You can answer yes to all three of the Observatory's questions and still see EBITDA fall
24 September 2026, 08:41
On 23 September the news agency ANSA reported on UniCredit's Osservatorio PMI del Sud (Southern SME Observatory), built with Svimez and Confindustria Campania Piccola Industria on a sample of 707 companies from eleven production supply chains. The results: 54.3% of companies report higher turnover over the past twelve months, 50.4% expect production to grow, 51.9% expect to take on more staff. Among the difficulties, 27.6% cite the cost of energy and raw materials.
Three answers out of four concern volume: how much is sold, how much is produced, how many people are needed. The fourth concerns a cost. None concerns what is left in between.
EBITDA measures what the survey doesn't ask
EBITDA is the result of operations before depreciation and amortisation, interest on debt and taxes. In plain terms: how much margin the company's core business generates before counting how it has been financed, how much it invested in the past and how much it pays in tax. It is the number that says whether the business engine works or not. When it is low or flat for several years, the problem is not the economic cycle: it is the operating model, that is, how the business buys, produces and sells.
In the businesses I work with, the year's turnover is the first thing the owner recites from memory. The previous year's EBITDA, almost always, has to be dug out of the annual accounts.
Twelve million, two hires, forty thousand euros less margin
An example. A food processing company turns over €12,000,000 in a year and closes with EBITDA of €1,800,000, 15% of sales.
The following year sales rise to €12,960,000: €960,000 more, up 8%.
Raw materials, packaging and energy absorb €780,000 of that increase.
Two people join, across the technical office and administration: two experienced professionals cost the company just under €60,000 a year each, so €120,000 a year more.
Rent, insurance and maintenance rise by €100,000 a year.
Total extra costs: €1,000,000 in a year, against €960,000 of extra sales. EBITDA falls to €1,760,000: €40,000 less than the year before.
If the Observatory's phone rang at that moment, that company would answer yes three times: turnover up, production growing, headcount up. And it would also list energy and raw materials among its difficulties. All true answers. None of them says that the margin has shrunk.
And the calculation doesn't stop at EBITDA. Below it come depreciation and amortisation — in an industrial business that invests, they are worth 3-4% of turnover — and below that the interest the company pays the banks. With €450,000 of depreciation in a year, operating profit in that example is €1,310,000, and from there come interest and then taxes.
The comparison takes ten minutes on the trial balance
There is no need to wait for the filed accounts. What is needed is last year's trial balance and the one updated to today, and it is a matter of controlling, not of compliance.
EBITDA is calculated for both periods in euros. Then two changes are compared: how much turnover has grown and how much EBITDA has grown, again in euros and over the same number of months.
If turnover is up 8% and EBITDA in euros is up by less than 8%, growth has eaten into margin: every extra euro sold has left less in the business than before. If EBITDA in euros has grown faster than turnover, growth has brought margin along with it, and at that point it is worth understanding which part of the business produced it.
It is a calculation that can be redone every month. An industry survey takes a snapshot of a sector once a year; the margin of a single business moves in the months when things happen, and in those months there is still time to act.
This article was prompted by a news item published in ANSA.