Giuseppe Bonazzi

Geographical indications (GIs), protected by the European Union with the collective marks of PDO (protected designation of origin), PGI (protected geographical indication), and TSG (traditional specialty guaranteed), play an important role in the social and economic system. They not only guarantee food needs, but promote correct consumer information, protect local food, and play a role in the environmental and social sustainability of rural areas. In Italy, Parmigiano Reggiano (PR-RE) PDO cheese is ranked second in foods with the GI protection mark by turnover. This research aims to assess the financial sustainability of the firms registered in the PR-RE PDO consortium using financial statement (FINSTAT) analysis. Financial ratios (FR) and the EM-Score were applied to assess firms’ performance, financial risk, and credit score. The analysis distinguished firms by legal form, cooperative and non-cooperative, and altitude range—plain hill and mountain. The main findings of the research were as follows: (1) a better performance of lowland non-cooperative firms and lower financial risk, (2) a longer duration of the inventory cycle of cooperative firms, and (3) a greater financial risk in mountain cooperatives. The results provide indications for improving firms’ performance and for designing financial instruments for the sector. To our knowledge, this is the first research to carry out an analysis of all the available FINSTATs of firms in the PR-RE PDO sector.

The biogas sector in Europe and Italy is attracting growing investment, combining agricultural activity, the circular economy, and renewable energy production. Firms in the sector widely use debt capital and, for this reason, there is a need to evaluate the structure of investments, financing, and debt service capacity calculated by applying interest coverage ratios (ICRs). ICRs are widely used by banks in granting loans, and calculation of ICRs allows managers and policy makers to correctly evaluate firms’ performance in the sector. In this research, based on a sample of 160 observations, the structure of investments and sources of financing of firms in the biogas sector, operating in northern Italy, are analyzed. ICRs are calculated with different approaches to establish which ICRs provide the most reliable results in the application. The research analyzes the correlations and highlights significant differences between ICRs. The research highlights some important findings: (a) the NWC is negative in 109 out of 160 observations and, therefore, constitutes a source of financing in the majority of observations; (b) ICRs based on EBITDA and CF are above the threshold value of “1” in 143 and 145 observations, respectively, while ICRs based on EBIT, OCF, and UFCF are above the threshold value of “1” in 132, 133, and 122 observations, respectively. The research allows the conclusion that the ICRs based on EBITDA and CF tend to overestimate results; ICRs based on EBIT, OCF and UFCF are preferable, and can therefore be applied by managers, banks, and policy makers and be used as debt covenants. For the calculation of the repayment of the NFP, the research has highlighted that ICRs in which the cost of the debt is deducted from the numerator are preferable. The research can thus be usefully applied and expanded to other territories, or by considering a larger sample with the aim of inferring conclusions of general validity.

Agri-food companies play an economic, social, and environmental role. In Italy, the typical products protected by the European Union with the PDO and PGI marks are spread throughout the national territory, even in disadvantaged ones, and generate turnover, employment, and positive effects in related industries. These companies are often of medium or small size (SMEs) and are financially constrained. The research applies the assessment of financial sustainability to the balance sheet statement (BSS), financial ratios (FRs), interest coverage ratios (ICRs), duration of the cash conversion cycle (CCC), and net working capital (NWC) data. It shows that companies in the sector have high capital intensity in both the fixed asset (FA) and NWC cycles. Profitability is largely eroded by the cost of debt (COD). Financial sustainability is calculated through the following: (1) the duration of the cash conversion cycle (CCC), broken down into the cycle lengths of inventory, receivables, and payables; (2) the calculation of the income and financial margins generated by the management and their correlation; (3) the calculation of financial ratios (FRs) and the verification of financial leverage (ROA > ROD); (4) the calculation of income and financial interest coverage ratios (ICRs) and tests on the significant differences between them. The application of ICRs with the financial methodology applied in the research makes it possible to (1) improve the assessment of financial sustainability and reduce the related risk and (2) reduce the information asymmetry between the company and the bank, facilitating access to credit. The duration of the CCC is negatively correlated to profitability (ROE), while size and economic performance are positively correlated. The ICRs (interest coverage ratio) calculated with the financial approach are statistically different from the ones calculated with the economic one. The application of the result is relevant to industry operators and for future research. The research is replicable; the results can be tested on other sectors of the agri-food sector and disseminated to operators.

Pork meat in Italy is one of the largest agri-food chains in Italy. In the swine production chain, slaughter plays an important role, because it has an impact on animal welfare, food safety and the sustainability of the agri-food chain. These companies also deal with pigs destined for typical Denomination of Origin products and therefore play an important role in the production chain of typical products and in the field of EU agricultural policy. In this context, the research aims to analyze the economic sustainability of the major pig slaughter firms in Italy, through data analysis of the annual account statement (AAS) on a sample of eight companies analyzed over a ten-year historical series. Financial ratios and margins (FRM) analysis is applied in the research. FRM analysis shows that firms have the largest absorption of financial resources in the net working capital cycle. The research highlights the high incidence of raw materials in companies in the sector. Consequently, the profit margins of the companies in the sample are modest and in some cases are lower than the cost of debt, suggesting a moderate capacity to attract capital. This result appears as a negative signal of the economic sustainability of the companies in the sector. The research, now limited to a small number of large companies, opens a line of research that can be developed by expanding the sample to small and medium-sized enterprises of the chain of Denomination of Origin hams in Italy to suggest improvement interventions, in particular for rural or marginal areas of production.

