District Monitor - Excerpt December 2008

District Monitor - Excerpt

Despite the difficult economic picture abroad... In the third quarter of 2008, the Italian industrial districts had to face increasing difficulties on the foreign markets. After increasing slightly in first half of the year, in the July-September period the exports of Italian industrial districts declined by 2.4% vs. the same quarter in 2007.

Broken down by target market, industrial district exports emerge as having suffered significant setbacks in their traditional commercial destinations (the United States first among them). By contrast, district exports continued to grow at a sharp pace in Central-Eastern Europe, Africa and the Middle East. Particularly strong performances were recorded on the Russian and Ukrainian markets, as well as in the United Arab Emirates, Saudi Arabia, Algeria, Libya, and Egypt, where growth rates were higher than 15%.

...more than a few districts kept growing... Despite the difficult economic picture abroad, more than a few Italian industrial districts managed to keep growing on the foreign markets in 3Q08. The performance of these districts was generally achieved on the back of their competitive positioning in terms of product quality, innovation, and differentiation, and of their ability to “communicate” and distribute their offer.

...at a brisk pace Stand-out positive performances were achieved by the Mantova engineering and metal products, Nocera Inferiore preserves, and Castel Goffredo hosiery, all of which stepped up their exports by close to 30% in 3Q08.

The Mantova engineering and metal products district benefited from higher commodity prices.

Companies belonging to the Nocera Inferiore preserves district were supported not only by the recovery of prices (triggered by the gradual reduction of inventories, which rebalanced demand and offer on the market), but also by increased export volumes to the main target markets (the United Kingdom, , and ).

Intesa Sanpaolo – Research Department 1 District Monitor - Excerpt December 2008

The positive results achieved by the Castel Goffredo district are a direct result of the deep transformation process undertaken by local companies, which have started diversifying their products (with increasing focus on underwear and, more in general, on seamlesswear, leveraging similar technologies to those used to make women’s hosiery), internationalising production (mostly by relocating facilities to Eastern Europe), and increasingly closing the distance separating them from the end client (through the opening, by district leaders, of directly-owned or franchised single-brand stores).

Main industrial districts growing on the foreign markets (3Q2008 exports, y/y % chg.) Mantova engineering & metal products Nocera Inferiore preserves Castel Goffredo hosiery Valdobbiadene Reggio Emilia & agricultural machinery Arezzo jew ellery textile products metal products thermomechanics Livenza & Quartiere del Piave furniture Lecco metal products Lumezzzane taps & metal household articles Bologna packaging machinery Brianza furniture Biella textile products Fermo footwear

0 5 10 15 20 25 30

Source: Intesa Sanpaolo elaborations on Istat data.

The Conegliano Valdobbiadene Prosecco district also brought the third quarter of 2008 to a positive close, with exports on the rise by 26.9% y/y, driven by excellent performances on the German and British markets, which more than offset the difficulties encountered in the United States. The Reggio Emilia and Modena agricultural machinery district grew by more than 20%. While sales in the United States and contracted, the area benefited from a surge in the value of exports to

Intesa Sanpaolo – Research Department 2 District Monitor - Excerpt December 2008

France, Germany, South Africa, Poland, the United Kingdom, Australia, and Morocco. The ability to work with a wide portfolio of destinations is proving to be just as important a factor as product quality.

Intesa Sanpaolo – Research Department 3