- ACTIONS TAKEN ON COSTS TO MITIGATE THE EFFECTS OF SALES
AFFECTED BY COVID-19
- JUNE-TO-DATE WRITTEN ORDERS ABOVE EXPECTATIONS
- DOWNSIZE OF THE CHINESE PLANT COMPLETED
- OUTSOURCED PRODUCTION IN VIETNAM ONGOING
The Board of Directors of Natuzzi S.p.A. (NYSE: NTZ) (“Natuzzi”
or the “Company”) approved today its 2020 unaudited second quarter
and first six months consolidated financial results.
UPDATE OF COVID-19 IMPACT ON THE
GROUP’S OPERATIONS
Consolidated net sales for the second quarter of 2020 were
dramatically affected by COVID-19 pandemic leading to, among
others, the closure of both stores and factories for most of the
second quarter.
With the exception of China, where stores were closed from
mid-January to mid-February 2020, our stores were closed for most
of the quarter from mid-March and gradually began to reopen from
mid-May. In Mexico, stores were closed from the beginning of April
through the first week of July.
Group’s factories also had to adapt to virus containment
measures, remaining closed for most of the second quarter: in Italy
our factories were closed from March 23 to April 25, 2020; in
Romania from April 10 to May 11, 2020; in Brazil the factory was
closed initially from April 23 to May 22 and subsequently from 19
June to July 13, 2020. As already disclosed, our Chinese plant was
closed between January and February.
Since the breakout of the pandemic, the Company's management has
implemented a series of initiatives to limit the negative effects
of the pandemic on business, with the primary aim of preserving the
Group's liquidity.
The initiatives undertaken by the Group include, among others:
a) temporary lay-off programs in Italy, Spain, UK, Switzerland,
Romania, Brazil and the USA. Among these measures, in Italy in
particular, the COVID-related temporary lay-off program is applied
to a large part of workers and employees and is supposed to be in
force until the end of the year; b) the deferral or suspension of
fiscal and social contribution payments, as provided by the Italian
and some other Countries’ Governments; c) rent reduction or rent
payment deferral to compensate for the closure of the Group’s
stores during the lockdown; d) the reduction of marketing expenses
and other operating expenses; f) the deferral of investments; G)
COVID-related loans obtained in Switzerland, Brazil and the
USA.
As soon as the lockdown measures were lifted around the world,
our business gradually started to recover, with the overall order
flow from June to date increasing above our expectations.
Strong demand has resulted in a significant increase in product
backlog over the last few months. We are putting in place measures
to increase the Group production capacity, accordingly.
Despite the recent strong trend in written orders, we remain
cautious about the prospects for the remaining part of 2020,
especially in view of the current resurgence of contagions in many
Countries.
SECOND QUARTER 2020
RESULTS
As a result of the above-mentioned effects of the pandemic,
consolidated net sales for the second quarter of 2020 were €61.6
million, down 33.1% from €92.2 million reported in 2019 second
quarter.
Considering the Group’s core business only (upholstery,
accessories and home furnishings), net sales were €59.7 million,
down 32.5% compared to last year second quarter, as a result of the
56.6% decrease in Private Label sales and a 26.7% decrease in the
Natuzzi sales.
Other sales were €1.9 million.
The 26.7% decrease in Natuzzi branded revenues was the result of
the 27.4% decrease in the Americas, a 34.8% decrease in the EMEAI
and a 4.8% decrease in the Asia-Pacific region.
Natuzzi branded sales, that are generated by direct retail
(Directly Operated Stores and concessions) and third-party operated
points of sale, were €52.2 million and represented 87.5% of the
Group’s core business, versus 80.6% in the second quarter of
2019.
The Group now directly operates 56 mono-brand DOS, of which 40
Natuzzi Italia, 14 Divani&Divani by Natuzzi stores and 2 new
Natuzzi Editions DOS in the UK. In addition, the Group directly
operates 11 Natuzzi Italia concessions in Mexico.
During the second quarter of 2020, direct retail sales were €8.9
million, down 44.6% versus the same period of 2019. Direct retail
was particularly penalized by the lockdown measures and, therefore,
in 2020 second quarter it represented 14.9% of core business
compared to 18.2% in 2019 same period.
The Natuzzi division also includes sales generated by
third-party operated mono-brand points of sales (franchised
operated stores, or FOS, and galleries), whose sale were €43.3
million, down 21.4% compared to 2019 second quarter, as a result of
the 21.3% decrease in the Americas, a 31.1% decrease in the EMEAI
and a 4.8% decrease in the Asia-Pacific region.
