ISBN: 978-972-9171-86-4

Manufacturing Industry in the sub-region of EDV: An Application of ELECTRE III Antonieta Maria Sousa Lima ISVOUGA - Superior Institute of Douro and Vouga, Santa Maria da Feira, Portugal antonieta_sousa_lima@hotmail.com A1 – Relato Financeiro

A6 – Informação financeira e responsabilidade social

Palavras-chave: EDV sub-region, Financial ratios, ELECTRE III, Industrial companies,

Activity code (CAE).

M8 - Other

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Manufacturing Industry in the sub-region of EDV: An Application of ELECTRE III

ABSTRACT

The purpose of this study is to construct a ranking of industrial companies operating in the sub-

region of Between Douro and Vouga (EDV), by activity code (CAE). In order to do so, we use

ELECTRE III as method to rank, and financial ratios as criteria to differentiate, namely, return

on equity (ROE), return on assets (ROA), financial autonomy (FA) and current liquidity (CL).

These four criteria allow us to differentiate companies according to their performances when

comparing with sector average ratios, given by Bank of Portugal’s statistics. We only rank

industrial companies, because they mostly characterize the business structure, using financial

data from 2010 to 2013. The study, based on a descriptive analysis, allow us to conclude that

from a sample of 185 companies, after applying exclusion criteria and divided into nine sub-

samples, most of them were ranked in one of the first three rankings. We also conclude that

from those companies, some have a high export level, and majority are in line or better than the

market, measured by the Bank of Portugal's statistics.

Keywords EDV sub-region, Financial ratios, ELECTRE III, Industrial companies, Activity

code (CAE).

JEL Classification G110

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1 - INTRODUCTION

The sub-region of Between Douro and Vouga (EDV) is a sub-region that aggregates

five municipalities, namely Santa Maria da Feira, São João da Madeira, Arouca, Vale de

Cambra and Oliveira de Azeméis. The business structure is based mainly on manufacturing

activities, strongly supported by exports. Therefore, seeing that Portuguese exportations have

been pointed as “the key” to the economic recovery and for the reduction of the external deficit

of the country, exporting activity represents an important value to the economic dynamism,

contributing EDV positively to the national intention.

So, given the unique features of sub-region of EDV, in manufacturing and exporting

activities, this paper studies the industrial companies, by activity code, in order to differentiate

them considering financial performance. In order to do so, we conducted a step-by-step process

based on a method to rank, ELECTRE III, and a group of criteria to differentiate based on

leverage, profitability and liquidity, particularly return on assets (ROA), return on equity

(ROE), financial autonomy (FA) and current liquidity (CL), from 2010 to 2013. Besides this,

to all companies ranked in one of the first three rankings, we analyze exportation activity.

In this sub-region of EDV, the principal industries are: wooden and cork industries,

leather industries and leather products, metallurgical and metal mechanics industry, cork and

shoes industries, textile, production of machinery and equipment, production of transport

materials (which includes the production of components and accessories for auto and theirs

motors) and production of rubbery articles and plastic materials. According to Torres (2010),

in 2007, the manufacturing industry was responsible for 52,4% of the working employees, 57%

of total sales and about 63% of Gross value added (GVA) created in the sub-region.

Thus, this paper is organized as follows: first, theoretical background is discussed,

particularly, the multi-criteria decision-making problem, ELECTRE III method’s main

features, and the importance of financial ratios. Subsequently, empirical work is presented,

followed by analysis of results. Finally, the main conclusions are drawn.

