Abstract
In Italy, the territory that includes the Emilia-Ro magna region, the southern areas of Lombardia and some of Piemonte’s territory is a center of nationa l importance for tomato production and transformation. The processing firms operating in t his area are characterized by significant investmen ts in fixed assets and working capital. The article an alyzes the annual account data of a sample of firms , showing that economic margins traditionally applied to assess the sustainability of the business cycle differ significantly from financial margins; also, the Interest Coverage Ratios (ICRs) differ if calculated by applying an economic or a financial a pproach. Moreover, the annual account data highlight difficult credit access, expressed by app lying a multiple regression model to analyze Free Cash Flow to Equity (FCFE) generation. The article suggests a useful metric to measure more correctly the sustainability of a firm’s management that coul d be applied to others in the agri-food sector, particularly if characterized by a capital-intensiv e processing cycle.
Highlights
In Italy, the territory that includes the Emilia-Romagna region, the southern areas of Lombardia and some of Piemonte’s territory is a center of national importance for tomato production and transformation
EBITDA is positive in 79 cases and Earnings Before Interest and Taxes (EBIT) is positive in 72 cases, while OCF is positive in 55 cases and UFCF only in 45 cases. ∏pT (PROFIT) has a value higher than Free Cash Flow to Equity (FCFE): PROFIT is positive in 50 cases out of 85, while FCFE is positive only in 37
The analysis of the sample of firms shows that the intermediate income margins (EBITDA and EBIT) have average values higher than the financial margins (OCF and UFCF); at the same time, the mean values of PROFIT are higher than FCFE
Summary
In Italy, the territory that includes the Emilia-Romagna region, the southern areas of Lombardia and some of Piemonte’s territory is a center of national importance for tomato production and transformation. Given the difficulties of the sector, the aim of this article is to analyze the management data of the tomato processing firms of Emilia-Romagna, Lombardia and Piemonte, with respect to capital structure of the firms, sustainability of the management cycle and credit access. To achieve this goal, we apply the methods of analysis of a firm’s data to a sample of companies, proposing and submitting to tests of statistical validity ratios and aiming at the analysis of financial debt service coverage. The results of the article could be applied by policy makers through public actions to support private firms, including a public line of credit, in order to correctly evaluate the financial viability of firms that have received public funds, limiting the risk of inefficient uses of collective resources
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