Mercoledì, 19 Settembre 2018
MILAN

Italian company earnings 'don’t cover cost of capital'

English
© ANSA

(ANSA) - Milan, August 8 - Running a business in Italy does
not make economic sense because earnings do not cover the cost
of capital, Italy's largest investment bank Mediobanca said
Wednesday in its "Cumulative Data of 2,032 Italian companies"
report.
In 2011 the cost of debt rose to 6% from 5.6%, while the
return on 10-year Italian government bonds increased to 4.9%
from 3.4%.
The average net return on investment of Italian companies
is 5.8%, insufficient to remunerate both proprietary and
third-party capital, the report said, adding it is more
cost-effective to invest in government bonds than to run a
business.
Mediobanca said because of this, during the course of the
year some 1.4% of the total value of industrial businesses in
Italy have been destroyed.
Large groups have suffered more than the rest, while that
of medium to large companies has been more contained, Mediobanca
said.
Only foreign-controlled companies have been exempt from the
destruction of value, due to the high remuneration of capital
that these enjoy, according to the report.

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