The draft financial statements as of 31 December 2018 have been approved by the Board of Directors of SACE (CDP Group), chaired by Beniamino Quintieri.
SACE SIMEST, the export and internationalization hub of the CDP Group, mobilized resources for € 28.6 billion to support Italian companies, an increase of 13% compared to 2017 and the highest amount ever committed to support exports.
This is a considerable achievement given the underlying economic climate. Despite the worsening global framework, Italian exports continued to be a driving force for the country, accounting for more than 30% of GDP, with a growth rate of +3.5%.
The result for 2018, in addition to those achieved in recent years, brings to € 72 billion the total volume of resources mobilized by SACE SIMEST over the last three years to support Italian companies. This is 11 percentage points higher than the target set in the Business Plan approved in 2016 and 60% higher than 2016 volume. Resources mobilized to support mid-caps and SMEs amounted to € 20 billion, an increase of 20% compared to 2016.
This result was achieved while complying with and exceeding the economic sustainability goals set out in the Business Plan, and is confirmed by all indicators of profitability for 2018 (ROE 3.9%), financial soundness (solvency ratio 174%), and efficiency (cost/income ratio 12%). Furthermore, cumulative profit was 18% higher than the target set out in the Plan.
“2018 was a record year for us and we are deeply satisfied of our three-years performance, having exceeded all the targets of an extremely ambitious growth plan”, said Alessandro Decio, CEO of SACE. “SACE has always been looked up as an excellence among export credit agencies. During this three-year period, in partnership with SIMEST and in accordance with its Holding’s strategic guidelines, SACE set up the export and internationalisation hub, becoming one of the driving forces of Italian exports as well as of the growth of the CDP Group to which we belong. We have achieved these results in complete accordance with the objectives of economic sustainability. Now we are totally focused on implementing the new Plan for 2019-2021 that was approved in February”.
Support for companies: geographical regions and sectors
SACE’s business operations generated 68% of the resources mobilized by the hub, reaching € 19.4 billion, an increase of 9.5% compared to 2017. Growth was particularly dynamic in traditional export markets such as the European Union and emerging Europe (where transactions more than tripled with respect to the previous year), and in emerging regions with high growth potential such as Asia, especially India and South Korea. The main export sectors were the cruise industry and its wide range of SME sub-suppliers, as well as the infrastructure and construction, oil & gas and electricity. The mechanical engineering sector accounted for the highest number of transactions (27% of the total), followed by the agro-food sector and the metal industry.
SIMEST also increased its activity in 2018 and mobilized € 746 million (+13% compared to 2017), net of export credit transactions undertaken in partnership with SACE.
Resources mobilized by SACE BT, which operates in the sector of credit insurance, surety bonds and construction risk, increased by 49% to € 4.8 billion, while the activities managed by SACE FCT, the factoring company, remained more or less constant, generating € 3.7 billion. SACE SRV, the hub’s credit recovery company, also delivered a good performance, confirming its role in sustaining companies with a total value of € 32.5 million in credit recoveries.
SACE SIMEST’s total portfolio of finalized operations scored a record € 114 billion, representing an increase of 22% compared to 31 December 2017.
Economic sustainability: results
The increase in the resources mobilized by SACE SIMEST was fully economically and financially sustainable, in line with the business model, and exceeded the targets set out in the Business Plan.
The main operational and financial data for the year as of 31 December 2018 are summarized below:
- Premiums. Premiums generated by SACE amounted to € 727.8 million (€ 804.4 million in 2017). This result was due, on the one hand, to a different mix of products requested by companies during the year, with greater demand for internationalization instruments and for cover against political risk, and, on the other hand, to an increase in reinsurance and a more competitive pricing approach in order to guarantee maximum support for SMEs operating abroad.
- Claims. Compensation amounted to € 238.5 million (€ 369.7 million in 2017) and mainly referred to transactions insured in the construction sector, whereas there were no particular country-specific concentrations.
- Recoveries. SACE recovered € 143.3 million in credits from sovereign counterparties, mainly in connection with bilateral agreements with Iraq, Argentina, Ecuador, Cuba and Aruba, in addition to € 64.5 million from private counterparties.