Sales generated by the unbranded wholesale division, addressing
the mass-merchant distribution, were €7.5 million, down 56.6%
compared to 2019 second quarter.
In light of the tariffs imposed by the US Administration on
goods imported from China, the Company has started to outsource in
Vietnam part of its Private Label production. The Group will
increase the outsourced production from Vietnam with the aim to
regain volumes and improve margins in the North American market. In
additions, the Company continues to explore further external
production capacity in European Countries.
2Q2020 GROSS MARGIN
Second quarter 2020 consolidated gross margin was 26.1%,
compared to 27.9% in 2019 same quarter, due to lower volumes caused
by the lockdown, partially offset by the adoption of measures to
lower the labor costs (for a saving of €4.3 million) and to reduce
other industrial costs in the Group’s plants. The Company continued
to benefit from a favorable trend in raw materials.
During the second quarter, the Cost of Sales also included €1.4
million of severance-related charges following the downsize of the
Group’s operations in China. Excluding such restructuring costs,
gross margin for the quarter would have been better than the
previous year.
2Q2020 OPERATING
EXPENSES
Operating expenses, which include Selling, Administrative, other
operating income/expenses and the impairment of trade receivables,
were €23.8 million (or 38.7% on revenues), decreasing significantly
from €33.5 million (or 36.4% on revenues) in 2019 second
quarter.
Actions were taken to lower the cost of labor (for a saving of
€3.6 million), lease expenses (for a saving €0.8 million), and also
advertising, fairs and travel expenses (for a saving of €2.7
million).
During the quarter, we also recorded €0.9 million of goodwill
impairment charges related to our retail operations in Mexico, as
well as €0.9 million for additional impairment charges on trade
receivables.
2Q2020 RESULTS
The Group reported an operating loss of €7.7 million, which
includes the above-mentioned impairment on assets and restructuring
costs in China totaling €3.2 million, versus an operating loss of
€7.8 million in 2019 second quarter.
Net Profit deriving from the 49% share of the Chinese vehicle
was €0.5 million in 2020 second quarter.
Loss for the period was €9.1 million.
FIRST HALF 2020 RESULTS
Consolidated net sales for the first half of 2020 were €144.1
million, down 27.4% compared to the first six months of 2019.
Considering the Group’s core business only, net sales were
€138.1 million, down 27.1% compared to 2019 same period, as a
result of the 21.1% decrease in sales for the Natuzzi division and
the 49.1% decrease in sales for the Private Label business.
Non-core sales were €6.0 million.
Gross margin for 2020 first half was 30.8% versus 29.1% in 2019
same period.
The Group reported an operating loss of €12.7 million in the
first half of 2020 versus an operating loss of €10.8 million in the
first semester of 2019. The 2020 first six months loss includes
also €4.9 million of higher one-off costs related to the downsize
of our Chinese plant, to the goodwill impairment of the Group’s
Mexican operations and to higher charges for trade receivables
impairment.
Net profit deriving from the 49% share of the Chinese vehicle
was €0.9 million for the first six months of 2020.
The Group reported a loss for the period of €16.9 million,
versus a loss of €15.2 million in 2019 same period.
As of June 30, 2020, cash and cash equivalents were €33.2
million, improving from €29.5 million at the end of March 2020.
The Group’s net financial position before lease liabilities was
negative at -€0.5 million, improving from the -€5.2 million at the
end of March 2020 and versus the -€2.8 million at the end of
2019.
During the first six months of 2020, net cash provided by
operating activities less net investments was positive at €6.8
million.
Chairman and CEO, Pasquale Natuzzi, commented: “Our second
quarter exposed us to the full effects of the pandemic, with most
of our customers and suppliers interrupting their activities as a
result of the virus containment measures imposed locally.
With the exception of China, the majority of our stores and
factories remained closed for most of the quarter. Currently, our
factories and points of sales are all operating, with our staff,
both in the factories, in the stores and in HQ, focused on
recovering the standard levels of service.
The timely reaction of the Group on industrial and overhead
costs has allowed to balance lower volumes and preserve cash. While
we have taken available steps to manage expenses during the COVID
period, our business will continue to focus on reducing costs and
improving margins.
As soon as the lockdown measures were lifted around the world,
our business gradually started to improve. Order flow from June to
date is better than our expectations.
In addition, we have progressed in reorganizing the Group’s
operations.
We have completed the downsize of our Chinese industrial
operations. As widely known, the products manufactured in China and
delivered to the North American market are penalized by import
custom tariffs. Our new, smaller Chinese plant will serve
exclusively the local market and the rest of Asia-Pacific region.