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2. THEORETICAL BACKGROUND

2.1. THE BASIS OF MULTI-CRITERIA DECISION-MAKING MODELS

A decision problem, according to Roy (1991), is a representation of an element of a

global decision. When solving multi-criteria decision problems, the difficulty is in the

requirement to include alternatives judgments (choice alternatives) from various points of view,

which refers to multi-criteria judgments (Escobar-Toledo & López-Garcia, 2005). So,

Zbigniew and Watróbski (2008) consider that the definition of a decision problem consists of

a two-element process, (C, θ), where C represents a set of criteria, describing relations between

properties of decision alternatives and preference levels of considered alternatives; and θ

represents a set of meta-data of a decision situation, consisting of the decision-maker’s

expectations about a decision situation. The fundamental element of the meta-data set θ is the

choice of a problematic situation according to the following (Roy, 1991):

- problem α – the choice problem (finding a subset of the set A which includes only the

best solutions);

- problem β – the sorting problem (assigning alternatives to defined categories);

- problem γ – the ordering problem (constructing a ranking of alternatives in the set A

from the best one to the worst one).

Such an approach considers only a part of the decision process. Applying multi-criteria

methods to analyze a decision situation requires the deliberate choice of a method suitable for

a given decision situation, for instance the ELECTRE method. The goal of the mentioned

choice is to find the multi-criteria transformation F which fulfils, F(C, θ) -> max u, where u is

an indicator of a decision-maker’s satisfaction, measured by his preferences.

2.2. THE ELECTRE III METHOD’S MAIN FEATURES

ELECTRE methods, from the “European school”, are considered relevant methods

when speaking about multi-criteria decision problems, as stated by Buchanan, Sheppard and

Vanderpooten (1999), Kangas, A., Kangas, J. and Pykäläinen (2001), Figueira, Mousseau and

Roy (2005) (following the studies of Roy, 1991; Roy & Bouyssou, 1993; Schärlig, 1985),

Tervonen et al. (2005), Hanandeh and El-Zein (2006), Wang (2007), Afshari, Mojahed et al.

(2010), Lima and Salazar (2011, 2013), among many others.

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Being ELECTRE method based on criteria, it is important to distinguish two sets of

parameters: the importance coefficients and the veto thresholds. The importance coefficients in

ELECTRE methods refer to intrinsic “weights”: for a given criteria the weight, wj, reflects its

voting power when it contributes to the majority which is in favor of an outranking. The veto

thresholds express the power attributed to a given criteria to be against the assertion “a outranks

b”, when the difference in the evaluation between g(b) and g(a) is greater than this threshold.

These thresholds can be constant along a scale or it can also vary.

In ELECTRE methods, an indifference threshold q, a preference threshold p, and an

additional binary relation Q are introduced. The definition of these thresholds will allow the

testing of all the alternatives that outrank the relation aSbh, “a is at least as good as bh” or “a is

not worse than bh”. So, this gives rise to one of the following four situations:

- [aSbh and not(bhSa)]: aPb (a is strictly preferred to b);

- [not(aSbh) and bhSa]: aRb (a is incomparable to b);

- [aSbh and bhSa]: aIb (a is indifferent to b);

- [not(aSbh) and not(bhSa)]: aRb (a is incomparable to b).

In ELECTRE III, the outranking relation requires the definition of a credibility index,

which characterizes the credibility of the assertion aSbh - “a outranks b” – being defined by

using the concordance index and a discordance index for each criterion gj in F1.

The concordance index cj(a, b) is calculated for each pair of alternatives (a, b) in terms

of each decision criterion. The comprehensive concordance index c(a, b) is the sum of the

concordance indexes cj(a, b) on each criterion weighed by the weights of each criterion. Thus,

- if the performance of a is greater or equal to that of b, or if the performance of a is

smaller to that of b but a staying indifferent to b then cj(a, b) = 1;

- if b is weakly preferred to a: cj(a, b) is obtained with an linear interpolation and is

between 0 and 1;

- if b is strictly preferred to a then cj(a, b) = 0.

1 To test the assertion aSbh (or bhSa), two conditions should be verified: -Concordance condition: for an outranking aSbh (or bhSa) to be accepted, a “sufficient” majority of criteria should be in favor of this assertion; and -Non-Discordance condition: when the concordance condition holds, none of the criteria in the minority should oppose to the assertion aSbh (or bhSa) in a “too strong way”.