- Profitability. ROE came to 3.9%, with a net profit of € 186.1 million (€ 274.9 million in 2017), exceeding the target set in the budget and in the Business Plan. These results were achieved despite the sharp rise in claims from the construction sector and the decreased contribution of financial management - due to market trends in the second half of the year – and were accompanied by a particularly prudent reserve policy, with a coverage ratio of the provision for unexpired risks of 111%.
- Costs. Operational expenses for the year amounted to € 87.3 million. The cost/income ratio stood at 12%, an excellent result and in line with the targets set in the Plan, despite heavy investment in the digitalization project implemented to facilitate access to the offering for SMEs.
- Equity. SACE’s net equity amounted to € 4.7 billion (+1%), while technical reserves totalled around € 3.9 billion (+14%). The solvency capital ratio stood at 174%, remaining substantially unchanged with respect to the previous year (177%), thanks to positive portfolio dynamics and a proactive risk management and reinsurance strategy that balanced the significant increase in volumes.
Initiatives to support companies in 2018
Below are some key facts and figures relating to the initiatives undertaken by SACE SIMEST in 2018 to maximize the support for the companies, especially SMEs, while ensuring economic and financial sustainability.
Support for mid-caps and SMEs. With some € 7.5 billion mobilized in 2018, this was the highest amount of resources committed to directly support mid-caps and SMEs, which currently account for 98% of the 21,000 total companies in SACE SIMEST’s portfolio. The guarantees issued to major Italian exporters, then translated into the awarding of large international orders, also generated benefits for SMEs that awarded sub-contracts along the supply chain.
Initiatives for supply chain companies. Agreements were signed for supply chain companies in sectors of strategic importance for the country (oil & gas, electronics, automotive, aviation and shipbuilding, concerning more than 5,000 companies) and business matching meetings were promoted with the involvement of around 600 companies.
Digitalization. A digital agenda has been set up as part of the strategy to make it easier for SMEs to access the hub’s solutions. This led to the launching of the new sacesimest.it web portal in 2017, which was enhanced and improved in 2018. By June 2018 there were five all-digital key products for SMEs, response times had been halved and products for SMEs are now much more accessible. Export Up, a new all-digital product for foreign credits, and digital factoring were also launched during the year.
Education to Export. The Education to Export training programme was launched to promote the culture of export, increase the number of SME exporters and strengthen the expertise of those already operating abroad. This high digital content programme offers companies professional information and courses, through the e2e.sacesimest.it portal and offline workshops organized in partnership with leading institutions.
Service model. Following on from the “one-door”model which, launched in 2016, led to the creation of the hub, a new service model envisages a higher focus on commercial aspects of the sales network, the creation of a dedicated structure for SMEs and the establishment of a single customer care unit designed to simplify access and points of contact.
Push Strategy. The more proactive sales approach was boosted by the implementation of the push strategy, whereby SACE SIMEST guarantees loans to large international buyers to facilitate the awarding of contracts/purchases of Italian goods and services. To this end, SACE SIMEST organizes business matching events between buyers who benefit from lines of credit and the Italian companies who are interested. Under this project, in 2018 were mobilized resources for € 1.1 billion in Brazil, India, Mexico and the UAE.
Awareness. The communication campaign “no enterprise is impossible for Italian enterprises” continued throughout 2018, to provide companies with more information about the instruments offered by SACE SIMEST, increase their awareness of the hub and generate new contacts. According to a survey by GFK, the campaign raised awareness of the SACE SIMEST hub among the target of reference from 28% to 48% and put the hub at the top of the list of operators specialized in insurance-financial services for exporters.
Performance of operative companies
All operative companies closed the year with a profit, contributing to the achievement of the targets set out in the Business Plan.
SIMEST. SIMEST’s activities to support internationalization (special loans and equity investments) and export credit (interest contributions) recorded an intermediation margin of € 39.1 million and a net profit of € 1.2 million.
SACE FCT. SACE FCT’s factoring business generated an intermediation margin of € 33.6 million and a net profit of € 500 thousand.
SACE BT. Credit insurance, surety and construction risk business undertaken by SACE BT generated gross premiums for € 90.9 million and a net profit of € 1.3 million.
SACE SRV. Commercial information and credit recovery business undertaken by SACE SRF generated a turnover of € 11.5 million and a net profit of € 1 million.