It is one of the giants that symbolize the North East industry. It has an order book of 800 million euros, without even counting the works linked to the PNRR. Yet, in the maddened world of inflation and the super-dollar, the Cimolai group is in dire straits. In the financial statements of the Pordenone-based company specializing in large steel works, a hole has in fact opened up caused by various derivative contracts, made with more than twenty different banks, which currently have a negative value that could be around 150 million euros. .
These are derivatives entered into by the former financial director (just removed with the head of the treasury) to hedge the group’s foreign assets from the risk that the euro would rise too much and erode margins. Since the euro has not risen, but has actually fallen to a 20-year low, derivatives have become a boomerang. So much so that the Cimolai group has started the procedures to carry out a capital increase, the amount of which will be defined after the Lazard investment bank has taken an updated photograph. Because – as far as we know – there is still great confusion about the real extent of these contracts.
The policy becomes a boomerang
Derivatives are used to hedge risks. In the case of Cimolai, as mentioned, the currency risks: given that a large percentage of the 800 million of the order book is in dollars, the group in past years needed to insure itself against the danger of the euro becoming too expensive. For this it has entered into derivative contracts. Nothing strange so far. The problem is that he has made so many derivatives, with many banks (more than twenty), some particularly aggressive and calibrated on a value of the euro – according to what is learned from financial circles – very high compared to the dollar. Some were even made in 2022. So in the last few months, when the dollar started running, those derivatives went at a loss.
The problem is not so much linked to the current negative value, which should (but there are no certainties or confirmations) be around 150 million euros: this is a theoretical value, which becomes real only when and if the derivatives are closed. The problem is another: the so-called “margin calls”.
In fact, derivatives work with guarantees (cash or government bonds) that the two counterparties (ie the company or the bank) must pay according to how the price of the derivative moves. Everyday. They work a bit like the deposits you pay when you rent an apartment: they are used to guarantee the counterparty in case of non-payment. As the prices of derivatives have gone very far in the red for Cimolai (due to the dollar rally), the counterpart banks have begun to ask the Pordenone group to replenish the guarantees in an ever greater way. That is to replenish the “deposits”. In short: the group had to pay cash.