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Next, the descending and ascending distillation procedures (Belton & Stewart, 2001;

Rogers et al., 1999) must be applied based on the credibility index, in order to construct the two

pre-orders for the alternatives. Being defined the two pre-orders, they are combined to get the

final overall ranking of alternatives.

Given the unique features of ELECTRE family, within all versions existent, the possibility for

taking into account indifference and preference threshold, the necessity of a quantification of

the relative importance of criteria, and to be specific for ranking problems was the reasons that

lead us to choose ELECTRE III method.

2.3. THE IMPORTANCE OF FINANCIAL THEORY

Financial theory, and financial ratios in particular, is inevitable to reflect on how

financial data can add knowledge to our understanding of why some firms cease to grow,

discontinue, fail, or go into bankruptcy - the worst nightmares of investors. Unfortunately,

history is full of companies that have filed for bankruptcy, supported in all kind of motives,

local and global recessions, and financial crisis, among many others. But, how can we protect

investors from this type of loss?

Research on default prediction has been conducted for many decades and a very large

number of empirical studies have been published since the pioneering work of Beaver (1966,

1968) and Altman (1968). Beaver (1966) presented empirical evidence that certain financial

ratios (the most notably was cash flow to total debt) gave statistically significant signals before

actual business failure. Altman (1968) extended Beaver’s analysis (1966) by developing a

discriminate function which combines ratios in a multivariate analysis. Altman (1968, 2000)

found that his five ratios outperformed Beaver’s cash flow to total debt ratio (1966). So, the

initial approach to predicted corporate failure was based on discriminate analysis, used to

discriminate between failed and no failed firms (Deakin, 1972; Altman, Haldeman &

Narayanan, 1977). Although, each study by itself provides a reasonable discrimination between

failed and no failed firms, truly that various studies hardly show any agreement on what factors

are important for failure prediction.

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3. METHODOLOGY

3.1. EMPIRICAL WORK OBJECTIVES AND RESEARCH QUESTIONS

The purpose of this study is to construct a ranking of industrial companies operating in

the sub-region of EDV, by activity code (CAE). So, a step-by-step process, based on a

descriptive analysis of results obtained with ELECTRE III method, allow us to answer to the

following questions:

- Can industrial companies be differentiated from each other based on financial

performance?

- Do companies ranked in one of the first three rankings have better performance than the

market? And are they exporters?

3.2. METHODOLOGY, DATA, SOFTWARE USED IN EMPIRICAL WORK

Based on Spronk and Hallerbach (1997), our empirical work is characterized as a step-

by-step process, where:

- We firstly selected from database SABI - Bureau van Dijk (database that compiles financial

information for Portuguese and Spanish companies), all companies that were registered in the

sub-region of EDV, between 2010 and 2013; these criteria gave us 1.243 companies. From

this sample, we only choose those that operates in the industries that characterize this sub-

region, by business activity code (CAE), specifically:

CAE 13 - Textiles manufacture;

CAE 15 - Leather and leather products industry; CAE 16 - Wood, cork and articles thereof manufacture, except furniture; Straw articles

and plaiting materials manufacture;

CAE 17 - Pulp, paper, paperboard and articles thereof manufacture;

CAE 22 - Rubber and plastic products manufacture;

CAE 24 - Basic metals manufacture;

CAE 25 - Metal products manufacture, except machinery and equipment;

CAE 28 - Machinery and equipment manufacturer;

CAE 29 - Motor vehicles, trailers, semi-trailers and vehicle components manufacture.

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- Secondly, from companies above selected, we now applied exclusion criteria. So every

companies with a: - Total sales <= 2,000,000; - Number of employees <10; - Export Values <

500,000 euros and – Financial Ratios with negative values, were excluded from the sample.

This criteria allowed to reduce the sample to 185 companies.

