offering of the main product lines.
Sales by product line 2012
2011
2010
Brass valves
18,601
26,537
31,788
Light alloy valves
23,524
23,265
20,027
Thermostats
13,074
14,560
14,829
Standard burners
39,337
42,631
41,405
Special burners
18,850
22,210
21,097
Accessories and other revenues
11,226
10,598
10,959
Hinges
6,121
8,782
10,792
130,733
148,583
150,897
in thousands of euro
total
year
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2012
2011
2010 in thousands of euro
32
Sabaf’s international growth: challenges and opportunities
Sales by geographical area
Revenue (in thousands of Euro) and incidence% of the total Italy
2012
2011
34.9%
45,597
56,321
2010
37.9%
40.8%
61,648
Italy – traditionally the main producer of appliances in Europe – is losing its position. Some customers have limited their business in Italy; others have completely abandoned the country or have interrupted their business due to financial problems. Sabaf – which has a consolidated presence on the Italian market – is focusing on differentiating its products and increasing its attention on energy efficiency to deal with a market that is facing structural problems.
Western Europe
2012
2011
5.6%
7,337
2010
7.5%
11,215
7.6%
11,561
In line with the trends on the Italian market, Western European countries present risks relating to the emergence of competitors from low-cost countries. Also in this case, Sabaf intends to focus on the quality and innovation of its products in order to consolidate its customer base.
Eastern Europe and Turkey
2012
2011
25.4%
33,236
37,459
2010
25.2%
32,553
21.6%
Sabaf is at the high end of the market, and intends to reap opportunities for expansion emerging in Eastern European countries, particularly Turkey. In this regard, the forthcoming opening of a production facility in Turkey during 2012 and the development of new trade relations are key to growth.
Asia and Oceania
2012
12,306
2011
9.4%
13,328
2010
9%
15,476
10.3%
Asian markets are marked by the emergence of consumption patterns similar to those of the West. The expansion of the gas cooking appliance industry, together with the possible tightening of safety standards, represents a growth opportunity for Sabaf, which can count on the strength of its brand and the “made in Italy” reputation.
SABAF - ANNUAL REPORT 2012
Central and South America
2012
21,895
16.8%
33
International operations and Core Markets
2011
19,838
Africa
2012
2010
13.4%
17,467
US, Canada & Mexico
11.6%
Sabaf now has a consolidated presence, also in production, on which to base future growth. Growth possibilities in Brazil, South America and Central America are related to the large size of the market and sustained growth trends. The potential raising of regulatory standards in some countries of the area represents a significant opportunity.
6,950
2011
5.3%
6,524
2012
2010
4.4%
7,056
4.7%
Sabaf intends to increase its presence in the area by leveraging its brand reputation, geographical proximity and long-term presence. City expansion plans in North Africa and the Middle East represent a driver for possible market opportunities despite the difficulties related to the current situation in some of the main countries.
3,412
2011
2.6%
3,898
2010
2.6%
5,136
3.4%
Its wide range of innovative and efficient products, together with relations with the main producers and its good technical reputation, provide the Group with new opportunities. Sabaf’s market share is constantly growing for the builtin segment. Growing security needs have emerged in different market sectors.
Trends in the cooking appliance manufacturing sector For years now the sector has tended to outsource component design and production to highly specialised suppliers, who, like Sabaf, are active in the world’s main markets and are able to supply a range of products tailored to the specific requirements of individual markets. In addition, the trend to internationalise production is becoming more accentuated, with production increasingly shifting to countries with low-cost labour and lower levels of saturation.
Moreover, the emergence of new players at the international level is causing over-supply. This in turn leads to pressure from competition and will probably bring about greater concentration in the sector. However, this trend is less evident in cooking appliances than for other domestic appliances: in the cooking segment, design and aesthetics on the one hand and less intensive investment on the other mean that small, highly innovative producers can also prosper.
Core markets In Western Europe, which accounts for about half of the end-user market for Sabaf products, the level of saturation reached by cooking appliances (i.e. the number of households owning such appliances) is close to 100%. Purchases of new appliances are therefore mainly replacement purchases. Moving house or the purchase or refurbishment of a home are often occasions for the purchase of a new cooking appliance. The market trend is therefore directly influenced by the general economic trend and, in particular, by households’ disposable income, consumer confidence and housing market trends. Therefore, the appliances sector has been particularly hit by the progressive worsening of the macroeconomic situation in Europe. Conversely, in other markets the saturation level is often much lower. Faster economic growth rates and a more favourable demographic trend than in Western Europe create huge opportunities for groups such as Sabaf that are able to work both with multinational household appliance manufacturers and with local manufacturers.
A varied picture Manufacturers of gas cooking appliances – Sabaf’s core market – consist of: • large multinational groups with a well-established international presence in sales and production and possessing strong brands; • manufacturers located in countries with low-cost labour that aim both to exploit opportunities in their home markets and to grow fast globally; • manufacturers focused on specific markets in which they are the market leader; • manufacturers (mainly Italian export firms) occupying segments featuring greater product differentiation (built-in hobs and ovens or large free-standing kitchens for example).