Besides, some wood and foam-related processes are now outsourced,
so enhancing flexibility to the Chinese plant.
At the same time, we’ve started to outsource production in
Vietnam for the private label segment. We plan to significantly
increase the outsourced production from Vietnam with the aim to
serve key accounts in the North American market. In addition, we
are working to finalize another outsource agreement in Eastern
Europe for the EMEA region.
The development of the mono brand store network, both franchised
and directly operated, has continued also during such difficult
times and today it represents half of the business. We will
continue to focus on the priority markets such as USA, China, UK,
Italy and Spain, to leverage on the brand awareness and existing
commercial organization. We are encouraged in particular by the
strong performance of our stores in the USA and UK.
We are making progress in the e-commerce in selected countries
to offer an omni-channel approach to our customers. We are now
working on expanding this channel also to other countries to
further increase the offer.
Social distancing has also changed the way in which we do
business. We have recently set up a ‘virtual congress’, through
which we have digitally invited and interacted with our customers,
all over the world, to give them an update of our retail, marketing
and merchandising strategy, as well as present the new Natuzzi
Italia and Natuzzi Editions collections by means of a
virtually-guided tour in a store.
What we have in front of us is an uncertain period, during which
we will have to get used to living with this new challenging
reality. In consideration of this, we will continue to develop the
retail part of the business, in a more digitalized environment and
with a more flexible structure in terms of cost and organization,
while maintaining a rigorous approach to cash and working capital
management.”
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
Certain statements included in this press release constitute
forward-looking statements within the meaning of the safe harbor
provisions of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934, as amended. These
statements involve risks and uncertainties that could cause the
Company’s actual results to differ materially from those stated or
implied by such forward-looking statements including, but not
limited to, potential risks and uncertainties relating to the
duration, severity and geographic spread of the COVID-19 pandemic,
actions that may be taken by governmental authorities to contain
the COVID-19 pandemic or to mitigate its impact, the potential
negative impact of COVID-19 on the global economy, consumer demand
and our supply chain, and the impact of COVID-19 on the Company's
financial condition, business operations and liquidity. Additional
information about potential factors that could affect the Company’s
business and financial results is included in the Company’s filings
with the U.S. Securities and Exchange Commission, including the
Company’s most recent Annual Report on Form 20-F. The Company
undertakes no obligation to update any of the forward-looking
statements after the date of this press release.
Additional Information
This news release is just one part of the Company’s financial
disclosures and should be read in conjunction with other
information filed with the U.S. Securities and Exchange Commission,
available at
https://www.natuzzigroup.com/en-EN/ir/financial-release.html under
the “SEC Filings” section.
About Natuzzi S.p.A.
Founded in 1959 by Pasquale Natuzzi, Natuzzi S.p.A. is Italy’s
largest furniture house and one of the most important global
players in the furniture industry with an extensive manufacturing
footprint and a global retail network. Natuzzi is the European
lifestyle best-known brand in the upholstered furnishings sector
worldwide (Brand Awareness Monitoring Report - Ipsos 2018) and has
been listed on the New York Stock Exchange since May 13, 1993.
Always committed to social responsibility and environmental
sustainability, Natuzzi S.p.A. is ISO 9001 and 14001 certified
(Quality and Environment), OHSAS 18001 certified (Safety on the
Workplace) and FSC® certified (Forest Stewardship Council).