- Thirdly, we separate the whole sample (185 companies) into several sub-samples, each one

concerning a CAE, obtaining nine sub-samples.

- In order to apply ELECTRE III method, we define Alternatives, Criteria and Threshold of the

model:

a) As Alternatives, we choose the 185 companies divided into the nine sub-samples;

b) As Criteria, we use financial theory, specifically four financial ratios: Return on Assets

(ROA), Return on Equity (ROE), Financial Autonomy (FA), and Current Liquidity

(CL). The average were calculated from 2010 to 2013, and all criteria have the same

weight in the model, 25%;

c) As Threshold, we define q (the indifference threshold), and p (the preference threshold),

for each criteria. To define q threshold, we use Bank of Portugal’s statistics by activity

code (CAE), referred in this study as the market, and p threshold was defined based on

Portuguese yield - 10 years, and ratios values defined by government subsidies

attribution rules, for instance, Operational Programme of Human Potential Organization

for Enrichment Evaluations (POPH), and National Strategic Reference Framework

(QREN). Criteria and correspondent Threshold are displayed in Table 1.

- Applying ELECTRE III software2, we get the Ranking Matrix. This information gave us the

best to the worst companies according to criteria and threshold defined, for each one of the nine

sub-samples.

- Finally, based on ranking matrix and conducting a descriptive analysis, we only highlighted

the companies ranked in one of the first three rankings.

2 To perform ELECTRE estimation, and construct Ranking Matrix, that gives us the best to the worst alternative, we use ELECTRE III software, kindly provided by Université Paris Dauphine.

Table 1: Threshold of the model

Source: Own elaboration based on Bank of Portugal statistics (2012), 2014.

q p Entity q p q p q p q p q p q p q p q p q pLiquidity     Current liquidity (%) 1,00 1,50 POPH 1,26 1,50 1,38 1,50 1,26 1,50 1,10 1,50 1,30 1,50 1,62 1,62 1,28 1,50 1,70 1,70 1,26 1,50Financial structure     Financial autonomy (%) 25,00 30,00 QREN 36,34 36,34 30,97 30,97 33,51 33,51 51,55 51,55 41,50 41,50 48,50 48,50 35,01 35,01 45,79 45,79 39,57 39,57Profitability     ROE (%) 3,00 3,50 Portuguese yield (10 years) -2,31 3,00 6,33 6,33 -1,71 3,00 12,57 12,57 19,29 19,29 -2,43 3,00 -0,13 3,00 4,98 4,98 8,94 8,94     ROA (%) 3,00 3,50 Portuguese yield (10 years) 4,53 4,53 8,35 8,35 4,59 4,59 12,22 12,22 17,23 17,23 3,93 3,93 5,89 5,89 8,05 8,05 11,46 11,46q - the indifference threshold; p - the preference threshold; POPH - Operational Programme of Human Potential Organization for Enrichment Evaluations; QREN - National Strategic Reference Framework.

CAE 25 CAE 28 CAE 29DESCRIPTION CAE 13 CAE 15 CAE 16 CAE 17 CAE 22 CAE 24Thresholds based on government

subsidies criteria attribution

3.3. FINANCIAL RATIOS APPLIED IN EMPIRICAL WORK

To define which financial ratios, among the so many found in the literature, are useful to

evaluate the financial performance and financial condition of a company, we based in Beaver (1966),

Altman (1968, 2000), Yap et al. (2010), and Chen and Shimerda (1981) studies. These authors search

indicates which ratios best predicts business failures, and conclude that there is no need for many

ratios. For instance, Taffler’s study, 1983, started with eighty potentially useful ratios, and ended up

with just four. Thereafter, in our study, four ratios were chosen among the many that had been used in

previous studies with financial theory. They assess profitability, leverage and liquidity.

