Esprinet is the leading wholesaler in the distribution of information technology and consumer electronics products in Spain and Italy, two of the three countries where it operates, with a global turnover of 4,500 million euros in 2020 and 1,600 employees (730 in Spain) . In Portugal, the company, which markets around 130,000 products from more than 650 manufacturers, is also growing strongly, but it is still fifth in market share. Its CEO, Alessandro Cattani, explains to CincoDías how the pandemic has driven the growth of his company and how the logistical problems caused by Covid-19 and the lack of chips suffered by the sector are affecting the business. It also points out where you see the opportunities in the future.
How has the pandemic boosted Esprinet’s business?
We are growing strongly. We ended 2020 with a global turnover of 4,500 million euros, 14% more than in 2019, of which 2,700 million correspond to Italy and almost 1,800 million to Spain and Portugal. Spain, where our turnover grew by 21%, already represents just over 40% of our income and somewhat more in terms of profit. In terms of ebitda, we grew 24% to 69 million and closed the year with a net cash of 300 million euros. A historical record. This is due to the fact that we have improved our profitability, we have significantly reduced the number of days of inventory, we have kept financing to customers more or less stable and we have managed to raise the payment period a little to manufacturers, who have recognized our good work during the pandemic. Esprinet has been listed on the Milan Stock Exchange since 2001. We started at 1.4 euros and now we are at 13.37 euros, almost touching highs. We have always made money. In 20 years, the company has accumulated a net profit of 470 million and we have paid more than 135 million dividends since 2001. In the last year we announced a dividend per share of 54 cents.
What would you highlight especially in 2020?
Those good results obtained despite the difficulties we have had to face. And not only because of Covid-19 but because of the lack of products that manufacturers have not been able to deliver due to the shortage of chips and logistical problems due to the pandemic. Our employees have fought like lions to stay active in this difficult situation, where we have prioritized distributors who serve schools and hospitals. For this reason, we have decided to pay an extraordinary bonus of 600 gross euros to each employee for the effort made, which has meant an investment of more than one million euros. In a company like Esprinet, which does not have a renowned brand like Gucci and we do a shadow job helping the main players (Media Martk, Amazon, El Corte Inglés, Carrefour …), what is valued is the quality of service and that can only be achieved if your team works hard and is happy. It is not easy to work in warehouses all day with masks on or with children at home. Esprinet has never stopped; During 2020 we hired 259 more people and, for this first semester of 2021 we have the hiring of more than 110 new professionals (56 in the Iberian Peninsula) to reinforce the sales and marketing, logistics and personnel areas.
Do you think that the growth achieved in 2020 will continue once the pandemic passes?
For the technology sector, the pandemic has been the best thing that could happen, but it has been a horror for people. This dramatic event has changed the way families, companies and public administrations understand technology. We have had a favorable wind, but we do not believe that the levels of rise that we have had these months can be held forever, although the importance of technology remains in our society. Analysts predict that throughout the first half of 2021, where we are still very confined, the demand for technological products will continue from families and companies, especially with laptops for teleworking. But, they point out that, with the vaccination, people will start spending again on restaurants, travel, hotels, clothing and the consumption of technology by families will drop a little. While that of the Administration will rise.
“We want to buy a company in Portugal and other niches in high-margin products in Spain and Italy”
What factors do you see that can continue to drive this sector and how will it help your business?
A powerful growth engine, without a doubt, will be the EU’s Next Generation recovery funds, which will bring a lot of money to Spain and Italy, as they are the two countries that will benefit the most. And if we look at where a large part of that money will go, it will be to projects of sustainability and digitization of the economy. Other engines will be 5G, which is going to push for a renewal of mobile phones, and the internet of things. Apple AirTags, a small device that allows you to track products, is an example of them, but it is something that we will see in the smartcity and in factories, where machines will be connected to capture data and perform predictive maintenance, among other things. 5G will also allow progress in telemedicine.
Behind what counts is a cultural change, which has accelerated with the pandemic.
Indeed. We are living in a magical moment, because there is a cultural change, there is a lot of money coming from the State and there are also technological innovations. If you look at families they have been digitized and companies are also doing it. For example, data from retail technological show that of the total online sales that have been made in these pandemic months, only 50% have been carried out by pure players like Amazon; the other 50% is online sales from Media Markt, El Corte Inglés, Alcampo, Carrefour. This is very important because it marks a path for the evolution of consumption, in the way companies operate. And the same happens with companies in other industries, and that implies investments in technologies of data center, servers, hard drives, network equipment, security solutions, software, cloud solutions … to be able to support all these operational processes.
What products have been sold the most during the pandemic and which new ones will they enter?
Among the most demanded have been laptops and tablets and, to a lesser extent, mobile phones. But sales of hair dryers and kitchen and personal care tech products also skyrocketed, because we all wanted to be a chef. And then there are televisions, small home printers, and video calling products. Looking ahead, we are looking at everything that has to do with electric mobility (bikes and scooters), an area that we believe will experience strong growth, and professional products linked to the cloud and cybersecurity solutions. This last segment is expected to rise sharply because cyber attacks, far from being contained, are on the rise.
He spoke before about the lack of chips and the logistical problems. How has each of them impacted you?
The logistics have affected us, but less than you might think. The impact, in this case, has been more in terms of costs, because with the pandemic there were ships that made full outbound routes and empty return trips. Also the problem that occurred in the Suez Canal caused us small delays. But the matter of semiconductors, it is a serious problem, because if we had had more product, we would have made even greater sales, and all forecasts point to this shortage of chips going to last for many quarters. We have contact with all the CEOs of the big manufacturers of technology products worldwide and they are all with the same problem. The quantities produced are increasing, but below demand. It is difficult to know how many sales can be lost, but there are because the renewal of equipment cannot be done at the speed demanded.
“We look to North Africa to expand, because we believe that it is an area with potential. And we do not rule out other countries, but for later “
Have the lack of components and logistical problems made the products more expensive?
Yes. Historically this industry is deflationary. If you waited you could buy something new and cheaper, but now it is not like that. This rise is not appreciated much because deflation plus inflation, which is what there is now, is equal to zero. But, now if you wait you pay something more. This has been compounded by a powerful rise in demand for electronic products with a lack of investment in new component factories and a veritable explosion in demand from car manufacturers, which have turned into real PCs on wheels.
Some of your competitors have been bought by venture capital firms. Is Esprinet in the market if a good offer arrives or, on the contrary, do you want to continue growing through acquisitions?
I can say little about the first. We are a listed company and if the shareholders receive offers I don’t know what they will say about it. But our plan is to grow through acquisitions. Last year we already bought the sixth Spanish wholesaler by size and first in the world of the cloud, the GTI Group, and the Italian wholesaler Dacom, specialized in the area of data capture and automatic identification. Now we want to buy a company in Portugal, where we seek to have a stronger position, and we will look at purchases in Spain and Italy of some niche companies in high-margin products (world cloud, security, servers … or gaming or electric mobility solutions in consumer electronics). We have also started working in the world of columns for charging electric cars and we would like to grow in this area of sustainability and the environment. The objective is a company that has a turnover of between 30 and 100 million with very good profitability, with an experienced team and a good portfolio of products and clients.
And do they want to enter new countries?
We are looking at North Africa, because with the purchase of GTI we also acquired a small company in Morocco and we believe that in that area, also for example in Egypt, there is potential. Likewise, we will evaluate other European countries but it will be later because during the next three years we will be focused on strengthening our presence in Italy, Spain and Portugal and evaluating whether North Africa is a business opportunity or not.