The tomato sector is a major area of agricultural activity in Italy; tomato production and processing characterize different Italian regions; in particular, there are two production districts, one in southern Italy and one in northern Italy, in the Po Valley. In recent years, processing firms have encountered increasing difficulties, due both to an increase in raw material costs and market difficulties. Tomato processing firms are often characterized by significant investment in fixed assets and working capital, with an ensuing increase in equity or debt financing, which increases the risk of bankruptcy, as has happened to many firms in the sector in recent years. Therefore, the aim of this research was to analyze the financial sustainability of tomato processing firms by applying financial ratios. To achieve this goal, this research focused on the annual data of a sample of 17 tomato processing firms operating in the Inter-regional Interprofessional Organization, “OI Pomodoro da Industria Nord Italia”. The firms were divided into still-active (not-distressed) and failed (distressed) firms, with the aim of analyzing the differences between the financial data and management practices of the two groups. The data suggest that larger firms, with an adequate financial structure, have been able to withstand the tomato market crisis in recent years, whereas distressed firms are on average smaller and suffer from higher recourse to debt capital and lower profit margins than not-distressed firms. This research could be applied by entrepreneurs, managers, bankers and public operators to define good management practices that should be achieved and measured with financial ratios, even as a means of reducing the risk of distress for firms operating in the tomato sector. This research highlights that financial ratios could be usefully applied for predicting the continuity of activity and therefore the sustainability of the management cycle, including its relationship to the whole socio-economic system over time.

The processed tomato is one of the major food products of Italy and characterized today many Italian Regions, in northern and southern Italy, even though the firms in the industry have had difficulties, in recent years, due to an increase in the cost of raw materials. Furthermore, tomato processing firms are often characterized by significant investment in fixed assets and working capital, with an consequent increase in equity and/or debt financing, with consequent increasing of the risk of bankruptcy, as happens to many firms in the sector in recent years. The aim of the research is than to analyze the risk of bankruptcy of tomato processing companies applying financial ratios. To achieve this goal, the research consider the annual data of a sample of 17 tomato processing firms operating in the Inter Regional Interprofessional Organization “OI Pomodoro da Industria Nord Italia”; firms’ data are divided into still-active (not-distressed) and failed (distressed) firms, with the aim of analyzing the differences between financial data and management practices of the two groups of firms to evaluate the sustainability of the business cycle. The company data suggest that larger firms, with adequate financial structure, have been able to withstand the tomato market crisis in recent years, where distressed firms are on average smaller and suffer from a higher recourse to debt capital with lower profit margins than not-distressed firms. The research could then be applied by entrepreneurs, managers, bankers and public operator to define good practices of management to be achieved and measured with financial ratios even in order reduce the risk of distress for firms operating in tomato sector.

Firms operating biogas plants are often characterized by making significant investments in fixed assets financed by equity and, mainly, financial debt. These firms have experienced significant growth in Italy, partly as a result of public contributions. The objective of the research is to analyze the management of biogas plant firms by analyzing annual accounts as the main document of use to third parties for the evaluation of a firm’s management. The research, conducted on a sample of 22 firms using 110 year-data, has highlighted that economic and financial margins are different, though often statistically correlated. The research shows that profitability and cash generation in the biogas plant industry are high, even if the generation of cash flow is less than the return on equity, and there are firm cases of having difficulty in financial debt repayment, even in the presence of positive economic margins. The research also shows that return on equity greatly exceeds the performance of Italian government bonds and of the majority of industrial sectors; this result points to the significant increase in returns on equity capital in the industry, potentially damaging other sectors, and highlighting the risk of the distortive use of public resources.

The objective of this article is to develop and apply a specific discounting cash flow (DCF) approach to evaluate investment in renovation to improve building quality, thus increasing energy efficiency. In this article, we develop and apply a specific net present value (NPV) and an internal rate of return (IRR) approach to quantify the value created for the owners of the building by the investment in renovation via energy-saving investments that produce positive externalities. The model has an applied interest because, in recent years, a lot of investments in real estate were made by owners in order to increase the green quality of the buildings, and several funds of public aid were provided by the government to stimulate these energy-saving investments. The model proposed here is applied to a case study of a 16-apartment building located in northern Italy considers the model attempts to quantify the initial investment value, the energy savings, the tax deduction of the initial investment and the terminal value of the investment as the increase in building value. The analysis shows that the model is consistent in evaluating investments to improve building quality, and investments within the context of the specific case study considered in the research have IRRs ranging from a minimum of 4.907% to a maximum of 12.980%. It could even be useful to consider a sample of cases to verify whether our results are representative of this specific case study. The model could represent a useful tool for consumers in evaluating their own investments in building renovation, from a stand-alone perspective and even by comparing them with other types of investment. The research could be developed in the future to quantify the social welfare generated by public spending via tax deductions to reduce the costs of investment in energy savings for buildings and could even be applied to new real estate projects in comparing different construction technologies and even comparing the return of renovation investment with other investments not even in the real estate sector.

Life Cycle Flow (LCF) Application to Evaluate the Real Estate Investment in Residential Buildings with Tax Benefit Incentives in Cases of Positive Externalities