The choice of ratios used was based on two main criteria: in their popularity, as evidenced by

their frequent of use in the finance and accounting literature, and in their good perform as showed in

bankruptcy studies. In particular3,

- N

NN sTotalAsset

NetIncomeROAesturnOnAsst )(Re [01]

- N

NN Equity

NetIncomeROEtyturnOnEqui )(Re [02]

- N

NN AssetsTotal

EquityFAutonomyFinancialA )( [03]

- N

NN bilitiesCurrentLia

CashStocksClientsLuidityCurrentLiq )()( [04]

3 Return on Assets (ROA): This ratio express how much profit a company generated compared to its assets. It is expected to increase over the years. Return on Equity (ROE): Give us the ratio

between profits and shareholders' equity, and is expected to have a rate of return higher than the rate of return on treasury bonds, to be able to say that the company is really profitable. It is

expected to increase over the years an amount at least equal to profits minus dividends paid. Financial Autonomy (FA): This ratio related to the company's financial structure, express the extent

to which the asset is being financed by equity and debt capital. This ratio is expected to increase every year or, at least, to remains stable. Current Liquidity (CL): Liquidity refers to the ability

to convert the asset into cash, being some items more liquid than others. So, this ratio measures the extent to which a company has cash to meet immediate and short-term obligations, or assets

that can be quickly converted to do this. It is desirable that the ratio exceeds at least the value of 1, meaning that the company has at least liquid assets to meet liabilities in the short term, even

without the liquidation of stocks. Quick Liquidity (QL): Measures a company's ability to meet its short-term liabilities with cash provenience of its net assets, but in a way more demanding

than in the general liquidity ratio, assuming that stocks (stocks of raw materials and intermediate and finished products) will be difficult to convert into cash quickly. It is expected to exceed

at least the value of 1.

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4. RESULTS OBTAINED

As already mentioned, we conducted a descriptive analysis of Ranking Matrix obtained with

ELECTRE III.

So, concerning CAE 13 - Textiles manufacture - all 8 companies were ranked in one of the

first or second places. Besides that, results show us that their performance measured by financial ratios

is better than the market ratios:

1º Ranking: - FEPSA-FELTROS PORTUGUESES, S.A.

- CARLOS SOUSA-INDÚSTRIA, LDA

- CORTADORA NACIONAL DE PÊLO, S.A.

- ARTEFITA-INDÚSTRIA DE PASSAMANARIAS, LDA

- FERNANDO ALVES DOS SANTOS-INDÚSTRIA DE REV.TÊXTEIS, LDA

2º Ranking: - TRECAR-TECIDOS E REVESTIMENTOS, S.A.

- DUVALLI, S.A.

- ERT TÊXTIL PORTUGAL, S.A.

We highlight Fepsa-Feltros Portugueses, S.A. with the best ratios (CL=3, FA=49,18%,

ROA=7,42% and ROE=14,93%), besides also being an export company with an export level of 65,43%

of total sales (6.250.286,14 euros of 9.552.317,44 euros). Also Cortadora Nacional de Pêlo, S.A. and

Trecar, S.A. have interesting export levels, above 20%. All the other companies export less than 10%.

Concerning financial ratios, all companies ranked in first place are better than the market, as well as

Trecar, S.A., ranked in second. All the others companies performed worse than the market, except for

ROE.

Now looking to companies selected to CAE 15 - leather and leather products industry - from the

54 companies ranked, only 3 were ranked in one of the first three places:

1º Ranking: - VANCAL, LDA

2º Ranking: - SILVA & COSTA, LDA

3º Ranking: - SÓVIRAS-COMPONENTES

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From all companies ranked only Vancal, Lda export 16,42% of total sales. The other companies

ranked export less than 1%. Regarding financial performance, all companies ranked in one of the first

three places are better than the market, for instance, Vancal, Lda with a CL = 5,13, FA = 83,41%,

ROA = 9,29% and ROE = 11,11%.