Natuzzi S.p.A. and Subsidiaries Unaudited consolidated
statement of profit or loss for the second quarter of 2020 and
2019on the basis of IFRS -IAS (expressed in millions Euro)
Three months ended on Change
Percentage of Sales 30-Jun-20
30-Jun-19 % 30-Jun-20
30-Jun-19 Revenues
61.6
92.2
-33.1%
100.0%
100.0%
Cost of Sales
(45.5)
(66.4)
-31.5%
-73.9%
-72.1%
Gross profit
16.1
25.7
-37.4%
26.1%
27.9%
Other income
0.9
1.4
1.5%
1.6%
Selling Expenses
(17.2)
(25.8)
-33.2%
-28.0%
-28.0%
Administrative expenses
(6.1)
(8.5)
-27.8%
-10.0%
-9.2%
Impairment on trade receivables
(1.3)
(0.4)
-2.2%
-0.4%
Other expenses
(0.1)
(0.3)
-0.1%
-0.3%
Operating
profit/(loss)
(7.7)
(7.8)
-12.5%
-8.4%
Finance income
0.1
0.1
Finance costs
(1.4)
(2.2)
Net exchange rate gains/(losses)
(0.4)
(0.7)
Net finance income/(costs)
(1.7)
(2.8)
Share of profit/(loss) of equity-method investees
0.5
0.6
Profit/(Loss) before tax
(8.9)
(10.0)
-14.5%
-10.9%
Income tax expense
(0.2)
(0.5)
-0.3%
-0.5%
Profit/(Loss) for the
period
(9.1)
(10.5)
-14.7%
-11.4%
Profit/(Loss)
attributable to: Owners of
the Company
(8.9)
(10.5)
-14.4%
-11.4%
Non-controlling interests
(0.2)
(0.1)
Profit/(loss) per Ordinary Share
(0.16)
(0.19)
Natuzzi S.p.A. and Subsidiaries
Unaudited consolidated statement of profit or loss for the six
months of 2020 and 2019on the basis of IFRS -IAS (expressed in
millions Euro)
six months ended on
Change Percentage of Sales
30-Jun-20 30-Jun-19 %
30-Jun-20 30-Jun-19
Revenues
144.1
198.3
-27.4%
100.0%
100.0%
Cost of Sales
(99.7)
(140.6)
-29.1%
-69.2%
-70.9%
Gross profit
44.3
57.7
-23.2%
30.8%
29.1%
Other income
1.9
2.6
1.3%
1.3%
Selling Expenses
(42.2)
(53.3)
-20.9%
-29.3%
-26.9%
Administrative expenses
(14.5)
(17.0)
-15.1%
-10.0%
-8.6%
Impairment on trade receivables
(1.8)
(0.4)
-1.3%
-0.2%
Other expenses
(0.4)
(0.4)
-0.3%
-0.2%
Operating
profit/(loss)
(12.7)
(10.8)
-8.8%
-5.4%
Finance income
0.2
0.2
Finance costs
(3.1)
(4.7)
Net exchange rate gains/(losses)
(2.0)
(0.1)
Net finance income/(costs)
(4.9)
(4.6)
Share of profit/(loss) of equity-method investees
0.9
1.0
Profit/(Loss) before tax
(16.7)
(14.4)
-11.6%
-7.3%
Income tax expense
(0.2)
(0.7)
-0.2%
-0.4%
Profit/(Loss) for the
period
(16.9)
(15.2)
-11.7%
-7.6%
Profit/(Loss)
attributable to: Owners of
the Company
(16.6)
(15.1)
-11.5%
-7.6%
Non-controlling interests
(0.3)
(0.0)
Profit/(loss) per Ordinary Share
(0.30)
(0.28)
Natuzzi S.p.A. and Subsidiaries
Unaudited consolidated statements of financial position
(condensed)on the basis of IFRS-IAS(Expressed in millions of
Euro)
30-Jun-20
31-Dec-19 ASSETS
Non-current assets
197.9
212.5
Current assets
136.4
156.9
TOTAL ASSETS
334.3
369.4
EQUITY AND LIABILITIES
Equity attributable to Owners of the Company
85.4
103.1
Non-controlling interests
1.0
1.7
Non-current liabilities
110.2
112.6
Current liabilities
137.8
152.0
TOTAL EQUITY AND LIABILITIES
334.3
369.4
Natuzzi S.p.A. and Subsidiaries Unaudited consolidated
statements of cash flows (condensed) (Expressed in millions of
Euro)
30-Jun-20 31-Dec-19
Net cash provided by (used in)
operating activities
7.8
4.7
Net cash provided by (used in) investing
activities
(1.0)
(3.3)
Net cash provided by (used in) financing
activities
(12.9)
(24.2)
Increase (decrease) in cash and cash
equivalents
(6.1)
(22.8)
Cash and cash equivalents, beginning of the
year
37.8
60.4
Effect of movements in exchange rates on cash
held
(0.6)
0.3
Cash and cash equivalents, end of the
period
31.1
37.8
For the purpose of the
statements of cash flow, cash and cash equivalents comprise the
following: (Expressed in millions of Euro)
30-Jun-20 31-Dec-19 Cash and cash equivalents
in the statement of financial position
33.2
39.8
Bank overdrafts repayable on demand
(2.1)
(2.0)
Cash and cash equivalents in the statement of cash flows
31.1
37.8
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200925005514/en/
Natuzzi Investor Relations Piero Direnzo | tel.
+39.080.8820.812 | pdirenzo@natuzzi.com
Natuzzi Corporate Communication Vito Basile (Press
Office) | tel. +39.080.8820.676 | vbasile@natuzzi.com
Natuzzi S P A (NYSE:NTZ)
Historical Stock Chart
From Mar 2024 to Apr 2024
Natuzzi S P A (NYSE:NTZ)
Historical Stock Chart
From Apr 2023 to Apr 2024