Regarding CAE 16 - Wood, cork and articles thereof manufacture, except furniture, straw

articles and plaiting materials manufacture - from 39 companies considered, only 5 stayed in one of

the first three rankings:

1º Ranking: - AMÉRICO DE SOUSA & FILHOS, LDA

2º Ranking: - MANUEL FEIRINHO & FILHOS, LDA

3º Ranking: - AMORIM & IRMÃOS, S.A.

- CORTIÇA BENICIA, S.A.

- M.A.SILVA II-CORTIÇAS, LDA

Except Américo de Sousa & Filhos, Lda, curiously the company ranked in first place, all the

others have export levels above 20%: Amorim & Irmãos, S. A. export 39,23% of total sales

(89.897.555,55 euros from 228.553.191,70 euros), Cortiça Benicia, S. A. exports 96,64%

(6.335.352,32 euros from 6.555.547,88 euros) and M. A. Silva II, Lda exports 39,03% (2.511.925,27

euros from 5.435.948,99 euros). Looking to financial ratios, all companies ranked in one of the first

three rankings performed better than the market.

When analysing ranking results to CAE 17 - Pulp, paper, paperboard and articles thereof

manufacture - we see that all companies were ranked in one of the three first places:

1º Ranking: - OLÍMPIO DE OLIVEIRA FONSECA, S.A.

2º Ranking: - CARTONAGEM CARDOSO, S.A.

- CARTONEX-ARTIGOS ESCOLARES E DE ESCRITÓRIO, LDA

3º Ranking: - FÁBRICA DE PAPEL E CARTÃO DA ZARRINHA, S.A.

- SOCIEDADE TRANSFORMADORA DE PAÉIS DO VOUGA, LDA

- MARIO VALENTE LIMA, LDA

- LAPA 3- CAIXAS DE CARTÃO CANELADO, LDA

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Looking for ranking results, every companies have export levels below 1,5%. Concerning

financial performance (in particular CL and FA ratios), every company are better than the market, but

ROA and ROE ratios are below, for instance, Olimpio de Oliveira Fonseca, S. A. with a CL=5,21,

FA=49,05%, ROA=2,51% and ROE=5,03%. Naturally values achieved must be interpreted carefully,

since market is just a reference of minimum profitability.

Ranking results to companies belonging to CAE 22 - Rubber and plastic products manufacture -

tell us that from the 9 companies, 6 stayed in the one of the first three rankings:

1º Ranking: - FREITAS & SILVA, S.A.

- IBOTEC-INDÚSTRIA DE TUBAGENS, LDA

2º Ranking: - ANCAL-PLÁSTICO, S.A.

3º Ranking: - VIEIRA ARAÚJO, S.A.

- A. HENRIQUES II, S.A.

- FORMAPLAS-TRANSFORMADORA DE PLÁSTICO, LDA

When analysing export levels, only Freitas & Silva, S.A. export almost 20% of total sales. All

the others companies export less than 2%, except Ibotec, Lda with export level of 8,61% of total sales.

Regarding financial performance, once again profitability ratios (ROA and ROE) are the one to be below

the market. From all, we highlight Freitas & Silva, S.A. with CL=4,26, FA=65,97%, ROA = 3,21% and

ROE = 4,91%. But as already mentioned, results must be interpreted carefully since market is just a

reference.

Concerning CAE 24 - Basic metals manufacture - all companies were ranked in one the first three places:

1º Ranking: - FERPINTA-INDÚSTRIA DE TUBOS DE AÇO DE FERNANDO PINHO

- SULIMET, LDA

2º Ranking: - ALBERTO DA SILVA BARBOSA & FILHOS, LDA

- FABRICA VISÃO, LDA

Regarding export levels, only Sulimet, Lda export more than 20%. All the other companies

export less than 10%. Looking to financial ratios, and from all companies ranked in the first ranking,

we highlight Ferpinta, Lda with a CL=3,80, FA=75,41%, ROA=7,45% and ROE=10,06%, although

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the export level is only of 5,05% of total sales (7.481.287,95 euros from 148.162.097,97 euros). The

other companies, both ranked in second place, have ratios below the market.

Looking to ranking results to CAE 25 - Metal products manufacturer, exempt machinery and

equipment - from 41 companies only 3 were ranked in one of the first three places:

1º Ranking: - FERBAL-SOCIEDADE FABRIL DE EMBALAGENS, LDA

2º Ranking: - MACAP II-COMÉRCIO E INDÚSTRIA, S.A.

3º Ranking: - TETRAMOLD-INDÚSTRIA DE MOLDES, LDA

Analysing export levels for companies ranked, every have levels below 10%. In the particular

case of Ferbal, Lda, this company export 1% of total sales. Now looking to financial performance,

except Tetramold, Lda., all the other companies have better performance than the market (see Ferbal,

Lda with a CL=7,43, FA = 73,08%, ROA=13,26% and ROE=18,31%).

Considering companies selected in CAE 28 - Machinery and equipment manufacturer – from the

10 companies considered, only 6 were ranked in one of the three first places:

1º Ranking: - GEBO PACKAGING SOLUTIONS PORTUGAL, S.A.

2º Ranking: - MARSILINOX-INDÚSTRIA METALÚRGICA, LDA

- FLUIDOTRÓNICA-EQUIPAMENTOS INDUSTRIAIS, LDA

3º Ranking: - ARSOPI-INDÚSTRIAS METALÚRGICAS ARLINDO S.PINHO, S.A.

- DIVMAC-PROJECTOS AUTOMATISMOS E PERIFÉRICOS IND., S.A.

- AZEVEDOS-INDÚSTRIA, MÁQUINAS E EQUIPAMENTOS IND., S.A.

Concerning export levels, most companies have important export levels, for instance, Divmac,

S.A. with 52,28% of total sales, Gebo, S.A. with 49,86% and Arsopi, S.A. with 32,18%. All the others

have export levels below 10%. Now looking to financial performance, every companies have, at least,

one financial ratio below the market, for example, Gebo, S.A. achieved a CL=1,66, FA=31,47%,

ROA=17,07% and ROE=54,42%, very higher values when compared with the market.

Finally, looking to rankings obtained to CAE 29 - Motor vehicles, trailers, semi-trailers and

vehicle components manufacture – all the 9 companies were ranked in one of the first three places:

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1º Ranking: - FAURECIA-ASSENTOS DE AUTOMÓVEL, LDA

2º Ranking: - GESTAMP AVEIRO-INDÚSTRIA DE ACESSÓRIOS DE AUTOMÓVEIS, S.A.

- SIMOLDES-PLÁSTICOS, LDA

- EDA-ESTOFAGEM DE ASSENTOS, UNIPESSOAL, LDA

- ASPOCK PORTUGAL, S.A.

- SCHMIDT LIGHT METAL-FUNDIÇÃO INJETADA, LDA

- SASAL-ASSENTOS PARA AUTOMÓVEIS, S.A.

3º Ranking: - GAMETAL-METALÚRGICA, LDA

- MONTE MEÃO - COMPONENTES AUTO, S.A.

Analysing export levels to companies ranked, all have values below 5%, except Aspock, S.A.

with 9,68% of total sales. Regarding financial performance, every company have all financial ratios

below the market, although we highlight Faurécia, Lda with a CL=0.92, FA=19,03%, ROA=6,84%

and ROE=78,38%. Once again this results must be interpreted adequately because market is just a

reference.

5 - CONCLUSIONS

Given the unique features of sub-region of EDV, the purpose of this study is to rank industrial

companies (from the best to the worst), by activity code, in order to differentiate based on financial

performance and export level. In order to do so, we conducted a step-by-step process, selected a

method to rank, ELECTRE III, and define a group of criteria based on leverage, profitability and

liquidity, particularly, ROA, ROE, FA and CL, from 2010 to 2013. From an initial sample of 1.243

companies, exclusion criteria were applied and sample was reduced to 185 companies, all industrial

companies operating in the most important EDV’s activities codes (CAE 13, 15, 16, 17, 22, 24, 25, 28

and 29). So, ELECTRE III ranked all these 185 companies by activity code, and results tell us that

most of them were ranked in one of the first three rankings, having some of them better financial

performance than the market, measured in this study by Bank of Portugal’s statistics. The results

interpreted based on a descriptive analysis, allow the following comments:

- CAE 13 - Textiles manufacture: All companies were ranked in one of the first three places. From

these companies, only Fepsa-Feltros Portugueses, S.A., Cortadora Nacional de Pêlo, S.A. and

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Trecar, S.A. export more than 20%; all the others export less than 10%. Concerning financial

performance, only Duvalli, S.A. and ERT Têxtil Portugal, S.A. performed worse than the market;

- CAE 15 - Leather and leather products industry: In this case, ELECTRE III ranked 54 companies,

but only 3 were ranked in one of the first three places. From all, only Vancal, Lda export more

than 10%, specifically 16,42%; all the others export less than 1%. Regarding financial ratios,

every companies are better than the market;

- CAE 16 - Wood, cork and articles thereof manufacture, except furniture, straw articles and

plaiting materials manufacture: From 39 companies considered, only 5 stayed in one of the

first three rankings. All these companies performed better than the market and export more

than 20%, except Américo de Sousa & Filhos, Lda, curiously the company ranked in first

place;

- CAE 17 - Pulp, paper, paperboard and articles thereof manufacture: In this case, all companies

selected were ranked in one of the three first places. Every companies have export levels below

1,5%. Concerning financial performance, and considering CL and FA ratios, every company

was better than the market, but to ROA and ROE ratios were below the market;

- CAE 22 - Rubber and plastic products manufacture: ELECTRE III ranked 9 companies, but

only 6 stayed in the one of the first three rankings. Freitas & Silva, S.A. is the only company

exporting almost 20% of total sales, but all the others companies export less than 2%, except

Ibotec, Lda with export level of 8,61% of total sales. Once again we have companies with

profitability ratios below the market, particularly ROA and ROE;

- CAE 24 - Basic metals manufacture: In this activity code, all 4 companies ranked stayed in

one the first three places. Within these companies, only Sulimet, Lda export more than 20%;

all the other companies export less than 10%. Looking to financial ratios, we highlight

Ferpinta, Lda because this company is the only to outperform the market;

- CAE 25 - Metal products manufacture, except machinery and equipment: From 41 companies

only 3 were ranked in one of the first three rankings. All companies have export levels below

17

10%. Looking to financial performance, except Tetramold, Lda., all the other companies

performed better than the market;

- CAE 28 - Machinery and equipment manufacture: Looking to 10 companies selected, only 6

were ranked in one of the three first places. In this case we have companies with interesting

export levels, namely Divmac, S.A. with 52,28% of total sales, Gebo, S.A. with 49,86% and

Arsopi, S.A. with 32,18%; all the others have export levels below 10%. Now looking to

financial performance, every companies have, at least, one financial ratio below the market;

- CAE 29 - Motor vehicles, trailers, semi-trailers and vehicle components manufacturer:

ELECTRE III ranked in one of the first three rankings all the companies selected. Except

Aspock, S.A. with 9,68% of total sales, all the others export less than 5%. Regarding financial

performance, all company have all financial ratios below the market, although we highlight

Faurécia, Lda.

With all this, we can say that ELECTRE III method proved to be a good tool to select companies

for example to invest or to work with, based on a descriptive analysis. However, the findings left by

this empirical work leave us open other lines for future research, for instance, to apply another multi-

criteria method as PROMETHEE, or even enunciate other assumptions (criteria and thresholds). It is

also importante to characterize the sub-region of EDV in its different dimensions (business stucture,

international trade, exportation level, for instance), and study in a detailed form if companies ranked

could be a “Business Elite”.

18

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